HC Deb 07 February 1933 vol 274 cc129-70

Order for Second Reading read.

9.15 p.m.


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

In December last the House of Commons, sitting in Committee, approved the Financial Resolution upon which the Austrian Loan Guarantee Bill, whose Second Reading I now beg to move, is based. In pursuance of the authority thereby given to us, His Majesty's Government ratified the Agreement or Protocol made at Geneva on the 15th July, 1932. Article 10 of that Protocol or Agreement says that it shall enter into force as regards the Governments which ratify it as soon as the ratifications of Austria, the United Kingdom, France and Italy have been deposited, and the ratifications of the above-mentioned States must be deposited not later than the 31st December, 1932. That article has been complied with, and all the ratifications were deposited by the due date. Consequently, the amounts of the several guarantees are: Great Britain, 100,000,000 schillings, or about £4,000,000; France, 100,000,0000 schillings; and Italy, 30,000,000 schillings; making 230,000,000 Austrian schillings in all. It is hoped that other nations will make some contribution.

When the House was sitting in Committee it took cognisance of the fact that the Protocol, which is 'appended to this Bill, falls naturally into two parts. On the one hand, a loan was to be guaranteed to Austria; on the other hand, Austria, the recipient of that loan, undertook to discharge punctually her foreign obligations, to abolish progressively exchange controls, to settle the affairs of the Creditanstalt, to balance her Budget, and to reorganise her internal economy, and particularly her railways. These reforms were to be carried out under the supervision of a representative of the League of Nations and an adviser attached to the Austrian National Bank. I am glad to be able to inform the House that all these obligations, none of them humiliating, but all of them natural where a party is soliciting assistance from another, are being satisfactorily carried into effect.

What is the test which we applied before consenting to sign this Agreement? We asked ourselves this question: Would the financial assistance which we were offering to make forthcoming put Austria in a position to rehabilitate herself? We answered that question in the affirmative. Perhaps the best proof of the improvement in the commercial situation of Austria is to be found by looking at the figures of her balance of payments. These were considerably upon the wrong side up till June, 1932. From January to March, 1932, her adverse balance of payments was 55.8 million schillings; from April till June, 1932, it was 41.9 million schillings; but between July and September she had a favourable balance of 4.1 million schillings; and that improvement, I am glad to say, is enduring.

Under the guaranteed loan of 1923–43 we were participants to the extent of 24.5 per cent, in a total loan of £24,000,000, and it was but natural that we should safeguard ourselves that the annual payments due under that loan would be made before we incurred any further obligation. We obtained in the most specific terms a promise by Austria that the annual payments would be faithfully discharged. Because we obtained this promise, it is said that we are only making this loan in order that interest under a former loan should be liquidated. I do not think that that criticism can be considered valid, for His Majesty's Government would plainly be failing in its duty if it invited Parliament to ratify one loan without ensuring that the previous loan was to be met; and it is that which we have done.

The interest on that loan has been, and, I trust, will be faithfully paid. [An HON. MEMBER: "Trust."] Well, we have the word of Austria that it shall be so, and there has been no failure by the bondholders so far to receive their interest upon the due date. It is at any rate an advantage that as a result of guaranteeing this loan in the circumstances which I have described we are to continue receiving in this country £800,000 per annum in respect of the previous loan, for if Austria had been allowed to fail, plainly these payments would not have been continued for ever.

It is also an advantage that the whole of the 100,000,000 schillings which we are to guarantee will remain in this country. The House will recall that after the failure of the Creditanstalt the Bank of England advanced, not 100,000,000 schillings, which is the sum specified in this Bill, but 150,000,000 schillings to the Austrian Government to save it from collapse. It is a proof at any rate of the good intentions of Austria that they have reduced that 150,000,000 schillings loan by 50,000,000 schillings.


Can the hon. Gentleman tell us whether that advance made by the Bank of England had the concurrence of His Majesty's Treasury, and whether the Treasury entered into an agreement to be responsible for that advance?


I was going to answer the question which my hon. Friend, anticipating my argument, has quite fairly put to me. The Bank of England made the loan to Austria in June, 1931, on its own initiative, hut His Majesty's Government at that date, though not the present Government, was informed of and expressed its concurrence in what the Bank of England was doing. The Bank of England made it a term of this advance that it should be repaid in full out of the proceeds of the first national loan that was floated by Austria, which was then considered a proximate possibility. So proximate was it considered that the Bank of England only advanced the money on weekly terms, Austria to pay interest on the loan at the Austrian bank rate which, in round figures, has varied between 6 per cent, and 10 per cent. The loan mentioned in this Bill will now be raised on the full credit of the British Government at somewhere, presumably, between 3½ and 4 per cent. That will be an advantage to Austria as well as an advantage to this country, which does not lose a single penny. [An HON. MEMBER: "Very clever."] The hon. Gentleman says that is very clever. I am glad he entertains so high an opinion of the Government, but we are not doing it to be clever. The Bank of England advanced this money out of humanitarian motives. That is proved by the facts. If no national loan were to be raised, of course the Bank of England could not be repaid out of the proceeds of the national loan. We undertake to guarantee a certain proportion of this loan, the whole of which is to remain in this country, and therefore we are spared from making an exception to our general policy of putting an embargo on foreign loans. There will be no strain on the exchanges whatsoever.

The House of Commons will want to know under what conditions this loan will be floated. It will not be floated except simultaneously with the French portion of the loan. I trust the House of Commons will consider that a sufficient safeguard. I have told the House quite plainly what are the facts regarding this loan. The House of Commons, sitting in Committee, authorised us to ratify the agreement. We have accordingly ratified it and I hope the House, by passing the Second Reading of this Bill, will enable us to complete the transaction.

9.27 p.m.


I feel sure I shall not be exaggerating when I say that the House has just listened to one of the most sordid stories of international finance it has ever heard. I do not claim to understand high finance—[Laughter.] —but I believe I understand as much about it as most of those who laugh at me. It amounts in fact to this, that the British Government is making it possible for the Austrian Government to repay money it owes to the Bank of England. That is pretty obvious. That is to say, the Bank of England in one year lends money to Austria; then Austria comes back to this country to ask our Government to collect taxes from our people to lend money to Austria to enable it to repay its debts to the Bank of England. I say, therefore, that that is a sordid international financial transaction.

Since we last dealt with this loan, something very important has emerged in Austria itself. I will devote the few minutes at my disposal to that point. I am very pleased to see the Foreign Secretary in his place. I want, however, first of all to challenge the statement of the hon. Gentleman who introduced the Bill that the Austrian Government has organised its internal economy to the satisfaction of the Powers lending the money. Let me tell him that the Austrian Government has organised its internal economy to such an extent that I am told on good authority that it has actually reduced old age pensions in order to satisfy money lenders and bondholders. I do not think that we, at any rate, in the House of Commons ought to help in any way any country in the world so to organise its national economy as to reduce the pensions of its old people.

The real point I want to raise is this: we criticised this loan when it came before the House of Commons before Christmas. We did not vote against it, and we shall not vote against the Bill to-night. We are however very much more critical of this proposal to-day than we were then, because not only has the lending of this money to Austria meant lowering the standard of life of her working folk, but the Austrian Government has recently allowed transactions which have violated the Treaty of St. Germain. I believe I am right in saying that Clause 134 of that Treaty lays it down very definitely that the importation into Austria of arms, munitions and war materials of all kinds, and the export of arms from Austria also is strictly forbidden.


The right hon. Gentleman will forgive me for interrupting, but it is my duty to remove at once the misapprehension which he is in that we are taking any action which would reduce Austrian old age pensions. We have imposed no such condition, and would not contemplate imposing such a condition. Quite on the contrary. Any action contemplated by us would enable Austria to discharge her liabilities, and not prevent her from doing so.


This is a matter of opinion. There is a difference of opinion in Austria itself and in the Austrian Parliament on this issue. The conditions of this loan were accepted in the Austrian Parliament not very long ago by a one vote majority only. The national economy referred to by the hon. Gentleman has meant a reduction of wages and old age pensions. We are told on good authority that 60,000 rifles and some machine guns were recently exported from Austria into Hungary. We should like to know before passing this Bill—and I think we are entitled to know, because we are going to guarantee about £4,500,000—whether this Government, the French Government or the Italian Government, any of the parties to this loan, has made any inquiries at all into the violation of the Treaty of St. Germain in connection with the recent export of armaments? The strange thing is that Hungary is supposed to be disarmed under one of the Treaties made at the end of the War setting up the Danubian States. It is true that Austria has always claimed, and rightly claimed, the friendship of the great States of Europe, and we on these benches, like all other parties in this House—I hope I am right in interpreting the views of other parties—feel that Austria is so circumscribed at the moment that she cannot possibly continue to live as a State of only 6,000,000 people with one-third of them living in one city.

We all feel that Austria should be helped, but I think we are entitled to ask why this great arsenal should be found in Austria—60,000 rifles and some machine guns too. I do not know very much about military terms, but they tell me that this number of rifles is sufficient to supply one and a-half divisions of an army! If that is so, we would like to know whether the Foreign Secretary has made any inquiry at all into this incident which has been recently disclosed. We press that point because those who have visited the Danubian States know full well that the situation there is really very dangerous at the moment. Hungary is supposed to be disarmed, and we are entitled to know from the Government, before we pass this Bill, how it comes about that the Hungarian Government, as we have been told, have been able to secure a large number of machine guns and 60,000 rifles from Austria. If the Treaty that established the present Hungary makes it impossible for them to import arms, then there must have been a violation of obligations there, too. We would like to know where these armaments come from. I am told that they cannot have been manufactured in Austria. They must, therefore, have been bought from some surrounding country, either Czechoslovakia, or probably Italy, or probably France—and France is going to be a party—


Or perhaps England.


This point is very important when we are dealing with this loan. I have no hesitation in saying from the little I know of these countries that the Treaties that were made at the end of the War must be revised. They limited Austria to a small portion of Europe, threw sections of mankind into a state like Jugoslavia and altered the frontier of Hungary so that thousands of Hungarians were placed under foreign control. The League of Nations, as I have said, will have to take cognisance of those Treaties and alter their provisions very soon. Otherwise, I am afraid, there will be serious trouble in the centre of Europe once again. I am speaking the mind of my hon. Friends when I say that we are unwilling to think that these nations shall be allowed to alter the Treaties that were made at the end of the War at the mouth of the cannon. They ought to be able to secure a revision of those Treaties by argument arid reason at Geneva instead of by rifles at Vienna. We should like to know, therefore, whether the Government made inquiries into this important point that has emerged in regard to Austria. While we are a little more critical of this loan than on the previous occasion, we shall not oppose the Bill in the Division Lobby.

9.37 p.m.


May I be forgiven if I do not follow my hon. Friend the Member for Westhoughton (Mr. R. Davies) into the international part of this situation. My sole object in rising is to show some concern for the British taxpayer. My hon. Friend the Financial Secretary, whose Parliamentary ability we all greatly admire, told us that this loan would put Austria on her legs. It is strange if that be so, because there have been several other loans advanced, by the British among others, to Austria, There was a loan, of which the hon. Gentleman talked, in 1923. That was the loan of something like £14,000,000 of which £10,000,000 is still outstanding. Then there was the Reconstruction Loan. I was amazed when I read through the accounts of the United Kingdom to find what a number of loans we have guaranteed. There was that Reconstruction Loan, in addition to this other loan, of £8,825,000, which is due to the British Government. Now we are told that if we advance another £4,300,000 Austria will be put on her legs. I have not any personal acquaintance with Austria, but I have here an account from the "Times" correspondent, which was published on the 4th January. It is "From our Vienna Correspondent." This correspondent, no doubt a very reputable gentleman, says: In its latest report the Austrian Marketing Board answers the self-posed question whether the prospect is favourable for an early improvement in the Austrian situation with a frank 'no'. Then he goes on to show the situation that exists in Vienna to-day: If outward signs of the growing impoverishment of Vienna were less easy to perceive previously, they came in large numbers during 1932. The flow of traffic on railways and roads has thinned clown almost to vanishing point … Tramcars on many Viennese routes run at long intervals, while an omnibus had become a relatively rare sight. The streets are once more alive with mendicant musicians and singers who sometimes invade tramcars to pour forth their tale of starvation. Then comes a most terrible paragraph: The number of suicides has increased by 88 per cent, compared with 1930; and the saddest feature is that the suicides seldom go alone. Husbands take their wives with them and as many of their children as happen to be under their wing at the critical moment. Now my hon. Friend comes down to the House and tells us that, having advanced these sums of money, and with this state of affairs in Vienna to-day, this £4,300,000 is going to put Austria on its legs. If we thought that anything of the kind would happen, we would not object to the loan. I object to it because in my judgment it is simply pouring £4,000,000 of good British money down the Austrian drain. The loan is to be under the control of the League of Nations. While I have the utmost admiration for the-League of Nations as an assembly for settling international disputes, I have none whatever for its financial sagacity. The League of Nations loans have amounted to £79,000,000, of which £36,000,000 to-day are in total or partial default. The League is not a financial authority to which I would entrust the British taxpayers' money.


What about the American loan to Britain?


Let us stick to one thing at a time. The Austrians said quite plainly on the 23rd June—and this again is stated in the "Times" Commercial Supplement this morning—that, if a further loan were not provided, they could not pay the interest on the previous loan. This new loan was therefore sanctioned by the League of-Nations on the 15th July. This is not entirely a loan for, according to French accounts, it is more for the relief of the Bank of England than for Austrian distress. In the French Chamber the other day, they had a debate on this matter, and M. Cheron, the Finance Minister, said that the proposed loan was more important from the point of view of foreign policy than of pure finance. Are we really to advance British money to further French foreign policy? I cannot agree with that idea, and I would like a further explanation. I have often, in this House, seen public money spent in buying off political discontents at home, but I have never known British public money spent to buy off public discontents abroad, yet apparently, according to the French idea, that is what this loan is intended to do. An hon. Member opposite said something about the American debt just now. The House of Commons devoted £19,000,000 of gold, or £29,000,000 of sterling, in order to educate the American Congress, though I think the object will fail, will prove to have been a costly futility; but that is not the point at the moment. The point is that we are advancing this loan to Austria for the purpose of furthering French foreign policy. The next thing, I suppose, will be a loan floated by the League of Nations in order to get Germany to acquiesce in the Polish Corridor, or something of that kind.

We are told by my hon. Friend that this will be repaid to the Bank of England. He said just now the Bank of England had on its own initiative, without any prompting from the Government, the Government simply concurring, advanced a large sum of money to Austria. If the Bank of England makes a blunder, the stockholders of the Bank of England should pay, and not the taxpayers of Great Britain. I do not agree that my constituents, many of them struggling men, should be called upon to pay Income Tax in order to buttress the dividends of the stockholders of the Bank of England. I want to be quite frank about this matter, and I warn the Government. I warn them as a friend, for I am a friend of the Government. I do not propose to cross the floor of the House. How long we are to have the great privilege of the presence on this side of my hon. Friends behind me I do not know, but so far as I am concerned I propose to stay on this side. I remember with what splendid sacrifice our taxpayers rolled up to pay their taxes. What will be the result when these people know that we are advancing £4,300,000 to Austria, a sum which I very much doubt if we shall ever recover. I want to save the Government from themselves, and therefore I tell them that this financial prodigality cannot go on. What will be the Chancellor of the Exchequer's Budget in April'! We know full well that it is going to be a very difficult one, and what we are doing now will not make things easier for him. It may be too late to stop this loan, but I beseech the Gov- ernment to have done with this financial prodigality in future.

9.49 p.m.


The proposal before us throws a great deal of light upon the whole subject of international indebtedness. Many economists have held that one of the principal reasons for the existing crisis is the fact that the post-war system of indebtedness is fundamentally different from the pre-war. In pre-war days there was not nearly so much government-guaranteed international indebtedness. When firms who had borrowed money failed to make repayment, liquidation or bankruptcy took place, the dead wood was cut out of international commerce and trade and the financial system was more recuperative. Many people have held that one of the reasons why the depression sags and sags from country to country is that post-war indebtedness is almost entirely intergovernmental indebtedness on Government securities, and because of that the debtor is kept artificially alive. The dead wood is not cut out of the financial system, and confidence is not restored. Although this Austrian situation is surrounded by political complications, we do not permit the financial aspects of it to emerge with anything like clarity. Nevertheless, it is perfectly true to say that any attempt to maintain the solvency of Austria or any of these States by a continuation of loans is doomed to financial disaster unless there is a regrouping of those countries to enable them to become exporting countries and repay their debts.

One of the weaknesses of the League of Nations is that the League is merely a conspiracy to maintain the frontiers which were set up by the Peace Treaty, and any attempt to keep these nations financially alive when they are economically dead is bound to result in disaster. The Austrian nation attempted to solve its problem by arranging a Customs Union with Germany, with whom it had many historical and commercial alliances, but that did not suit French policy, and the French lent money to the Austrians to keep them bankrupt. It was Austrian policy that the country could only become economically wholesome again by being able to ally itself with an economic unit which was sufficiently complementary, but that did not suit France, and France lent money to Austria on conditions that the Custom Union project was abandoned. The Foreign Secretary-has been achieving some remarkable triumphs at Geneva, but this is the most extraordinary of them. We are to understand that we are to lend money not for the purpose, as euphemistically expressed by the Financial Secretary to the Treasury, of putting the country on its feet but of keeping it bankrupt, because a condition of bankruptcy is the object of French foreign policy. Our great nation, which has always prided itself upon its liberal and humanitarian foreign policy, is allowing itself to become a pawn in French financial diplomacy in order to maintain a system of anarchy in Central Europe which ultimately must lead to war. I submit that the time has arrived when this nation must disentangle itself from these commitments. If the Bank of England, in pursuing its own financial interests, enters upon an undertaking in Central Europe, this nation's international reputation must not be allied to the Bank's blunders.

This loan is represented to us as a most serious proposition. The Financial Secretary to the Treasury was not, however, quite his usual self-confident self. Although he spoke with that charm and lucidity to which we have become accustomed, we discerned an atmosphere of diffidence that sat very ill upon him. He tried to persuade us that this loan, which we are confirming, would put Austria on its feet. I have already pointed out that its main purpose is to keep Austria bankrupt. If the loan was so well secured, why does not the Bank of England rest content with the security? Why do we need to find the money? If it is so well secured, why is it that we have to raise money to pay the banks and to relieve them of their obligation? I do not understand that, and perhaps the Financial Secretary or the Foreign Secretary, whoever is going to respond, will tell us. Indeed, the loan ought to be more secure now than when it was floated, because it was floated at 10 per cent., and it is now being floated at 3½ to 4 per cent., which surely is a safer loan than one at 10 per cent. One would think that if the security was safe when the Bank of England lent the money, it is even more safe to-day. I shall be glad if the Financial Secretary will be good enough to take the House into his confidence and to tell us why we are asked to raise this money to reimburse the Bank of England. Is it as a wedding present to the Governor? What is the purpose of it?

A much more serious aspect of the matter is raised. I have never been able to understand, being an innocent proletarian, the whole system of international banking. I have over and over again heard disquisitions from the Front Bench against the desirability- of raising loans for development and relief purposes. What has been the argument? It has been the ancient Treasury argument that if the Government entered into the loan market it would only do so in-competition with private enterprise, and that any money which was spent was merely in substitution, and not in augmentation, of the money which private-interests would have spent. Do we understand that to be the position to-day? Do we understand that the £4,300,000, which is being raised in this country when spent in Austria, is in substitution of £4,300,000 which would have been raised and spent in Great Britain? Where is the ancient Treasury argument now, unless it be now that it is an uneconomic proposition to build houses in Great Britain, but a perfectly sound proposition to finance flats in Vienna?

This system of international lending seems to be a method of sending money far enough away so that it will not return so quickly as to embarrass us. If any suggestion is made here that the Government should use their credit to raise money for work schemes at home, it is turned down and condemned by all the financial pundits of the House as being mere Lloyd George electioneering or socialist extravagance; but it is perfectly sound finance for His Majesty's Government to ask us for £4,300,000 to reimburse the Bank of England which has lent money to keep a central European State in bankruptcy in order that it might be a pawn in French foreign policy. Where are we getting? We are in the middle of one of the worst winters of unemployment that this country has ever seen, and the House of Commons is considering a proposition of this kind, which has neither honour nor sound finance to back it up. I submit that if this nation and the world are going ultimately to emerge from industrial depression, it can only be by cutting many losses in international loan markets. We have already told America that international good health can be served only by our falling down now on our debts to her. It might be a good thing to allow some of those who owe us money to fall down upon their debts to us. They might then be in a position to borrow in the international market upon a sounder basis and resume normal commercial relations with the rest of the world.

As long as we go on like this, we shall he simply throwing good money after bad and maintaining frontiers and divisions which are profoundly and fundamentally uneconomic. The Foreign Secretary will probably be standing at the Treasury Box before very long telling us that he regrets that the intensification of the economic crisis in central Europe makes it impossible for those countries to pay us the money without the gravest impairment of international credit. We have heard that language so often before. If the House of Commons is going to vote this £4,300,000, let it do so with the full consciousness that what it is doing is to back up one of the Bank of England's blunders, and that we need never hope to get a cent of the money back again. I hope that this is to he the last of our loans to Austria. The House of Commons has not been treated fairly, by the inadequate explanation of the difficulties of the case and by the embarrassments of the situation that prevented the Financial Secretary from putting the matter before the House with his customary candour.

10.2 p.m.


This proposal for a guarantee has met with considerable criticism in this House and outside, because it forms part of that always dreary process of lying upon your bed after you have made it. The hon. Member for Ebbw Vale (Mr. A. Bevan) had something to say on the point that honour did not call for this particular loan. That being so might I be allowed to remind him, and perhaps other hon. Members, that the old Austro-Hungarian Empire consisted approximately of a population of something like 56,000,000 people, and that out of that population no less than 2,000,000 people resided in the capital, Vienna. I think that that was a reasonable working proportion. What is the position to-day? The new Austrian Republic has a population of 6,000,000 people as against 56,000,000, and the same capital still has a population of something like 2,000,000 people. This achievement was brought about by the Treaty of St. Germain-en-Laye, for which we, as much as anybody else, were responsible. When a city of 2,000,000 people is thrown together with perhaps half-a-dozen impoverished Alpine provinces, and they are told that they are an economic unit whatever they may have to say to the contrary, can we wonder at it that constant subsidisation is required on behalf of the Allies who were responsible for the original Treaty?

Undoubtedly we are partly responsible for this misbegotten creature which has a head three times too large for its body, and I do not think that we have any right to whine when we are presented with a share of the payment due under the affiliation order. The time for any other considerations, if my memory serves me right, lapsed on 10th September, 1919, when that treaty was signed. Furthermore, it is unfortunate for us that we cannot even contemplate the possibility of allowing this national freak dying a natural death. Those of us who have studied the question realise only too well that Vienna today is still the central clearing house, and entrepôt, for most of Central Europe and also for the Balkans, and if by any chance we were to allow that city to dwindle into anarchy, I feel sure the House will agree with me that that would have a very serious effect upon the economic life of Central Europe, which in turn would rebound upon ourselves. Perhaps, therefore, the most sensible way in which the House could look upon this, as I think I am right in calling it, very necessary loan and, in passing, let me admit that it is improbable that we shall ever see one of these Austrian schillings again, nevertheless, let us look upon this loan as. an insurance premium against Communism in Central Europe.

With regard to the July Protocol, upon which this Bill is based, there would appear to be several questions of importance upon which the House is entitled to a little more information, I admit at once that on this occasion I consider that this country is being treated with unusual clemency. I should like to draw the attention of the House to the fact that in Paragraph 2 of Annex I the Austrian Government proposes to repay the Bank of England, from this loan, its debt of 100,000,000 Austrian schillings. It seems that we, in this loan, send them 100,000,000 schillings, and they at once return the amount to this country. There seems to me to be something a little naive about such a proposition. After all, the passing of these schillings, as it were, from the right-hand trouser pocket to the left, will not, as far as I can see, affect us very greatly, but, as this is not the first, and I expect will not be the last, loan to Austria that the House will have to guarantee, I think that the problem merits a little further attention.

In Article 4 of the Protocol—and the same reference is to be found in Paragraph 1 of Annex II—Austria makes the startling promise to balance her budget by the end of last year. The Financial Secretary told us that they had indicated they would do this in the future, but, according to my reading of the Bill, they promised to do so by the end of last year. I have not, however, the facts but, if an opportunity arises, I should very much like to know whether this feat has been achieved. We also find that in Article 2 the security for this loan is stated to be the pledged assets of the Austrian State, subject to the priorities attached to three previous loans. I wonder whether my hon. Friend will tell the House later what is the estimated value of those assets, and how much of that value has been absorbed by the priorities. Surely the House is entitled to that information; otherwise it does not seem to me to be a wholly businesslike proposition.

Again, in paragraph (v) of Article 2, such vital matters as the rates of interest and the issue price of the loan are not revealed. Is not this information to which the guarantor is entitled; and, if so, might we have it before the end of the Debate?

Incidentally, Article 10 of the Protocol contains an arithmetical curiosity. I agree that my hon. Friend has already alluded to it, but he did not quite elucidate the point about which I desire to ask. Although the total loan is for 300,000,000 schillings, only 238,000,000 schillings, according to my calculation, are noted as guaranteed by the various Powers. I should very much like to know whether the remaining 62,000,000 schillings are intended to be raised in Austria, and, if so, what success could be achieved in such an operation? If, as my hon. Friend suggested in his opening remarks, this amount is to be raised by other Powers, are there any signs that that is being done at the moment?

In conclusion, I should like to draw the attention of the House to Annexe III. It contains one paragraph, paragraph 5, which I enjoyed immensely. It reads: The representative of the League of Nations shall provide himself with the necessary staff. His expenses and those of his office shall be approved by the Council and defrayed by Austria. I feel that Austria is doubtless thinking that not only does she have to call the bailiffs in, but she also has to take them out to lunch. We also see in Annexe III that wide powers are given to the League of Nations representative and an Adviser to the Austrian National Bank, who is also to be appointed by the League. I think the House would like to know whether either of these is likely to be a British subject, and who they are likely to be. I submit that these are points on which the House is entitled to some information, and I trust that that information may be forthcoming. If it is satisfactory, to some extent it might possibly help the House to that state of "grinning and bearing it" to which we have become so accustomed while paying for these Peace Treaties, Peace Treaties that have not up to the present been satisfactory, and I, for one, feel that at the first opportunity they ought to be looked into very carefully.

10.14 p.m.


The hon. Member for Westhoughton (Mr. Rhys Davies) said that he was more critical now than he was before Christmas, and the same line was taken by the hon. Member for Ebbw Vale (Mr. A. Bevan) in his very interesting speech. Both hon. Members were hostile to the principle of the Bill. I was surprised at that. Both of them forget who is responsible for the necessity for this Bill. We are not responsible for the necessity for the Bill. They are. And, although the Financial Secretary's excellent speech was very skilful, one could see that he was skating over thin ice—that he was supporting a Bill which he did not like, for which he was never responsible, and which had been forced upon him, and that he had been left to mop up a mess for which neither his nor our party were responsible. That being the case, hon. Members on the other side have the effrontery to get up and say that they do not like this Bill. We had a very long Debate on the Financial Resolution, and I put a question to the Chancellor of the Exchequer on 20th December. I asked: Did the Bank of England make this advance at the request of the Government? The advance was made in order to keep the Creditanstalt on its feet—a purely political action. My right hon. Friend answered: I will not say that, as I was not a member of the Government at the time, but that it was made with the approval of the British Government I have no doubt."— [OFFICIAL REPORT, 20th December, 1932: col. 935, Vol. 273.]


The Financial Secretary to-day has said that it was not made with the approval of the Government. It was made by the Bank of England, and subsequently the Government approved the course that the Bank took.


I am not going to answer for the Treasury, but the Bank of England would not think of lending £4,300,000 to Austria unless it had known first whether the Government wished it or was against it. This was in 1931. We were not in office. That brilliant galaxy of talent now on the other side was—


Your Prime Minister was in office then.


And your Lord Snowden.


This is an example of the fantastic and grotesque actions of misgovernment that took place. It is for such reason that Lord Snowden left that party with disgust. If any blame accrues to anyone, let hon. Members opposite remember that they were partly, if not wholly, to blame, for it was their own Chancellor of the Exchequer who led them into giving approval, or led them not to disapprove when the Bank of England made the application to the Treasury to know whether the money should be lent or not. I object very much and on the lines of the right hon. Gentleman the Member for South Molton (Mr. Lambert). It is no good talking self-righteously about the standard of living of Austria being kept up by us. I want to see the standard of living of the people of West Surrey, Norwich and Bristol kept up. In the last Debate I said I would rather see money lost in Surrey, Bristol or in Norwich than in Vienna. If it is to be lost, let it be lost at home. Let the hon. and learned Gentleman who rebuked me during the Debate on the Money Resolution go to Bristol and say he prefers the money to be lost in Vienna rather than it shall be lost in pulling down slums in some of the unlovely cities in England. It is false sentiment run riot. We are not responsible for this Bill although we have to carry it. The Chancellor of the Exchequer said, during the Debate on the Financial Resolution, The Committee, no doubt, will ask itself what test should be applied to this problem in order to decide whether it is prepared to approve the Resolution which is now before us, and I suggest that the test which should be applied is whether if this loan is made with the guarantee of the several Governments, it does really offer a reasonable chance that Austria may once again recover her position, that she may be able to meet her foreign obligations.… These reforms are to be carried out with the assistance of a representative of the League, a Dr. Rost van Tonningen."—[OFFICIAL REPORT, 20th December. 1932; col. 9315. Vol. 273.] I have taken the trouble to find out what Dr. Rost van Tonningen said. He said the Austrian foreign debt in June, 1930, was £140,000,000, of which £120,000,000 was non-commercial. The Budget deficit for the first nine months of 1932 was nearly £1,000,000. And the service of the debt cost £10,000,000 annually plus £5,000,000 of arrears. I think the Financial Secretary was a little disingenuous about that. I have a cutting here from the "Times" of 18th January which says that, according to statistics published by the State Court of Accountancy, the figures for the Austrian Budget for the first nine months of 1932 showed that there would be a deficit of nearly £1,000,000. That is only a few weeks before we were debating it in December. If one were to be cynical as to the form in which the bonds of this loan should be printed, he would remem- ber that it is a loan to take the place of another loan. The crest of the Austrian Empire before the War was a double-headed eagle, and underneath was the Austrian or Virgilian motto "Uno avulso non deficit alter," which now means, default on one loan, and then replace it by another. The verb in that motto is the word "deficit," so we are going into this guarantee with our eyes open. We are fully warned that there will be a fresh call upon the Treasury to implement the guarantee sooner or later.

I maintain that we ought to ask the various other nations who are likely to join us in this guarantee for raising a loan, to control by a consortium and without any infringement of sovereign Austrian rights or any of the courtesies due to Austria, the Austrian Customs and Excise so that we should not ultimately find ourselves, owing to some gap in our precautions, without the interest on the loans about to be guaranteed. On top of the money already owed there is to be a further debt of not less than £12,000,000 in respect of the present loans. Taxes are not being collected in Styria and Western Tyrol. In fact, when the officials attempt to obtain the taxes for the Government they are met with armed resistance. How can we expect Austria to supply money to pay the interest upon this loan when she cannot get in her taxes. The fact of the matter is that a bankrupt Austria maintains her social services—and there is a great deal in what the hon. Member for Ebbw Vale said—on taxes she cannot collect and on loans from her friends in respect of which she defaults and then asks for more. He said that we ought to cut out the dead wood. I do not like to use the word "crash," but I think that it would have been better if we had allowed the inevitable collapse of Austria instead of postponing it. Austria ought to be allowed by a liquidation to put her house in order. The Socialist Government forgot a commercial proverb—that although you may put a bankrupt on his feet you cannot always keep him there. You might spend all you had on Austria, but it does not follow that you would save her. That is what we are trying to do with Austria. We ought never to have intervened and the Socialist Government ought never to have countenanced the lending of British money to bolster up the Creditanstalt. They told the Bank of England to go ahead and that they would stand by it. The Bank of England found the money, but the Creditanstalt did crash. What happened? The British Empire still goes on. In future, if France and Italy wish to outbid us and compete in guaranteeing political loans either to Austria, Albania or Yugoslavia, let them do so. We are not going to find any more money for that purpose. We bolstered up Turkey for years to keep the equilibrium in the Balkans. The great Lord Salisbury said ultimately that we put our money on the wrong horse. We found her with money. She was our bitterest enemy during the War. There was the Gallipoli campaign, and Turkey made mischief for us all over the East, while we had made sacrifice after sacrifice to keep the Sultan on the Throne. Just before the outbreak of war we found a loan for Hungary. Hungary took arms against us. This lending of money to foreign countries for political purposes should be brought to an end. The Financial Secretary represents the Treasury. He has been warned. My right hon. Friend the Foreign Secretary, who has more than enough on his shoulders, will have to bear this further warning on his shoulders. The House of Commons will not confirm a policy of this kind in the future. It is a very good thing that we kept the Stamp Duty at a high figure on foreign bonds. When I was officially responsible for certain things here it was suggested that we should bring down the duty on foreign bonds. I thank God that we did not. We were told that if we did not reduce the Stamp Duty on foreign bonds the loans would go to America for issue, and that we should lose the profit. What profit? I am very happy to say that by keeping a high duty on the issue of foreign bonds we drove the issues to America, and now America has them on her shoulders and not our investors, and the loans are in default. The old blind principle of our lending money on any pretence whatever to foreign countries, even bankrupt foreign countries, is dead and done with, and should be buried. I must support this Bill, which was bequeathed to us by the late Government and Mr. Snowden. But we all trust it is the last time that the principle it embodies will be put into a Bill brought before the House of Commons. If another such Bill is brought before the House, I hope that I shall be with the right hon. Member for South Molton and that two of us, at any rate, will not vote for it.

10.28 p.m.


A lot has been said tonight by one of the chief props of the Government, who has been attacking two of the other chief props of the Government who are here to-night defending the Government's proposal in this matter. I have no doubt that they will survive the attack. The hon. Member for Farnham (Sir A. M. Samuel) read an account from the "Times" of the state of affairs in Vienna at the present time. From the information that I have received from friends there I think that that statement is very much exaggerated and that, serious as the situation may be, there is no danger of the immediate collapse to which the report would seem to point. The hon. Member made an attack, and one that is quite customary, upon the Financial Committee and the policy of the League of Nations. In so far as that is true it is nothing other than an attack upon the chief financial experts of the world, because the people who go to Geneva to give advice upon the Financial and Economic Committee are the leading financial experts of this country, of France, Germany and the other countries.


Experts of what?


They make many mistakes in advising people inside their own countries, and in this country, and it is not surprising that when their collective wisdom is called together they may give similar advice to the League of Nations. Therefore, the attack is not upon the League but upon the particular persons who are there to advise it on financial issues. The correct remedy is to send wiser and abler advisers there.

When the Debate took place on the previous occasion the idea was put forward that one of the conditions of the loan was that the Customs Union between Germany and Austria should not be allowed to take place. We were told in the reply to the Debate that the result of passing that resolution would be that there would be no change and that the situation would, at any rate, be no worse. I do not think that is quite the whole story. The position really is that France insisted absolutely that this loan had to be issued under the terms of the Protocol of 1922. They insisted for political reasons and the Permanent Court of International Justice had before it this Protocol in connection with the ' well-known case of the Customs Union which the German Government brought about, and they decided by a majority that the Customs Union was illegal under the terms of that Protocol. Therefore, it follows that for the next 20 years any Customs Union between Germany and Austria will be illegal and an impossibility.

We ought to have some defence from the Government as to why they came to agree to an extension of the issue of the loan under conditions of this kind. Were they obliged to do so? Surely they could have insisted that it should be free from these fetters, which are most unfair and unreasonable in the case of Austria, which is in a difficult position geographically and economically as a result of the War. It may be that a customs union between Germany and Austria is too limited and that there should be a wider area covering all that part of Europe, but it is unfortunate that we should agree to this new scheme, which continues for 20 years the fetters placed upon Austria by the Protocol of 1922. It is clear that the whole object is to repay the loan made by the Bank of England; we are simply meeting a debt incurred by the Labour Government. They regret it now, but it is an honourable obligation made with their con currence—


Surely the Financial Secretary made it clear that the loan by the Bank of England did not in any way involve an obligation on the Government?


The Financial Secretary made it clear that the Labour Government on its own motion undertook the liability of concurring.


To concur in a loan made by a private company is not to underwrite a loan.


We all know that the relations between the Government and the Bank of England ought and should be very close indeed, and that when a loan of this size is made to a foreign country it is well known to the Foreign Office. In this case the Labour Government decided that they would concur and approve, and there is clearly a moral obligation on the Government of this country to carry it through. I hope this will be the last time, and that nothing of the kind will be necessary in the future. The whole point is this. There is no case, apart from this loan, for picking Austria out and making the loan to her, but we have done so. Whether we shall have to make another loan in the future depends on the World Economic Conference which is to be held some time this year. If the Government pursue a bold policy for a reduction of tariff barriers and all restrictions on trade throughout the world with courage and determination, as I hope they will, the situation in Austria arid other countries may improve and prosperity return. If they do not then it is clear that this loan will be perfectly useless; we shall be throwing good money after bad. I hope that this will prove another stimulus to the Government to make the greatest possible success they can of the World Economic Conference.

10.34 p.m.


There seems to be an idea that this loan made by the Bank of England was a loan made at the request or with the consent of the Labour Government. I naturally have no means of knowing the position, but I understand from the Financial Secretary, who no doubt has looked carefully into this matter before he made his statement, that there was no approval of any sort or kind, before it was made or at any time, and, indeed, that this loan was not in any way an isolated transaction but part of a much larger transaction between the creditors of the Creditanstalt—the Austrian Government, the National Bank of Austria and the Bank of England, whereby the Austrian Government guaranteed £14,250,000 sterling to the creditors of the Creditanstalt. It was in order to enable that guarantee to be carried through that the Bank of England, which no doubt was vitally interested in preserving the financial stability of the big London houses, put at the disposal of the Austrian Government the 150 million schillings, probably in the form of sterling. That was a matter which was done entirely for the sake of the City of London, and it was not done as the gesture of a humanitarian bank in order to save Austria. It was because the Austrians already owed so much to the City of London that if the Creditanstalt had simply been allowed to default there would have been a very urgent crisis in the City of London itself.

The criticisms which we have to offer upon this Bill are, first, that by this snowball of international indebtedness you will never cure the Central European position. It is quite clear that the object of this loan—it has been so stated—is to put at the disposal of the Austrian Government an amount of foreign exchange to enable them, first of all, to convert some of their short-term liabilities into long-term liabilities; and, secondly, to enable them to have a certain amount of foreign exchange for the purpose of providing the service of the previous loans; that is to say, this money is fresh capital out of which interest on the old loans may be paid. When, this £4,500,000 is exhausted no doubt Austria will come back again, or someone will suggest that Austria should come back again, and borrow some more money to pay the service on this loan and the previous loan, and the loan of J. P. Morgan and Company, which was made in 1930 to the Austrian Government. So we shall go on building up this superstructure of indebtedness upon a foundation which does not exist at all, because there is no economic unit in Austria which is capable of carrying this huge weight of debt.

We believe that if this problem is to be tackled at all, as was said on a former occasion, it has to be tackled by reconsidering the whole Central European situation and doing something to build up economic units which are capable of becoming self-supporting. For that reason the restriction which has been put upon Austria as a condition of this loan, that for 20 years she will not enter into any Customs union with Germany, is, we think, a very serious restriction, and one which is extremely vicious in view of the European situation.

There is one other aspect of the problem which calls for a great deal of criticism. This 100,000,000 schillings the equivalent of which is being provided by a loan in this country, is expressly to repay the Bank of England, and it is so laid down in the annexe to the Protocol. The Bank of England is a particular creditor of Austria, and we do not see any reason why that particular creditor should be provided with the money at the expense of the English taxpayer, because there is very little doubt that no one will ever see this £4,500,000 again except the Bank of England. They, of course, are going to get it, and they will, therefore, benefit to that extent. I suppose the country will never get it back again until they nationalise the Bank of England and get it in that way. No doubt the country will do that, though whether this item will then be traceable in the accounts, it is impossible to say.

We asked the Government on a former occasion to explain why, when we cannot pay America, as we say, when we cannot provide money internally for essential services such as slum clearance, housing and proper unemployment benefits, we are able to raise in this country a loan of £4,250,000 which is to be paid to the Bank of England. We are, in fact, apparently preferring the claim of the Bank of England to be reimbursed for a bad loan which they made two years ago, to the urgent needs of our own people. We on this side of the House do not see how any Government can justify it. Nor, may I say, to their credit, have the present Government ever tried to do so. We have never heard an argument from the benches opposite which sought in any way to answer that criticism. We challenged the point formerly, but the Financial Secretary with his usual adroit ness managed to skate over the ice with out falling into that particular hole. We hope, however, that the Government will take this opportunity of explaining through the House to the unemployed, who number some 180,000 more than they did last month—


Does that please hon. Gentlemen opposite?


It does not please me any more than it pleases the hon. Member.


The hon. and learned Gentleman is, I think, the sixth Member of his party who has referred to it this evening.


Certainly. We are vitally interested in the feelings of hon. Gentlemen opposite, and we believe it is very good for those feelings that they should constantly remember the position of unemployment. As I say, perhaps we may on this occasion have explained how it is that in the circumstances which I have mentioned this money can be raised on the London market and put to this use of repaying the Bank of England, when apparently it is impossible for the Government to raise money for housing and other purposes which might lead immediately to employment. That, I think, is a question which the unemployed will want to have answered when they read to-morrow that the Government are providing £4,250,000 for Austria.

10.44 p.m.


This has been a useful Debate, but it is well to bear in mind, in view of the case which has been so forcibly put from the other side of the Table, that the statement has already been made that hon. Gentlemen opposite do not intend to vote against the Second Reading of the Bill. This matter has a history which must be kept in mind if one is to judge it fairly. The Government certainly have no reason to oppose the view which has been expressed in many quarters, that when our own country is living through such difficult times, when there are so many good objects which we should all wish to see supported to the fullest possible extent, nobody desires to see us travelling all over the world in a sort of Don Quixote fashion, bestowing money lightheartedly upon other areas and other peoples. We do not want to do that, and certainly that is no part of the outlook of the British Government in this matter.

On the other hand, I must be allowed to say—and I aim sure that hon. Gentlemen opposite will support me in this— that it is the greatest possible mistake to suppose that the prosperity of this country and of our own people has no relation at all to the situation of people in other parts of the world, and if one can find a case in which there is really a specially strong need for help and a specially strong reason for believing that help may have good results, then I think we must find a balance between these two very natural and very proper needs.

At Geneva, I found that the Finance Committee of the League of Nations was engaged in drawing up an elaborate plan which, if it had been adopted in full, would have meant the guaranteeing of loans, not only to Austria, but to other countries in the centre of Europe, whose necessities I do not dispute. That was being done by the very distinguished men who are on the Finance Committee of the League. The British Government thought it right to examine those proposals very closely, very shrewdly, because, after all, we have to consider our own national position and not allow our actions to be completely decided even by the most experienced and the most disinterested international organisation. We put on our experts to study the plan, and we came to the conclusion that we could not ask the House of Commons and the country to accept this very elaborate scheme, which would have bestowed benefits upon several countries in Central and Eastern Europe. But the case of Austria, beyond all question at all, had some special features, and here are two very special features.

There is no doubt whatever, I apprehend, that a financial disaster occurring at Vienna would have a greater effect upon the whole credit of Europe than a similar sort of collapse in many of the adjoining States. I think anyone who has followed the history of the matter will have recognised the significance of the fact that the Creditanstalt crisis was the prelude to the German crisis of 1931. What have we been trying to do at Lausanne? We have been endeavouring, no doubt, to serve what we believe to be the interests of our own country, but we have been trying to do it by having regard to the terrible stress and the fearful necessities of some of the populations on the Continent of Europe, and we have endeavoured to get co-operation for the purpose of lifting the burden, if we could, upon Europe as a whole.

The first reason why the Austrian case was thought to be one which stood rather specially apart was that, I believe, in the judgment of all competent persons, a collapse in Austria, a collapse in Vienna, which, as the hon. and gallant Member for St. Marylebone (Captain Cunning-ham-Reid) rightly said, might mean political anarchy, was a thing which would certainly produce the most dreadful reactions, not only in Austria itself, and in its immediate surrounding neighbours, but in Europe generally. Furthermore, the collapse of a financial house or of a particular bank is felt by poor people just as much as by rich and may produce very great hardships. That is one reason, and the second is the very practical one that if Austria made default on her 1923 loan, then, straight away, we were in for a loss of £800,000 a year, which is a good, solid, practical factor. In those circumstances the experts who examined this, the Chancellor of the Exchequer and the Treasury, came to the conclusion that, while we could not announce at Geneva that we would adopt this elaborate plan of the Finance Committee, which would have tried to assist quite a large number of countries, this was a case which stood much more by itself and one where we ought to see if we could give some help.

But see what the conditions of help are. While this House is asked to give a Second Heading to a Bill authorising the making of this loan, the loan is not going to be made unless, indeed, it is with the co-operation of other countries, including France. We have no idea of doing it entirely by ourselves. We have got a similar assurance from one or two other important countries in Europe. If now it is possible for these countries to join together with us to make this loan, the special circumstances of the Austrian case would justify our joining in. If others are not able to do it, we cannot do it either. The hon. Member for Marylebone asked why it was that while the Schedule of the Bill speaks of an amount of 300,000,000 schillings, the actual amount mentioned is a smaller sum. The answer is that the smaller amounts adding up to 238,000,000 schillings are amounts promised firm assuming we are all able to come together. But, of course, the list is open. Already there have been hopes that some other countries will make contributions, and if it is possible 300,000,000 schillings is the total wanted to be provided.

Those are the broad reasons why the Government thought that this case ought to be considered specially. There is one thing more. Not only will any competent student admit that an Austrian collapse would be exceedingly severe in its possible consequences to Europe and other countries, but, as a matter of fact, it is only right to recognise that the Austrian Government, faced with great difficulties, have already made considerable efforts, and not unsuccessful efforts, to pull itself round. I am not going to be so rash as to make any promises at all. No one shall quote what I am saving to-night, if things go badly, as saying that I have assured the House of Commons that all is now going to be perfectly all right. I do not know, and we none of us know, but we had to consider what Austria had done. The right hon. Gentleman the Member for South Molton (Mr. Lambert), with whose general view of the necessity of being careful I entirely agree, quoted a passage from the "Times," but I do not think he observed that that was followed by a very careful statement, and there are a couple of extracts which I will venture to read. The first is that the statement to which he referred does not take account of the fact that the Budget for 1933 has been balanced and that expenditure has been reduced by 269,000,000 schillings in the period 1931 to 1933. I naturally inquired about the Budget of 1933 which has already been the subject matter of assurance, and I have ascertained that in 1932 there was a very small adverse balance, less than £500,000. In 1933 the Budget, as presented, by means of very considerable economies and the additional burdens they have taken on themselves, is actually a balanced budget and to that extent Austria is entitled to say to some of her neighbours that she has been doing her very best to pull herself round. The second extract I should like to read is this: The Austrian Treasury was able to meet all foreign claims of holders of the League of Nations Loan of 1923 and of the International Federal Loan of 1930 on 1st January, 1933. the transfer of payment being continued. I can only say I wish other foreign Governments would in all cases do the same. Austria is entitled to say she has in these days of exceptional difficulties, and with the advice and the help of the League of Nations advisers, been doing her utmost to pull herself round. We have not the slightest intention of undertaking this new experiment by ourselves, but we did think it right to say, when the League of Nations presented us with a much more elaborate programme, that we really could not do all this. The burden on our country and the claims on our people did not make it possible to suggest that we could do all that, but here was a very vital case in which we would do it provided some of the other countries of Europe would do the same. I think that the House will see that that was a reasonable and sensible course, and it is a very narrow view of our own interests and our own duty to say that we should wash our hands entirely of other people and that they can collapse without serious reactions upon ourselves.

The hon. Member for Westhoughton (Mr. R. Davies) raised a side point, but a perfectly reasonable point, in this connection. He called attention to the fact that, according to rumours and reports, there had been a strange event, namely, some importation, it is suggested, of arms into Austria. The hon. Gentleman asked the Government quite naturally what the Department for which I am responsible had done about it. As soon as we heard of this, I directed that inquiry should be made of all the capitals in Europe which could possibly have information to give. These inquiries were addressed in very careful terms by our representatives there. The worst of it is that in these cases you very seldom get a completely clear account of the matter about which inquiries are made. I think it is plain that the hon. Gentleman, possibly by a slip of the tongue, went too far when he spoke of the Austrian Government importing arms. That does not appear to have occurred at all. What appears to have occurred is that a number of arms, not new, but old arms, were sent to two factories in Austria, so it is said, for the purpose of being reconditioned, for, I suppose, more effective use. They consisted of a large quantity of rifles and 200 automatic rifles. They were not imported by the Austrian Government, but they were undoubtedly received by two factories which are in Austria.

The next question was, "Where are they going to?" As the hon. Gentleman correctly informed the House, there were rumours in the papers that they were going to Hungary. When inquiries were made at Budapest, the answer was that the Hungarian Government had no knowledge of the matter at all. We have done all that is proper to test that, but that is the answer we get. As regards the Austrian authorities, they say that the arms were forwarded with the con- sent of the competent Austrian authorities as coming to the country for the purpose of being reconditioned. The question still is, therefore, as far as they have not been distributed, where they are going to. On that, I will only say that I have acted with promptitude and made it plain that we desire to know more about it, and that we most particularly call attention to the fact that we would conceive it as a breach of the Peace Treaties if they were to be distributed as some people suggested.


Has the right hon. Gentleman information where they came from?


We made inquiries from the country from which it was suggested they came, and were assured by that country that, as a matter of fact, they are unable to give us much information. I have not given up inquiring into the matter, and am in contact with some of the other Governments in Europe about it. I would just observe this, that I think it is just as well that the fact should have been ascertained that two Austrian firms have been allowed by the Austrian authorities to import arms with a view to reconditioning them for export. I think it is very well in view of the terms of the Treaties that the fact should have been publicly stated, as it was quite accurately, by the hon. Member. We desire if we can to get at the bottom of the affair, not with the object of calling anybody hard names, but to stop what would be a Very serious thing—if it were the case that there was a secret supply of arms from any quarter. But, after all, the House will see that this question of arms has nothing to do with the Austrian financial situation. The arms are not being imported by the Austrian Government, none of this money goes to pay for them. Having given the House, as candidly as my information permits me to do, the facts about that situation, I ask the House to take the view that this is a case where, naturally, we all examined the claims made upon us with a great deal of concern and anxiety; and because of that, and of the history behind it, as my hon. Friend the Member for Farnham (Sir A. M. Samuel) said, I hope the House will give us this Measure.


I understood the right hon. Gentleman to say that the Austrian Government, by their Budget of 1932, had served the loan guaranteed in 1923, and yet on 20th December the Financial Secretary to the Treasury said: The Austrian Government undertook to transfer the sum required for the service of this Joan in monthly instalments. The transfer of these instalments has been suspended since 1st July, 1932."—[OFFICIAL REPORT, 20th December, 1932; col. 969. Vol. 273.] I am at a loss to reconcile that statement with the statement made to-night.


I think the hon. Gentleman will see that there is no inconsistency. The question whether in a given year a country balances its Budget is a question of balancing outgoings and receipts. Whether it is or is not punctually serving a loan is not quite the same thing. I believe it is true that when that statement was made there had been some delay, at any rate, in serving the loan, but it is the fact that there never has been actual default in serving the loan of 1922–23; and by means of this new advance, combined with the contributions from France and other countries, we believe we are really assisting Austria to meet that liability.


Do I understand that those monthly instalments have since been met?


indicated assent.


I understood from the speech of the Financial Secretary that none of this money was actually going to Austria. If that is so, what is the point of saying that Austria has balanced her Budget? If she has balanced it why should we take on this liability?


The answer is that at present Austria has got a short-term loan at a high rate of interest. If this proposal goes through she is going to get the money at a low rate of interest. So far as the loan of the Bank of England is concerned—whatever may be challenged or is in dispute as to the impression given by a former Chancellor— it is certain that the Bank of England lent money on the terms that whenever Austria next got a loan that money should be repaid. Therefore, the only choice between us is either not to go into this business at all or else to accept the posi- tion that if the loan is made by several nations together this borrowing by the Bank of England will be repaid. Those are not the terms we have inserted. It is one of the conditions on which the Bank of England loan was granted. When I say that Austria will have additional re sources, it is quite true that so far as this country is concerned, it is a case of a given sum cancelling out against another sum, but we must remember that the total loan to Austria does not come from this country alone.

11.5 p.m.


I do not want at this late hour to trespass very much upon the time of the House. We have listened to an answer from the Foreign Secretary which he called "candid," but which was in fact more clever than candid, and to a speech from the Financial Secretary which skated over the most important points raised in the Debate. It is not at all clear whether, when the Bank of England made this advance to the Creditanstalt, they obtained the Treasury's participation. The Financial Secretary to the Treasury says that they did and did not. The Chancellor of the Exchequer says that be was not a member of the Government at the time, so that he could give the House no information. It is a very important point indeed. If the Chancellor of the Exchequer at that time, Lord Snowden, gave any guarantee to the Bank of England that the State would back the Bill that lies behind this advance to Austria, an attempt has been made behind the back of the House of Commons to lend money to a foreign government by utilising the Government's bankers and pledging this House's credit without any consultation with its Members.

So far we have had no very clear explanation on this point. The Financial Secretary to the Treasury was embarrassed and unhappy when he was questioned on this subject. He never told us whether the Government was a party to the advance made by the Bank of England to the Creditanstalt. That is the most important question that could be raised in this Debate. The Government, at the present moment, are ratifying a decision taken secretly between Lord Snowden and the Governor of the Bank of England, and by doing so we are losing the whole of the boasted control of the House of Commons over finance. It is remarkable that no speaker in the Debate has given any information as to whether the Government was a party to the loan which was made to the Creditanstalt. I will give the Financial Secretary an opportunity of telling the House whether the Government was or was not a party to that loan.


I would not like my hon. Friend to go away dissatisfied, nor should I like him to go away under the misapprehension that there is any distinction between what my right hon. Friend said and what I said myself. My right hon. Friend was asked by the right hon. Gentleman the Member for Farnham (Sir A. M. Samuel) if the Bank of England made this advance at the request of the Government, and the Chancellor of the Exchequer replied: I will not say that, as I was not a member of the Government at the time, but that it was with the approval of the British Government I have no doubt."—[OFFICIAL REPORT, 20th December, 1932; col. 935, Vol. 273.] That is precisely what I myself said, indeed what I think I have said this evening, namely, that the Government of the day regarded it as desirable from every point of view to avert financial collapse in Austria and to approve the action that was taken by the Bank of England. I think that that is an amplification and an extension of what my right hon. Friend said, and I made that statement with the intention of giving to my hon. Friend who interrupted me and who put the question, the fullest explanation.


I am very much obliged to the Financial Secretary. I do not think that his explanation of the Chancellor of the Exchequer's explanation gives us a very clear indication of what really happened. The Chancellor of the Exchequer said, "I will not say that, as I was not a member of the Government at the time," but he could have applied underneath the Gallery to his own officials to get the information on that point. The trouble about this loan is that the Government have inherited an unhappy commitment from Lord Snowden. The Government are ashamed of that commitment, but they are determined to ram it through the House of Commons. The Government are deter- mined, knowing that this loan was made behind the back of Parliament, to endeavour to fulfil the embarrassing commitment left to them by Lord Snowden. I think the House will lose all reputation if it passes a Bill of this kind. What is happening is that we are fulfilling a subservient function. We are to back a Government bill a year and a half after the obligation has been incurred without our knowledge. I think we ought to resist this proposal, and if we do so, I do not think that it will embarrass the Government very much, because the Government, as far as I know, are not on affectionate terms with Lord Snowden. The principle of Parliamentary control of finance is the most important issue in this Bill.

Supposing that by some extraordinary chance one of the hon. Gentlemen on the Front Opposition Bench became Chancellor of the Exchequer, and was thinking of making a loan to Russia, he might say, "We cannot get this loan from Parliament, but we will instruct our bankers to make the loan, and will ask Parliament to ratify it later." Then every Member on the Treasury Bench would say that our control over the public purse had been destroyed, and Parliament's authority over finance had been undermined, and we should have a number of brilliant perorations against such a policy. The present position is not different. The Government are ratifying la loan which has been made in an illegal and disingenuous fashion by the former Chancellor of the Exchequer, Lord Snowden, and, if any Member of the House has any independence of the present administration, he will not vote for it.

On the other hand, if the Government say that they never accepted any responsibility for the loan, would they explain why they bring in what is practically a Bank of England Belief Bill? They are bringing in a Bill to help a country which is competing with our own traders. Why not bring in a Bill to help joint-stock bankers in Lancashire, Yorkshire and elsewhere? If the Government are so anxious to relieve bankers, surely they will relieve those who are financing our home trade, and not those who are assisting our foreign competitors.

I do not think that this Government approve of financing the Creditanstalt or Austrian traders. I know that they realise that they have inherited a monstrous commitment fom their predecessors, and are anxious to make the best of it, and they send the Foreign Secretary to perorate, as he did in the most winning language, about helping Austria; but he forgot to tell us that the proceeds of this loan are not going to help Austria, but are going into the coffers of the Bank of England. The Foreign Secretary, further, made great play with the fact that Italy and France had participated in this loan, but he did not give the House any information as to the terms imposed by France and Italy. They made a condition that Austria could not enter into a very desirable Customs Union with Germany. We are being dragged into these squalid intrigues between Italian and French politicians over the corpse of Austria. I think that that is a mistake. If France and Italy will turn Austria into an almshouse, they had better be told to keep her, but I do not think that the British taxpayer should be called upon to do so.

I seriously ask Members of the House, especially the younger Members, to make a great effort to preserve their independence to-night by turning down this proposal. The Government cannot resign if this Bill is rejected, but they would be taught a lesson to respect the old House of Commons tradition of our control over the public purse. It seems to me that the observations which have been made by the Foreign Secretary and the Financial Secretary are so futile that it is an insult to the intelligence of the House to ask it to accept their arguments. The Chancellor of the Exchequer, who was quoted by the Financial Secretary, told us that he practically knows nothing about this loan, because he was not in office at the time. He goes to the Treasury every day, but, apparently, they do not show him the papers relating to what happened before he came into office. Because, I suppose, we reached a new era when he descended upon the Treasury. The busy officials underneath the Gallery who can explain, everything were happily dumb in this occasion. The Government 'are trying to save Lord Snowden's face, though with the greatest reluctance; but even so I appeal once again to the younger Members of the House, and to all independently minded Members, not to support this Bill. We are always being told by the Government that they cannot afford 'a penny to get rid of our suppurating slums, or for any sort of social service, but they are quite willing to march forth with £4,500,000 to help the Bank of England or Austria. At some time or other Members will be faced with a general election, and I should like to see their faces when they are told by their constituents: "You supported a Bankers' Relief Bill for £4,500,000, while refusing to find a penny to deal with the slum problem and other grave social evils in this country." That is what they will be told if they do not go into the Lobby and support us. We are really trying to do our best for the House of Commons traditions by 'attacking this particularly disingenuous and unconstitutional Bill.

11.16 p.m.


I think the House has the right to have one of the most important questions answered by the Foreign Secretary. The Government were asked the other day and again to-day by the right hon. Gentleman the Member for South Molton (Mr. Lambert) if there has been any agreement or arrangement of any sort or kind with any of the countries which are guaranteeing part of this loan and if they have laid down any sort of condition that there should not be a treaty between Germany and Austria, for the purpose of reducing tariffs. I can imagine no circumstance which would bring the Foreign Secretary into this Debate unless it was to give an answer to that important Foreign Office question. The Financial Secretary on 20th December made it fairly clear to some of us, as we thought at the time, that it had nothing whatever to do with a trade treaty between Germany and Austria and that there was no part of the Protocol which laid it down that for say, 20 years, Germans and Austrians were not to make any form of trade agreement. Yet, a few days afterwards we had a leading article in the "Times" which indicated that the French had apparently laid it down that for the duration of the loan, for 20 years, there should be no possibility of a trade agreement between Germany and Austria, which is in a hopeless financial position.

This point has been raised by more than one hon. Member, and we have had no answer. The speeches and ideas of the Socialist Opposition are directly contrary. They all seem to think that there has been an agreement of this kind. It is hopeless for the House of Commons to be passing a Bill of this nature; it is not right that we should pass it if there has been some private European treaty, one of those secret treaties, which are the worst of all, by which you prevent the Austrian people, whom you have placed in a hopeless position as an economic unit, from trading with the great nations around them on more favourable terms than now. You have no right, as I see it, to take part in treaties of that kind imposing burdens on countries in the centre of Europe who are at present hopelessly incapacitated by the burdens laid upon them by the Peace Treaties. I think the House is entitled to know perfectly clearly and once for all whether there has been any sort or kind of foreign agreement.


I will answer the question, as the hon. Member says, once for all and perfectly clearly. There is no private or secret understanding or agreement of any sort or kind. I cannot agree with the hon. Member that the question the puts has not been answered. It was answered in the Debate on the Financial Resolution and was answered in anticipation by my hon. Friend beside me, and if the hon. Member will look at the Schedule and read between lines 15 and 20, he will there see the answer printed on the face of a House of Commons paper.


I ask my right hon. Friend, What is the basis of the speeches which have been made from this side? Here is a leading article in the "Times" of the 3rd January which lays it down, with reference to the Treaty between Germany and France, that this renunciation was the price required for the French participation in the new scheme of financial assistance, without which the issue of a fresh loan would not have been possible. Will my right hon. Friend the Foreign Secretary, say that the leading article in the "Times" is entirely inaccurate, or is it accurate?


I will make the point quite plain to my hon. Friend. I have not said anything at all before about the explanation of the speeches of hon. Gentlemen opposite, or with regard to the contents of any article, but what I am saying, and what I have said quite clearly, is that I do not know of any secret or private arrangement or treaty, or any understanding of any kind. If anyone wants to know what the condition is, it is here printed in the document. If the hon. Gentleman will look at it, he will see: That the above Governments, including the Austrian Government, declare that such assistance is given on the basis of Protocol No. 1 signed at Geneva on the 4th October, 1922, and of all the undertakings resulting therefrom. That is to say, that the provision of the earlier Protocol of the year 1922 applied without change to the present document. I will first give the example that one of the conditions is that Austria undertakes, in accordance with the Treaty of St. Germain, not to alienate its independence. What is not true is that there is any special condition put upon Austria in respect of this new loan; still less is it true that there is any treaty, arrangement, or understanding of which I have no knowledge whatever.


I accept that statement, but the right hon. Gentleman has said this Treaty carries on the same position as that of the 1922 Treaty. This Treaty takes it on for the full 20 years, and that may very likely be the cause of the misleading opinion held by some people. There is a strong feeling that you have lengthened the time laid down previously, and made it more difficult to have any sort of breakdown of the economic barriers in Central Europe. I think that it is a very bad condition to have in this Treaty. As my right hon. Friend said, there is nothing secret or anything of that kind, but it is a curious thing, as many people think, that you are doing in this Treaty something which will make it more difficult to effect a real economic solution of the policy of the great Central European Powers.

Bill committed to a Committee of the Whole House for To-morrow.—[Mr. Hore-Belisha.]