SCHEDULE.—(Austrian Protocol.) (Hansard, 16 February 1933)

§ Mr. CHARLES WILLIAMS
When we were last discussing this matter I was endeavouring to put to the Financial Secretary a question which he omitted to answer. Does any part of this Schedule lengthen the time of the 1922 Protocol? It is a matter which the Committee has a right to know. The second point which I wish to put is, what can Austria actually do under this loan in the way of making a Treaty to lower her tariffs or to come to any tariff arrangement with other countries? We have had two important statements on the question. One from the Chancellor of the Exchequer on 20th December last in which he said: Both the Italian and the French Governments declined to join in any project for a guaranteed loan unless Austria were prepared to reaffirm her previous undertaking that she would not alienate her economic independence."—[OFFICIAL REPORT, 20th December, 1932; col. 934, Vol. 273.] We all know what economic independence may mean. It may mean a good many 1320 things, but the Financial Secretary on the last occasion said that there was nothing in the Protocol which prevented Austria from making any trade or commercial agreement. Between these two statements there is a difficulty, and I am anxious to find out the position. I will illustrate my point in this way. Many people say that the Ottawa Agreements bound us. In a sense they did, and because of these Treaty arrangements with the Dominions we are not so free to make other Treaty arrangements. The point some of us wish to know is whether Austria is prevented by this Protocol from making an agreement to lower her tariffs with any of her neighbours. Can she enter into a tariff agreement with" Germany or France or anyone she likes? I am sure that both the statements of the Chancellor and of the Financial Secretary are intended to be clear, but a good many of us are not certain whether Austria can enter into tariff agreements with other countries.

§ The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha)
I will satisfy my hon. Friend's curiosity and will answer him as quickly as I can. The hon. Member for Westhoughton (Mr. R. Davies) put this question and was perfectly satisfied with the answer. There is nothing in this Protocol that does anything else but reaffirm the status quo. Austria guaranteed not to alienate her independence by the Treaty of St. Germain. That is merely reaffirmed here. Nothing is added to it either in substance or in time. As regards the second ques- 1321 tion—whether Austria can make commercial treaties about tariffs, either to lower them or to heighten them, that position is absolutely guaranteed under this protocol. In fact, Austria has already commercial agreements with the countries that my hon. Friend mentioned.

§ Mr. C. WILLIAMS
Under the new protocol you lay down, as the hon. Gentleman says, that you are not in any way binding Austria, but surely the new loan lengthens the time of the old loan. The old loan was for that 20 years.
On page 4 of the Agreement it is stated: The loan shall be for a term of 20 years. Apparently that would be from 1932 to 1952. The old loan was from 1922 to 1942, and really it does mean that we are lengthening the time. I think we ought to know whether we are actually altering things.

§ Mr. HORE-BELISHA
I want to be absolutely specific in reply to my hon. Friend. The basis of the whole of this question of Austrian independence is the Treaty of St. Germain, the terms of which I read to my hon. Friend in the last Debate: The independence of Austria is inalienable otherwise than with the consent of the Council of the League of Nations. There is nothing in this Protocol which in any way compromises or qualifies that position, and it is the Treaty of St. Germain which is the basis of the document.

§ Mr. WILLIAMS
We understood that the whole time—absolutely. But the thing is that we do lengthen the period of the loan, and the period of the loan is the period of the treaty, as I understand it, so that by that we are adding 10 years to the original term. We are not making any different terms except lengthening the period, and that is what we have never been able to get out of the Government.

§ Mr. HORE-BELISHA
This Protocol merely reaffirms the Protocol of 1922. That Protocol merely re-states the position under the Treaty of St. Germain, and the Treaty of St. Germain remains the basic position. Nothing is altered here, as I have told my hon. Friend, either in substance or in time. If the 1322 question ever arose it would be for the League of Nations presumably, and perhaps for the Hague Court, if it were referred to the Hague Court, to determine that. There is nothing here that alters the basic position.

§ Mr. WILLIAMS
I am not arguing about the basic position. Is that perfectly clear? Here we have clearly laid down that this loan is operating for 20 years from now or from last August; in other words, we are lengthening the time of the loan by 10 years. That is all I wanted to know. We are lengthening the time, but in spite of that, we do not alter the conditions.

§ Mr. HORE-BELISHA
I am glad to know that there is absolutely no difference between my hon. Friend and myself. The Treaty of St. Germain lays down the position for all time, and Austria may not alienate its independence except with the consent of the Council of the League of Nations. The Protocol merely reaffirms the Treaty of St. Germain; it does not alter the time at all; it merely re-affirms it. If the Council of the League of Nations decide that Austria can alienate its independence then it will be able to alienate it, otherwise not; but there is no change whatever under this Protocol from the previous position.

§ Mr. MANDER
I do not think my hon. Friend makes the position quite satisfactory in saying there has been no new commitment. As I understand the position, under the Treaty of St. Germain Germany and Austria Cannot unite without the unanimous consent of the Council of the League of Nations, but in addition to that there was this Protocol of 1922, which is a quite separate instrument, under which for a period of years, I think it was 20, Austria agrees not to apply for union with Germany. The agreement for a Customs union, which was proposed a few years ago, was put to the Permanent Court of International Justice, who decided by a majority of one that it was illegal and inconsistent and that no such union could be formed. My hon. Friend says that there is no new commitment. That is not satisfactory, because, while it is true that Austria is not bound to anything fresh, she is bound for a longer period. You might as well say to Germany at the Disarmament Conference: 1323 "We are going to ask you to renew the Treaty of Versailles for another 10 years. It is not a new commitment. It is what you have had for the last 10 years." That would be quite unsatisfactory, and they would never sign it. I think that the Government have been unwise and wrong in making an agreement of this kind to issue a loan under these terms. They have done it, no doubt, in order to obtain an agreement with France.
There ought to be some explanation from the Government as to why their diplomacy was so unsuccessful at Geneva on this occasion that they felt bound to fall in with the wishes of the French to extend the period by which Austria will be bound, under the Protocol of 1922, for something like another 10 years. It is perfectly clear that that is what is going to happen 'as a result of this agreement. That is why the agreement is so intensely unpopular and why there was an agitation throughout the country and in the Austrian Parliament, where it was only carried by one vote. There was considerable doubt for some time whether there would be one vote. I think some body was ill or somebody died and enabled them to get a vote. The thing was certainly extremely unpopular in Austria for that reason. The House are entitled to know what were the motives that actuated the Government in imposing those conditions.

§ Mr. BRACKEN
We have just had a characteristically fatuous speech from the Liberal benches. We are opposed to this loan. The Government have paid more attention to the Treaty of St. Germain than to upholding the League of Nations because there was a very serious breach of the Treaty of St. Germain in the gun-running activities from Austria to Hungary.

The DEPUTY-CHAIRMAN
I do not think that that can possibly arise on the Schedule.

§ Mr. BRACKEN
Of course, I bow to your Ruling. I would point out to you that this Debate is on the whole subject of the credit of Austria. Austria breaks the Treaty of St. Germain, it affects the Vote that will be given in this Committee. We do not want to enter into the points that concern the League of 1324 Nations; we are merely anxious to defend the credit of the British taxpayers.

§ Mr. MANDER
I should certainly have referred to the point that the hon. Member is referring to if I had not known that it was out of order.

The DEPUTY-CHAIRMAN
The hon. Member for North Paddington (Mr. Bracken) is really making a Third Reading speech.

§ Mr. BRACKEN
I commiserate with you, Captain Bourne, that you should have the assistance of the hon. Member for East Wolverhampton (Mr. Mander) when you are making Rulings from the Chair. It may be that this is a Third Reading speech, but I think that all that we need worry about to-night is that the Chancellor of the Exchequer is not here to give us an official opinion on this point, though we are most obliged to the Financial Secretary to the Treasury for being present. His courtesy and diligence have impressed the whole Committee. He has treated us extremely well, as has the right hon. and gallant Member for Rugby (Captain Margesson). We hare some very serious criticisms to make of this Bill, but I advise my hon. Friends who seek to do so that the time to make those criticisms is on Monday, when we shall have the Chancellor of the Exchequer present. In view of the fact that we are spending £4,500,000 to fill the coffers of the Bank of England, owing to its injudicious loan to Austria, we have a right to expect the Chancellor of the Exchequer to be present. I advise my hon. Friends not to press the Financial Secretary too hardly. We must make our points on Monday, because it is an important matter—[Interruption.] The hon. Member for Bridgeton (Mr. Maxton) has intervened in characteristic fashion. He says that Members are going through the doors in order to avoid the Whips; but, as the three members of his party have avoided the Whips, it does not lie with him to rebuke us—

§ Mr. MAXTON
Four.

§ Mr. BRACKEN
I beg pardon, four. Only two of his party are now present, one of whom used at one time to be associated with myself—

The DEPUTY-CHAIRMAN
References to the party of the Eon. Member 1325 for Bridgeton have nothing to do with the Schedule.

§ Mr. BRACKEN
Of course I entirely agree, but, if the hon. Member had not intervened, I should not have been drawn away by this red herring—

The DEPUTY-CHAIRMAN
If the hon. Member criticises me, I shall have to ask him to resume his seat.

§ Mr. BRACKEN
I was not in any way criticising you, Captain Bourne; I was criticising the hon. Member for Bridgeton. I should never criticise the Chair in any respect. As, however, this is a very important debate, and as a large Division can be expected, I think our criticisms are very well deployed, and, if it is in Order—[Interruption.] I would remind the hon. Member who interrupts me that he belongs to a party which is famous for its abstention from the Division Lobbies. I would advise my hon. Friends to crystallise their criticisms on Monday next, and be a little merciful to the Financial Secretary, who has treated us extremely liberally in this important discussion.

§ Mr. RHYS DAVIES
I cannot quite understand the opposition to this Bill coming from the right wing of the Tory party. We have been told by the Financial Secretary that we cannot retrace our steps on this Measure. In fact, once the House had passed the Money Resolution on the Bill, the Government immediately, I understand, ratified the guarantee to Austria, and consequently nothing can usefully be done, now. Even if the hon. Gentleman who has made so strong an appeal took the matter into the Division Lobby, it would not affect the position very much. I feel as strongly about this loan as any Member in the House, but I have a feeling that it is not quite fair to use this Bill as the pivot upon which to argue for a revision of the Treaty that confines Austria to its present limits. I hope that an opportunity will come very soon for Members of all parties to discuss the Treaties which confine Austria to limits which would make it practically impossible for her to live; but I am not willing that we should use this Bill as a pivot for the discussion of that very much bigger question.

§ Mr. ANEURIN BEVAN
I was astonished to hear my hon. Friend on the Front Bench say that the passing of the Money Resolution meant that the House has already parted with the money. That is an extraordinary position.

§ Mr. HORE-BELISHA
I did not understand my hon. Friend to say we had parted with any money, because that is obviously untrue. We have ratified.

§ Mr. BEVAN
So the money has not in fact been paid to the Bank of England and, if this Bill is not carried, the Bank of England cannot have the money.

THE DEPUTY-CHAIRMAN
The hon. Member is now making a Third Reading speech. There is nothing in the Schedule to authorise the payment of money to anyone.

§ Mr. BEVAN
I merely raised the point because of the point that has already been made. What we have attempted to do in this Debate is to find from the Front Bench what are really the conditions attached to this loan. I understand that the Governments of the United Kingdom, France and Italy are ready to grant further assistance to Austria for this purpose and that those Governments and the Austrian Government declare that such assistance is given on the basis of the Protocol signed at Geneva on 4th October, 1922. So we are now to understand that the reason why this £4,300,000 is being asked for from the British taxpayer is in order to relieve France from the embarrassments which will follow consequent upon Austria having to appeal to the League for the revision of the Treaty of St. Germain. That is the position we are now faced with. To say that we are finding this £4,000,000 on the basis of the Protocol of 1922 is to say that we are attaching definitely political conditions to the lending of the money. That is undesirable where private firms lend money to Governments. There was considerable discussion and great resentment throughout the country because it was said that certain banks, in lending money to Great Britain at a difficult time, attached certain political conditions, but the practice of Governments attaching political conditions to loans is very grave indeed, because it focuses against the lending Government 1327 the political resentment of the people who borrow the money. [Interruption.] If the Noble Lord would have his little joke outside—

§ Major the Marquess of TITCHFIELD
It was not a joke. It was very serious.

§ Mr. BEVAN
If the Noble Lord guffaws like that at something serious, what would he do at a joke? The seriousness of the position is that the Austrians feel deeply resentful at the conditions that are attached to the loan. That resentment in ordinary circumstances would focus itself against the Bank of England, and the political consequences to this country would be negligible. But it is dangerous in the extreme for Great Britain and the League of Nations, which is an organisation intended to promote harmony among countries, to lend money to a country on the ground that it had made sufficient sacrifices among its own people not to be able to meet the obligations of the loan subsequently.
If these loans are going to be arranged, let them be arranged between private persons and not between Governments, so as to upset good feeling between nations because of the consequences involved. There was a lot of resentment in Australia when Sir Otto Niemeyer, of the Bank of England, went to Australia and said, "You must put your house in order. You have certain obligations to the City. You have borrowed certain monies. You must revise your Budget. You must reduce your outgoings and your social services in order that the moneylender may be paid on his bond." But we escaped. The Australians did not say, "Great Britain is a Shylock; Great Britain is asking the Australians to reduce their standard of living." [An HON. MEMBER: "Australians!"] I am talking about Australia. I specifically mentioned Australia. I said an official was sent by the Bank of England to Australia to ask the Australians to reduce their standard of living in order to meet obligations to moneylenders in Great Britain, and the same official, my hon. Friend informs me, was sent to Austria.

§ Mr. BUCHANAN
Sent by a Socialist Government.

§ Earl WINTERTON
These incidents occurred when the late Government were in office; and is not the whole of this Bill, like many other bad things that this Government do, a legacy from the late Government.

§ Mr. BEVAN
That is correct, but why should you carry such a heritage of sin. You have sufficient crimes of your own without having to answer for the crimes of the late Labour Government as well. We have it in our power at the moment to prevent the malevolent schemes of the late Socialist Government from coming to fruition. It was not the Government of Great Britain who sent Sir Otto Niemeyer to Australia. It was the Bank of England—the City. But it is the Government who have called upon the Austrians to reduce their standard of living by this Bill. I submit that the feeling between Australia and Great Britain was not injured by what Sir Otto Niemeyer did there because we as a nation and a Government were not involved in the financial policy. We escaped the consequences because we allowed it to be an arrangement between a Government and a foreign firm. But here it must be an arrangement between Governments, and so it is the Government of Great Britain which says to Austria, "Reduce your standards of life and keep yourself in the chains of St. Germain for 40 years in order to meet your bondholders," and the bondholders are now the British Government and the British people. This is a very serious post-War development in the relationship between nations. The political consequences of loans of this kind were to a large extent avoided before the War because the prestige of Governments and the honour of nations were not involved. But here we are making the lending of money an instrument in international diplomacy. Here we attach to the lending of money obligations between Governments which must be regarded by people of the borrowing country as a tyrannous imposition.

§ Mr. MAXTON
Why not Mr. Montagu Norman as Secretary of State for Foreign Affairs?

§ Mr. BEVAN
We have already one Foreign Secretary. We have to pay him, and should not have to pay for the blemishes of a second. I submit to the 1329 Committee in all seriousness that I am not making this point because I want to cause unnecessary difficulties but because of the dangerous consequences which will follow if loans are made in this way. If, as the hon. Gentleman the Financial Secretary to the Treasury so urbanely pointed out when he moved the Second Reading of the Bill, the purpose of this loan is merely to put Austria upon her feet, and she will be able to meet her obligations without difficulty, why attach this loan to her at all? Why not merely lend the money, saying to Austria: "You are a good borrower. You are a perfectly sound proposition, Great Britain is going to start a new role as a money lender and we are going to lend you £4,300,000, in co-operation with other Governments, because you are a good borrower and need the money." Why have we not done that? Will the Financial Secretary inform the Committee why we have made it a political loan and not merely a financial transaction? If this loan is not a pawn in a political game, why is it not a pure and simple financial transaction as between lender and borrower? In this Schedule you have attached the loan to a Treaty, you have made it conditional upon certain political considerations. You say: "We lend you this money on one condition, and the condition is that you shall not attempt to recast your frontier: that you shall be permanently bankrupt, that you shall remain under bond to French diplomacy and that under no circumstances shall the Austrian nation appeal to the League of Nations to have their economic independence restored."
I ask the Committee to consider what it is doing in passing this Bill and Schedule. This is not lending money to Austria on the basis of a financial proposition. If it was a sound financial proposition the Bank of England would stick to it. It has been put upon us because the Bank of England secretly entered into obligations with the League of Nations, without consent of this House, that honour or signature of this country should be attached to a loan of £4,300,000, on political conditions, before this House had considered it and that was done behind the back of the House of Commons, and now we are asked to ratify the secret diplomacy of the Bank of England. We are asked to 1330 find £4,300,000 because Mr. Montagu Norman, the Governor of the Bank of England, has been the secret plenipotentiary of the Government, without the consent of the House of Commons. We are entering our protest against this because it is a most sinister development of international diplomacy. If France wants to make use of her gold ingots and impose her will upon Central Europe, Great Britain must not be made the instrument of French diplomacy. I will ask the Financial Secretary a few questions: (a) Why is this not a purely financial loan: (b) If it is not purely a financial loan, what are the political conditions attaching to it. If political conditions are attached to it, in what way do those conditions rebound to the benefit of Great Britain. What have we to do with the attaching of political conditions to this loan to Austria.

§ Mr. HORE-BELISHA
Is this still question "B"?

§ Mr. BEVAN
Yes, as to what are the political conditions. What advantage do we get from it to justify the lending of £4,300,000? Will the Financial Secretary answer? If it is a sound financial proposition, why does not the Bank of England carry it? Why have we to carry it? If it is not £4,300,000 thrown away in order to get Austria in a certain political relationship to her neighbours and to the League, why does not the Bank of England carry the money?

The DEPUTY-CHAIRMAN
The question of the policy of the Bank of England cannot arise on this Schedule.

§ Mr. BEVAN
I bow to your Ruling, Captain Bourne, but I suggest that we are discussing the Schedule, which makes it clear that this loan is to be made on a certain basis and that that basis is political. Therefore, I am asking if the hon. Gentleman will do the Committee the service of replying to the question which we are putting. Up to now we have not had an answer, and, if we cannot have an answer clearly to this question, then there is going to be more difficulty on the Third Reading. Let the hon. Gentleman be frank with the Committee and show us the body in the bag in all its naked horror. Let us see what are the proposals to which the Government have committed themselves. If the 1331 hon. Gentleman will be candid and frank with the Committee and tell us what his difficulties are, we may sympathise with him and give him the Bill on Third Beading, but, if he tries to conceal the difficulties and will not be frank with the Committee, we shall press our opposition on the Third Reading.

§ Mr. HORE-BELISHA
The hon. Member for Ebbw Vale (Mr. A. Bevan) concluded an exhaustive, fervid and moving speech by asking me four questions, (a), (b), (c) and (d). Would that he had asked me the questions first. If he had, we might have been spared a long, moving, fervid and eloquent speech because the answers to the questions are quite simple. I am sorry that it escaped his attention that I have answered them already. I am anxious to be as precise as possible. The answers are these, and I hope the Committee will be satisfied. There is no political condition attaching to this loan; it does no more than reaffirm the status quo. This protocol reaffirms the Protocol of 1922 which reaffirmed the Treaty of St. Germain. My hon. Friends who have spoken have apparently forgotten what the Protocol of 1922 affirmed. It affirmed the independence of Austria. Austria undertook to preserve her independence. We, in turn, undertook to respect her independence. That is one of the Clauses of the Protocol of which my hon. Friend is apparently now complaining. The undertaking of Austria not to alienate her independence shall not prevent Austria from maintaining, subject to the provisions of the Treaty of St. Germain, her freedom in the matter of customs tariffs and commercial or financial agreements and, in general, in all matters relating to her economic regime or her Commercial relations, provided always that she shall not violate her economic independence by granting to any State a special regime or exclusive advantages calculated to threaten this independence. That Clause I have quoted is in absolute accord with the recommendations made by the right hon. Member for Darwen (Sir H. Samuel) this afternoon, namely, that unfair advantages should not be given to one country against another.
My hon. Friend asks why any reference at all is made to the political independence of Austria. I will tell him, quite candidly, as I have told him before, 1332 that Austria is a petitioner for a loan. France is one of the nations to whom Austria addresses herself. France says that she wants to be sure before guaranteeing a loan that the independence of Austria shall not be alienated and merged into that of another country whereby her right to receive her money may be jeopardised. Austria is perfectly independent. She can refuse to take this loan; and France can say that she prefers to have the assurance that the Treaty position shall be preserved. The hon. Member for Ebbw Vale happens to represent a Welsh constituency in the British Parliament, but if he had read the debates in the French Parliament he would have seen that the French Government was attacked on precisely the opposite grounds.—namely, that French interests were being sacrificed to British policy and that Great Britain was standing in the way of the kind of conditions of which the hon. Member complains.

§ Mr. BEVAN
When a lender lends money to a borrower, and that borrower is a State, conditions are usually attached to the loan of such a nature as will preserve the solvency of the borrower and make it more probable that the money will be paid. Will the Financial Secretary say in what way these conditions make it more practicable for Austria to pay?

§ Mr. HORE-BELISHA
Really, I do not know whether to satisfy the hon. Member I am justified in inflicting another long speech on the Committee. I have stated many times, and I wish my hon. Friend would take notice of what I say, that if he will read the Protocol he will see that Austria undertakes to balance her Budget and take every measure necessary to repay this loan. That is a perfectly legitimate obligation for a lender to place upon a borrower. No political condition is placed upon Austria which does not already exist. I cannot say it more specifically. The position under the Treaty of St. Germain is re-affirmed.

§ Mr. MANDER
Is not the period lengthened?

§ Mr. HORE-BELISHA
No. The Treaty of St. Germain provides that Austria shall not alienate her independence for all time, not in 1944 or 1967, but at all except with the consent of the League of Nations.

§ Mr. MANDER
There are two entirely different points here, and I think the Financial Secretary is mixing them up. It is true that under the Treaty of St. Germain Austria cannot for all time join Germany without the consent of the League of Nations, but we are talking about the Protocol of 1922, which is for a term of years only. Is it not true that this particular document has by this agreement been lengthened for a certain period of years?

§ Mr. HORE-BELISHA
I wish my hon. Friend would pay attention to what I am saying. Under the Treaty of St. Germain Austria undertakes, for all time, not to alienate her independence, irrespective of any Treaty, except with the consent of the League of Nations. In 1922 she seeks to borrow money, and those from whom she seeks to borrow money say, "Certainly, we will lend you the money if you reaffirm the Treaty of St. Germain." Austria reaffirms the Treaty. In 1932 she seeks to borrow more money, and the persons from whom she seeks to borrow say, "Certainly, if you reaffirm the Protocol of 1922," which reaffirms the Treaty of St. Germain. It does not extend it; it reaffirms it. If my hon. Friend wants a legal verdict that can only be given by the judges. I am saying what the political position is. There is nothing in the political position which detracts from or extends in any way the situation as it was created by the Treaty.