HC Deb 25 June 1934 vol 291 cc807-70

Order for Second Reading read.

3.49 p.m.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain)

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

On Saturday there was published in the Press the text of Notes exchanged between the German Ambassador and His. Majesty's Government concerning the service of certain German loans. I think a perusal of those two Notes will make clear the circumstances in which the Government have, very regretfully, found themselves obliged to introduce the Bill of which I am now moving the Second Reading. There is no doubt that the position of Germany with regard to the foreign exchange necessary to discharge her obligations is one of very great difficulty, but I think two questions arise in connection with that position. The first is whether these difficulties have been brought about, as is alleged by the German Government, mainly by the action of foreign countries, or whether, as is maintained by all the foreign creditors of Germany, it is not largely due to the policy of the German Government itself, and, in particular, to the policy of the Reischsbank. The second question is whether the payment of the full service of the two Government loans known as the Dawes and the Young Loans would be an intolerable strain upon Germany's resources in foreign exchange. I do not wish to repeat here all that is said in the British Note, but I cannot think that any impartial person reading that Note could feel that the answer to these questions could be given in favour of the German view. In the German Note a great deal of emphasis is laid upon the reduction in the Reichsbank's reserves of gold and foreign exchange, and it is said that those reserves have been sacrificed in an effort to maintain payment of the German obligations, but it is nevertheless the fact that a very great part of this serious diminution in the reserves of the Reichsbank has been due to a device adopted by the bank which in its effect is really equivalent to depreciation of the German currency, although great stress is laid by the bank upon the necessity of maintaining the gold parity of the reichsmark.

This device consists in advances of foreign exchange to German exporters for the purpose of enabling them to purchase depreciated bonds abroad. They then sell those depreciated bonds in Germany, where they command a higher price, and they just make a profit in reichsmarks which of course reduces their costs and, as I say, has the same effect as depreciation of the currency. During the six months ended 31st March last the creditors found that, while the Reichsbank was pleading its inability to find foreign exchange to meet its obligations, it had released foreign exchange equivalent to no less than 335,000,000 reichsmarks for this purpose of buying depreciated bonds, scrip, blocked marks, etc., and that 335,000,000 reichsmarks is nearly four times the amount of interest for a full year upon the Dawes and the Young Loans. The exporters are expected to repay these advances out of the foreign exchange which they receive in payment for their exports. That, of course, comes later, but it does, as is pointed out in the British Note, really constitute a hidden reserve of foreign exchange which must be taken into account in any calculation of Germany's resources in that respect. Therefore, it certainly seems a very strange thing that, while pursuing this policy, the German Government should maintain that it is really impossible to transfer the very much smaller amount required to fulfil the obligations upon these two loans. There are other matters mentioned in the Note on which the creditors consider that the estimates made by the Reichsbank are very much less favourable to Germany than would be justified by an impartial examination of the facts. I am afraid I must record that, rightly or wrongly, the creditors of all countries no longer feel the confidence that they did in the good faith of Germany.

In the course of the discussions that have been taking place in Berlin between the creditors and the representatives of the Reichsbank, the British creditors offered to accept suspension of the service of all the loans except the Dawes and Young Loans and possibly two other minor Government loans. The effect of that offer would be that, out of the 800,000,000 reichsmarks which would be due during the current year, the German Government would only have to find about 100,000,000 reichsmarks in cash. That offer was so extraordinarily favourable to Germany, as it seems to me, that I must say I think their rejection of it was altogether incomprehensible. At any rate, I cannot see any reason why they should have objected, to it on either economic or financial grounds. However, they did reject it, and the consequence is that the creditors in the foreign countries concerned have found themselves forced to consider what measures they could take in order to preserve the interests of their nationals. That very brief account of the circumstances—I refer hon. Members to the British Note for further details—is the justification for the Bill that I am now presenting.

Hon. Members will have seen that at the end of the British Note it was made plain to the German Government that the door was still open for further negotiations, and the German Government were invited to send representatives to London for further discussions in the hope that it might be found possible to avoid using the powers which are sought for in this Bill. I am happy to say that that offer has been accepted, and I sincerely hope that it may still be found practicable to make some arrangement with the German authorities which will ensure fair treatment for British bondholders and British traders before 1st July. All the same, we cannot postpone the request to this House for the necessary powers in the hope of a solution which may, after all, be found impossible. We trust, therefore, that we shall be given the Second Beading of this Bill to-day, and that it will be passed through all its stages, so that if it should, unhappily, prove necessary, we may have the powers to put it in force to see that the British nationals are fairly treated.

The Bill, as hon. Members will observe, contains two operative Clauses—Clause 1, which provides for the setting up of a Clearing Office, and Clause 2, which gives power to the Board of Trade to restrict imports, that is to say, to impose quotas where discriminatory quotas are imposed upon the United Kingdom by foreign countries. I want to make it quite clear that Clause 2 is not directed against Germany; nor, indeed, is it directed against any country in particular. It is a Clause which has been inserted in this Bill after many representations from traders that we should take powers of this kind, because we are in the presence of a comparatively new weapon in disputes about imports into various countries, and we must, if we are to deal practically and effectively with that new weapon, be similarly armed ourselves.

As a matter of fact, we are almost alone in the world in not having powers of this kind. We have already similar or analogous powers with regard to the duties under Section 12 of the Import Duties Act, 1932. That Section gives us power to impose discriminatory duties where discrimination is exercised in the matter of duties against us, but we have no corresponding powers about quotas, for the simple reason that we have not hitherto imposed quotas in this country, with the exception of a few cases of agricultural products where quotas have been imposed for an entirely different purpose. But a practice has now sprung up on the Continent of imposing quotas which reduce the possible import of any particular article into a country, and then offering to bargain to increase the quota in return for concessions to be given by the other side. That is a very difficult position to contend with in the absence of any similar or retaliatory powers on our side, and, therefore, we have felt that it was necessary that we should fill up this gap in our defences. But I say here that we do not like quotas in this country, we have no present intention of imposing quotas and we most earnestly hope that it will never be necessary to use the powers which are contained in Clause 2. Our belief is that the very fact that we possess these powers may make it quite unnecessary to put them into operation.

If I may go back to Clause 1, which has, of course, reference to the particular circumstances to which I have been alluding, the House will see that the Clause is drawn in very wide terms. Under the Clause, the Treasury may make Orders which will provide for the payment to the Customs on account of a Clearing Office of the whole or part of the value of goods imported from the country to which the Clearing Office is being applied, and the Clearing Office may use the proceeds of those payments in order to discharge debts due by the inhabitants of that country to persons or corporations resident in or carrying on business in this country or in the British Empire, whether those debts are in respect of goods supplied, or whether they are in respect of the service of loans. The extent to which this Clause may be put into operation depends entirely upon the course of the negotiations which are shortly to be entered upon, but there are two points which seem to us to be essential for any satisfactory agreement. The first is that there shall be full payment of the service of the Dawes and Young Loans which have legal priority; and the second is, that as regards other matters there shall be no discrimination unfavourable to ourselves between ourselves and the treatment of creditors of other countries.

I hope that, even if it should be necessary to set up a Clearing Office in order to achieve these two purposes it may still be possible to leave British exports to Germany outside the operation of the Clearing Office, and that there will be no interference with that trade; but it will be seen that the Clause is drawn widely enough to deal with a contingency of that kind should it occur, because it would be possible to provide that the whole value of German goods imported into this country should be made available to the Clearing Office for the purpose of discharging debts due by Germans or British goods exported to Germany. But I am assuming, and I hope that I may safely assume, that there will be as little interference with trade as possible, and that we shall have to concern ourselves only with the service of loans. In that case our first object will be to provide for the full payment of the interest on the Dawes and Young Loans, and it will be proposed in that case to issue an Order providing that 20 per cent. of the value of German imports should be paid to the Customs on behalf of the Clearing Office. The Clearing Office would notify the German authorities of this payment, and since the German Government have announced that the service of the loans will be paid in marks, that means that there will be marks available in Germany with which the German authorities can recoup the trader, who will only receive from the British purchaser 80 per cent. of the value of his goods.

With regard to the other loans—loans other than the Dawes and Young Loans—the German Government are proposing to issue in respect of their service Funding Bonds on the lines suggested by the British creditors, but with 3 per cent. interest. The creditors will be prepared to accept those Funding Bonds, provided that the terms of the bonds are satisfactory, and that, as I said before, there is no unfair discrimination against them as compared with other people. At the present moment, I believe, conversations are proceeding between the German authorities and the Swiss and Dutch creditors, and upon the result of those negotiations must depend whether, in fact, there is or is not discriminatory treatment against the creditors in this country. But assuming that there is no discrimination, then, I think, there is no serious difficulty likely to arise in respect of the treatment of these other loans.

With regard to the Dawes and Young Loans, I think I should, perhaps, try to make clear one or two points of detail as to the conditions. First of all, what holders and what bonds would be entitled to the benefit of the Clearing Office? The answer to that is: All British nationals holding sterling bonds wherever they are resident, and all foreigners holding sterling bonds who are resident in the United Kingdom. The next question is, what would be the extent of the benefit? The answer to that would be, that as far as the Dawes and Young Loans are concerned, 100 per cent. of the interest would be paid, and with regard to the other British issues of German loans, the holders would receive Funding Bonds or better terms than that, according to whatever arrangements may be concluded by the Germans with the Swiss and the Dutch. Thirdly, with regard to the foreign issues, they would receive only Funding Bonds. The determining date as to the ownership will be 15th June, that is to say, in order to qualify as British nationals holding the bonds, they must have held the bonds on 15th June, and not later.

There are just two other points on which I should like to say a word. The first is that, although I have spoken only of our differences with Germany in this matter, and although in fact it is only those differences which have caused us to introduce this Bill to the House of Commons, the Clause is not confined to Germany, but is drawn in such terms as would enable it to be applied to any other country if the need arose. I did consider for some time whether the Clause should be so drawn, or whether it should not be confined merely to the one case which had arisen, but I think that everybody must have noticed that lapses—if one may use such a word—of this kind are apt to be catching, and certainly if the need should arise again it would, I think, be unfortunate if we had to come repeatedly to the House of Commons to ask that the terms might be extended to this or that country. I do not anticipate that that same sort of question will arise elsewhere, but on the whole it seemed to me that it was better to have the power even though it might never be necessary to use it.

The second and the last point I want to mention is that everybody must be aware that you cannot have resort to a Measure of this kind without a certain amount of interference with the normal course of trade, and everybody would desire that that interference should be as confined as possible. With a view to the wisest and most careful consideration of any difficulties that may from time to time arise in the administration of the powers that are sought in this Bill, I am proposing to set up a small Advisory Committee which will contain not only the representatives of the Treasury and the Board of Trade, but also representatives of the Bank of England, the Joint Stock Banks, the Federation of British Industries and the Chambers of Commerce. I think that in that way we shall have an opportunity of keeping ourselves in touch with expert opinion on all matters that may arise under the administration of this Clause, and I hope in that way to reduce any friction and inconvenience to the smallest possible dimensions. I dare say there will be some questions on which hon. Members may desire further information. I could have entered into greater detail no doubt, but I felt, on this occasion at any rate, that the House would like to have a broad outline of the position in order that they may see what are the main equities, and the way in which we propose to deal with them.

4.20 p.m.


The House is especially grateful to the Chancellor of the Exchequer this afternoon for having taken us in his introductory remarks over the ground which led to the introduction of this Bill. We are as anxious on this side of the House as Members in any part of the House that nothing should be said to-day recklessly which would injure the prospects of negotiation and settlement of this dispute, but we really must complain to the House and to the Government that this Bill, having been brought so suddenly before us, leaves us without the opportunity of the full examination which we would desire before we gave our approval to it. We are grateful to the Chancellor of the Exchequer in the two questions which he posed to the House and which he answered himself to his satisfaction and to mine, as far as I was able to follow him, but it is really too much to ask that we should give our considered reply to the Government at such short notice and with such scant information.

The right hon. Gentleman questioned the policy of the Reichsbank, and asked whether Germany had accumulated reserves of exchange. That is the kind of question on which we are peculiarly unfortunate, because we have not access to information except the information contained in the reports from Herr von Hoesch to the right hon. Gentleman the Secretary of State for Foreign Affairs. I have taken the trouble to examine them, and I must say that I think Herr von Hoesch has strained the argument in favour of his case. The right hon. Gentleman the Secretary of State for Foreign Affairs has answered the case put forward by Herr von Hoesch, but this afternoon we shall find it exceedingly difficult to pass judgment upon, or to give approval to, any of the details of this very difficult Bill. I shall not pretend to understand exactly all it implies. The right hon. Gentleman told us that it is his intention to set up a clearing house through which all transactions and all manner of trade will be carried on, and that payments will be made in respect of all articles imported from Germany into this country. He said there was an intention to charge 20 per cent. ad valorem on the whole of such categories of goods, which was to be paid to the importer by the exporter through the commissioner in respect of such goods.


The hon. Member said that 20 per cent. was to be charged. I do not know whether that was a misunderstanding. The 20 per cent. is 20 per cent. out of the 100 per cent. of the value, and 80 per cent. therefore will he paid direct by the importer to the German exporter.


That is how I understood it and what I was endeavouring to state, but I did not quite follow the implications of the 3 per cent. funding point, but I will leave that matter to other hon. Members who are more expert than I. We regret very much that we have come to this necessity in relation to Germany and in relation to the possibility of resorting to this kind of machinery for dealing with further questions of foreign debts. After all, I think we ought to examine our own responsibility in this regard. Germany has imported borrowed capital to a very great extent in recent years. I understand that she imported 3,500,000,000 dollars in the five years from 1924 to 1928. They were the days of generous lending to which the hon. Member for Farnham (Sir A. M. Samuel) has so often called attention in this House. We were called upon, and we readily responded to the issue of loans in all parts of the world. The London market was exploited and the investing public of this country were induced to part with their money in investments in all parts of the world for all kinds of purposes. Germany was the largest Continental borrower. She borrowed not only for the re-organisation of her own industries but also for public services, buildings, and a variety of reconstruction purposes in those years. It states in paragraph 3 of Herr von Hoesch's Note that she borrowed 18.2 milliards of marks from 1924 to 1930.

It is difficult to know whether those who lent so readily are themselves free from responsibility in this regard; whether those who induced the British public to invest and to put up the money for all kinds of hazardous loans are not partly responsible, and whether the lenders of this country were apt to invest recklessly and are almost as much to blame as a Government which tries to avoid repayment of those loans. The Germans were borrowing when they were already heavily charged with obligations in respect of Reparations, and they must have known, and indeed the lenders should have known, in piling up those enormous commercial loans, in addition to the Government loans of which we have heard this afternoon, the very great risk of not being able to secure repayment. The time has now arrived when we see the almost unsurmountable difficulty of meeting those repayments. Paragraph 3 in the German Report, which Members must have read, is most illuminating, having regard to the things which have been said in this House and which have been said to the public outside, and the columns of nonsense which appeared in our public Press in years gone by, for we find that Germany has really paid no Reparations at all. Germany has only paid Reparations by borrowing, and the most remarkable thing has come to light in the statement from Germany itself in which these figures appear. In paragraph 3 Herr von Hoesch said that foreign capital to the net amount of 18.2 milliards of marks flowed to Germany in the years 1924–30, which enabled her to pay interest on her commercial foreign debt, to increase by 2.1 milliards her stock of gold and exchange to approximately 3 milliards of marks, to pay reparations to the extent of 10.3 milliards of marks. Germany has borrowed 1S.2 milliards of marks to pay Reparations of 10.3 milliards of marks. She has borrowed £l in order to pay 12s. of her debt. She has used the remainder for various purposes in strengthening her own financial and industrial position. That is a thing which should be driven right home to the minds of the people of this country, and in any controversy really that must be a very important part of it. Germany has not paid Reparations except to the extent that she has borrowed to pay Reparations, and when she has ceased to borrow she wants to cease repayment. That is the content of the paragraph to which I have called attention. We come to the farcical position revealed in this statement. I do not wish to use words carelessly, but really a most laughable state of things is revealed in this Note. I congratulate the right hon. Gentleman the Secretary of State for Foreign Affairs upon the very dignified way in which he has replied to this communication from Germany. I come to paragraph 11 in which Germany announces her intention of suspending payments for six months. Nothing is said as to what is to happen after the six months. No good reason is given to make one believe that after six months the payments will be resumed or that Germany will be in a position to resume payment. The words are: The transfer of the interest service of the foreign loans is to be suspended for six months from the 1st July. This, if it is carried out completely and if German foreign trade can only be maintained at the previous level, would open up the prospect that the Reichsbank's reserve of gold and exchange, which has almost reached zero point, would, in six months, recover by an amount which would be smaller than Germany has previously paid in reparations in one month. There is no ground to believe that Germany will be able to resume payments in six months any better than she can to-day. There is no encouragement to believe in anything which is said in this report, but there is an important paragraph, and I hope that the Chancellor of the Exchequer will be able to give due notice to it. In paragraph 13 a very important consideration arises—that is, the rate of interest on the Dawes Loan. The rate of interest was fixed nominally at 7 per cent., but owing to the great change in the currency since then the rates are considerably hgher than that. On page S of the White Paper it is stated that the rates of interest, in spite of currency depreciation, are 11.39 in the United States, 11.79 in this country, 8.01 in France, 8.47 in Holland and in Switzerland 12.69. That is a matter of very serious consideration and it will be a special subject for negotiation with a view to some kind of permanency of settlement being arrived at by all parties.

In paragraph 14 of the White Paper there is reference to the fact that payment by Germany as from the 1st July is no longer possible. We are there told that Germany cannot pay. Having regard to the statement that Germany cannot for the present meet her obligations, there is reference in paragraph 15 to an expression of hope by the German Government that the situation may not be further aggravated by compulsury measures against German exports. These matters are very intricate, and the average Member of Parliament will have to depend on the information collected and collated by the experts, who are in intimate touch with the financial situation in Germany and with the arrangements in this country. The experts have had a good deal to say on these matters. It is well to recall the fact that in 1924 the Dawes Plan was called "the experts' plan." A body of experts had met and reported in April, 1924, in a very exhaustive and involved series of proposals, and the Labour Government were called upon to implement the recommendations of those experts when the proposals came before the House. The agreement to carry out the experts' plan contained the machinery, procedure and stipulations in great detail.

I have refreshed my memory of the Preamble signed by Mr. Dawes, in which he said that the creditors of Germany were paying taxes to the limit of their capacity and that Germany should be taxed from year to year to the limit of her capacity. The intention was that Germany should not escape the taxation which was falling upon her creditors who had taken part in the War, from which we have all suffered and from which the world suffers so much to-day. It was arranged that Germany should be subject to no more taxation than the other countries, and the reparation claims against Germany were made having regard to her capacity to pay, without injuring her economic life and destroying her trade. Then we had a body of representatives at The Hague Conference in 1930, when the reparation payments were fixed year by year from 1929 to 1987. The payments to be made by Germany were fixed, but in the copy of the documents in the Library there is reference to the fact that Germany has a right of appeal. I should like to know whether Germany in case of need has the right to suspend payment, as she is now doing, or whether she has the right in case of need to make an application that payment should be suspended for a time. I am not sure whether the meeting of creditors came to be held in pursuance of that provision.

The German justification for their present action is the conditions that have fallen upon Germany in the world crisis. She calls attention to the enormous falling off in her export trade. Germany has suffered like the rest of the world in a reduction of the volume of her trade. Her export trade is down by almost the same percentage as our own. The world trade is down to less than 40 per cent. of the figures of four or five years ago. Germany has undoubtedly suffered, and in regard to the problem of debt payment she is in the position of some of our own Dominions. When a country is a debtor country and it derives less from the sale of its goods abroad that country finds it exceedingly difficult to send outside her own boundaries enormous payments for the service of her debts, but Germany has no special complaint in this respect. As a debtor country she is in no worse position in regard to loss of trade than many a creditor country. We are all affected by the falling off in world trade. I am, however, a little afraid that in our fiscal policy we are making it impossible to restore prosperity and the capacity to pay debts. The idea that we can by tariffs, import regulations and quotas solve this problem of debts is an utterly mistaken one. I do not question the right of the Government to take the steps which they consider necessary, but I do think that the final remedy for debt conditions is not to be found in this sort of a policy. I think that a more generous and wiser course will, perhaps, come as a result of what is taking place to-day.

I should like to know who are the chief bondholders in this country who are affected by the German action. The right hon. Gentleman said that an advisory committee is to be set up. That committee will represent certain large financial interests in this country, in the main. It will also represent some industrial interests. We claim that the advisory committee ought to be as widely representative as possible. I refuse to believe that all the people competent to adjudicate on this question are those who spend their lives in finance, in banks and in the consideration of statistics, without regard to the general effect upon the political life of the country as well as the financial considerations of the problem. I should like to know whether the bondholders are few or many and whether some information can be given on the point as to whether the committee could not be extended so as to contain elements which will not be purely interested in a selfish or sectional way. We should like the Committee to be open to people who are competent to assist the right hon. Gentleman by giving advice which will be more representative of the wider national interests than has been suggested in his speech.

We beg the Chancellor of the Exchequer and the Government, with their overwhelming majority, to take notice of the dangers that present themselves in these communications and the growing difficulty of the world situation consequent on a delay in debt settlement, and to see whether when the time comes, as it must come soon, we can go to the Conference prepared not to be unduly generous to Germany—I do not believe that Germany has any claim to generosity; I am not satisfied that she is using the resources she has to the best purpose, and I am not satisfied with her future intentions—but to be as generous as we can and at the same time just to our own people as a whole.

4.40 p.m.


This Bill has been presented with reference to the German default and public attention has been concentrated almost entirely upon that aspect, but the Bill goes far beyond that question, as the Chancellor of the Exchequer made clear in his speech. It deals not only with the measures to be taken to remedy the grievance of this country, in common with the grievances of other creditor countries, against Germany, but it also proposes to confer very large powers, in fact, unlimited powers upon the Government, subject to approval by Parliament in each particular case, where quotas are imposed by other countries, not only discriminatory quotas but any quotas which, in the words of the Bill, are considered to be specially detrimental to this country. As I read Clause 1 its provisions may also be used where it is thought that this country has a grievance in relation to the allocation of exchange by the Government of any foreign country which is regulating exchange operations. I should like to ask the Financial Secretary to the Treasury when he replies whether the Government have in mind in Clause 1 the use of such powers in the event of any grievance arising in the conditions of exchange restrictions in other countries.

With regard to the main purpose of the Bill, to which the Chancellor of the Exchequer very naturally devoted the greater part of his statement, we on these benches consider that in the Note which has been presented by the British Government to the German Government the case there set out has been fully established, that on the merits in this dispute it is clear that Germany has not acted rightly, and that there is no adequate justification for the default which she has declared. That being so, it is proper that the British Government should take such action as is within their power, and as circumstances permit, in order to secure redress. When the Government come to the House of Commons and ask the House to support them I think that all of us who have any sense of responsibility would be very chary in striking a discordant note and giving the impression abroad that there are divided counsels here in Parliament. In that regard I concur with the view expressed by the hon. Member for Gower (Mr. D. Grenfell) at the outset of his observations.


We are not all of that mind.


This controversy with Germany should be envisaged by the Members of this House purely with regard to the merits of the particular issue. Many hon. Members, perhaps most hon. Members, hold strong views with regard to the present regime in Germany in general, but that is an issue which does not arise to-day. Matters of this kind should be properly treated in a restricted sense solely with regard to their own particular merits. When it was a question of trading with Russia we, of the Liberal party, always strongly protested against the character of the Russian regime being brought into the question of negotiations, on the ground that the negotiations should be of a financial or commercial character. We did not agree with the view constantly expressed, for example, by the Noble Lady the Member for West Perth (Duchess of Atholl) that Russia should be treated as a pariah on account of the faults of her political regime, somewhat in the spirit which, I believe, still prevails in some rural districts, where feudal ideas are not yet dead, that you must not deal with a tradesman unless he is a member of your own political party.

In this case no one on these benches would desire to import into the present controversy any considerations arising from the fact that the underlying idea of the general regime in Germany is one with which we are out of sympathy. We regret that any controversy should have arisen with Germany on this matter. Since the War this country has genuinely, and, I think, generously, endeavoured to treat Germany in a spirit of accommodation, and has tried to secure the restoration of her economic position believing that this is necessary not only for our own sake but for the economic welfare of the whole of Europe. It is an interesting fact, mentioned by the hon. Member for Gower, who quoted from the Note of the German Government, that, as a matter of fact, the reparations which Germany has been supposed to have been paying since the earlier years following the War have almost all been provided by her own creditors. She is in the position of the old lady who declared with much satisfaction that she had been able to borrow enough money to pay all her debts. That is precisely the position which has prevailed in Germany.

A final settlement was thought to have been arrived at under the Dawes and Young plans. Bygones were to be bygones, and for the future that was to be regarded as a sacred obligation which was to govern the future financial relations between Germany and other Powers. It is profoundly disturbing that even this obligation is now being repudiated by the German Government. Therefore, we think it is quite necessary and right that the Government should take such action as is possible to secure redress of what is a legitimate grievance on the part of Great Britain. How this Clearing Office would work was somewhat obscure, but the matter has been very much elucidated by what the Chancellor of the Exchequer has told us this afternoon. Clearing houses have been set up in other parts of Europe dealing with not dissimilar matters, but they have been set up by mutual consent, and worked both ways by agreement between the Governments concerned. But this Clearing Office will be perhaps unique in that it is to be set up unilaterally, and may not have the consent or co-operation in working of the other party, namely, the German Government.

The Chancellor of the Exchequer has told us that it is not proposed to sweep into the funds of the Clearing Office all payments due by merchants of this country to manufacturers and merchants in Germany but that 80 per cent. of the sums due to them will in fact be paid direct, and that only one-fifth of the debt owing by our traders to German traders will be retained in order to make good the default of Germany on these two loans. The Chancellor of the Exchequer anticipates that the German Government may make good the other 20 per cent. to their own nationals out of the funds which they themselves have declared have been put aside in the Reichsbank, in marks, to meet interest and payments due on these loans. If that proves to be so it will be a happy solution, and we all desire that the German Government should so acquiesce and provide for the remaining 20 per cent. in that way. We earnestly hope that that will be the case. But it may work out differently, and we have to envisage that possibility. It worked out differently when we imposed duties on Irish goods in order to collect sums due from Ireland, and, while I do not oppose the use of the trade weapon in this case to deal with a political or financial question, I regard it with some apprehension, and can well understand that the Chancellor of the Exchequer should have been animated by feelings of reluctance, as he said to-day in his observations, in finding himself obliged to introduce a Measure of this character.

The use of the trade weapon in a political dispute is always dangerous, but it is much better indeed than the use of force, which would have been the case in the 19th century, when a fleet might have been sent to threaten Russia in regard to the incident of the British engineers. All who are partisans of the Covenant of the League of Nations recognise that trade embargoes may be useful, and possibly the only means of bringing pressure to bear upon a nation which may be regarded by the League of Nations as guilty of some grave fault, but it is a weapon which ought to be used only in extreme and critical cases, otherwise whenever there is a dispute between countries and it means an embargo, as in the case of Russia, or collecting financial debts through a clearing house, as in the case of Germany, it means that international trade will become more and more harassed, and manufacturers, merchants and shippers, carrying on their functions to the advantage of mankind, will find themselves harassed and hindered and thwarted, owing to controversies between Governments with which they themselves have no concern. Thus industry and industrialists really become the victims of politics.

Suppose in this case matters do not work out quite in the way the right hon. Gentleman hopes, and in the way which we all hope, and that there are reprisals, and that we had to take measures amounting to an embargo. It would not be an embargo only against German imports into this country, because an embargo on one side is always met by an embargo on the other side. Suppose the German manufacturers are not recouped by the German Government, and are not willing to sell their goods at 20 per cent. loss. You may find the trade betwen this country and Germany dwindling more and more, and coming almost to a standstill. The miner who is working in a coal mine, whose product is exported to Germany, or a fisherman whose catch is sold to Germany, will be the people who will feel the ultimate effects of this Measure. They know nothing about Dawes or Young; they would only know that they are affected in their livelihood owing to a controversy between Governments and the failure of statesmen to come to agreement.

As recently as 1929 we sold to Germany goods to the value of £37,000,000. I know that there are many hon. Members who assume that no foreign country ever buys anything from us; they think that our foreign trade is of no importance. Last year we sold £14,000,000 worth of goods to Germany. Even £14,000,000 worth is worth having, and if we can bring that figure back to £37,000,000, that is the goal to be aimed at rather than the possibility of seeing our trade with Germany dwindle still further. While I agree that the Government are compelled to take action in this matter I hope—indeed I feel sure—that they will adopt a conciliatory attitude in a desire to arrive at a settlement, if we can, and avoid the immediate effects and the possible future risks involved in making an Order under Clause 1.

The Chancellor of the Exchequer has told us that Clause 2 is entirely unconnected with the German dispute. I was rather surprised to hear him say that. I thought he was going to say that this was a reserve in case the German Government did engage in a commercial war and put discriminatory quotas against our goods, in which case we should want to exercise a power of reprisals against their goods. The right hon. Gentleman did not say that. On the contrary, he explained that it was an entirely different matter, and had been initiated on account of entirely different considerations. In that case I do not see why it should not have been in a separate Bill. This is not really one Bill but two Bills, and Clause 2 has nothing to do with the Clearing Office; it has nothing to do with the German debt. It is a general power of retaliation, without limit of time, without limit of country, and places in the hands of the Government full powers to take reprisals against quotas, as the Import Duties Act takes power to take reprisals against tariffs.

The Chancellor of the Exchequer said that the Government do not like quotas, and do not propose to use the powers under Clause 2 unless they are compelled to do so. That is very interesting coming from him, and I have no doubt that that view will be shared by several of his colleagues. But will it be shared by all, the Minister of Agriculture, for example, who has told us that quotas have come to stay? The Minister of Agriculture preaches the doctrine of economic nationalism as a good thing in itself, "not to be condemned as a disease." He told the whole nation, in a broadcast speech a few months ago, that it was a thing to be desired and to be pursued. We have elements in the Government which, far from disliking, enjoy quotas, and would wish to see them carried still further. In the hands of Ministers of that school Clause 2 places an extremely powerful weapon. No doubt ostensibly this power is to be used if there are discriminatory quotas against us or quotas which are specially detrimental, but it is easy to say that any quota adopted by any country is specially detrimental to this country. Every system of quotas adopted anywhere is intended to be detrimental to the foreigner, and it would be specially detrimental to the foreign country which sends the largest quantity of the particular goods which are subject to a particular quota. I can well imagine, say in a year or two, a Government which desired to pursue the policy of the Minister of Agriculture forgetting all about the obiter dictum of the Chancellor of the Exchequer, that the Government dislike quotas and do not want to use this power, using this Clause in order to extend still further the whole system of quotas in this country. There are no limits in this Clause. It can be applied anywhere, at any time, to any extent and with respect to any country. It is true that a Resolution has to be proposed in the House of Commons and the House of Lords, and has to be endorsed, but everyone knows that occasionally the House of Commons is docile and has been known to acquiesce in every proposal of the Government of the day without venturing on any occasion to interpose its own authority and reject any suggestion which is made, and even this House of Commons may conceivably show the same acquiescent spirit.

Let it be remembered that there are hon. Members of this House and of the Government who, in earlier days, when it was proposed to establish tariffs, said that we did not want tariffs in order to establish a permanent and general system, but to fight tariffs elsewhere, and extend the area of freedom for British trade. There were millions of people who accepted that view and supported it. It is all forgotten now. A permanent and general tariff is part of the system of the country. How about quotas? Are we to see Clause 2 used in precisely the same way? While ostensibly it is a means to fight quotas elsewhere and to secure their abolition in the interests of British trade, it may well be that the same experience as we have had in regard to tariffs will apply also with regard to quotas, and that Clause 2 will be found to be exceedingly detrimental to the general trade of the country, inward and outward. Let it be remembered that when the Russian embargo was imposed as a weapon to secure the release of the British engineers in Russia, we asked the Government whether it would be used for that purpose only and not for general trading negotiations, and the Government refused to give us that assurance. It was only afterwards, when that was pressed and received the extremely powerful support of the right hon. Member for West Birmingham (Sir A. Chamberlain), that the Government changed their attitude and did surrender and agree that the Russian embargo should be used only for the purpose for which it was first advocated, and for no other. Can we get a similar assurance to-day with regard to Clause 2?

This purports to be an emergency Bill which must be pressed through before 1st July and become law by that date. It has to be taken in the House of Commons on two consecutive days. There is no time for commercial and other interests in the country to consider the matter maturely and make representations to Members of Parliament, and no time for opinion here to form itself. The Debate on the Second Reading to-day may bring out points, but there will be no time to consider carefully Amendments for Committee or on Report. To-day the Second Reading is to be passed; tomorrow there are to be the Committee stage, the Report stage and the Third Reading, and the Bill will be rushed through to the House of Lords. So far as Clause 1 is concerned it may be that there is some urgency, but why this extreme speed with respect to the much wider powers to be conferred under Clause 2, which need not have been introduced into the Bill at all, and might well have been the subject of a second Bill? These are points that ought to be considered by Members of the House, and the Amendments that are to be moved in Committee will require such consideration as the brief time at our disposal allows. I am sure that the whole House, or the vast majority of Members, will share the regret of the Chancellor that it should be necessary to introduce into Parliament disturbing Bills of this character. The world is troubled by tariff wars, by conflicts of quotas, by competitions in currency depreciation, and now by reprisals for non-payment of debt. All these things restrict commerce, prevent recovery, and they maintain and may increase unemployment. For all these reasons we most earnestly hope that the negotiations on which the Government are to engage with-in the next few days may be carried to a successful conclusion.

5.5 p.m.


It has been a matter of great interest to us all to hear the explanation of the Chancellor. I am sure the House is pleased that the serious nature of the position is appreciated, and realises how essential it is that we should look upon this matter in the spirit in which the Chancellor of the Exchequer has dealt with it. There are special difficulties in connection with trade with Germany. I do not want to follow much that has been said to-day. I feel sure that the House and the country realises that Germany paid Reparations out of borrowed money, and that a great deal of the money that was spent on other things was not spent in the wisest and best ways. But those are things of the past, and what we have to face is the present situation. It has been clearly pointed out to (the House, both in the dispatch which we have in the White Paper and in the speech of the Chancellor, that in the opinion of those who are in a position to judge Germany is able to meet these obligations. It is vital, however, that certain steps should be taken, provided the negotiations are not successful. In the opinion of most of us it is very important that matters should be thoroughly and satisfactorily arranged in the discussions that are taking place. Not only should the liabilities of Germany under these particular loans be discussed, but the whole position, which is seriously affecting trade between the two countries at the present time.

The right hon. Member for Darwen (Sir H. Samuel) referred to the quantity of goods that were being bought in Germany from this country. Is it realised how much has been paid for those goods, how much of the liability for those goods has been met up to date? After all, we cannot go on selling goods if we do not get paid for them. That has been the trouble with trade right through Europe. It has been especially bad recently in the case of Germany. The Chancellor referred to the way in which payment of skripmarks had been dealt with. I do not know whether the House understands what is being done. When goods are sent over to Germany the German Government now provide that there can be no direct payment made to the merchants of this country. It has all to go into a Government fund called the Gold Discount Bank. This Government bank then pays one-half direct to the merchant and issues scrip for the other half. It then offers to purchase the scrip at a discount of 50 per cent., and then sells it to a German exporter at a discount of 55 per cent. The man who sells his goods gets 50 per cent. cash, and another 25 per cent. So he loses 25 per cent. That is one of the ways in which British trade suffers. When the scrip is sold to the German exporter the bank gets 5 per cent. off, and then the balance is provided to help the German to export to this country. So that the 100 per cent. is found but our people do not get anything like it, the German export trade alone profiting. Therefore, we are bound to see a diminution in business as long as that method continues.

There is another difficulty. To-day the German is not allowed to accept bills, not allowed to meet his obligations until a permit has been obtained to find the necessary foreign money. The English shipper who sends to Germany has therefore to wait. First of all he is advised to make sure that a permit has been granted before he sends his goods. Then he finds another regulation in the way, and that is that until the Customs certificate for delivery of the goods has been produced no permit can be given. The goods must therefore land in Germany and he loses control before he even knows whether he is to get paid. That I understand is one of the greatest difficulties in trading.

I hope that the Government will not limit any action they may have to take or any discussion that they may have with the German authorities, to the question of the interests on the loans, but that in the interest of trade generally they will see that all these matters are put on a better footing. It is this sort of thing which has troubled the country more even than the loans, important as the loans are. How are we to get on if we cannot carry on our trade with Germany or Germans trade with us? I agree entirely with what the right hon. Gentleman has said. We depend to a very large extent on foreign trade, and it is absurd for us to make light of anything which shakes or injures our foreign trade. To that we must be very alive as time goes on. It is important that the whole question of our trade should be considered by the Government now. The chambers of commerce, for which I speak at the moment and at short notice, are quite in sympathy with the action that the Government propose, although we all very strongly hope that the negotiations to be undertaken will enable the Government to settle this question without taking the final action here suggested.

If any Members of this House imagine that trading interests affect only the waders themselves they never made a greater mistake in their lives. Every person in this country depends upon the trade of the country; whether he be a small man with a small income or wage, or a bigger man, he is just as materially affected by these matters, and almost more so than the traders. Therefore, when advice is being taken it is as well to have the advice of those who are experts. For that reason it is satisfactory to know that the Chancellor has arranged to have sound advisers. I do not think the analogy of a political dispute is a fair one in cases of this kind. This is not a political dispute. It is a purely financial and business transaction. It does not matter whether they be exchange restrictions or anything else, it is a matter to which we are thankful that the Government are alive. It is a pity that we were not able to arrange for a clearing house mutually agreed upon as desired by chambers of commerce. I know that there were difficulties, but I hope that now a lot of those difficulties will disappear.

Clause 1, in my opinion, is sound, and business men support it strongly. Clause 2, as the Chancellor said, does not necessarily apply to any difficulties at the moment. But, after all, is it not time that we should be able to take what steps are necessary should any difficulty arise? Trouble blows up very suddenly. Parliament is to adjourn for two or three months and we do not know what commercial or economic question may arise in the Recess. We may have the quotas driven to death. It may be necessary for those who look after the trade of the country to be armed in these matters, so that they can keep the peace. It is only by being armed that you can keep the peace. I am sure that not only business men but the people generally, when they understand the question will support the action of the Government in arming itself to deal with questions which we all hope will never arise. We hope sincerely that the negotiations will be successful. For years many of us have done our best to promote closer understanding and more intimate relations between this country and Germany, which we look upon as essential. Germany must realise that there is no country in the world that has been so friendly or that has done so much to secure justice and fair play for Germany as this country. Any unprejudiced observer and recorder would be obliged to say that the patience shown by this country and the efforts made by this country have all been for the good of Germany and of those other countries in Europe in regard to which these difficulties have arisen. No blame can be attached to us for the situation. I hope there will be no need to put into force the provisions of this Bill, but I think, at the same time, they are excellent provisions to have in case of trouble arising hereafter in relation either to Germany or any other country.

5.15 p.m.


I think the hon. Member for the West Derby Division of Liverpool (Sir J. Sandeman Allen) expressed the view of most, if not all, of us, when he hoped that these provisions, whatever their merits may be, will never have to be applied. That opinion cannot be too strongly expressed. As regards the effect which the Bill would have, if carried into force, I cannot speak with the authority of the hon. Member, but I happen to represent a constituency, two of the principal interests in which are mining and fishing, two subjects which have already been mentioned in this Debate. I may be permitted to explain to the House why these proposals are causing some doubt and concern to those connected with the two industries I have mentioned. I do not think any of us would deny to the Government the right or the power to take as strong measures as possible to safeguard the proper privileges and rights of British nationals, but we cannot help feeling some anxiety as to what may happen if all does not go as well as we hope in connection with these proposals.

The coal trade is the most important in Fife. In the last year or 18 months, thanks largely to the measures of the National Government, the industry there has been improving month by month and at the present time it is employing every available miner in that district. That industry is concerned, lest anything should happen, which would reduce its exports. If I were to ask the Secretary for Mines whether he had any fears upon that score he doubtless would say "No!" and he would point out that there existed what he would probably term a special agreement for the export of coal to Germany. But if this solemn Dawes agreement can be broken, the other agreement might be broken also. Therefore we cannot help feeling a little concerned. The other special interest in my constituency is the herring fishing. I do not say that herring is a vastly important export in relation to the total trade of the country. I know that, in figures, it is comparatively small, but it is an industry which affects the whole coastline of the East and North of Scotland and part of the East Coast of England and its geographical importance is therefore considerable. We have heard that, on account of these same currency and transfer problems, Germany is not going to take any herring at all from us this year and that is a very serious report indeed for the people engaged in that industry. Germany took more than half the total cure last year and if there is any possibility of that market being closed this year, it is a very grave matter indeed.

One is forced to this conclusion. We hope that the conference which is to meet to-morrow will not confine its attentions to the subject matter of this Bill or to the immediate problem raised by the Chancellor of the Exchequer. Those subjects are inextricably bound up with the whole question of trade between the two countries. It is impossible to pick out the Dawes Loan or the Young Loan and to say, "That is something separate; we shall put aside and treat it to-day, and deal with the other things to-morrow." These matters cannot be dealt with in that way. They all form one and the same problem, and those who are specially interested in the export trade would beg the Government—speaking with the greatest possible goodwill—to extend their deliberations with the German representatives, as far as is necessary in order that all these problems of currency and transfer may be properly considered. I think I may say that those remarks represent the views of an exporting district of this country which has, comparatively recently, declared its continued loyalty to the National Government. As the representative of that loyal district I ask the Government to give those views proper consideration in their deliberations on this issue. If I may be pardoned a personal reference, may I say that if there was one issue more than another upon which I secured election in that division it was the issue of our negotiations with foreign countries. I trust that I may be able to return to my constituency when the General Election comes and face my constituents with this declaration—that never has the National Government let down the export trade of the country.

5.22 p.m.


The House is indebted to the Chancellor of the Exchequer for the very clear statement which he has made of the rather complicated facts set out in the two Notes comprised in the White Paper. I shall have some criticisms to make on the Bill itself but I wish to say, at the outset, that I can well understand the resentment which is felt at the treatment by the German Government of the bondholders as disclosed in those Notes. That resentment seems to me to be justified and no criticism upon which I venture, must be thought to concede any part of the German case in that respect. But I am bound to regard this Bill from the point of view not merely of the bondholders but of its effect upon British interests as a whole and, in particular, British industry. I was interested to hear from the Chancellor of the Exchequer that in his judgment the position arising out of exchange with Germany of the Notes comprised in the White Paper is the necessary justification for this Bill. But be it noted that the Bill applies to two separate and distinct subject matters. The Chancellor of the Exchequer made it clear that, as far as the Government are concerned, or as far as he is concerned, he has not Germany in mind in reference to Clause 2 of the Bill. How can it be then that Clause 2 is justified by the Notes in the White Paper? I can well understand the Chancellor disclaiming that Clause 2 is to apply to Germany. I speak in the presence of the Foreign Secretary who, in answer to a question of mine this afternoon said that, to apply Clause 2 to Germany would be, in normal circumstances, a failure to comply with the obligations undertaken by His Majesty's Government under the Trade Agreement with Germany of December, 1924. There, the conditions are expressly defined under which such prohibitions and restrictions as are contemplated by Clause 2 of this Bill may alone be imposed. Therefore the remark made by the Chancellor of the Exchequer in this respect was nothing more than a statement to the world that this country would continue to recognise its undertakings under Article 10 of the Trade Agreement with Germany.

I sincerely hope that the negotiations with the German representatives may fructify, but if those negotiations are to take place so soon, and if their subject-matter is to be as limited as the right hon. Gentleman has indicated, then I ask whether, should these negotiations be successsful, he will withdraw the Bill?


indicated dissent.


The right hon. Gentleman indicates that he will not withdraw the Bill even in the event of the negotiations being successful. Therefore it is right to assume that the Bill is intended to be of far wider application and implication than merely Germany itself, although the right hon. Gentleman has said that it is the situation disclosed in the White Paper and nothing else which is the justification for the Bill. I fail to reconcile the statement made by the right hon. Gentleman in his speech with his dissent from the suggestion which I have made just now, unless there is a great deal more behind the Bill than he has indicated to the House. I certainly am not opposed to Clearing Office arrangements. Indeed I think I was the first Member of this House to put forward the suggestion, which I did in the form of a question to the Board of Trade some three years ago. But the Clearing Office arrangements which I contemplated then were arrangements made by mutual agreement and designed to facilitate trade between the countries which were parties to those agreements. The Clearing Office to be set up under this Bill is not even professedly for the purpose of advancing trade. It has an entirely different object. It is merely a debt-collecting agency and I am satisfied that its results will be, in no long time, to diminish the already too small trade between this country and Germany.

The Bill is not restricted by its terms to Germany or to the situation which has arisen in respect of the Dawes and Young Loans. It applies to any foreign country which imposes prohibitions and restrictions., I have obtained, by the courtesy of the Secretary to the Overseas Trade Department, a list of the countries which would come within the purview of the Clearing Office provisions of this Bill. So far from it being a question of Germany alone, there are 29 countries which would come within these provisions, including—and I only mention the more important—the Argentine, Austria, Chile, Czechoslovakia, Germany, Greece, Hun- gary, Latvia, Lithuania, and Spain. It is a very wide power to give to any Government to say that it should be in a position overnight without as much as "by your leave" to make an order applicable to all or any one of 29 countries with whom we are in trade relations. There is only one condition subject to which the Government may exercise the power to make such an order and that is the condition that there have been certain restrictions. We know now from the Government that there are no less than 29 countries to which that condition could be applied. Of course the right hon. Gentleman says by implication, if not expressly, "You must trust us to act reasonably and only to act in special circumstances and in particular cases."

The Government come to the House too often with suggestions of that kind. They bring forward omnibus legislation and ask us to rely upon selective administration. That means, in effect, that this House is surrendering some of its most important powers to the Government of the day, and then, when the particular emergency passes, those powers will not be restored to the House but retained by the Government. So much for the countries to which the Clearing Office arrangement applies—29 of them. To what classes of property are these Clearing Office arrangements to apply? The Chancellor of the Exchequer referred to one class of property, and in the notices in the Press with regard to this Bill it seems to be the common idea that the Bill refers merely to one class of property, namely, debts arising out of goods imported from, let me say, for the sake of example and simplicity, Germany into this country. But there is another class of property also that is subject to these Clearing Office arrangements, and that is debts not arising necessarily out of goods imported into this country from Germany, but merely debts which happen, however they may arise, to be due to persons resident or ordinarily carrying on business in Germany.

This is a vital matter, and I will give one or two illustrations, but I will give no illustration which has not come before me in the last few days as a practical matter of business for my consideration, having regard to actual or prospective transactions with persons carrying on business in or with this country. They will all be actual instances. First, you have the case of goods imported into this country from Germany by an English importer. I know that the Chancellor of the Exchequer has said that only 20 per cent. are to become subject to the Clearing Office arrangements, but under the terms of the Bill a situation may arise in which the importer here of German goods will be called upon to pay the whole of the purchase price to the Clearing Office here. Although the Bill says that the importer is discharged by that payment, be it remembered that he is only discharged in this country, and payment here is only a good defence in the courts of this country. But, unlike the law in this country, in many foreign countries, certainly in Germany, Czechoslovakia, Holland, and Switzerland, jurisdiction is founded merely upon the fact that a debtor may have some property in that foreign country.

Mark the situation. Your English importer has to pay his purchase price to the Clearing Office here. The German does not get that money, and he is dissatisfied. He finds property of the English importer, either in Germany, Holland, Switzerland, or Czechoslovakia, and he immediately not merely brings an action, but arrests the property and levies provisional execution upon it; in a word: the English importer of those goods from Germany, having paid the Clearing Office and having property abroad finds it seized. In this way any prudent trader in this country who carries on an international trade and has a bank balance, house property, or goods in any country where arrest is part of the system of jurisdiction, dare not import goods from Germany into this country, because he might be made to pay twice, first to the English Clearing Office, and secondly—under the provisions of the foreign law—to the German creditor. That must make clear that the German can seek out the property of the English trader. He does not depend upon it being in Germany. It may be in any other country in Europe where this provision for arrest applies, as it does in most Continental jurisdictions.

Let me leave that particular class of case and give another, also one of practical experience which has fallen for consideration since the Bill was published. A Dutchman buys wheat in Germany, and sells that wheat to an English merchant here. The English merchant then becomes liable to pay the purchase price for that wheat to the Clearing Office, because the debt though due to the Dutchman has arisen in respect of goods imported from Germany. The Dutchman cannot recover in this country from the Englishman, because the latter gets a discharge under the terms of this Bill. The Dutchman has already paid, or may have paid, the German from whom he bought the goods. The result is that the German has had his money, or is entitled to it from the Dutchman, the Englishman has paid the money to the Clearing Office, and the Dutchman who pays for the goods to Germany in order to sell them to England does not get his money at all if he sues for it in this country, though if he sues in Holland or in any other country in which the arrest of property applies and our Englishman has property there, he can recover, and our Englishman will have paid twice.

I do not think these provisions for depriving of the proceeds of their commerce the citizens of countries outside Germany and England is likely to add very much to international comity, and I am sure they are likely to detract very much from international trade. Again, take the case of a confirmed bank credit. A British bank has given a confirmed bank credit to a Swiss subject wishing to sell German goods to this country. The bank is under an obligation to the Swiss seller of the goods. The British importer of the goods has, under the Bill, to pay to the Clearing Office. The bank has to pay the Swiss, or be subjected to proceedings in this country, to which it would have no defence because the bank in this country would not have paid anything to the Clearing Office, nor does this Bill cover the bank or even profess to cover it in such a case. It only covers the importer. It is only fair and proper that I should make it clear that I am assuming that the Government exercise the powers for which they are asking. They are grave and serious powers, but if they do not intend to exercise them, they should not ask for them, and the House should not give them.

I have dealt so far merely with the class of property comprised in the terms "debts due or to become due in respect of goods" coming into this country, but there has been a singular reticence on the part of the Government as to other classes of property subject to this Bill, namely, debts due or to become due to persons ordinarily resident or carrying on business in, let us say, Germany, because it is at Germany that the Bill is primarily aimed. It does not matter how they arise. They may arise, not in respect of goods, but in any other way whatsoever, the only condition for bringing them within the Clearing Office provisions being that the persons to whom they are due or to become due should be ordinarily resident or carrying on business in Germany.

My hon. Friend the Financial Secretary to the Treasury will have assuaged very general and very genuine anxieties this afternoon as to the intended operation of the Bill as regards bank balances, for, as far as the phraseology of the Bill is concerned, it applies to bank balances in the same way as to any other class of property. My hon. Friend, in that charming way with which the House is so familiar, rather scoffed at me for putting my question to him earlier this afternoon in a different form of words a second time. I did it because he was making a pronouncement on behalf of the Government on a matter which has aroused the greatest anxiety abroad, and I did not desire that there should be any ambiguity about the statement that bank balances will not be affected. I may tell him that I have myself had to consider the question of whether bank balances were affected by the terms of the Bill, and I have been under the reluctant compulsion of advising that they were, and to my knowledge in a number of cases bank balances have already been withdrawn from this country in view of the provisions of the Bill. I assume that, in view of the categorical statement made by the hon. Gentleman and in order completely to relieve the anxieties which the hon. Gentleman has already assuaged, the Government will accept an Amendment to the Bill expressly excluding bank balances from its operation; and I shall be glad to have an answer to that effect from my hon. Friend when he replies.

Bank balances, however, are only one part, and although the most important by no means the only important part, of that class of property which is comprised in the terms "debts due or to become due to" persons in Germany. What about every Lloyd's policy, every policy for marine insurance, every policy of fire insurance, every policy of life insurance? Immediately it falls due, it is a debt within the provisions of this Bill. Once a Bill in these terms is placed on the Statute Book, no person ordinarily resident or carrying on business in, for instance, Germany, can insure at Lloyd's or in any British insurance office, against marine risks, fire risks, or any other risks, except at his own peril. At any moment, overnight, without any notice, the Government may make an order applying the Bill to debts arising out of insurance policies. And it is not only German nationals to whom it will apply; it is citizens of every one of 29 countries. If my right hon. Friend the Foreign Secretary were again practising at the Bar, and an Argentinian, a Brazilian, a German, a Hungarian, an Austrian, or a citizen of any one of the list of 29 countries came to his old chambers in Temple Gardens, and said to him, "Here is this Bill; tell me, as a lawyer, dare I take out a policy of life, marine, or fire insurance out of which a debt may arise?" My right hon. Friend would have been under the reluctant compulsion, as I have been, of answering, "No, it is not safe as long as these provisions remain in the Bill."

Further, interest on investments, interest held in Germany on British War Loan, Victory Bonds, British Government securities, immediately it becomes due, becomes subject to the Bill. Victory Bonds, obligations of the British Government, when redeemed become a debt, and come under the provisions of the Bill. No German dare sell securities on the Stock Exchange to any British investor, because under the Bill, immediately he does so, the proceeds become a debt and therefore may be claimed under this Bill. He has therefore to sell to another foreigner; he dare not sell to an Englishman. It is indeed a fine day when a National Government put foreign holders of British securities into a position in which, for their own sheer safety, they have to sell British securities to a foreigner and cannot prudently sell to an Englishman. Every legacy under a will is within the terms of this Bill as now phrased. As it falls due, the interest under settlements comes within the four corners of this Bill. I do not wish to weary the House by illustrating every category which comes within this Bill's purview. In short, every debt is caught which is or may become due to a German or the citizen of any one of the other 28 countries to which the Bill may be made applicable. I do not hesitate to say that had this Bill been restricted to a limited purpose it might have achieved its object without involving the risk of the dangers which I feel it my duty to place before the House. It is far too wide and dangerous, not merely because it gives the Government powers which no Government ought to seek or take, but because it strikes at the foundation of British credit, and is likely to have serious reactions upon British industry.


I am listening with great interest to the hon. Member's speech. Will he mind telling the House to which particular provision of the Bill he is referring when he includes all these debts?


I have been unwilling to read the text because I do not want to weary the House. I am referring to Sub-section (2) of Clause 1. It applies in the first place to goods imported from Germany. The debt there has to arise from goods imported from Germany, but irrespective of the persons to whom the debt becomes due. Then there is the second and wider class of debts, debts, in the words of the Bill, due or to become due to, or for the benefit of, persons ordinarily resident or ordinarily carrying on business in that foreign country. That is a debt, howsoever arising, irrespective of whether it has any relation to goods or not.


(Mr. H ore-Belisha): Will the hon. and gallant Gentleman read the first words of the Sub-section?


Certainly— An Order made under this Section. I am putting the case which, I think, the House ought to consider. I have no desire to be unfair to the Government, and I hope I have not been. I made it clear that I was basing my arguments, as my hon. Friend the Financial Secretary will concede I am entitled to, on the powers which the Government are claiming from the House. They are asking by omnibus legislation very wide powers which they say they will administer selectively. The House of Commons in legislating cannot leave the matter there. The House must accept responsibility for the Bill as a whole as it may leave the House. The difficulties of the situation are by no means exhausted, and I should like to take the matter a stage further and make a few observations on the succeeding Sub-sections. Sub-section (3) provides that the payment to the Clearing Office establishes a good discharge for the person from whom the debt is due. That is all very well. It may be a good discharge in this country, but it is not a good discharge anywhere else, and it is possible that there might not merely be an arrest of property, but, if the debtor went abroad, an arrest of the person who had paid the money to the Clearing Office. Sub-section (4) is the machinery for the collection of the money. The Clearing Office is established and the English importer has to pay the price of the goods or the 20 per cent., or whatever the percentage may be, to the Commissioners of Customs at the point of importation. How is that going to facilitate British industry? You have an importer who is buying goods on, say, three months terms. He has made all his arrangements and has made his sales upon the footing that he has to pay his supplier in three months.


Really, the hon. and gallant Gentleman should read the Bill. It says: at such time and in such manner, as may be specified.


I will ask my hon. Friend to read on. Putting it shortly, it says that for the purpose of facilitating the collection of debts to which the order may apply, in respect of goods imported into the United Kingdom, the person importing them "shall, on importation" do one of two things. These words indicate as important the point of time. The person has the alternative of doing one or two things at that point of time and only then—he has to do either of them "on importation." He has either to produce a certificate from the Clearing Office that the debt due or to become due in respect of the goods is already paid or that he has given security; or he has to pay to the Commissioners of Customs a sum of money. The point of time at which that amount becomes payable is "on importation"; that means when the goods are cleared at the Customs. I ask hon. Members, looking at it from the point of view of a business matter, how the thing would work.

I come back to what I was saying when the Financial Secretary interrupted me, and I am not complaining in the least about that. The importer has entered into an arrangement to sell goods upon certain terms in this country and orders the goods from Germany on three months' terms. He has made his financial arrangements accordingly. Under this Bill he is not allowed to wait for three months before paying. He has either to find security or the cash before he can handle the goods at all, still less before they can be delivered to the person from whom the money is due. There is no power to say that the person to whom he sells the goods shall also pay at the same time. Whether it be raw materials or manufactured goods, the importer has to find the cash on the point of importation before he can handle the goods, and has perhaps to wait six months before he gets payment, although he has made all the arrangements which would have enabled him to deal with the transaction in a financially satisfactory way. Every firm cannot find this money or security. Unexpected requirements such as this will fall very harshly on business firms. Suppose you have a firm with debentures. It may be trading in a normal way quite satisfactorily, but it might find the greatest possible difficulty in raising securities to the satisfaction of the Clearing Office. Whether you are paying your money or finding security for payment to the satisfaction of a British Government Department, it comes to precisely the same thing. Instead of paying, the firm might perhaps persuade the Government Department to accept a bank guarantee or the bond of a guarantee society. But neither banks nor guarantee societies will give guarantees or bonds unless those for whom the bonds or guarantees are given are known to them to be able to meet the payments or have given security for the purpose.

I have spoken of the ordinary importer. Take, however, the case of a commission agent who sells goods here on the basis of, say, a 2½ per cent. commission. His only interest in the matter, after negotiating a sale in this country, is to get the goods over here and hand them over to the English purchaser. He gets 2½ per cent. for doing that. Now under this Bill he has got to find the whole of the purchase price, and he may be a man whose business in the ordinary way does not require him to have any capital. Let me give a case which has been presented to me in the last 48 hours. There is an agent carrying on business in a most respectable and responsible way where the firms—both the German manufacturing firm and the English purchasing firm—are of the highest standing and reputation. The agent who gets the commission for arranging the sale to the purchaser has financed the manufacturer of the goods by lending him £28,000. He has got no charge on the goods because they are not yet in existence. He has lent the money simply to finance the manufacturer. When the goods come to this country they will not be delivered to him, but direct to the English purchaser. That becomes a debt due in respect of goods imported into this country. The debt is payable under the terms of this Bill to the Clearing Office but the British agent—a British citizen and taxpayer—who has financed the German firm with £28,000, cannot recover it from the source to which he was entitled to look, namely, the proceeds of the sale of the goods which he had financed.

This Bill has really not been fully considered and thought out or it has been drafted by those who have no practical contact with the actual everyday conduct of business in this country. Subsection (5) is worth dwelling on just for a moment. It says that a person importing goods into this country shall have the like rights against any person by whom documents of title relating to those goods are held as if he had made the like payment to that person. That assumes that the documents of title are held in this country. Under the banking arrangements that may prevail the documents of title may not be here at all and the person will not have the like rights or any rights against the person holding the documents of title.

There is a last matter on which I shall venture to trouble the House, and I thank hon. Members for their patience, which I greatly appreciate. But this Bill is a matter of real importance. In Subsection (6) reference is made as to how money collected under the Bill is to be applied. Be it noted that the collection is to be made from British citizens or persons in this country. The distribution is to be made not only to people in this country, but to any British citizen, wherever resident, and any person, whether British citizens or not, living within the British Empire. I think I have taken it too widely. I do not want to mislead the House, and I will qualify what I have said. I should have said the money may be applied to paying persons ordinarily resident or carrying on business in the United Kingdom, whether British or not, or to British subjects, wherever resident, that is, broadly speaking, within the British Empire. In other words, payments are made out to a larger number of persons than the number from whom the money is taken.

Let it be noted that the beginning of the Clause dealing with the method of payment states that the Clearing Office may pay "in such order of priority as may be specified." I suggest that that is an entirely novel procedure. When an arrangement is being made to collect assets for distribution among creditors there should be no right of priority among the creditors, especially when the money is collected from a limited number of people and the distribution is made amongst a larger number Surely the ordinary procedure of giving a pro rata distribution ought to be adopted, so that everyone may stand in the same position relatively in respect of his claim. It is a dangerous thing to give to the Clearing Office the right to prefer, shall I say, the bond holder to the industrialist, or one industrialist as against another industrialist. That may have results which can scarcely be foreseen, because the difference between a man receiving money early or later may make all the difference not merely between comfort and discomfort, or profit or loss, but between being able to carry on and being made bankrupt. The House ought not to give to the Clearing Office the power to discriminate between British subjects, or persons resident in this country, who are entitled to share in the pool. I have delayed the House too long, have spoken longer, I think, than I have done before, but this is an important matter and opportunity for Debate on this Bill is limited. My excuse, if excuse is needed, is that the Government have introduced this is an emergency Measure which is so important that it must be rushed through the House of Commons; and if apology is needed to the House I find it in this, that this is said to be an emergency matter of great importance and as such requires careful deliberation and examination.

6.4 p.m.


I confess that 10 days ago, when my right hon. Friend gave notice of this Bill, I had certain misgivings, and those misgivings were intensified when I read the Bill, and I am glad to say that since I read the correspondence between His Majesty's Government and the German Government, and, still more, since the speech made this afternoon by my right hon. Friend, those misgivings are to a great extent lessened, but they are not entirely eradicated. I should like to direct the attention of the House to one or two points relating to the connection between the large favourable balance of trade that the Dominions and Colonies have with Germany and the unfavourable balance of trade which we have. But before doing that I will make a few general observations. The case as regards the Dawes and Young Loans, that it is a calculated and clever refusal to pay, has been made out. The Dawes and Young loans are in quite different categories from other loans. There is a practical difference and, indeed, a moral difference between the Dawes and Young Loans and all the commercial and bankers' loans made to Germany.

The Dawes and Young Loans were recommended by an international conference, they were accepted by the German Government, they were guaranteed by the German Government, and were either guaranteed or recommended to their nationals by various Governments, including our own. Therefore, it is right and proper that a failure in the payment of interest on those loans should be a Government concern; but I do submit that that consideration does not apply to the vast mass of capital poured into Germany, chiefly from America, though to a great extent also from this country, during the years 1925 to 1928. That capital, after all, took an ordinary commercial risk, an ordinary investment risk. People chose to invest in Germany because they got higher rates of interest than in this country, and they must have known that that capital, which was used either to improve the amenities of German towns, by garden suburbs schemes, and so on, or to recondition and re-equip German industry, could only pay its interest if German industry could compete in the markets of the world, capture, to a large extent, the markets of the world, and so earn the necessary favourable balance of trade. Therefore, I deprecate treating these two classes of debts on a similar basis, and frankly I deprecate Government interference to secure ordinary commercial and financial debts, while fully recognising that it is the task of the Government to secure that the obligations under the Dawes and Young Loans are met.

I leave aside the effect on trade and employment in this country of any grave diminution of German trade, only pointing out that we do a large handling trade, especially of Empire produce on its way to Germany. A large mass of Empire goods comes here, is handled and then is re-shipped to Germany. That, in particular, applies to wool. I would rather deal with the trade of the Empire and certain sections of the Empire. Germany last year sold to the Empire, exclusive of the United Kingdom, 294,000,000 marks' worth of goods. She had an unfavourable trade balance of £22,500,000 with the Empire. She had a favourable trade balance with us of £12,750,000. Therefore, including the United Kingdom, she had an unfavourable trade balance with the Empire as a whole of some £10,000,000. Take the case of Australia, In the three years 1931–32–33 Australia bought from Germany goods to the value of 62,000,000 marks and sold to Germany goods to the value of 317,000,000 marks, that is to say, she sold to Germany almost exactly five times as much as she bought from Germany. How is the transaction carried out? I suggest that the only way this is done is that each year we receive in the form of German goods imported into this country about £5,000,000 a year of Australian in-interest due to us; that that favourable balance of Australia is really a payment of interest coming by triangular trade to London.

Let me put it in an extreme way in order to make it clear. Australia owes us, including commercial debts, about £30,000,000 a year in interest. She could pay the whole of that by shipping to Germany £30,000,000 worth more—say wool—than she bought from Germany, and Germany could pay Australia for that by shipping £30,000,000 worth of German goods to our country. Those German goods would form a credit in London of £30,000,000 which would meet the interest claims upon Australia. That is an extreme case; but I would suggest that, in actual fact, in each of the three years 1931, 1932 and 1933 we have received here in the form of German goods Australian interest to the amount of just over £5,000,000. The same thing applies also, I think, to all our Dominions and Colonies. They all have, to a varying degree, a favourable trade balance with Germany, and interest due to us comes in the form of German goods. It is the same with the Argentine. The Argentine has a large favourable trade balance with Germany.

If the result of this policy should be in any way to force Germany, in order to get a favourable balance of trade, to restrict imports to a considerable extent, that will make more difficult the payment of interest obligations in the City of London. I also suggest that during recent years Denmark has had a large favourable balance of trade with us, and that some of the interest payments due by Germany to us have come by Germany selling to Denmark and Denmark selling to us, and this has been detrimental alike to our agriculture and our trawl fishing industry. If by any chance Germany restricted purchases from the Dominions in order to get a favourable trade balance, she might buy elsewhere, and the world market would remain the same; but I feel that it is possible that she might become more self-sufficient. I sincerely hope that that policy will not be adopted, that she will see reason and meet the just claims of the Dawes and Young Loans, but even if she meets them she may, in her efforts to get a favourable trade balance, be driven more into self-sufficiency. We know that during the War she achieved a very great measure of self-sufficiency and that at the present time she would be enabled to attain it to a far higher degree.

I trust that Germany will not be driven into the course of self-sufficiency, and that she will recognise her obligation and be able to meet it Great suffering to Germany will be involved either by intensified self-sufficiency or the other possible course, which might be the establishment of a monopoly in foreign trade. Under that monopoly she could restrict imports and force her goods over hostile tariff barriers throughout the world. To do that she would, of course, have to force down the standard of living of her people to a very great degree. I would say in all sincerity to His Majesty's Gvernoment that I hope, while they are rightly insistent that there should be a just settlement with Germany, that they will recognise that they are dealing with a people still suffering from post-War neurosis. I trust that they will recognise that they are dealing with a people suffering from internal and external fears. I am glad the right hon. Gentleman the Member for Darwin (Sir H. Samuel) warned the House that we must cast aside all the revulsion we feel about certain methods of the German Government. I do cast it aside, although I regret those methods as much as any other Member of the House. The German people to-day are still suffering, and I feel that we can afford to be magnanimous. We can afford, above all, so to approach them as not in any way to hurt or injure their national pride.

Germany has one immediate fear. She has made herself practically self-supporting as regards her food supply, but there has been drought in Germany as elsewhere, and the German Government and people are filled with fear that the harvest may fail. If the harvest fails, they will undoubtedly be faced with intense suffering. They have either to face semi-starvation, or, as I say, to flood the markets of the world with their goods to pay for the necessary imports of food. To do this they have to force the standard of their living down, if their goods are to get over the high barriers. I beg His Majesty's Government, seeing that the German people are in that condition, to say, as regards this Bill, "We demand this power, and we intend to use it in order to enforce the rights of the Dawes and the Young bondholders, but, in view of that fear in Germany, we shall tell the German people that we will not use this weapon in any circumstances till after 1st October, when we know whether their harvest is a success or a failure."

I know that many hon. Members believe that the world, including Europe, is making towards stable recovery. I cannot understand how anyone who looks at the condition of Europe can fail to see that the condition is more unstable, more uncertain and more unhappy than it has been for many generations past in time of peace. Europe is balanced, as it were, on the edge of a knife. She may come down on one side towards increased prosperity and better conditions and towards peace and security, or she may come down on the other side towards economic catastrophe and chaos, revolutionary and social trouble, and inevitably to war. If by any rash move we—I will not say cause—but fail to prevent economic crisis in Germany, that crisis may spread and involve Holland and Switzerland, whose finances and industries are so closely bound with those of Germany. I beg the House and the Government to consider the suggestion that I have made that generosity with those people may prove a profitable investment. I beg them to ask and to get this machinery, but to pause before they use it, because it may set in motion other forces which cannot be controlled, and the results of which no man can foresee.

6.23 p.m.


I do not want to intervene to any extent in this discussion. The House will readily recognise that this subject is not just precisely my line of country, but I could not possibly allow this Measure to proceed without saying something upon the subject. The hon. Member for Lowestoft (Mr. Loftus) has made a very eloquent and moving appeal for a tolerant and benevolent view towards the German people. It is very difficult, as he indicated, to separate the German people from the present regime in Germany. An appeal which would have been listened to by nearly every hon. Member of this House with great sympathy a year ago meets with a less sympathetic hearing to-day. I am not going into that particular aspect. I want to criticise His Majesty's Government from another point of view for their introduction of this Measure. As I understand the Measure, it is designed to collect the interest due to certain bondholders, which interest would not be collectable by those bondholders unless governmental steps were taken. This is the third occasion in this Parliament on which the Government have come before us with a demand of this description. There was the question of the Irish land bondholders. The whole power of the State had to be flung into the field to make it possible for those who hold Irish land bonds to draw their interest.


It affected the British Treasury.


Here, again, we are under a certain moral obligation. I am not quite clear in my mind. I am considering the hon. Member's interruption to see if it has any weight before I leave it. I cannot see that it has. The Government have rushed in to put forward all the powers of the State in order to see that the Irish land bondholders should receive their interest. During the discussions, I and other spokesmen offered alternative ways of dealing with the situation created in Ireland by the refusal of the Irish Free State Government to meet the interest on the bonds, but this nation said "No. We have to rush in and safeguard these payments." Then there was the case of Newfoundland.


It is not a case of getting money for the bondholders. The people who held Irish land bonds had a government guarantee and the people whom the Government are protecting are not the bondholders but the taxpayers in this country.


I know you can find all sorts of excuses and explanations, but when the Irish Free State declined to meet their liabilities a new situation was created, as I said in this House at the time. Do not let us quibble. The special punitive duties were imposed on the Irish Free State for the sake of collecting the money to pay the interest to the Irish land bondholders. [An HON. MEMBER: "No!"] You can quibble and dodge round about as much as you like, but that is the actual fact as everybody in this House knows. That Measure was only introduced because Mr. de Valera refused to meet the Irish land debts due to this country.


To save the taxpayer.


A new situation was created by Mr. de Valera's refusal. In regard to Newfoundland an exactly similar situation arose. Newfoundland could not meet its interest on certain outstanding debts, and again this nation's resources had to be mobilised to save the interest of the Newfoundland bondholders. Now we are asked to do the same thing for citizens who have invested in certain German loans, the Young Loan and the Dawes Loan. Admittedly, when these loans were floated the State put a certain amount of support behind them; not so much support as in the case of the Irish land bonds, but more than in the case of the Newfoundland loans. The reputation of the nation was involved, and now that the interest is in danger the whole power of the State is invoked and the normal working of the Parliamentary institution is interrupted in order to save the interests of those bondholders. The sole purpose for which the House is assembled to-day is to bring in all sorts of extraneous things. We are here to set up a machine to collect the interest for those who hold bonds in either the Dawes or the Young Loan.

It is only about a week since the default took place. I have sat in this House during the present Parliament and have heard agriculturists, week in, week out, month in, month out, asking the Government to do something for their industry. I have sat in this House week in, week out, month in, month out, and have heard the shipbuilding interests asking that something should be done for shipbuilding or shipping. I have sat in this House month after month and listened to representatives of the cotton industry demanding that something should be done for them; and the same with coal. Every producing interest in this country has come to the House asking for governmental assistance, governmental action, governmental support of some kind or other. But no; in all these cases of productive industries, where direct employment of the workers was involved, there had to be long negotiations, long discussions, advisory committees, commissioners of investigation touring the country; and then, usually, after all the investigations, after all the inquiries, the mountain has produced some ridiculous mouse which was of absolutely no use whatever as real livestock to the industries concerned. Here however, we have the rentier, the moneylender, the fellow that sits and draws interest, as distinct from the man who goes out and tries to make something. Whenever his four per cent., or his five per cent., or his seven per cent. is in danger, the whole machinery of the State must be mobilised, and, not six months or 12 months after the difficulty arises, but in the ensuing week, every other bit of business of the House of Commons is to be held up so that special facilities shall be given to protecting the interests of the moneylender.

I have heard two or three speeches today from some of the most distinctive Free Traders in this country—men who have been prepared to give up all and to risk all for preserving the liberty of the individual to trade as and how he pleased, and to limit and reduce all the barriers that might exist as between the trade of one nation and the trade of another. I hear them to-day being faintly critical of this proposed Measure, but I do not hear them opposing it. I hear them admitting that these things—the setting up of a clearing house for the collection of debts, the granting to the Government of power to impose quotas all over the world—are tremendous barriers in the way of free association in trade between nation and nation. But, although they recognise that this is a tremendous breach of the basic principles which they regard as paramount in political and economic things, yet the importance of collecting the interest on the Dawes and Young loans is so tremendously great that their principles again must be put into the background for the purpose of facilitating this Measure.

I am not going on any further. As I said when I started, this is not my line of country. I am getting over the hurdles as best I can—dodging most of them—[Laughter.] Let me respond to that laughter. Most of you are not honest enough to say that. In these days, every speech that is made here leaves out more than it puts in. Let me put these points to the Chancellor of the Exchequer. This Measure is introduced to-day admittedly as emergency legislation, admittedly for temporary purposes—or rather, I should not say admittedly, but expressively for temporary purposes. It is introduced with the strongly expressed hope that it will never be used, that the circumstances will not compel the use of it. I want the Chancellor of the Exchequer, or whoever speaks for the Government in closing the Debate, to tell us this: Have the Government considered, in the short time during which they have given consideration to this whole problem, all the consequential things that will arise should this not work as a bluff, as it is to-day? If the threat of this little bit of trade war, directly against Germany, does not produce the desired results, are the Government facing up to some of the points put by the hon. Member for Lowestoft (Mr. Loftus) as to the repercussions in other parts of the British Empire? If this particular Bill to-day does lead to the further destruction of the possibilities of stability in Europe, do the Government know what they are going to do if this trade war on which they are embarking to-day goes beyond a mere trade war, and means the embroilment of the whole of Europe again in the struggles that we hoped we were getting away from? This Measure may be good bluff; it may be good jingoism; it may even be good debt collecting for moneylenders; but I would ask the Chancellor of the Exchequer whether the Government are satisfied in their own minds that it is sound statesmanship?

6.38 p.m.


This Debate would not have been complete without the eloquent intervention to which we have just listened. It has been strangely out of line with the earlier part of the Debate. I do not think that the Government can have any complaint against the general reception which their Bill has received at the hands of the House., There has been almost universal support for the Bill, coupled with almost universal regret that it should be necessary, and it is in that spirit that I wish to say a few words myself.

I suppose that nobody with commercial training can welcome the introduction of this kind of barbarous weapon into the delicate machinery of trade. The Chancellor of the Exchequer was not present, I think, to listen to the speech of the hon. and gallant Member for North-East Bethnal Green (Major Nathan). The hon. and gallant Member's exposition was perhaps the most interesting that we have had in the course of the Debate, because he gave authentic examples of the real damage that may arise in certain possible circumstances in the administration of the Bill. The dangers are obvious. If the Bill were administered in the spirit of warfare, you could damage all manner of industries such as the hon. and gallant Member referred to. His points were very largely Committee points, and not really suited to a Second Reading Debate but I should like to refer to one of them, and to express a hope that the Chancellor of the Exchequer will be able to limit the Bill in one respect at least. It has been pointed out that this Bill would refer to insurance contracts, and it is obvious that German insurance in London might suffer profoundly if people believed that a London policy was liable not to be paid in full.

London is probably the world centre of insurance, and its policies command the confidence of business people all over the globe. But who would take out a life insurance policy if he thought that some years hence 20, 30 or 40 per cent. might be deducted from the amount payable on that policy? Life insurance policies may last for a very long period, and even fire and marine insurance policies normally last many months. Clearly, nobody with the threat hanging over him that an Order might at any (moment be produced taking a percentage of the amount payable on such a policy, should a claim arise upon it, would willingly come to the London market to receive a document of that kind. We have had assurances that bankers' deposits and balances will not be brought within the scope of Clause 1. May I ask the Chancellor of the Exchequer to give us an assurance that insurance policies also will be excluded? He will give considerable relief to the London insurance industry if he can tell us that.

6.44 p.m.


If the Irish Free State had refused to pay some people while paying others, if they had consented to pay bonds which were held in Ireland, if they had bought their bonds abroad at a discount and paid the bonds in Ireland, then I think that our attitude towards the Irish Free State would be justified, and would be such as we feel towards the German Government. It is this new feature of selecting among all your creditors those whom you will pay, this buying of their property cheap by making it valueless and then transporting it to Germany and making it valuable—it is this new feature in dealing with the credit of the world that has really forced the hands of the Government of this country. It is not the Dawes Loan or the Young Loan; it is a new method used by an autocratic Government of dealing with its obligations, which, if allowed to go on, would not merely be catching, but would destroy all prospect of recovery of trade. That is why I shall support this Bill. I think the time has come when we have got to invent a weapon to deal with this situation, and I do not even object to the Government using machinery, as they are in this Bill, which gives them more or less autocratic powers, because we are dealing with people who have these autocratic powers, and, if we are to be armed to face them, we must have the same weapons as they have. It is a beastly situation to be in.

I am probably the only genuine Free Trader left in the House. It has caused me some amusement to listen to the speeches of Tariff Reformers begging the Government to remember the interests of our foreign trade. I wish they would remember it at the proper time. Here we have a case which is really similar to the case with which we were faced 20 years ago. It is true that this weapon, if used, will destroy the trade between us and Germany. I do not care whether they take 20 per cent or 100 per cent. It will make trade impossible. It will make it impossible for a merchant who has paid 20 per cent. to the British Government and 80 per cent. to the man to whom he owes money to go safely to Germany. I am sorry for him. Bank balances are safe, I understand, but insurance becomes impossible. Not only that, but all the hundred and one commercial and even private associations between us and Gel-many must come to an end if the Bill is put into operation. That is the price that we have to pay. In 1914 all the business interests' connected with trade between us and Germany were saying exactly what the hon. Member for North East Bethnal Green (Major Nathan) has said to-day. This is destroying trade. This act of war is the ruin of trade. Yet we had to go into that War. In the same way, we are now putting into the hands of the Chancellor of the Exchequer a power to declare a new form of war, but one none the less deadly to trade between us and Germany and none the less likely to extend to other countries and in other directions. But I think on the whole I prefer this sort of war with all its abuses, with all its inevitable results of poverty and dislocation of trade, to the other sort.


What guarantee have you that it will not bring the other sort?


None at all. All I can say is that I prefer this to the other. The only question on which we have to make up our minds is whether we are justified in saying to our Government: "You have power to declare war with Germany." That is the problem that we ought to face to-day. A great many Members have said, as indeed I would say, "We hope to goodness it may never be necessary to put this weapon into operation." At the same time, I want to strengthen the hands of the Government so that, when they are dealing with a foreign country in the matter, they may be able to say, "We have the country behind us," and I think the country is behind them. We distinguish between the German people and the German Government, as we did in the last War, and as soon as the division became clear we brought about peace. Now you are up against exactly the same situation. I want the Chancellor of the Exchequer and the President of the Board of Trade to go into these negotiations armed in the best possible way and with the same determination to look after the interests of international comity as was shown by Philip Snowden when he was dealing with the Young and Dawes Loans. I have no interest in the Young and the Dawes Loan. My interest is simply that we should put an end once for all to this growing habit of distinguishing between your friends and your enemies as to those whom you will pay, and this dishonest habit of making my property valueless until I have sold it to a German and then the German getting a profit out of it.

Those are the two new features which, if we allow, we must make up our mind to see extended indefinitely. I believe we can prevent that for all time by taking a firm line now, even though that does risk the possibility of our having to say in that case, "No more trade with Germany till you put it right." I think it is rather a pity that the best statement of the case against the Bill should have come from the hon. Member for North- East Bethnal Green, who is a Jew. After all, he and I feel very much alike on this question of the attitude of the German Government and the attitude of the Jews in boycotting trade with that country. I admit that in this matter my heart very often runs away with my head. I think here we have a case where it is not merely in the interests of this country but in the interest of the recovery of the trade of the whole world to establish once for all the principle that there is a way, if we care to take it, of stopping this invidious form of bankruptcy.

6.53 p.m.

Lieut.-Colonel Sir ARNOLD WILSON

It is always difficult for a private Member to speak on any subject relating to foreign affairs without doing more harm than good, and there is a good deal that must be left unsaid on a topic like this. When the Bill was printed and came into my hands, I saw with great surprise the word "reprisals" at the top. I looked into the Oxford-English Dictionary and saw that "reprisal" meant the act or practice of seizing by force the property of subjects of another nation, in retaliation, for loss or injury suffered from these or their countrymen, with the footnote "now only historical." I felt "enabling" might have been better. It may be the truth, but truth best kept in the background as the Bill applies to the whole world and not to Germany only. This is another example of the age-long conflict between finance and industry. Finance has at the moment the better of it. I should not greatly care if I thought as a result of the Bill finance in the end would get the better of it, but I do not think it will. My fear is lest we provoke reactions in Germany which will have the reverse effect. I have recently spent a fortnight in that country, and I felt in the atmosphere a willingness to suffer, a willingness to cut down import trade still further, to tighten their belts, to make yet greater sacrifices and to develop their resources to an even greater extent than at present. If effect be given to the Bill, I fear the gravest psychological reactions in that country, and I fear also bankruptcy in a number of foreign countries of firms which have been closely linked by means of cartels with German industry. Germany has hitherto imported large quantities of a number of commodities. She will have to cut down those imports. She will increase her production to an even greater pitch than at present, and in the long run I fear that we may be worse off than now. It is to me a matter entirely of expediency, and I am trying to look at it in that light.

When I turn to the question of paying those who are entitled to sums of money now accumulating in Germany, it seems to me that we are on extraordinarily difficult ground. There are many large firms, some of them only nominally British, some with very great interests, which for the last four or five years have been accumulating large sums of money in Germany. They have been investing them in that country in many forms. Will those sums be debts legally due? If so, it will swamp the whole scheme. There must be very large sums locked up in Germany on behalf of concerns with international ramifications which are legally within the scope of the Bill. I fear for the trade between Germany and India, Germany and Australia, and Germany and New Zealand. There are very large favourable balances between those countries and Germany, and I fear that the Australians will be compelled to take much larger quantities of German goods than at present in German bottoms in order to ensure a market for their commodities. German shipping passing through the Suez Canal is already second only to that of Great Britain.

I should view with great anxiety any change, however well-intentioned on our part, which had the effect of making the Dominions more internationally minded that they are at present. It would be disastrous if the entrepôt trade, and the three-cornered trade which is now the rule as between India and the Dominions, Germany and Great Britain should be wiped out by a Measure such as this. I earnestly trust that that will not happen. There is no time limit for the Bill. Surely it is rather a heavy weapon to have in one's hand for all time, not only for this Government but for all future Governments, to be able at any moment to impose, with or without the consent of an advisory committee, these drastic measures upon any and all countries on the face of the earth. Could there not be a time limit by which we could reconsider it at intervals of say three years? It is a complete change in our Constitution to have these powers vested in the Government for all time.

I hope we may hear a little more as to the legal position of those who have contracted to supply goods which can only in practice be obtained in Germany. I have tried to find legal decisions bearing on the subject. What will their status be? Then there are the three-cornered agreements. I believe there are only four countries in Europe which have not some form o£ clearing house as between some other countries. Norway and Denmark and Spain and Portugal, so far as I can ascertain, are the only countries except ourselves which have no clearing horse agreements. There is a good deal of experience available now. It would be of great assistance if we could have some sort of White Paper published showing what the experience of foreign countries has been, how it has worked, and what the result has been. There must be a great amount of information on the subject available at the Treasury. It would certainly increase the competence of the trading community, though I do not profess to speak on their behalf, if they could know a little more how these things work in practice. There are private clearing houses in Hamburg, Lubeck, Cologne and Dusseldorf and other centres which are working quite successfully at present on a £100,000, £200,000 or £500,000 maximum. They are working very cheaply and inexpensively on a purely voluntary basis. They have been created solely to stimulate trade. I fear that under this Bill all these private clearing houses will be wiped out. There are firms who, under private barter arrangements, have endeavoured to buy as much as or more than they sell to Germany, and on that basis have built up a pretty satisfactory trade. Will not all these agreements and private arrangements be wiped out?

I approach the question on practical lines, with no desire to prevent or impede the successful passage of the Bill, which, greatly as I regret it, I recognise as a necessity for a strictly limited purpose, though I cannot see the need of a Bill covering the whole world for an indefinite period. Why was it necessary for the British Government to take the lead in this matter? Other Governments also guaranteed the Young and Dawes Loan, their signatures appearing jointly with ours on the prospectus papers. These were issued with the approval of the British Government, and other sections of the loans were issued with the same degree of official sanction. Yet nothing has been done by other countries responsible with us in these negotiations. I repeat that the Bill is necessary, though I deeply regret it, and hope the effect will be strictly limited, that it will not perhaps be applied at all. I do plead for personal communication between leaders of Germany to-day, whatever we think of their policy, and the leaders of this Government. I do not believe delegations on either side are likely to reach anything like a settlement. I am convinced that if leading statesmen could meet on some island, however remote, we could get settlements of this and other questions.

7.4 p.m.


I listened to the speech of the last speaker with great interest. I agree that this is a big stick and may mean the dislocation of trade, but I would ask him to consider what he would do in a case where a country defaults on its foreign obligations and uses the money lent to it to buy up its own securities at a depreciated rate? Are you to sit still because it is more profitable to sit quiet and let this dishonesty go on? I do not believe that that is good business. When the hon. Member for Bridgeton (Mr. Maxton) says we are preferring the rentier, the bondholder, to the trader, has he considered the sort of bondholders that are protected by this Bill? I do not think he bears in mind the special character of the Dawes and Young Loans. The Dawes Loan saved Germany from collapse. Without it, there would have been chaos. It was based on the solemn undertaking of the country to pay interest in all contingencies. It was the same with the Young Loan. Docs the hon. Member understand that the whole basis of international trading depends on keeping a bargain of this sort? If it were impossible for Germany to pay, there would have been some case. Surely the Chancellor of the Exchequer made it clear, beyond all argument, that Germany has chosen to use money in recouping herself, by buying her bonds abroad at a depreciated rate and by spending a large part of the available balance in imports of war material. I believe the second part of that statement is incontrovertible.

Here we have a case where we have to take a lead. What the effect will be on trade I do not know. I am rather of the same view as the right hon. and gallant Member for Newcastle-under-Lyme (Colonel Wedgwood). I rather believe this is a war of a kind preferable to lack of action. I believe it will carry with it a grave dislocation of trade. Surely the fact that, whatever we suffer, Germany will suffer more, ought to lead to a bargain of a more advantageous description.


Germany is prepared to suffer. I do not think that we are, for so small an amount of money.


I do not think that, as a matter of business, it does to let a wrong go by. Up to the present, as far as the Chancellor of the Exchequer has gone, all that the Clearing Office will pay is interest on bonds. I ask with all earnestness my hon. Friend opposite what would he have done in this situation? Would he have taken it lying down and done nothing in order to try to protect the right? I do not believe he would have done that in the Chancellor of the Exchequer's place. I am certain that the country is entirely behind the Government in this matter.

7.11 p.m.


I do hope that the right hon. and gallant Member who has just spoken will not address the American Senate, for if he does I can say that they will cheer him loudly, and suggest following this example as far as another little debt is concerned. This Bill is introduced as emergency legislation. My first comment is that as an emergency Bill it is far too wide in its scope. There is no limit to the countries in which emergencies might arise. There is the introduction of Clause 2, which has no relation to the emergency at all, and which would find a better place in the Finance Bill if brought forward at all. There is no limit to the class of debts to be dealt with although, according to the Financial Secretary, the class of debts to be dealt with will not cover the wide range that the Member for North-East Bethnal Green (Major Nathan) dealt with.

Finally, there is no limit to the period of operation of the Bill. This bringing forward of a perfectly general power, unlimited in scope and in time, based on the excuse of an emergency, is something which, I venture to think, the hon. Gentleman opposite may consider some day to be an unfortunate precedent. It is something for which, I think, there is no other precedent, and if it turns out that somebody some day wants to adopt wide powers this will be able to be taken as a precedent. You will have placed on the Statute Book, in 48 hours, a Bill of general purposes unlimited in time and area. If there is any justification for this Bill as an emergency Bill, it ought to be limited strictly to those matters necessary to meet the emergency. Otherwise, there is no justification for asking the House to rush the Bill through in this way. If the Chancellor of the Exchequer wants a wide, general Bill, surely the proper procedure would have been to introduce the Bill in the ordinary course, not treating this Bill solely as a Measure of emergency which, he says, it has to meet.

We do not want any more wars, economic or otherwise. This Bill certainly looks like heavy economic artillery, and has at the top the unpleasant word "Reprisals." The right hon. and gallant Gentleman who has just spoken has used the words "dishonest" and "wrongdoer," referring to Germany. It is not a hopeful atmosphere in which to embark on negotiations for a settlement, when you call one of the parties dishonest and a wrongdoer. Once one embarks on a structure of building up economic armaments, it is likely to be just as dangerous as building up physical armaments, liable to make it more easy to use measures of this kind, especially where you have got a Bill in very wide terms such as this one.

There are much wider questions, however, which are raised by this Bill to which I should like to make some reference. This raises the whole question of international debts default. Sooner or later, if the present economic system is to survive in the world, the Governments of the world will have to face up internationally to the problem of bankruptcy which long ago they faced up to domestically. The Governments have built up complicated machinery internally by which when a man gets a load of indebtedness and is no longer able to bear it, he is allowed, through a system of bankruptcy, to have his debts wiped off, a percentage being paid of what he has left. Then he starts afresh.


If the court allows him.


Yes, when he gets his discharge. I am not dealing with people who are dishonest bankrupts. I am dealing with the system which has been built up to deal with the cases of people obliged, for some reason or other, to void or get rid of their debts in order that they may be released. That system, which is built up nationally, has been found absolutely necessary owing to the accumulated indebtedness under the capitalistic system. In exactly the same way you have had for decades now the building up internationally of indebtedness between country and country, but there is no method by which that indebtedness can ever be resolved. Even when there is a default, it does not wipe out the debt. The debt still remains. It may be that a debtor is unable to pay the interest for a period of time, but the load of debt which has been the thing which has largely caused him to pay interest, as in private business, continues. At some time, sooner or later, there will have to be set up internationally the means of getting rid of the perpetual accumulation of indebtedness under the present economic system. Clearly in such a matter, you cannot leave it either to the creditor or the debtor to decide as to whether, in particular circumstances, it is right that the debt should be wiped out, or the interest reduced or whatever the particular means of assisting the debtor may be.

As long as capitalism lends its surpluses abroad, irrespective of the interests of the people at home and very often irrespective of the interests of the people to whom it lends, as in the well-known case stated by Sir Arthur Salter—the Brazilian Loan—it really is ridiculous that the people who lend the money in that way should be able to insist upon the State coming in as a debt collector with all sorts of Measures, such as the Measure now before the House, which seriously interfere with legitimate international trade, merely for the purpose of collecting those debts. It makes an impossible and a chaotic situation, and naturally enough, in such circumstances, the debtor and the creditor always take opposite views as to what is advisable generally in the circumstances.

We are telling America that it is far better for America that we should not attempt to pay. We realise that it is far sounder economically in the interests of the world generally that we should not try to pay America. America may take the opposite view. Germany tries to persuade us that it is much better really that we should not have payment as regards the Young and the Dawes Loans. The difficulties which will be created by it, and the difficulties of Germany and so on make it impossible. We, on the other hand, take the view that they ought to pay, that it is possible for them to pay, and that it will not interfere with international trade. In such circumstances there is absolutely no one to decide on issues of that kind as to whether or not anybody ought to pay. The result is that you have the two parties without any sort of court or tribunal before whom they can come to decide issues of that kind.

Why when these difficulties arise should it always be the bondholder who is protected? Why does the right hon. Gentleman think that it is necessary to jeopardise the position of the producer vis-à-vis the bondholder? He recognises, as well as any of us, that in this matter there must be a divergence of interests between the producer and the bondholder. You cannot insist upon the reception of one-sided payments such as the interest on bonds or the delivery of goods to the credit of the bondholder in this country, which is what he is going to insist on if he sets up a clearing house for seriously interfering with the ordinary flow of international trade. The House has seen an example of that in the Argentine Agreement, which was an agreement entered into very largely for the purpose of protecting the bondholder in this country, permitting the continued importation of commodities here in order that the bondholders might be able to draw their interest on Argentine bonds, a matter which has been looked at very regretfully by the producer of agricultural commodities in this country.

The two interests—the producer interest and the bondholder interest—are obviously antagonistic in just the same way as in the present case the interests of the producer and of the bondholder as regards German trade are obviously antagonistic, and must be antagonistic. The goods which are imported here from Germany can either be utilised as exchange for goods exported from this country and the Dominions through triangular trade to Germany, or else they can be used as a one-sided payment to pay money to the rentier here who owns the Dawes Loan or the Young Loan. In the one case they will assist employment in this country. That is to say, if they come here in exchange for debts they will assist employment in this country. If they come as payment to the rentier it is likely that they will be re-exported as fresh capital, not to Germany, but to some other country, and merely pile up afresh one-sided indebtedness between this country and some other country without any assistance to employment in this country, or with a much smaller assistance to employment in this country.

It appears that the present Government always take the view that it is the rentier who must be protected first regardless of what happens to the interests of the manufacturers or producers. We do not believe that, if you are going on with your present system, you ought to make that the order of precedence, but that you ought to consider, first, the problem of employment and of the producing industries, and afterwards the problem of the collection of debts, if you insist upon collecting the debts of other people. There is no reason why we should rush into action a week before any default has, in fact, been made, when by puttnig this up, we are either relying upon it being a bluff and not having our bluff called, or if our bluff is called, or if we mean, in other words, actually to impose this system, then obviously we must be seriously jeopardising the trade between this country and the Dominions and Germany. It might be that if the Bill were merely a temporary one and were to be used only with full regard to the interests of the producers in this country, it would not be so harmful as it is in its present form. I am afraid that I have not very great faith that this will be used only in the interests of the producers of this country. In fact, it is obvious from its form and from what has been said that it is to be used in the interest of the rentier population.

There is, in my submission, no possible justification for including Clause 2 in the Bill. It may be that the right hon. Gentleman wants powers, and it may be that the Board of Trade wants powers, but they are not powers apparently associated with those that are desired in Clause 1. Anyway, they go infinitely further than is in the least necessary in order to implement Clause 1. They are the widest possible powers whereby the Board of Trade, without coming to the House at all, can impose restrictions on importations with regard to any country which has itself imposed restrictions that are specially detrimental to this country or to one of the Protectorates, Colonies or parts of the British Empire, and, which is especially detrimental, will apparently apply to any case where our trade is larger than the trade of other people. Of course, the detriment to our trade by any restriction will be something greater than to the trade of any others. These general powers ought not to be put into the Bill, and we shall certainly oppose Clause 2 as strenuously as we can in the further stages of the Bill. We are not vitally concerned in this question, which is a scrap between the capitalists of this country and Germany. We are anxious, if these powers are to be used, that they should not be used to the detriment of the workers of either country. As is known, we have a strong objection, as many other people have, to the regime in Germany, but we have not the slightest desire that the workers in Germany should suffer in any way. If, as I fear, the Bill is not going to succeed as a bluff, and is therefore to be put into operation, it will, in our view, undoubtedly affect the workers both in Germany and in this country, and will add a further block to the already overblocked channels of international trade.

7.27 p.m.


Even those who have entertained qualms about the possible effects of this Bill have supported it, or at least regarded it as inevitable. I take it that I can put the hon. and learned Gentleman the Member for East Bristol (Sir S. Cripps) in the latter category. He tells us that he would prefer to see an international court for the settlement of differences between creditors and debtors. He has not told us how the verdicts of such a court should be enforced, but whatever the procedure may be, we are here concerned with a purely practical issue at the present moment of time, which, unfortunately, is antecedent to that millennial state of affairs which we trust one day will reign. The hon. and learned Gentleman always seeks to draw a distinction, as he has this evening, between the rentier, as he calls him, and the producer, and he places their interests into conflict, but he has failed to observe the complete balance, at any rate, of this Bill, the first Clause of which is concerned with the bondholder and, the second of which is introduced in the interests of the producer.


The hon. Gentleman will credit me with saying that the bondholder was put first and the producer second.


I understood from his speech that the hon. and learned Gentleman was about to oppose Clause 2, but I now gather that he was making a small rhetorical point about the actual sequence into which the Clauses fall. The hon. and learned Gentleman might, at any rate, bear in mind that, had it not been for this wicked bondholder, Germany could not have been rehabilitated, and therefore Germany would not have been in a position to purchase goods which help the producer. However, I desire to remove at once any misapprehension that the Bill may be of an offensive character.

The opening words of the Clauses make it plain that the Measure is defensive and not offensive. Both the Clauses open with the word "If." What is provided is that in the event of certain action being taken against this country a clearing house may be established on the one hand, or a quota system on the other. In both cases this country is resisting measures that are taken against it, and is not being the initiator of measures. The word "reprisals," to which so much attention has been called, which figures in the Title of the Bill, is not intended in any belligerent spirit, but merely indicates that we are furnishing ourselves with the necessary weapons to protect our own interests. Under the Import Duties Act we already have power to put on special tariffs against countries which discriminate against us, and it is a pure anomaly that we do not at the present moment possess a similar power to institute quotas.

The right hon. Member for Darwen (Sir H. Samuel) feared that we were, under the cover of these defensive powers, about to take some action against other countries, but I would point out to him that the Clause of the Import Duties Act which enables us to put on additional tariffs in the cases which I have mentioned has only been invoked once, in the case of France, a country with which I hope we are about to conclude a trade agreement. Therefore, the right hon. Gentleman may completely remove from his mind any doubts he may have as to the aggression of the intentions with which the Measure will be operated. In fact, its provisions are a necessary part of the armoury of a modern State. Almost every other country in Europe to-day possesses powers similar to those contained in this Bill, and generally in a much wider form, and I am sure that no one would desire to deprive us of the right to meet like with like.

That is why the Bill is drafted in general terms, but there are special circumstances which justify the first Clause. On the 14th June, Germany announced to the world a complete suspension of the transference of interest on her medium and long-term debts, including the Dawes and Young Loans. The terms of our reply are before the House in the form of the White Paper. Briefly, they may be summed up by the statement that we cannot accept the inclusion of the Dawes and Young Loans within a moratorium, nor can we accept any discrimination against the British creditors of Germany. The right hon. Gentleman followed by others, says that he hopes we shall treat this matter with conciliation. I think our conciliatory spirit is shown in the Note itself, where we invite discussion with German representatives, which is about to begin.

Our special case in this matter is fortified by a consideration of the import and export figures. There does not seem to us to be any valid reason why the profit made by Germany out of her trade with this country should be diverted to the detriment of the British holders of German bonds. We intend to use the powers which we are taking, with moderation. In the first instance only 20 per cent. of the Customs value of the goods will be paid by the importers to the clearing house, the rest being remitted to Germany. As Germany has herself stated that she intends to continue paying her debts in marks, the exporter of goods ought to receive payment in full. Supposing, asks the right hon. Gentleman, the Reichsbank does not pay the exporter in full. Of course, that is the concern of the Reichsbank, and it would be tantamount to a further default on Germany's part if she failed to do so, because she herself has offered to pay in marks. The difficulty, as she alleges, is the power of transfer, a difficulty which we are hereby assisting her to solve.

So long as no steps are taken by Germany to restrict trade in any artificial manner, there is no reason why this system of paying 20 per cent. to the clearing house should not work to the mutual convenience of both sides. Of course, if Germany takes other steps in the matter I candidly admit that the Bill arms us with the fullest possible powers. The Bill has been subjected by the hon. and gallant Member for North East Bethnal Green (Major Nathan) to a close scrutiny and analysis, and the conclusion of his remarks is to show that we are taking complete powers. That I do not deny, but that we shall use them with moderation I can assure the House, and I do not think that anyone who has spoken has felt disposed to question that fact.

All the chief European creditors of Germany have unfavourable balances of trade with Germany, and all those countries have taken similar powers in regard to Germany. It is not to be expected, considering these facts, that Germany is about to take steps which will dislocate her own commerce. Is it credible that she should do so? There is no ground therefore for fearing that the introduction of this Bill is going to have any serious commercial repercussions. It is very much to be hoped that that will be avoided. I have said that we intend to apply the powers with discretion, and I would make it plain, in reply to the hon. and gallant Member for North-East Bethnal Green, and my hon. Friend the Member for Central Leeds (Mr. Denman) that we do not intend to include in the clearing, bankers' balances, insurance payments, or financial remittances, but merely debts due in regard to German goods exported after the 1st July. I trust that that assurance will assuage any fears that may have been entertained on the point.


Will the Government accept amendment to that effect, or do they wish to have the powers as in the Bill?


That is a curious question to put to me at the conclusion of my speech. The hon. Member addressed the House and if he had put that question during his speech I would have given a reasoned answer. My answer now is that if you are furnishing the British Government with powers to protect their own nationals you should not be chary about it. You should trust the Government to exercise the powers that can only be properly exercised by the Executive. Whatever temporary inconvenience there may be, and, of course, there are always inconveniences, even if you take the right and proper course of action, I am sure that both Parliament and the people of this country would have expected the Government to act as they have done in the interest of their nationals for whose business it is their duty to care.

Bill committed to a Committee of the Whole House, for To-morrow.—[Captain Margesson.]