HC Deb 01 March 1937 vol 321 cc43-83
The Chairman

It may be for the convenience of the Committee if I state at this stage that the only Amendments which I propose to call, of those on the Order Paper, are the first one, in the name of the hon. Member for East Edinburgh (Mr. Pethick-Lawrence), and the last one, in the name of the hon. Member for Huddersfield (Mr. Mabane). The other Amendments, I think, are all out of order as varying the incidence of the burden on the taxpayer.

Sir Percy Harris

On a point of Order. May I point out that the third Amendment in the name of my hon. Friend the Member for West Middlesbrough (Mr. K. Griffiths) will ultimately reduce the charge on the taxpayer, as it will not mean so many years' interest on the loan? May I ask for your Ruling on that point?

The Chairman

I am told by the mathematicians that it makes no difference whatever as to the actual amount of the liability. The reason for my Ruling is based upon Standing Order No. 63, which, as the hon. Baronet knows, is one dealing with the subject of the King's Recommendation, and if he will refer to Erskine May on that subject, he will see that it is stated there that the Commons have always faithfully observed, and therefore I think it is my duty to continue to observe, the provisions of that particular Standing Order. The passage in Erskine May goes on to refer to Amendments which vary the incidence of a tax having been ruled out of order as inconsistent with the King's Recommendation. As a result, I must rule out of order any Amendment which alters the incidence of the burden. Hon. Members will see that an Amendment which would shorten the period during which a particular sum has to be repaid would alter the incidence of the burden by placing a heavier burden on the taxpayers in the earlier years during which it has to be repaid. In regard to the Amendment in the name of the hon. Member for Huddersfield which would extend the period, that again is out of order for a similiar reason, in that it would impose a liability for repayment on certain future generations of taxpayers who, under the Resolution, would be under no liability whatever.

3.49 p.m.

Mr. Pethick-Lawrence

I beg to move, in page r, line 19, to leave out "four," and to insert "two."

The effect of the Amendment, as hon. Members will no doubt appreciate, would be to cut down the borrowing powers conferred upon the Chancellor of the Exchequer under the Bill by one-half, to reduce them, that is to say, from £400,000,000 to £200,000,000, and my principal purpose in moving this Amendment is to limit the borrowing powers of the Chancellor to what I imagine to be the outside figure for genuine capital expenditure. There are other reasons to which I will refer later, but that is the principle of the Amendment. I am prepared to admit that the figure of £200,000,000 selected for this purpose is in the nature of conjecture, but the reason I cannot put forward any more accurate figure is that the information which the Chancellor has supplied up to now is so exceedingly meagre that no more close approximation can be suggested. In the course of his speech in winding up the first day's Debate on the Financial Resolution, the Chancellor attempted to answer a challenge I had thrown out to him earlier in the day to relate the amount of borrowing either to the capital or to the non-recurrent expenditure.

Those hon. Members who heard the right hon. Gentleman or read in the OFFICIAL REPORT what he said will realise that he was exceedingly vague on the subject. He argued that of the total expenditure of £1,500,000,000 estimated roughly for the next five years, some part, at any rate, would be non-recurrent, and that he was allocating something like £1,100,000,000 to be paid out of current revenue and only the comparatively small balance of £400,000,000, which was only just over one-quarter, to non-recurrent expenditure. I venture to challenge the validity of that argument. In the current financial year, I think the Chancellor told us, something like £188,000,000 was the estimate of the expenditure on the Services, and that some quite small part of that might be regarded as non-recurrent. I do not think the Committee will differ from me in thinking that the bulk of that £188,000,000 is ordinary expenditure below which it is not likely to fall again. Five times £188,000,000 is 940,000,000, which will be the expenditure based on the present figure. Taking that amount from £1,500,000,000, we have £560,000,000 left. That is really the estimate of the additional expenditure which the Chancellor proposes roughly to devote to the Services, both on recurrent and non-recurrent expenditure, in the next five years. Of that amount he proposes to borrow no less than £400,000,000. I venture to say that it is practically impossible that capital expenditure on this rearmament programme will amount to anything like so large a proportion.

Let us examine what are the real items of capital expenditure which the Chancellor is likely to incur. The items which he actually mentioned were the purchase of land, the erection of shadow factories, the erection of barracks, and, rather surprisingly, he spoke of the creation of stores. There are, of course, one or two other items which I can imagine will be legitimately included in the total capital, but, as far as I recollect, these were the only ones to which the Chancellor referred. I put it to the Chancellor whether he can really maintain for a moment that the total he expects to spend during the next five years upon the items to which I have referred, even if there are one or two additional ones which he likes to mention, can amount to anything like as much as £200,000,000. Perhaps he will be able to give us grounds for thinking that he does, but I am firmly of opinion that £200,000,000 is the outside upper limit of what genuine capital expenditure can reach during that period.

It may be, of course, that the Chancellor prefers the word "non-recurrent," and that he will attempt to include under non-recurrent expenditure things like battleships and items of that kind which can only by a stretch of the imagination be called capital expenditure, although they might conceivably be classed as non-recurrent. If the Chancellor attempts to make that addition to the list of capital expenditure I would remind him that although battleships last in service for a considerable time, the Navy has a way of continually increasing. Further, many new designs come along, which make it very problematical whether there would be a reduction in the Estimates on account of these particular items. But whether he can add to the list in that way or not by calling them non-recurrent, I deny that they are capital, I have attempted to confine this figure to the limit of the real genuine capital expenditure. I should be interested to hear from the Chancellor—and the Committee is entitled to the information—whether he considers that the genuine capital expenditure which will be incurred in the next five years can possibly exceed the figure of £200,000,000. That is the main object of my moving the Amendment.

I should like to add this, and I think it is strictly relevant to the question of the reduction of the amount. A discussion has been aroused in the course of the Debates which we have had up to now on this subject on how far anything like the sum of £400,000,000 can be added to the debt at the present time without creating inflation. The Chancellor was glad to avail himself of a statement that he found expressed by a leading economist, Mr. J. M. Keynes, that if the depressed areas were brought into active working, obviously a far larger sum than £80,000,000 a year could be raised without creating inflation, because the savings at the present time were far in excess of that figure. Of course, if the whole of the savings, or a very large part of them, were to be available for this loan, there would be a great deal in that argument, but the point I have been making all along has been that the state of industry being what it is at the present time, these savings are likely to be fully used up in other things.

We have to remember that the Government's programme of rearmament is by no means to be confined to armaments manufacture by the Government themselves. A very large part of the rearmament is to be carried on through private manufacturers. Not only will there be private manufacturers of armaments, but there will be the persons who are making the materials—finished products from their point of view, but raw materials from the armament manufacturers' point of view—which will go to swell the total. The Government's rearmament programme involves capital expenditure by both the armament manufacturers and those who produce the subsidiary materials. So that at a time when industry on its own is expanding in all directions and laying down a large amount of additional capital, the Chancellor of the Exchequer is coming into the market, first of all, to make a demand upon the armament manufacturers to increase their plant, and the figure that he is putting forward is on top of all that.

In that connection I would point out that the amount of new capital being invested every month is rapidly increasing at the present time. The amount of capital issued during the month of February was very considerable. I shall not go into the figures, because of course the actual force of the figures depends very much on how far the money is really new money and how far it is merely a conversion process. Therefore one cannot push the argument too far. But I do not think the Chancellor will seriously deny that ordinary business is expanding very much at the present time, is making very great demands on capital, and that it is on top of that situation that the proposals of the Chancellor are superadded. Quite apart from the correlation of the amount that the Chancellor proposes to borrow and the amount of capital that he proposes to create, I suggest that the smaller figure of something like £40,000,000 a year instead of the larger figure of £80,000,000 a year will create a much less upset in the financial apparatus and do much less to create inflation than the larger figure which is proposed in this Bill. For those two reasons, first of all in order to confine the amount of the loan to the actual amount of physical capital likely to be created, and, secondly, in order to minimise the danger of inflation, I move the Amendment.

4.3 p.m.

Mr. Kingsley Griffith

I wish to associate myself with the Amendment, and I shall put my reason for doing so very shortly. Borrowing for expenditure the object of which is exhausted or superannuated before the time for repayment has been completed, is the mark of wartime finance. We are not at war yet, and I think we all want to avoid the position in which my mortgaging ahead in time of peace we may find our financial position weakened in the actual need of war, if that should come. For that reason we do want to reduce the amount of the borrowing to that which may be proved to be absolutely necessary, and to have a scientific basis which can be explained by the proportion of lasting assets which are produced in expenditure as against those which are immediately or rapidly perishing.

It would not be in order to challenge the principle of borrowing altogether, because the House has decided in favour of that on the Second Reading of the Bill, but it is not disputed that, other things being equal, if we were not being driven to a rather dire necessity we should all of us regard a measure for borrowing in time of boom as being in itself unsatisfactory. We may be driven to do a thing from which our economic consciences revolt all the time, but we are entitled to be satisfied that the amount we are asked to assent to is strictly necessary, and we ought to be given some definite reason for it. So far no such basis has been given, and we shall listen with interest to anything that the Chancellor of the Exchequer may have to say on the subject.

4.6 p.m.

Major Hills

The hon. Member for East Edinburgh (Mr. Pethick-Lawrence) made two points. The first was that the amount raised by loan ought to be limited to capital and non-recurrent expenditure. I think he would limit it to capital expenditure without including non-recurrent expenditure. I want to know by what measure he can judge what the capital or non-recurrent expenditure will be over five years. The hon. Member may have formed an estimate. I may have formed an estimate, but whatever either of us does is only a guess. All that we are committing ourselves to by allowing the Chancellor to borrow up to £400,000,000 is putting a limit above which he cannot borrow. No one says that he will borrow up to that limit; all that the Bill gives him is the power to borrow up to that limit. I confess that I cannot see any reason for restricting it, even admitting, which I do not admit, that it ought to be limited to capital expenditure. I can foresee a great deal of expenditure which is quite properly charged on loan, a great deal of cost which may go forward to the following years, but even on the hon. Gentleman's own saying I do not know how he can determine what will be the capital expenditure for the next five years.

The hon. Member's second point was that borrowing was inflationary. To-day he used a somewhat different argument from that which he used on the Financial Resolution. On that Resolution he said—and I agreed with him—that if you pump money into the currency, other things being equal you inflate that currency, prices begin to rise, and so forth. But the hon. Gentleman forgets that as well as pumping money in you are pumping money out. You are not only borrowing £80,000,000 a year, but you are taking £220,000,000 a year out of money that remains in the hands of individuals and public companies in this country. On that argument I very respectfully differ from the hon. Member, and I am glad to see that that great authority whom I admire as much as the hon. Member, Mr. Maynard Keynes, agrees also. [Laughter.] I certainly do not laugh at Mr. Keynes. He was the one man who told us that we were wrong in going back to Gold in 1925, and who said that we would have industrial troubles as a result. He was right. Anyhow I am glad to see that so great an authority says that if the Chancellor is prudent he can borrow this money without inflation.

To-day the hon. Member for East Edinburgh used a somewhat different argument. He asked, "How do you know that the money coming forward for investment will be sufficient to allow you to borrow this £80,000,000 a year?" I agree very much with what my right hon. Friend the Member for Hillhead (Sir R. Home) said from this seat last week. I believe that the Chancellor can "take it in his stride." I have not the least fear, looking at all the conditions that exist now, that the money will not be available. No one can look around him and see the returns of public companies, nearly all of them paying increased dividends, without seeing that we are on the up-grade, and in those circumstances I cannot feel the least doubt that this money will be easily available without the evil which the lion. Member for East Edinburgh fears. I certainly think that the Committee ought not to limit the Chancellor of the Exchequer. I think the Chancellor ought to have liberty to borrow up to £400,000,000 over the five years.

4.10 p.m.

Mr. Benson

I generally have a very high opinion of the views of the right hon. and gallant Member for Ripon (Major Hills) on financial matters, but I must say that on practically every point that he has made to-day I differ from him fundamentally. As a matter of fact on one point we do agree, and that is that it is common ground that we do not know how much capital expenditure the Government propose in their rearmament programme. The Chancellor of the Exchequer said that himself, and to-day my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) has made that very point, that he has had no indication whatever of the amount of capital expenditure. Our point is this: We are not prepared to trust the Government with £400,000,000 of borrowing powers. They may require more capital or less. If they find that they require more than the £200,000,000 that we suggest, let them come to this House and make their case for it. We know nothing in the record of this Government which entitles them to ask the House for what is practically a blank cheque. I was rather surprised at the attempts that the right hon. and gallant Member for Ripon made to defend the Government against the charge of playing with inflationary matters. He admitted, I thought, that the pumping of £80,000,000 of fresh purchasing power a year into the pool was inflation.

Major Hills

It might be inflation.

Mr. Benson

But he says it is counteracted by the fact that the Chancellor proposes to take by taxation for armament purposes £230,000,000. It is true that, taxation curtails their spending power on motor cars, shaving soap, the "Times" and other luxuries. But it increases the spending power of the Government by exactly the same amount; it is not taking a penny out of the pool but is merely deflecting the spending power from one type of industry to another.

I am surprised that the right hon. and gallant Member for Ripon should use such an extraordinary argument in the defence of his Government. It really shows the depth to which those on the Government side have gone in the attempt to defend what is really an inflationary proposal. The right hon. Member for Ripon said there was no fear that the money would not be available. No one on this side has ever suggested that the money would not be available. Of course the Government can borrow £400,000,000. If they wanted they could borrow £4,000,000,000. Our point is not that the money is not there. If it is not there, it can always be created by inflation. Our point is that by this borrowing the Government are throwing a strain upon the available resources, available after industry has had its quota, and that in order to obtain that money it will be necessary to inflate and create fictitious money.

That is our point, not that the Government will not get it, but that they will get it only as a result of increasing the stringency of fresh capital for industry, or by the creation of credit, which is in itself inflation, just as inflationary as if the Government issued unbacked Treasury notes. The Government have made various attempts to defend themselves against the charge of inflation, but they have not yet succeeded. If there is long-term borrowing the inflation is very mild, but short-term borrowing is very inflationary. One has only to realise the effect of the borrowing by Treasury Bills in connection with the Exchange Equalisation Fund. The Chancellor of the Exchequer borrowed £350,000,000, and the immediate effect of that borrowing was to change the whole course of prices. Previously prices had been steadily falling. I quote from "Lloyds Bank Magazine" to show the course of wholesale prices: 1929, 150; 1931, 107; 1932, 103.5; 1933, 103.5; 1934, 106.4; 1935, 108.1; 1936, over 120. That £350,000,000 of borrowing had an inflationary effect, and in so far as it was inflationary at that time it was valuable, just as the borrowings of the Labour party in 1929–31 were inflationary and, therefore, valuable. Inflation is bad only when you try to inflate on the verge of a boom. If you are in a slump, a little inflation by Government borrowing or spending is a healthy stimulus. What the Government are now proposing is that we shall stimulate industry to a high degree at a time when it is working at the top of its energy. The result will be that we shall have a vicious spiral of increased prices, further capital expansion, a rise in interest rates and further increased prices, and we shall find that this borrowing has been one very vital factor in pushing us into a boom and into the consequent slump.

4.18 p.m.

Mr. Charles Williams

The hon. Member for Chesterfield (Mr. Benson) began by saying that we ought not to allow the Government to borrow this money because no one could trust them, but towards the end of his speech he was saying that one reason why we should not borrow was because trade is doing so well. Surely if the Government have brought trade from a bad period into a good period we may have some trust in them, and I rather think he defeated the object of his speech in his last remark. But I rise to say why I think that at the present time it is probably wiser on the whole, for the Government to borrow this money. Naturally I was immensely pleased to hear one or two speeches like that of my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) taking the line of what I call purist finance, that is to say, that a Government should never borrow money at any time, or, at any rate, should never borrow it when it does not suit the policy of the Socialist party. The Government want to borrow about £80,000,000 a year, and the Opposition Amendment says the borrowing should be reduced by a half. It is a curious fact, but the amount the Government are proposing to borrow is almost exactly the same as the amount they are taking year by year out of the capital pool of this country in the form of Death Duties. I should not he in order in going into that subject now, but if it is wrong to borrow this money for the purpose of using it for things which are almost immediately or soon consumed, it is equally wrong to take the other money for that same purpose.

I think I noticed another error, if I may say so with great respect, in the speech of the Mover of the Amendment. He laid it down that the sum to be borrowed should only be enough to cover what might be considered capital expenditure. Without entirely disagreeing with him on that matter—at any rate in certain conditions, though not in these conditions—there are a great many items on which the money will be spent which may be regarded as capital expenditure. A considerable sum will go in the purchase of sites for aerodromes, and another considerable amount is likely to go, I understand, on factories, which will last for a very long while.

Some of us do not pretend to be financiers and are not among the few hundreds of men who were, apparently, against the return to the Gold Standard. The right hon. and gallant Member for Ripon (Major Hills) referred to one of them; I do not know how many there are, but I am always hearing that assertion made about individuals. As an ordinary individual I look at the position in this way: For many years we have not been expending as much as we ought to have spent to meet our obligations under the League of Nations among other things, and for the purpose of defending ourselves, and we are now endeavouring to make up that lag. During those years capital has been able to accumulate, and we are now making a demand on that accumulated capital for the purpose of overtaking those arrears. If this Amendment were adopted and the Chancellor could borrow only some £200,000,000 the rest would have to come from direct taxation, and that undoubtedly would impose a much more heavy burden on trade and industry. While I dislike either Government borrowing or municipal borrowing at any time, I consider that in an emergency of this kind, when we have a definite lag, the Government are justified in saying that rather than discourage the growth of industry by fresh taxation it is better to borrow some of the surplus money which we are told by financiers is available, as long as we put a limit to the amount we borrow, which the House is doing. We are not saying the Government shall borrow £400,000,000, but we are limiting their authority to borrow up to that amount. Though I am among those who very much dislike borrowing, I think as a private individual and a private Member of Parliament that the Government are doing what, in the circumstances, is best in the interests of the nation as a whole.

4.25 p.m.

Mr. Muff

I wish to support the Amendment, but for different reasons from those which have so far been advanced. My chief reason is that I want to make certain that we get value for our money, and judging by the rise in prices which has already taken place it looks as though we shall get only about £200,000,000 worth of goods and materials as an actual return for the £400,000,000. If this Amendment were accepted it would mean that we should lose only £100,000,000. I put it to the Chancellor of the Exchequer that there is a grave fear that those effusively patriotic men who operate somewhere near Threadneedle Street—up a yard or something like that, or in a street—on what are called "margins" are going to render a distinct disservice to this country by their method of inflating the cost of materials and not allowing the country to get value for its money.

I will illustrate the position in this way. In a place called Robert Town, on the top of a hill, somewhere in the West Riding, two men invested in what they call in our part of the world a hencote. They bought it in a town called Heckmondwike-in-the-Hollow. They were economical and they went one night, in the dark, to fetch this hencote. A third man volunteered to help them to carry it. The two purchasers got hold of the hencote, one in front and one behind, and trudged up the hill to this place called Robert Town. On the way they missed the man who had so effusively proffered his services and called out, "Where are you, Bill?" He answered, "I'm inside t'hencote carrying the pegs." In plain language, the man was sitting there as a passenger carrying the perches on which the hens roost. I think that illustrates the position of some of those in the City who have so effusively come forward to help to carry through this £400,000,000 loan scheme. They produce nothing—to use the language of Birmingham, "They toil not, neither do they spin"—and I am hoping that the Chancellor will reintroduce the old Birmingham doctrine of ransom when the Budget is drawn up.

4.29 p.m.

Mr. Lewis

After three full days of Parliamentary discussion of this problem there does not remain very much fresh to be said. I think the House has already accepted the general proposition of the Government, including the proposition that part of the expenditure shall be found by borrowing. All I would like to say about the three days of Debate is that it has been remarkable to notice the agreement there is in all parts of the House that we dare not allow our inferiority in armaments to continue any longer, let alone to increase. To-day we are invited to consider what proportion of the proposed expenditure shall be raised by borrowing, and it has been suggested that instead of the limit of borrowing being £400,000,000, that sum should be halved. The Chancellor of the Exchequer had to consider this problem from two points of view, the demands of the Services on the one hand and the possibility of finding the money on the other.

With regard to the size of the demand, he evidently came to the conclusion that he could not safely provide entirely by taxation the amount which he wished to provide. It is obvious that the larger the borrowing powers he asked for, the greater would be the sum total that he could offer to provide for rearmament. Once he has exhausted the taxable possibilities and added the borrowing possibilities, the higher he pitches the borrowing possibilities the greater the sum total at which he arrives. There is a great advantage in pitching the sum total as high as possible. The comments that have appeared in foreign newspapers show us clearly that the size of the programme has had a beneficial effect in foreign countries, both upon those who, like ourselves, wish to keep the peace and upon those who may contemplate breaking it. Foreign countries know that we are not a warlike people and that we are slow to go to war. They have seen that we are slow to rea-arm. It is well that we should realise that, just as when we go to war we see it through, so, faced with this problem of rearmament we shall, if necessary, see it through.

As to the objections which have been put forward to borrowing for such purposes, I must confess that I thought there was great weight in some of the arguments used by the hon. Member for East Edinburgh (Mr. Pethick-Lawrence). He drew a clear distinction between providing money for such purposes as aerodromes or new barracks and providing it for battleships, guns or shells. I agree further with him that we have no evidence before us to show that any large proportion of this proposed borrowing will be covered by works which may properly be described as of a capital nature, as, for example, the purchase of land or the erection of buildings. Probably the hon. Member was right further when he said that nothing like the whole sum will be covered by things which could be described as items of a non-recurring character. In this matter it is a case of necessity drives. If a practical alternative to borrowing the money could be shown, I think that we should all hesitate a long time before we agreed to borrow, but no practicable alternative has been put before us. If we are to face any programme such as the Chancellor has outlined, we must borrow, and borrow largely.

While I am willing to support the Chancellor of the Exchequer in the request which he makes this afternoon to extend his powers of borrowing to the amount of £400,000,000, I express the hope that he will not find it necessary to use the borrowing powers to anything like the proposed extent, and that he will exhaust his ingenuity in looking for new methods of taxation and in widening the field of taxation. The growing prosperity of the country will increase the tax yield, possibly beyond even his expectations, but if the worst comes to the worst and such hopes should prove unfounded, and it should be necessary to borrow up to the full sum that he has named for the purpose for which he has asked for powers, this House, in the situation in which we find ourselves, will not hesitate to give him the powers, and the country will not hesitate to approve of our doing so.

4.36 p.m.

The Chancellor of the Exchequer (Mr. Chamberlain)

When I saw the Amendment of the hon. Gentleman on the Paper, I had some little difficulty at first in deciding what must be the ground of his proposal to substitute £200,000,000 for £400,000,000. I thought it must have some relation to what is regarded as the wickedness of borrowing in any circumstances, and that he was taking the view that to borrow £200,000,000 would be only half as wicked as borrowing £400,000,000; and that therefore we should come down to that amount. If that had been the consideration in his mind, I should certainly have expected him to go lower than £200,000,000, but it now appears that I was mistaken and that that was not the theory upon which his Amendment is based. It seems that the hon. Gentleman is drawing a distinction between legitimate borrowing for capital purposes and illegitimate borrowing for purposes which are not capital. I welcome this advance. We are getting on, as Mr. Asquith used to say. The hon. Gentleman is coming in our direction, and if he has already come as far as that, I do not despair of converting him entirely during the proceedings on the Bill.

Having established that laudable basis for borrowing, the hon. Gentleman has made his own calculation as to how much of the respective expenditure, no figure for which has yet been fixed although a figure has been suggested, may properly be called capital. As my right hon. and gallant Friend the Member for Ripon (Major Hills) so justly said, any calculation of that kind is guess work. The hon. Gentleman does not know what we are going to spend the money upon, and he has to make a completely arbitrary assumption in order to arrive at any calculation at all. Although he draws a distinction between capital and non-recurrent expenditure, he admits that some of the expenditure is properly capital. He admits that we are spending money upon buildings of a permanent or semi-permanent character such as barracks which may properly be called capital expenditure, but he seemed to be surprised that, when I was mentioning one or two items the other day, I included among them stores. Surely there is nothing to be surprised at in that. If you decide that, in order to comply with some new standard of safety, it is necessary to add to your reserves and stores of ammunition in this country and to bring them up to an entirely new level, that is not recurrent expenditure. Once you have expended that money and got up to your new level, you stop there, unless you alter your level again. It, therefore, seems to me that you may properly describe expenditure of that kind as non-recurrent, and you may go so far as to say that it may be called capital expenditure, too. The distinction between what you may borrow for and what you may not, is one which has been introduced by the hon. Gentleman opposite, and not by me. Although it is true that I said that some of this expenditure was non-recurrent, I did not say I based myself entirely on that distinction in fixing the limit of borrowing at £400,000,000.

Speaking of that, may I just make a comment upon an observation which fell from the hon. Member for Chesterfield (Mr. Benson), who has not a very high opinion of this Government? I am, however, glad to note that he would trust us to the extent of borrowing £200,000,000. How did he describe this operation? He said that he was not prepared to give the Government a blank cheque. I sometimes think that hon. Gentlemen opposite slip into phrases which they are accustomed to use when they are addressing their constituents and others, without thinking very carefully what they really mean. I daresay that the hon. Gentleman has handled many blank cheques in his life, whether drawn by himself or by other people in his favour, and if he will cast back his recollection he will remember that in the case of a blank cheque there is no figure on the face of it. Surely you cannot call this a blank cheque, because there is a sum written on the face of it. True, it is not a cheque for £400,000,000, but it is the limit of the amount which the Government can borrow under the Bill, if passed in its present form. I think the hon. Gentleman will have to withdraw the description of what we are doing as a blank cheque, because it is only a request for a limited amount of borrowing power. It is not even true, that the House of Commons, having given this power, will have no more control over the borrowing. As I have said before, Estimates will be presented to the House which will show, in each year or from time to time if Supplementary Estimates are presented, how much of the gross amount of the Estimates is to be provided out of borrowed money and how much out of revenue. It would then be for the House to express its opinion as to whether there is anything improper in the proportions which are then shown.

Let me deal with the distinction made by the hon. Member for East Edinburgh (Mr. Pethick-Lawrence) between recurrent and non-recurrent expenditure, and remind him that when I attempted to lay down the general principle to guide the Government in this matter I did not go nearly as far as he did by suggesting that it would be proper to borrow the whole of the non-recurrent expenditure. That is his view.

Mr. Pethick-Lawrence

Oh, no.

Mr. Chamberlain

Perhaps I should say capital expenditure?

Mr. Pethick-Lawrence


Mr. Chamberlain

I am sorry that the hon. Gentleman is not coming along a little bit further. At any rate, I did not say I proposed to borrow the whole of the non-recurrent expenditure. I said that a part of the non-recurrent expenditure will have to be paid out of revenue; what part and how much it would be, would have to be decided from time to time, in the light of the considerations which have to be taken into account. I do not base my case for borrowing upon any such distinctions as those made by the hon. Gentleman. A large part of this expenditure is of a capital character. I say, further, when you consider that we are compelled to contemplate this enormous expenditure in a comparatively short time, and that it is largely due to the fact that you have to make up arrears for expenditure over a much longer time, that that seems to be a justification in itself for the altogether exceptional procedure that we are following.

Mr. de Rothschild

Could the right hon. Gentleman state what the proportion is between the capital expenditure and the recurring expenditure?

Mr. Chamberlain

No, that is precisely what I am not prepared to do, and it is not necessary that I should do it if I do not rest my case upon that distinction. I think it is extremely difficult to draw with certainty a line between recurrent expenditure and non-recurrent expenditure; there are certain items as to which it is arguable whether they should be on the one side of the line or on the other. But if the argument which I have just suggested to the Committee be accepted, it really does not very much matter that you should divide your expenditure into these two separate and distinct categories, because that is not really the foundation of what I am asking the Committee to allow me to do.

The hon. Member for East Edinburgh and the hon. Member for Chesterfield have spoken once again about the evil effects of inflation which will follow on this borrowing, and the difficulties which will be imposed by it on the capital market. I speak with diffidence in the presence of those who have studied this question and have arrived at those views, but, on the other hand, those views are not held by all authorities on the subject, and, without referring again to Mr. Keynes, I may say that naturally I have tried to inform myself as best I could, on the best advice available to me, as to whether any injurious effects such as those contemplated by the hon. Members are in fact likely to occur, and I am satisfied, myself, that there is no likelihood either of any difficulty in the capital market or of any undue inflation in consequence of the borrowing of £400,000,000. The hon. Member for Chesterfield told us that after we had borrowed for the Exchange Equalisation Account there was immediately a tremendous rise in prices. That merely amounts to saying post hoc propter hoc. Because the one thing happened first, and the other happened afterwards, the hon. Member assumed that the second event was the necessary result of the first.

Mr. Benson

I said that borrowing on Treasury bills was definitely inflationary, and I merely instanced the effect that it had on prices. If the right hon. Gentleman wishes to consult an authority on the subject of Treasury bills and inflation, may I suggest that he should read the very excellent book of the right hon. and gallant Member for Ripon (Major Hills), who is very specific on that point?

Mr. Chamberlain

I am familiar with the excellent book of my right hon. and gallant Friend, but I understood the hon. Member's argument to be that the rise in prices which followed was the direct result of borrowing for the Exchange Equalisation Fund. When one considers the circumstances, when one remembers that the Exchange Equalisation Account was started in a time of prolonged and intense depression, when prices had reached exceptionally low levels, and when one remembers that those levels had just reached a turning point, it surely is rather far-fetched to attribute to that particular operation an effect which was world-wide and which certainly did not depend upon one single operation in one single country.

Mr. Benson

It is not true to say that the effect was world-wide. European prices went on falling. French prices were going down, and Italian prices were going down. The only prices which rose as well as our own were the American prices, and America was also injecting large amounts of her currency into her market. I was not condemning the right hon. Gentleman for the inflationary effect; I said definitely that at that time it was a very valuable circumstance.

Mr. Chamberlain

Of course it is perfectly true that a world movement does not operate simultaneously throughout the world, but my general proposition was that the world movement began here, as so many movements do, and was followed elsewhere, and I still maintain that it is far-fetched to attribute to that single operation something which was bound to happen, and hound to happen at about that time. Really, the question of inflation depends upon, and is linked up with, the question of savings, and the hon. Member is beginning to doubt now whether savings will be adequate to provide for the £400,000,000—on the assumption that £400,000,000 is borrowed—as well as for the demands of private concerns at the same time. Again, I speak after having consulted other authorities, and having regard to the amount of the savings and the tendency of savings at the present time, I would point out to the hon. Member that the new expenditure by the Government on the rearmament programme itself will tend to make new savings, and also that the demands which are going to be made by private firms for the purpose of armaments will largely be met by the Government themselves. The hon. Member has no doubt appreciated that, I think in reply to an interruption by him the other day, I said that in the case of the

shadow factories the capital is largely going to be provided by the Government.

Mr. Pethick-Lawrence

I said that.

Mr. Chamberlain

Then they will not need savings; they will get their capital from the Government. Considering also the general upward progress of trade in all directions, I have not the slightest doubt that the savings will be amply sufficient to provide for any demands that may be comprised within this £400,000,000. I submit to the Committee that the hon. Gentleman has made out no case for halving the £400,000,000 which I am asking for power to borrow. It is true that he has not attempted to alter the period over which the money can be borrowed—

Sir P. Harris

That was ruled out, quite correctly, if I may say so, by the Chair. There was an Amendment on the Paper to that effect.

Mr. Chamberlain

The hon. Gentleman did not put anything on the Paper—

Sir P. Harris

Other Members did.

Mr. Chamberlain

I submit that no case has been made out for the Amendment, and I ask the Committee to reject it.

Question put, "That the word' four stand part of the Clause."

The Committee divided: Ayes, 199; Noes, 87.

Division No. 93.] AYES. [4.55 p.m.
Acland-Troyte, Lt.-Col. G. J. Cazalet, Capt. V. A. (Chippenham) Evans, Capt. A. (Cardiff, S.)
Agnew, Lieut.-Comdr. P. G. Chamberlain, Rt. Hn. Sir A. (Br.W.) Findlay, Sir E.
Albery, Sir Irving Chamberlain, Rt. Hn. N. (Edgb't'n) Fox, Sir G. W. G.
Allen, Lt.-Col. J. Sandeman (B'kn'hd) Channon, H. Furness, S. N.
Anstruther-Gray, W. J. Chapman, Sir S. (Edinburgh, S.) Ganzoni, Sir J.
Apsley, Lord Clarr[...], Sir Reginald Gilmour, Lt.-Col. Rt. Hon. Sir J.
Baldwin, Rt. Hon. Stanley Cobb, Captain E. C. (Preston) Gluckstein, L. H.
Balfour, Capt. H. H. (Isle of Thanet) Colville, Lt.-Col. Rt. Hon. D. J. Glyn, Major Sir R. G. C.
Balniel, Lord Cooke, J. D. (Hammersmith, S.) Goldie, N. B.
Barclay-Harvey, Sir C. M. Cooper, Rt. Hn. A. Duff (W'st'r S. G'gs) Graham, Captain A. C. (Wirral)
Barrie, Sir C. C. Cooper, Rt. Hn. T. M. (E'nburgh, W.) Gridley, Sir A. B.
Baxter, A. Beverley Courtauld, Major J. S. Grigg, Sir E. W. M.
Beamish, Rear-Admiral T. P. H. Crooke, J. S. Grimston, R. V.
Beauchamp, Sir B. C. Crookshank, Capt. H. F. C. Gritten, W. G. Howard
Beit, Sir A. L. Crossley, A. C. Guest, Hon. I. (Brecon and Radnor)
Bennett, Sir E. N. Crowder, J. F. E. Hacking, Rt. Hon. D. H.
Blair, Sir R. Culverwell, C. T. Hanbury, Sir C.
Blaker, Sir R. Davison, Sir W. H. Hannah, I. C.
Boulton, W. W Dawson, Sir P. Hannon, Sir P. J. H.
Bowater, Col. Sir T. Vansittart Denman, Hon. R. D, Harbord, A.
Bower, Comdr. R. T. Denville, Alfred Haslam, H. C. (Horncastle)
Braithwaite, Major A. N. Doland, G. F. Haslam, Sir J. (Bolton)
Brocklebank, C. E. R. Dorman-Smith, Major R. H. Heilgers, Captain F. F. A.
Brown, Rt. Hon. E. (Leith) Drewe, C. Heneage, Lieut.-Colonel A. P.
Brown, Brig.-Gen. H. C. (Newbury) Duckworth, Arthur (Shrewsbury) Hepburn, P. G. T. Buchan
Bull, B. B. Dugdale, Major T. L. Herbert, Major J. A. (Monmouth)
Burgin, Dr. E. L, Duggan, H. J. Hills, Major Rt. Hon. J. W. (Ripon)
Butler, R. A. Duncan, J. A. L. Holmes, J. S.
Campbell, Sir E. T. Dunglass, Lord Hope, Captain Hon. A. O. J.
Carver, Major W. H. Ellis, Sir G. Hopkinson, A.
Cary, R. A. Elliston, Capt. G. S. Hore-Belisha, Rt. Hon. L.
Castlereagh, Viscount Emrys-Evans, P. V. Horsbrugh, Florence
Cazalet, Thelma (Islington, E.) Errington, E. Hudson, Capt. A. U. M. (Hack., N.)
Hudson, R. S. (Southport) Moore, Lieut.-Col. T. C. R. Somervell, Sir D. B. (Crewe)
Hume, Sir G. H. Morris-Jones, Sir Henry Somerville, A. A. (Windsor)
Hunter, T. Muirhead, Lt.-Col. A. J. Southby, Commander A. R. J.
Jarvis, Sir J. J. Munro, P. Span, W. P.
Jones, L. (Swansea W.) Neven-Spence, Major B. H. H. Stanley, Rt. Hon. Oliver (W'm'l'd)
Kerr, H. W. (Oldham) O'Neill, Major Rt. Hon. Sir Hugh Strauss, E. A. (Southwark, N.)
Kerr, J. Graham (Scottish Univs.) Orr-Ewing, I. L. Strickland, Captain W. F.
Knox, Major-General Sir A. W. F. Palmer, G. E. H. Stuart, Lord C. Crichton- (N'thw'h)
Lamb, Sir J. Q. Patrick, C. M. Sutcliffe, H.
Lambert, Rt. Hon. G. Penny, Sir G. Tate, Mavis C.
Law, R. K. (Hull, S. W.) Perkins, W. R. D. Taylor, C. S. (Eastbourne)
Leighton, Major B. E. P. Petherick, M. Taylor, Vice-Adm. E. A. (Padd., S.)
Lennox-Boyd, A. T. L. Pickthorn, K. W. M. Touche, G. C.
Levy, T. Pownall, Lt.-Col. Sir Assheton Tree, A. R. L. F.
Lewis, O. Procter, Major H. A. Tufnell, Lieut.-Commander R. L.
Liddall, W. S. Raikes, H. V. A. M. Turton, R. H.
Lindsay, K. M. Ramsay, Captain A. H. M. Wakefield, W. W.
Llewellin, Lieut.-Col. J. J. Rathbone, J. R. (Bodmin) Ward, Lieut.-Col. Sir A. L. (Hull)
Lloyd, G. W. Rayner, Major R. H. Ward, Irene M. B. (Wallsend)
Locker-Lampson, Comdr. O. S. Reid, Sir D. D. (Down) Warrender, Sir V.
MacAndrew, Colonel Sir C. G. Remer, J. R. Watt, G. S. H.
McCorquodale, M. S. Rickards, G. W. (Skipton) Wedderburn, H. J. S.
MacDonald, Rt. Hon. J. R. (Scot. U.) Ropner, Colonel L. Wells, S. R.
Macdonald, Capt. P. (Isle of Wight) Ross, Major Sir R. D. (Londonderry) Wickham, Lt.-Col. E. T. R.
McKie, J. H. Russell, R. J. (Eddisbury) Williams, C. (Torquay)
Maonamara, Capt. J. R. J. Salmon, Sir I. Williams, H. G. (Croydon, S.)
Maitland, A. Salt, E. W. Winterton, Rt. Hon. Earl
Margesson, Capt. Rt. Hon. H. D. R. Samuel, M. R. A. Wise, A. R.
Mason, Lt.-Cal. Hon. G. K. M. Sandeman, Sir N. S. Withers, Sir J. J.
Maxwell, Hon. S. A. Sanderson, Sir F. B. Womersley, Sir W. J.
Mayhew, Lt.-Col. J. Shaw, Major P. S. (Wavertree) Young, A. S. L. (Partick)
Meller, Sir R. J. (Mitcham) Simon, Rt. Hon. Sir J. A.
Mellor, Sir J. S. P. (Tamworth) Smiles, Lieut.-Colonel Sir W. D. TELLERS FOR THE AYES.—
Mills, Sir F. (Leyton, E.) Smithers, Sir W. Major Sir George Davies and
Mitchell, H. (Brentford and Chiswick) Captain Waterhouse.
Acland, Rt. Hon. Sir F. Dyke Green, W. H. (Deptford) Paling, W.
Adams, D. (Consett) Greenwood, Rt. Hon. A. Parker, J.
Adams, D. M. (Poplar, S.) Grenfell, D. R. Pethick Lawrence, F. W.
Adamson, W. M. Griffith, F. Kingsley (M'ddl'sbro, W.) Potts, J.
Alexander, Rt. Hon. A. V. (H'lsbr.) Griffiths, G. A. (Hemsworth) Pritt, D. N.
Ammon, C. G. Groves, T. E. Ridley, G.
Attlee, Rt. Hon. C. R. Hall, J. H. (Whitechapel) Robinson, W. A. (St. Helens)
Banfield, J. W. Hardie, G. D. Rothschild, J. A. de
Barnes, A. J. Harris, Sir P. A. Sanders, W. S.
Benson, G. Hayday, A. Seely, Sir H. M.
Broad, F. A. Henderson, A. (Kingswinford) Short, A.
Bromfield, W. Henderson, T. (Tradeston) Silverman, S. S.
Buchanan, G. Hicks, E. G. Simpson, F. B.
Burke, W. A. Jagger, J. Smith, Ben (Rotherhithe)
Chater, D. Jenkins, A. (Pontypool) Smith, E. (Stoke)
Cluse, W. S. Jenkins, Sir W. (Neath) Sorensen, R. W.
Clynes, Rt. Hon. J. R. Johnston, Rt. Hon. T. Stewart, W. J. (H'ght'n-le-Sp'ng)
Cove, W. G. Jones, Morgan (Caerphilly) Strauss, G. R. (Lambeth, N.)
Dalton, H. Kelly, W. T. Taylor, R. J. (Morpeth)
Davies, S. O. (Merthyr) Kennedy, Rt. Hon. T. Thorne, W.
Day, H. Kirby, B. V. Thurtle, E.
Dunn, E. (Rother Valley) Lathan, G. Tinker, J. J.
Ede, J. C. Leach, W. Viant, S. P.
Edwards, Sir C. (Bedwellty) Logan, D. G. Walker, J.
Evans, D. O. (Cardigan) McEntee, V. La T. Watkins, F. C.
Fletcher, Lt.-Comdr. R. T. H. McGhee, H. G. Westwood, J.
Foot, D. M. MacLaren, A. Williams, E. J. (Ogmore)
Frankel, D. Maxton, J. Williams, T. (Don Valley)
Gardner, B. W. Messer, F. Windsor, W. (Hull, C.)
Garro Jones, G. M. Montague, F. Woods, G. S. (Finsbury)
George, Major G. Lloyd (Pembroke) Morrison, R. C. (Tottenham, N.) Young, Sir R. (Newton)
Gibbins, J. Muff, G.
Gibson, R. (Greenock) Naylor, T. E. TELLERS FOR THE NOES.—
Mr. Charleton and Mr. Mathers.

5.2 p.m.

Mr. Denman

I beg to move, in page 3, line 7, to leave out from "Parliament" to the end of the Sub-section.

I move this Amendment formally on behalf of the hon. Member for Huddersfield (Mr. Mabane) so as to put myself in order, and I shall eventually withdraw the Amendment. The point that it raises seems worth an answer from the Chancellor of the Exchequer. The Clause as it stands says that the money to be paid into the Exchequer shall be paid from moneys provided by Parliament for the several Defence Services. The Amendment seeks to delete the words "for the several Defence Services," thereby making it possible to take the money from any Vote. The point has this significance, that we have been blamed outside for not attaching sufficient importance in the Debates on this Bill and on the Money Resolution to the problem of the home front, and my hon. Friend is seeking to make the money payable from Votes that deal with the home front. It is worth while the Chancellor making it perfectly plain that the Bill has no relation to what is known as the home front. The money to be borrowed is to be spent upon the Defence Services, and subjects like gas masks and the anti-gas services will, I suppose, come on the Home Office Vote, and no part of this money that is to be borrowed can be used on that. Similarly it would not be permissible to borrow for any capital developments on agriculture. Again, food storage for the civilian population would not be an object for which it would he legitimate to borrow. It seems to me, therefore, desirable, for the public information, that the Chancellor should make it clear that this money is solely to be expended within the Defence Services and not on any of those subjects which we ordinarily describe as the home front.

5.5 p.m.

Mr. Chamberlain

I am sorry that the hon. Member for Huddersfield (Mr. Mabane) is not here to put his own case. I fancy that the case made by the hon. Member for Central Leeds (Mr. Denman) does not reveal the purpose for which the Amendment was put down. It is plain on the face of the Bill that this money is confined to the Defence Services. It says so on the very first page of the Bill. The £400,000,000 is to be applied as appropriations in aid of the moneys provided by Parliament for the Defence Services for those years. It goes on in the last Sub-section to define what is meant by Defence Services, and it says they mean the Navy, Army (including Royal Ordinance Factories) and Air Services. It is, therefore, impossible that the Home Office Vote should be included in the matter.

Sir P. Harris

The hon. Member made one very serious point with regard to food storage. It is assumed that great storage tanks or concrete buildings are to be constructed for defence purposes. It is interesting to know that this £400,000,000 will be expended on what, after all, would be really capital expenditure.

The Chairman

I have listened to the hon. Member who proposed the Amendment with a view to realising what it meant. Now it seems to me that not only the hon. Baronet but probably the hon. Member who moved the Amendment also are both entirely out of order. The Amendment has nothing whatever to do with expenditure. It refers to repayment.

Mr. Maxton

Do I understand from the Chancellor of the Exchequer that any sums spent by the Home Office or by the Minister of Agriculture would be additional to the estimates of £1,500,000,000?

The Chairman

I am afraid I did not sufficiently include all the offenders in my condemnation. I should have said that the Chancellor of the Exchequer was also out of order. The hon. Member for Bridgeton (Mr. Maxton) is equally out of order in the question that he asks.

Mr. Maxton

I am prepared to accept your Ruling, Sir, that the Amendment is out of order, but we are in Committee and I should imagine perhaps that a manuscript Amendment would be in order. I notice that the purpose of the Bill is to provide money for the Defence Services and for purposes connected therewith. I should imagine that the point that I am putting to the Chancellor now comes within the "purposes connected therewith."

The Chairman

I am sorry, but that is not within the Question that is before the Committee.

Mr. Chamberlain

On a point of Order. Would it not be in order to raise this point on the Question, "That the Clause stand part of the Bill"?

The Chairman

That might be, but I am sure that it is not in order now.

Mr. Maxton

I understand that the Amendment is to leave out the words out of moneys provided by Parliament for the several Defence Services. Later on we have to deal with a Subsection which defines the Defence Services.

The Chairman

The hon. Member has not read the whole of paragraph (d).It begins: the sums required to be paid into the Exchequer under this Sub-section shall be paid.

Mr. Maxton

The paragraph reads: The sums required to be paid into the Exchequer under this Sub-section shall be paid, at such times and in such proportions as the Treasury may from time to time direct, out of moneys provided by Parliament for the several Defence Services. The Chancellor has told us that the House of Commons control over this is found in our control over the Estimate. Now we are told that the Defence Services only have an expenditure within the scope of this £400,000,000 that we are discussing.

The Chairman

The hon. Member is still labouring under a misapprehension. He is dealing entirely with the objects upon which the money is to be expended. The Amendment has nothing whatever to do with that. The Sub-section deals with the way in which interest and capital sums are to be repaid to the Exchequer, and paragraph (d) says that they are to be repaid out of moneys provided by Parliament for the several Defence Services. There might be expenditure on something totally different and yet it might be provided that it should be repaid out of moneys provided for certain Services. This reference is simply and solely to repayment and we cannot discuss expenditure on the Amendment.

Sir P. Harris

If these words were left out, the money could be repaid from money voted for other Departments, such as the Board of Trade. If they remained in, it would be limited to moneys voted for the Army, Navy and Air Force.

The Chairman

That is not the point at all.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

5.13 p.m.

Mr. Pethick-Lawrence

This is practically a one Clause Bill and all the discussions which it would have been out of order to raise by Amendments to the Sub-sections have to be compressed into a single discussion on the question that the operative Clause stand part of the Bill. I propose to take the opportunity of putting some questions to the Chan- cellor. In the dialogue that took place between him and my hon. Friend the Member for Chesterfield (Mr. Benson), as far as I could make out, my hon. Friend was handing out bouquets to the Chancellor for his handling of the crisis some years back and the Chancellor was pushing them away from him. It would not be your wish, Sir Dennis, that I should repeat the discussion we had on that occasion. The first point to which I want to address myself occurs both in Subsection (1) and Sub-section (2). I should like the Chancellor of the Exchequer to tell me whether my reading is correct or not. I understand the words— issue from time to time … sums not exceeding—L400,000,000"— to mean that the total amount of cash which the Treasury will obtain owing to these powers, is not to exceed £400,000,000. That is to say, supposing, for instance, the Treasury were to issue a 3 per cent. loan at a discount. Say they were to issue a £10,000,000 loan at a discount of, say, 2½ per cent., then clearly the actual amount of cash which the Treasury would get from that loan would be only £9,750,000, but the loan would be for £10,000,000, and so on throughout the whole of the amount. From the wording of the Bill the Treasury is empowered to raise money to the extent of £400,000,000 which might involve a total debt substantially in excess of £400,000,000 if most of it was in fact issued at a discount. The wording is rather obscure on that point, and I should be glad if the Chancellor of the Exchequer would tell me whether I am right.

With regard to the power of the Treasury to issue the loan as and how it may please, there are several points which I want to put to the Chancellor of the Exchequer, and several views I want to impress upon him. During the Great War the rate of interest on loans rose from a modest figure at the beginning to a very high figure at the end, and the Chancellor of the Exchequer in those days had to pay, on behalf of the nation, a very large amount in order to get the money from those who had it in the later stages of the War. Compared with the War finance this £400,000,000, much as it is for certain purposes, is a comparatively small amount, but I am sure that not only we on these benches but the nation as a whole is determined that certain individuals shall not reap rich profits from the emergency which the Chancellor of the Exchequer tells us we are in at the present time.

I am one who believes that the new powers which the Chancellor of the Exchequer has got through the Exchange Equalisation Fund and through the departure from Gold give him the means of regulating to a very large extent not merely the day-to-day interest which he pays on his Treasury Bills, but to a certain extent the long range of interest also. We had an illustration of that when the Chancellor of the Exchequer carried through the very successful conversion of the 5 per cent. War Loan two years ago. Owing to the great powers of dealing with money which are in the hands of the Government at the present time, the Chancellor was able to force down the rate of interest then to 3f and to the surprise of a great many people he was able only recently to carry it considerably below the 3½ per cent.

The second point I want to put to the Chancellor is, therefore, will he give us an assurance that, in the floating of this succession of loans, he will adopt a hardhearted attitude towards those who have money to invest, and that he will not try and coax them, as they were coaxed during the Great War, by higher and higher rates of interest, but that he will use such powers as he has in order to get the money for the nation at a reasonable rate? That brings me, in passing, to refer to the actual rate of interest at the present time. A little while back the rate of interest was below 3 per cent. but it rose to 3 per cent., and the effect of the Chancellor's announcement of his £1,500,000,000 was to drive up the rate of interest until it reached very nearly a figure of 3½ per cent. I was careful, as the Chancellor will remember, last week not to prophesy that it would stay at that figure, and as I anticipated there is some recovery to-day. I believe in the long run by various means which are open to him at the present time and were not open to the Chancellor of the Exchequer during the War it is possible for him to keep the long-range interest down. Will the Chancellor of the Exchequer give us an assurance that he will not allow rich men to make large profits out of charging high rates of interest on the loans, but will do everything in his power to keep the rate of interest low throughout the currency of these flotations?

Further, I would Like to raise the question of the flotation of loans at a discount. I have already referred to that point and asked the Chancellor of the Exchequer whether I am right in assuming that the total loans to be floated may be considerably in excess of £400,000,000 if issued at discount. But whether that is right or wrong, it is well known that there is a predilection at the Treasury in many cases for a lowish rate of interest at a discount, the reason being, of course, that more money can be raised from well-to-do people if they think they are going to get not only the rate of interest, but a premium on the redemption of the loan. If the Chancellor of the Exchequer allows the Treasury to float these loans in that way, then, when these five years are over, the country will be saddled with not merely £400,000,000, but something substantially in excess of that sum. The third point, therefore, is to ask him to give an assurance that there will be no attempt made to float loans at an appreciable rate of discount, by which I mean at a rate of 1 per cent. or 2 per cent. A quarter or half per cent. may be necessary for the purpose of performing the operation, but no appreciable rate of discount should be given.

The next point refers to a method which was largely adopted during the Great War for floating loans. It was found sometimes during the War that it was very difficult for the public to subscribe the money, and therefore the Government took what was financially a very grave and unfortunate step. It said to possible investors, "It does not matter whether you have the money or not, the Bank will advance you the money on your existing assets, and later on by arrangement between you and the bank, it may be this year, next year or some years hence, you can repay the bank." I have been arguing against the proposals of the Chancellor all through that they might be inflationary, and I still adhere to that opinion. There is one thing that I am clear about, and that is, that if he were to float his loans in the way that I am now describing by pure bank credit, then the inflationary effect on his loans would he very much greater still. The effect of getting the banks in effect to subscribe the money and not to place the burden upon their clients until some time afterwards, is to float a loan purely on bank money, and that means that the total credit so created can be a very much larger amount even than the amount of the loan.

Therefore, I hope that the Chancellor will on no account resort to the pernicious practice adopted during the War of making these vast inflationary loans based on bank credit. It had some of the most serious effects during the Great War, and, incidentally, brought immense riches to the banks and sent up prices and rates of interest far more than would otherwise have been the case. If it were really the intention of the Chancellor of the Exchequer to raise his loans in such a way as that, it would be far better, if the money was to be pure credit, that the nation should produce its own credit and get its own profit on it. That at any rate would be intelligible, but to allow banks to make vast profits out of loans guaranteed by the State would, incidentally, produce the worst evils of inflation, which, I hope, even the present Chancellor of the Exchequer will refrain from doing. That is all that I have to say on Sub-section (2), and the Committee will no doubt be relieved to hear that my remarks on the later Sub-sections will not be so detailed. Sub-section (3) I can entirely support, and therefore I need not say anything about it.

On paragraph (a) of Sub-section (4), it had been proposed to move an Amendment. The effect of that Amendment, if it had been possible, would have been simply to reduce the amount of borrowing. Therefore I do not think it was a very important Amendment, though I should have supported it had it been in order and been allowed to go to a division. Paragraph (b) of that Sub-section contains the conditions upon which the sums issued shall be repaid, and when the Chancellor of the Exchequer was speaking about this matter on the 17th of last month, he described it as a mere book-keeping entry between the Departments. If I understand the provisions of Sub-section (4) aright, I cannot think that that accurately describes the proposed transaction. I am not, of course, falling into the error of imagining that these are the terms upon which the loans are issued to the public. I appreciate that it has nothing whatever to do with that matter, but if I understand the Sub-section aright, it imposes upon the future revenues the charge of meeting the interest and the sinking fund of these loans. I am aware of the fact that no one Parliament can bind another, and that it would be perfectly possible for some future Parliament to rescind this either in so many words or in effect.

Unless I am wrong the effect of Subsection (4) as it stands will be that the Chancellor of the Exchequer in the year beginning six years from now will have to find the money in his Budget, presumably out of revenue—unless he raises fresh loans—to pay the interest and such Sinking Fund as is provided in Subsection (4, b) in order to effect the repayment of the loan. If, therefore, I am right, it seems to me that this Sub-section is a good deal more than a mere bookkeeping entry between the Departments. It is a proposal which Parliament will have to honour, unless Parliament, as any Parliament can do, reverses its decision and extends the period of repayment, or alters it in any other way.

That brings me to the question of the rate of interest. When the Money Resolution was brought forward it was the opinion of the House that the effect of this Sub-section was that the debt will be paid off at the end of 35 years from now—that is, for five years from now there is no Sinking Fund, and the repayment period will be for 30 years afterwards. As I see it, that is not necessarily the case. It is true that if the loans were borrowed exactly at 3 per cent., then the loan would be paid off at the end of that time. If they were borrowed at 3 per cent., without discount, and redeemable in 30 years, the effect of Subsection (4) would be that the close of the repayment of the loan would be at the end of 30 years. But if the Chancellor of the Exchequer departs from those terms, and issues the loan at, say, 3i per cent. or at 3 per cent., say, with 5 per cent. discount—both of which courses I very strongly deprecate—then, although the Treasury have got moneys out the the Defence Services year by year up to the end of 35 years—the amount of repayment specified in Sub-section (4)—it might well be that so far as the Exchequer as a whole was concerned they would not fully have accomplished the repayment. If I am right in thinking that, I should like the Chancellor of the Exchequer to tell us what, if any, is the further provision that is made for extinguishing the balance of the debt left over after the transaction has been completed. I admit that it is rather a complicated point.

Provided the rate of interest is precisely the same as is specified in Sub-section (4) I can see quite clearly that the debt will be extinguished in 35 years, but in so far as the arrangement differs from that, for instance, if the Chancellor of the Exchequer is able to borrow at a cheaper or a dearer rate, there will clearly be a balance, either in our favour or against us, which will remain at the end of the 35 years. Therefore, we need some explanation from the Chancellor of the Exchequer, before we pass this Clause, as to how precisely it is intended to handle the matter. I do not think that there is anything further that I should like to raise, but I should be glad if the Chancellor of the Exchequer would enlighten me on the points of fact about which I have requested information. Further, I hope that he will be able to give us some firm assurance as to the conduct of this matter in future which will relieve us from the feeling of anxiety that posibly something might happen similar to what happened in the Great War, and that we may have great windfall profits made either by investors at high rates of interest, or by the banks owing to credit inflation similar to that which took place during the Great War.

5.36 p.m.

Mr. Benson

I wish to confine my remarks to Sub-section (4). The Sinking Fund or terminable annuity has not received as much attention in our Debates as the major problem of the borrowing of the £400,000,000. I think it is desirable that this matter should be discussed, because I can see neither rhyme nor reason why it should appear in the Bill. As my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) has pointed out, everyone knows that this House is not capable of binding a future House. The House of Commons cannot lay down a law which some future House cannot repeal, and the whole policy of sinking funds has always broken down on that point. This House from time to time has played with the idea of Sinking Fund to pay off debt ever since Walpole tried it 200 years ago, and, with one or two trifling exceptions, they have invariably proved failures. Therefore, it seems to me utterly ridiculous to put into a Bill machinery which has invariably proved futile in the past and will unquestionably prove futile in the present case.

There is nothing in this particular Sinking Fund that makes it any better than any of the previous ones. On the contrary, it is a good deal worse in many respects. In the first place, it is extraordinarily clumsy. It is an inter-departmental Sinking Fund. As I understand it, when we start our repayments there will appear in the Service Estimates a sum representing the repayment of capital and interest, which will be handed over to the Treasury. That means that the Treasury will provide the Departments with certain sums of money which the Departments will then hand over to the Treasury in repayment of the debt. It is a clumsy inter-departmental cross-entry in the books. It may have the effect, so long as it remains law, of throwing the responsibility of cancelling so much debt each year on the Government, but by linking it up with payments between the Departments it will have the effect of making the various Service Estimates difficult to compare, and it will swell the total and produce no real good.

I cannot understand what was the difficulty in understanding the Amendment which should have been moved by the hon. Member for Huddersfield (Mr. Mabane). He merely proposed to short-circuit the Service Departments, and the result would have been that Sub-section (4b) would have provided that the Exchequer shall issue money to itself to repay itself for the money which it has just issued. I think that on the whole that was as sensible a proposal as making these cross-entries through the various Departments. There is nothing in this proposal of the Government which really binds the future. As a matter of fact this Sinking Fund is weak in this respect, that it actually can fulfil the full letter of the law without reducing a single penny of the Debt. A Chancellor of the Exchequer who wishes to obviate the burden has only to borrow on Ways and Means advances or Treasury Bills, repay these Treasury Bills and Ways and Means advances out of the capital repayment of this Sinking Fund, and he will have fulfilled the letter of the law without reducing the Debt by a single penny.

What is the motive of putting all this cumbersome machinery into the Bill? I am not quite sure whether it is sheer window-dressing or whether the Chancellor of the Exchequer has really good intentions. If he has good intentions I hope that he will excuse my quoting some words on the subject of sinking funds and good intentions by Mr. Gladstone. This is the authentic statement of what Mr. Gladstone said in 1875: The misfortune of having these good intentions, and of giving them form, is this—that they induce people to believe that they have done something for the public service and the reduction of the Debt when they really have done nothing whatever—to suppose themselves to have done something real when they have made an imaginary sacrifice to economy and public interest, for which, unfortunately, they are much more disposed to compensate themselves by substantial additions to the public expense. How better could the Chancellor of the Exchequer's proposal be described? His good intentions are of a rather peculiar character. In this Sinking Fund he actually arranges that his repayments shall increase as the period of time grows more and more distant. If he borrows his £400,000,000, his first year's annual repayment will be £8,400,000, and it is not until 35 years' hence that the maximum figure of £20,000,000 a year will be reached. In other words, as far as the Chancellor of the Exchequer is concerned, the greater the distance in time, the brighter and more radiant will his good intentions shine. In the first 15 years he will repay only £160,000,000, and in the second 15 years £240,000,000. The right hon. Gentleman reminds me of the small girl who was asked whether she was going to grow up into a good girl, and she replied that she would rather be beautiful and repent. The Chancellor of the Exchequer, like all other rakes, when he sows his wild oats has no doubt at the back of his mind that he intends to reform and that ultimately he will repent in full. That is quite common among sinners, but I think the Chancellor of the Exchequer is an exceptionally cautious case, for he must be the only sinner who has ever attempted by Act of Parliament to postpone his final repentance to his 103rd birthday.

What is the use of cumbering this Bill with fantastic and futile machinery which will not work? There is only one guarantee of debt repayment, and that is the financial integrity of the Chancellor of the Exchequer. If that integrity exists, sinking funds are not necessary; if it does not exist they are of no avail.

5.45 p.m.

Mr. Chamberlain

I will endeavour to answer the questions which the hon. Member for East Edinburgh (Mr. Pethick-Lawrence) has very courteously addressed to me, and I need hardly say that on matters of fact I am unable to find any fault in his interpretation. The amount of the sums aggregating £400,000,000 is, as he rightly suggested, the amount of cash which can be raised by the Treasury. The hon. Member asked me to give an assurance on three points. In the first place, that in floating loans I would use my powers to keep the interest low. Let me say with regard to that, as to the other assurances for which he asked, that they all deal with matters of some importance which must undoubtedly be watched, but it really would not be a good principle for me to give specific and definite assurances on them at this stage. I think he will agree with me that as this period of borrowing is to last over five years there may be changes. No one knows how long he may remain in the particular position he happens to hold at the moment, and, therefore, I have to contemplate that during the course of the next five years I may no longer be in charge of the Exchequer. The hon. Member says that this Parliament cannot bind its successors. I do not think it can, and, therefore, I am not in a position to give specific and definite assurances, but I have no hesitation in saying that I intend to use all the power I have to keep the interest on any loans which I raise as low as I can.

The hon. Member asked also for an assurance that I would make no attempt to float any loan at an appreciable rate of discount. There again I cannot say what the position may be for five years, hence, or what may be the best way of raising money at any given time. I do not think I can go further than that, except to say that I shall endeavour, as far as I am concerned, to raise all the money I have to raise on terms which at the moment seem to me most favourable for the taxpayer. The third point on which the hon. Member asked for an assurance was with reference to certain loans raised during the War on bank credits; he asked that I would not resort to a practice of that kind. If I remember aright there was considerable difficulty at the time to which he referred in obtaining subscriptions direct from the public and that that was the reason why the the banks were called in. I do not anticipate that any such difficulty will arise now, and whilst guarding myself against any specific assurances over this long period of time, I think the hon. Member may feel no anxiety on that point.

Mr. Pethick-Lawrence

I appreciate the difficulty of the Chancellor of the Exchequer in giving actual pledges on the other two points, but on this last point I think he should give us a little more, because it is universally agreed that it was a colossal blunder and cost the country a great deal of money. I hope the Chancellor of the Exchequer will go a little further on this point.

Mr. Chamberlain

I can only say that I have no intention of resorting to any such practice, and I have no reason to suppose that I shall be put in the position which existed in 1914–18 when that procedure was adopted. Let me come to the points raised on Sub-section (4). What I had in mind was that there was no relation between the rate of interest and the period of repayment of any loans which might be raised under the terms set down. They are to regulate the procedure between the Exchequer and the Departments concerned. It is true that under these provisions, provided they are not upset by any Act of Parliament hereafter, the accounts will be squared as between the various Departments and the Treasury. The hon. Member will appreciate that that does not necessarily mean that any loans raised from the public will have been paid off. He said that if there was, in fact, a difference between the average rate of interest at which the loans were raised to the public and the rate of 3 per cent., it might be either way; either the public debt will be paid off or it will not be paid off. He asked what provision in that case would be made for a Sinking Fund which was not provided for under these arrangements. I think he will find the answer in Sub-section (3), where it is provided that the interest on the public loans falls within the Fixed Debt Charge, which is recouped in turn by the interest derived from the Defence Departments out of money voted by Parliament. Therefore, if it should prove at the end of the period that there is still something unpaid it would fall within the Fixed Debt Charge and provision would be made to discharge it.

Mr. Pethick-Lawrence

Surely Subsection (3) refers only to the period of five years and has nothing to do with the Fixed Debt Charge?

Mr. Chamberlain

It is my fault; I should have said Sub-section (2). I was in fact referring to Sub-section (1) of Section (2) of the War Loan Act, 1919. Sub-section (2) of this Bill authorises the Treasury to raise money: in any manner in which they are authorised to raise money under and for the purposes of Sub-section (1) of Section one of the War Loan Act, 1919; and any securities created and issued to raise money under this Subsection shall be deemed for all purposes to have been created and issued under Subsection (1) of Section one of that Act. The effect is to provide that the interest shall be within the Fixed Debt Charge. I appreciate that the position is not very clear.

Mr. Pethick-Lawrence

I cannot possibly question what the right hon. Gentleman says, but I should like to be quite clear what it is he really means. Do I understand him to mean that if Section 1 of the Act of 1919 is read into this Sub-section, it will have the effect, after the period of 35 years, that any repayments still left over, either of interest or Sinking Fund, will come out of the ordinary services of the year? I am not clear what the position is.

Mr. Chamberlain

I am afraid it is rather technical, but the interest on the loans raised is provided for under the Fixed Debt Charge. If the hon. Member will look at Sub-section (5) paragraph (b) he will see that in regard to the repayment arrangements as between the Defence Departments and the Treasury so much thereof as represents interest shall be applied in payment of an equivalent amount of interest which would, but for this provision, have been paid out of the permanent annual charge for the National Debt. That is the Fixed Debt Charge. Therefore, the Fixed Debt Charge is recouped for any interest it provides by interest paid by the Defence Departments. If there is a difference between the rates of the two and after 35 years some part of the principal is still unpaid, it will have to be provided for by the Fixed Debt Charge. The hon. Member said that before the debt is paid off another Government might rescind these proposals and put an end to the Sinking Fund. I cannot possibly prevent that. The hon. Member is perfectly right in saying that no one Parliament can bind its successors, but all the same I think it is right to put it on record that this is our intention, and, of course, it is equally arguable that a future Parliament will not upset the arrangements. At any rate, I think the provisions will have a healthy effect on the expenditure of the Defence Departments, and although I cannot deny that they may be upset in the future, nevertheless, I attach some importance to them.

5.59 p.m.

Mr. A. V. Alexander

I am very disappointed at the answer of the Chancellor of the Exchequer. On the last point, with regard to the charge to be made against the Service Departments, all I can say is that it seems to me that in any given year the Defence Departments may have deducted from their Estimates such charge in relation to the loans which have been of service to them in the past, as the Treasury may think fit. They are to be charged at the rate of 3 per cent., but when the Chancellor of the Exchequer speaks about the Service Departments being charged, he means nothing of the kind. I can well understand the public being puzzled unless they were dealing with a revenue Department enjoying a payment made to them out of revenues earned, but in effect there is nothing more in this provision of the Bill, than that such charge will be deducted from the gross estimate of the expenditure of the Fighting Service Departments in any given year after the expiry of the five years period.

Another thing which struck me very forcibly in the answers which the Chancellor made in the earlier discussion on the Clause is that apparently it is all right for the Government to put forward arguments on the principle of budgeting and balance sheets that would never be accepted by the directors of ordinary companies or by those running ordinary institutions. From that point of view, I consider that the Chancellor has not made an adequate answer to the points so forc- ibly expressed by my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) in the discussion of the Money Resolution and on the Second Reading of the Bill.

Let me take, for example, the suggestion that, in connection with the rearmament programme, the ordering of stores for the future must legitimately be regarded as capital expenditure. I did not spend a very long time in a Service Department—I was at the Admiralty for about two and a-half years—but after my experience there, it is news to me that the ordering of stores can in any way be justified as capital expenditure. In support of that contention, the Chancellor quoted the ordering of possible reserve ammunition. In what way does the ordering of reserve ammunition in this respect differ from the provision which has been made over and over again in the Estimates of the Fighting Services for reserves of oil fuel for the Navy and the Air Force? The reserves which have been laid up from time to time by the Service Departments, whenever they were permitted to do so by the Treasury—which was not nearly so often as the Service Departments desired—have always had to be met out of revenue. I do not believe for one moment that hon. Members who are company directors, when dealing with a question of this sort in their own business would listen to the argument that such provisions should legitimately be charged to capital account.

With regard to the suggestion made by the Chancellor, in reply to my hon. Friend, that he is satisfied that there will not be a shortage of savings, to which reference has been made, and that therefore, as was said by the right hon. Gentleman the Member for Hillhead (Sir R. Horne) last week, the country will be able to take this loan procedure in its stride, I must say that the Chancellor's statement to-day that the giving out of orders for the rearmament programme will stimulate a certain amount of new saving and that consequently the position will be eased, supports the case we are putting forward that, instead of raising £400,000,00o by loan, it would be practicable and reasonable, in view of the stimulation of expenditure on the one hand and the savings of individuals on the other, to meet a large part, if not the whole, of the armaments expenditure out of taxation.

I hope that on reflection, and after reading what he has said on this point tonight, the Chancellor will see that he has supported the case of the Opposition against this expenditure being provided by loans, and will admit our case, which is that we believe, in the interests of the public, the Exchequer and the taxpayer in the long run, this expenditure ought to be met far more out of direct taxation. After listening to the Chancellor's two speeches this afternoon, I am more convinced

than ever that this sort of procedure, far from being sound, is in the main an effort by the Government to escape from the political obloquy and criticism, which would arise on their rearmament programme if they did their duty and taxed direct for what are wasting assets.

Question put, "That the Clause stand part of the Bill."

The Committee divided Ayes, 213; Noes, 101.

Division No. 94.] AYES. [6.6 p.m.
Acland-Troyte, Lt.-Col. G. J. Dugdale, Major T. L. McEwen, Capt. J. H. F.
Agnew, Lieut.-Comdr. P. G. Duggan, H. J. McKie, J. H.
Albery, Sir Irving Duncan, J. A. L. Macnamara, Capt. J. R. J
Allen, Lt.-Col. J. Sandeman (B'kn'hd) Dunglass, Lord Manningham-Buller, Sir M.
Anstruther-Gray, W. J. Ellis, Sir G. Margesson, Capt. Rt. Hon. H. D. R.
Apsley, Lord Elliston, Capt. G. S Markham, S. F.
Asks, Sir R. W. Emrys-Evans, P. V. Mason, Lt.-Col. Hon. G. K. M.
Assheton, R. Errington, E. Maxwell, Hon. S. A.
Baldwin, Rt. Hon. Stanley Evans, Capt. A. (Cardiff, S.) Mayhew, Lt.-Col. J.
Balfour, Capt. H. H. (Isle of Thanet) Everard, W. L. Meller, Sir R. J. (Mitcham)
Barclay-Harvey, Sir C. M. Findlay, Sir E. Mellor, Sir J. S. P, (Tamworth)
Baxter, A. Beverley Fox, Sir G. W. G. Mills, Sir F. (Leyton, E.)
Beamish, Rear-Admiral T. P. H. Furness, S. N. Mitchell, H. (Brentford and Chiswick)
Boauchamp, Sir B. C. Ganzoni, Sir J. Moore, Lieut.-Col. T. C. R.
Beit, Sir A. L. Gilmour, Lt.-Col. Rt. Hon. Sir J. Muirhead, Lt.-Col. A. J.
Bennett, Sir E. N. Gluckstein, L. H. Munro, P.
Blair, Sir R. Goldie, N. B. Neven-Spence, Major B. H H.
Blindell, Sir J. Graham, Captain A. C. (Wirral) O'Connor, Sir Terence J.
Boulton, W. W. Granville, E. L. O'Neill, Major Rt. Hon. Sir Hugh
Bowater, Col. Sir T. Vansittart Gridley, Sir A. B. Orr-Ewing, I. L
Bower, Comdr. R. T. Grigg, Sir E. W. M. Palmer, G. E. H.
Bracken, B. Grimston, R. V. Penny, Sir G.
Braithwaite, Major A. N. Gritten, W. G. Howard Percy, Rt. Hon. Lord E.
Briscoe, Capt. R. G. Guest, Hon. I. (Brecon and Radnor) Perkins, W. R. D.
Brocklebank, C. E. R. Hanbury, Sir C. Pstherick, M.
Brown, Rt. Hon. E. (Leith) Hannah, I. C. Pickthorn, K. W. M.
Brown, Brig.-Gen. H. C. (Newbury) Hannon, Sir P. J. H. Pilkington, R.
Bull, B. B. Harbord, A. Procter, Major H. A.
Burgin, Dr. E. L. Haslam, H. C. (Horncastle) Radford, E. A.
Campbell, Sir E. T. Haslam, Sir J. (Bolton) Raikes, H. V. A. M.
Carver, Major W. H. Heilgers, Captain F. F. A. Ramsay, Captain A. H. M.
Cary, R. A. Heneage, Lieut.-Colonel A. P. Rathbone, J. R. (Bodmin)
Castlereagh, Viscount Hepburn, P. G. T. Buchan- Rawson, Sir Cooper
Cayzer, Sir C. W. (City of Chester) Herbert, Major J. A. (Monmouth) Rayner, Major R. H.
Cazalet, Thelma (Islington, E.) Hills, Major Rt. Hon. J. W. (Ripon) Reed, A. C. (Exeter)
Chamberlain, Rt. Hn. Sir A. (Br.W.) Holmes, J. S. Reid, Sir D. D. (Down)
Chamberlain, Rt. Hn. N. (Edgb't'n) Hope, Captain Hon. A. O. J. Remer, J. R.
Channon, H. Hopkinson, A. Rickards, G. W. (Skipton)
Chapman, Sir S. (Edinburgh, S.) Hore-Belisha, Rt. Hon. L. Robinson, J. R. (Blackpool)
Clarke, Lt.-Col. R. S. (E. Grinstead) Horsbrugh, Florence Ropner, Colonel L.
Clarry, Sir Reginald Howitt, Dr. A. B. Ross, Major Sir R. D. (Londonderry)
Clydesdale, Marquess of Hudson, Capt. A. U. M. (Hack., N.) Russell, R. J. (Eddisbury)
Cobb, Captain E. C. (Preston) Hudson, R. S. (Southport) Salmon, Sir I.
Colville, Lt.-Col. Rt. Hon. D. J. Hume, Sir G. H. Salt, E. W.
Cooke, J. D. (Hammersmith, S.) Hunter, T. Samuel, M. R. A.
Cooper, Rt. Hn. T. M. (E'nburgh, W.) Inskip, Rt. Hon. Sir T. W. H. Sandeman, Sir N. S.
Courtauld, Major J. S Jarvis, Sir J. J. Shaw, Major P. S. (Wavertree)
Courthope, Col. Sir G. L. Jones, Sir G. W. H. (S'k N'w'gt'n) Simon, Rt. Hon. Sir J. A.
Crooke, J. S. Keeling, E. H. Smiles, Lieut.-Colonel Sir W. D.
Crookshank, Capt. H. F. C. Kerr, Colonel C. I. (Montrose) Somervell. Sir D. B. (Crewe)
Cross, R. H. Kerr, H. W. (Oldham) Somerville, A. A. (Windsor)
Crowder, J. F. E. Kerr, J. Graham (Scottish Univs.) Southby, Commander A. R. J.
Culverwell, C. T. Knox, Major-General Sir A. W. F. Spens. W. P.
Davies, Major Sir G. F. (Yeovil) Lamb, Sir J. Q.
Davison, Sir W. H. Lambert, Rt. Hon. G. Stanley, Rt. Hon. Oliver (W'm'l'd)
Dawson, Sir P. Law, R. K. (Hull, S.W.) Stewart, J. Henderson (Fife, E.)
De Chair, S. S. Leighton, Major B. E. P. Strauss, E. A. (Southwark. N.)
Donman, Hon. R. D. Levy, T. Strauss, H. G. (Norwich)
Denville, Alfred Lewis, O. Strickland, Captain W. F.
Doland, G. F. Liddall, W. S. Stuart, Lord C. Crichton- (N'thw'h)
Dorman-Smith, Major R. H. Lloyd, G. W. Tate, Mavis C.
Drewe, C. MacAndrew, Colonel Sir C. G. Taylor, C, S. (Eastbourne)
Duckworth, Arthur (Shrewsbury) MacDonald, Sir Murdoch (Inverness) Taylor, Vice-Adm. E. A. (Padd., S.)
Duckworth, W. R. (Moss Side) Macdonald, Capt. P. (Isle of Wight) Thomson, Sir J. D. W.
Touche, G. C. Waterhouse, Captain C. Withers, Sir J. J.
Tree, A. R. L. F. Watt, G. S. H. Womersley, Sir W. J.
Tryon, Major Rt. Hon. G. C. Wedderburn, H. J. S. Wood, Rt. Hon. Sir Kingsley
Tufnell, Lieut.-Commander R. L. Wells, S. R. Young, A. S. L. (Partick)
Turton, R. H. Wickham, Lt.-Col. E. T. R.
Wakefield, W. W. Williams, C. (Torquay) TELLERS FOR THE AYES.—
Ward, Lieut.-Col. Sir A. L. (Hull) Williams, H. G. (Croydon, S.) Dr. Morris-Jones and Lieut.-Colonel
Ward, Irane M. B. (Wallsend) Winterton, Rt. Hon. Earl Llewellin.
Warrender, Sir V. Wise, A. R.
Acland, Rt. Hon. Sir F. Dyke Greenwood, Rt. Hon. A. Paling, W.
Adams, D. (Consett) Griffith, F. Kingsley (M'ddl'sbro,W.) Parker, J.
Adams, D. M. (Poplar, S.) Griffiths, G. A. (Hemsworth) Pethick-Lawrence, F. W.
Adamson, W. M. Hall, J. H. (Whitechapel) Potts, J.
Alexander, Rt. Hon. A. V. (H'lsbr.) Hardie, G. D. Pritt, D. N.
Ammon, C. G. Harris, Sir P. A. Ridley, G.
Attlee, Rt. Hon. C. R. Hayday, A. Robinson, W. A. (St. Helens)
Banfield, J. W. Henderson, A. (Kingswinford) Sanders, W. S.
Barnes, A. J. Henderson, J. (Ardwick) Seely, Sir H. M.
Barr, J. Henderson, T. (Tradeston) Short, A.
Benson, G. Hicks, E. G. Silkin, L.
Bevan, A. Jagger, J. Silverman, S. S.
Broad, F. A. Jenkins, A. (Pontypool) Simpson, F. B.
Bromfield, W. Jenkins, Sir W. (Neath) Smith, Ben (Rotherhithe)
Buchanan, G. Johnston, Rt. Hon. T. Smith, E. (Stoke)
Burke, W. A. Jones, H. Haydn (Merioneth) Sorensen, R. W.
Charleton, H. C. Kelly, W. T. Stewart, W. J. (H'ght'n-le-Sp'ng)
Chater, D. Kennedy, Rt. Hon. T. Strauss, G. R. (Lambeth, N.)
Cluse, W. S. Kirby, B. V. Taylor, R. J. (Morpeth)
Clynes, Rt. Hon. J, R. Lathan, G. Thorne, W.
Cove, W. G. Leach, W. Thurtle, E.
Davidson, J. J. (Maryhill) Lee, F. Tinker, J. J.
Davies, S. O. (Merthyr) Leonard, W. Viant, S. P.
Dunn, E. (Rother Valley) Logan, D. G. Walkden, A. G.
Ede, J. C. McEntee, V. La T. Walker, J.
Edwards, Sir C. (Bedwellty) McGhee, H. G. Westwood, J.
Fletcher, Lt.-Comdr. R. T. H. MacLaren, A. Williams, E. J. (Ogmore)
Foot, D. M. Maclean, N. Williams, T. (Don Valley)
Frankel, D. Maxton, J. Windsor, W. (Hull, C.)
Gardner, B. W. Messer, F. Woods, G. S. (Finsbury)
George, Major G. Lloyd (Pembroke) Montague, F. Young, Sir R. (Newton)
George, Megan Lloyd (Anglesey) Morrison, R. C. (Tottenham, N.)
Gibbins, J. Muff, G. TELLERS FOR THE NOES.—
Gibson, R. (Greenock) Naylor, T. E. Mr. Groves and Mr. Mathers.
Green, W. H. (Deptford) Oliver, G. H.

Bill read the Third time, and passed.

Clause 2 ordered to stand part of the Bill.

Bill reported, without Amendment; to be read the Third time To-morrow.