ARMAMENTS CONTRACTS. (Hansard, 24 March 1937)

§ Mr. T. Johnston
We take this opportunity of raising the questions of prices, profits, speculation and the plunder of the nation in connection with its rearmament programme. Two days ago the right hon. Gentleman the Minister for the Co-ordination of Defence admitted and deprecated speculation on the metal market but added that, in the main, such speculation had not, so far, affected prices. This view is somewhat different from that which he expressed in a speech made outside this House some time previously. On that occasion he was more emphatic, and he said that nothing in the way of speculation had affected the price of our armaments.
2932 There is a French proverb to the effect that the more a thing changes the more it remains the same, and we find from past history as we find to-day that the hour of the nation's need is always the hour of capitalism's greatest opportunity. It is necessary that we should remind ourselves of what happened in 1914 and 1915, because what happened then is precisely what is happening now and will, in our view, inevitably have the same results and consequences. May I remind hon. Members that on the outbreak of the last War the Trades Union Congress and the Executive Council of the Labour party and the General Federation of Trade Unions, combined to make an offer to the Government of the day. Speaking for their followers they said they would not seek to exploit the War situation for financial gain, provided that the Government took the necessary steps to prevent the capitalists exploiting the nation for financial gain. That offer was refused—politely, but nevertheless refused.

§ Mr. Henderson Stewart
Can the right hon. Gentleman give the date?

§ Mr. Johnston
I can obtain the precise dates if the hon. Member wants them. He will find particulars in the "Round Table" magazine of December, 1915, and in the OFFICIAL REPORT of 15th November, 1915, when they were stated by the late Sir Alfred Markham. That offer, as I have said, was refused and then the ramp began. In March, 1916, we find the Bank of England issuing advertisements through the public Press containing the following words: Unlike the soldier, the investor runs no risks. This was when they were "boosting" the 5 per cent. Exchequer Bonds. In July, 1915, the present President of the Board of Trade introducing the Price of Coal (Limitation) Bill, said that within the previous year the coal-owners of Great Britain had increased prices to the British people—I am leaving out the foreign markets — to the extent of £20,000,000. That plunder went on in increasing volume until the Sankey Commission reported that the coal-owners of this country during the War had reaped additional profits to the tune of over £100,000,000.
As regards shipping, a responsible organ like the "Statist" declared that 2933 shipping profits went from £20,000,000 in 1913, to £250,000,000 in 1915. The late Sir John Ellerman at the end of the War was in possession of £35,000,000 worth of shipping. The scandal was so grotesque that the then leader of the Conservative party, Mr. Sonar Law, himself an investor and a shareholder in a shipping concern, stood up in this House and denounced with great fervour and emphasis the scandal which had gone on in the shipping world. But this plunder went on in every direction. We had the amazing spectacle of the Food Controller, himself a great merchant in the City of London, stopping the importation of Danish butter until the market was more brisk. Then, in order to balance matters, he got up in another place and proposed that the national Budget should be balanced by taking £20,000,000 from the moneys paid to soldiers and their dependants.
When we come to armaments we find that the position was really more indefensible, and it is that position that I desire more particularly to raise to-day. The Government of that time took practically all the steps that the Minister for Co-ordination of Defence is taking now to protect the national interest, and it took steps that the right hon. Gentleman has not yet taken, steps which I prophesy he will be compelled to take to protect the solvency of this nation from the price ramp in armaments and materials which has just begun. The Government in 1915 set up national shell factories in order to counter the rapacity of those who were exploiting the national interests at the time, and as a result of those national factories the Government got the price of 18-pounder shells reduced by no less than 40 per cent. The Metals Department at the Ministry of Munitions, upon the authority of my right hon. Friend the Member for Carnarvon Boroughs (Mr. Lloyd George), saved the nation no less than £15,000,000. Now it is said that the people who are in these businesses are just as patriotic, just as considerate of the national necessity, as the people in other industries and other trades and professions. I regret to say that that is not borne out by the history of the last 20, 30, 40 and 50 years; it is not borne out either here or in other lands. There is something in this industry which leads men engaged in it to abandon all patriotic considerations and to exploit the national 2934 necessity—and more than that, to endanger the national interest.

§ Sir Robert Horne
To what industry does the right hon. Gentleman refer? There are innumerable materials that go to the making of any armament. Does he include them all? Is the manufacture of steel, for example, supposed to be an armament purpose? It concerns armaments?

§ Mr. Johnston
I am going to supply the right hon. Gentleman with the information, if he will bear with me.

§ Sir R. Horne
I wish only to follow the argument.

§ Mr. Johnston
The right hon. Gentleman cannot follow my argument if he will not allow me to state it, and I am going to state it; I came here prepared to state it. I could give the instance of British firms, armament finns, that fortified the Dardanelles against us. Vickers was the name. I call that an armament firm. During the Russo-Japanese war the city of London financed Japan at 9 per cent. and coaled the Russian Fleet at the same time. I call that making profits out of armaments, too. I do not know what the right hon. Member for Hillhead (Sir R. Home) would call the Whitehead torpedo factory that was instituted at Fiume, in Austria, and built torpedoes which were later used to sink British shipping in the Mediterranean. I call that an armament firm. It is still permitted by law. I do not know what the right hon. Member for Hillhead will say about it; I shall be interested to hear. I do not know what he will have to say about the situation which, right up to the outbreak of war, compelled our manufacturers to pay a royalty of 1s. 3d. for British shells to Messrs. Krupps.
The whole business wound up at the end of the War with the Board of Inland Revenue officially reporting to a Select Committee of this House that 360,000 people to their knowledge had increased their fortunes over the pre-war basis by no less than £3,000,000,000. Let hon. Members read the revelations of the American committee of inquiry, published over a year ago, about the operations of the Electric Boat Company and Messrs. Vickers. Let them read how one supplied munitions only to Peru while the British firm was to supply only to Chile, Peru 2935 and Chile being at war. We had to provide one armament and the Americans to provide the other, and then, if you please, Messrs. Vickers and the Electric Boat Company were to divide the profits at the end of the year. The scream of the joke was reached surely when Professor Delaisi could prove that the great French manufacturing firm of Creusot and a great German manufacturing firm jointly arranged a clearing-house in Switzerland during the last War, whereby Germany was to be supplied with the aluminium for its Zeppelins, and carbine and the cyanamide for its explosives, provided that the French got German magnesium in exchange. After the last War we had another outbreak between Greece and Turkey, when the Entente Cordiale was still in operation, whereby our firms supplied one side in the War and the French firms supplied the other.
That is what I mean by saying that there is something in this industry which seems to make it more open to charges of non-patriotism and anti-patriotism than are most other industries in the country. This is the industry, with all its allies and associates, that the right hon. Gentleman and the Government say must continue to operate on a basis of private profits. It is quite true—I pay him my tribute for this—that he is taking some steps to limit the plunder that is inevitable in such a time as this. There have been great industrialists in this country who have averred that under private enterprise you cannot prevent the private enterprisers from "dodging." Let me quote what the late Lord Leverhulme said to his shareholders at their annual meeting on 28th April, 1921: We have always depreciated fully and amply all the profits not only of the parent company at Port Sunlight and elsewhere, but of all associated companies, as also have our predecessors in those associated companies prior to the time of their purchase by ourselves. This depreciation has in many cases been excessive. For instance, in one associated company, when I looked into the depreciation account of that company, I found that the whole of the plant, machinery, buildings, etc., had been steadily depreciated at a fixed rate year after year, and that the depreciation fund stood in 1920 at £20,000 more than the amount appearing on the books as the value of the properties as depreciated. Therefore the whole of the plant, machinery and buildings of that company stood at £20,000 less than nothing. 2936 The right hon. Gentleman the Minister for the Co-ordination of Defence is trying to watch their on-costs. That is so; I read of it in the report of the Select Committee on Estimates. But there are 100 methods by which the State can be dodged there. The inevitable result has already begun to be applied. In finance the cost of borrowing to municipalities is rising. It has risen steadily week after week during the past two months. Engineering firms are hopefully floating themselves at fabulous prices. I have in my hand the prospectus of a quite reputable firm, the Scottish Machine Tool Corporation, Limited, floating themselves into a joint concern with a capital of £400,000, appealing to investors to invest in 1,480,000 ordinary shares of 4s. each at a premium—at 5s. a share. When we look at the record of these concerns we find that jointly in 1934 they showed a loss of £11,045, a profit in 1935 of £298, and in 1936 a profit of £1,17,000. This quite reputable concern is now, on the basis of armament orders, on the basis of the boom which is coming, inviting investors to subscribe to their company in the expectation of getting fabulous profits.
Hon. Members will doubtless deal with this subject more in detail, but I have here in my hand instances of landowners asking 50 years purchase for land for aerodromes. It is the Oxford University Trust. But there are others, all at the same game. There is the hon. and gallant Member for Accrington (Major Procter), I think it was, who has made speeches and written articles about cases within his knowledge, in which he calls the landowners "vultures." That is a term you might expect to be used from these benches about the landowning fraternity, but when you get back-bench Members opposite beginning so to describe the landowners who are exacting these fabulous prices from the nation in its hour of need, Ministers and the country can begin to be assured that there is not only smoke but there is fire also.
Take shipping. I have been asking some questions of the President of the Board of Trade on this matter, and I should like to ask the right hon. Gentleman the Minister for the Co-ordination of Defence how he justifies this. Here are British armament manufacturers chartering foreign-owned vessels to make hundreds of voyages. In one year there 2937 were 55 foreign vessels with cargoes or in ballast going out, and 26 coming in, all coastwise traffic, to and from other British ports. They are allowed to operate in their motor-driven vessels with one-third fewer seamen and engineers than British vessels are compelled to carry, and they are exempt from British Income Tax. The profits on these charters do not yield a penny to the British Treasury. Here are patriotic armament kings in Scotland, England and Wales deliberately choosing vessels flying foreign flags to carry British armaments and British materials from British ports to British ports, and when the hour of danger comes, as come it may, the right hon. Gentleman and his friends will not be able to use these vessels. They are foreign-owned vessels, and they will be away across to Holland, Germany, Sweden and Norway again. What British shipbuilders, British seamen, British engineers and British railroad proprietors have to say about this sort of thing I cannot imagine.

§ The Minister for the Co-ordination of Defence (Sir Thomas Inskip)
I am sorry to interrupt the right hon. Gentleman, but I am anxious to follow his argument. Is it his suggestion that British armament firms are specially using foreign vessels, or is he dealing with the whole system of coastal shipping in connection with our defences in case of war?

§ Mr. Johnston
I am dealing for the moment solely with the use made of foreign ships by British armament manufacturers and by firms engaged in the scrap-iron trade and so on, and ancillary industries, giving a deliberate preference to foreign shipping while there is British coastwise shipping available, and thus making extra profits.

§ Sir T. Inskip
Again I do not want to interrupt, but I want to follow this in order, if I can, to be of help on this point. Does the right hon. Gentleman suggest that armament manufacturers are exporting scrap in foreign vessels or importing scrap in foreign vessels?

§ Mr. Johnston
Perhaps I should have made it a little more clear, but I was dealing entirely with coastwise traffic from British port to British port. I was not dealing with any cross-seas traffic at all for the moment. I am dealing purely with the fact that British armament manufacturers are giving preference deliberately to 2938 foreign-owned ships. I do not know how far they are foreign owned. I do not know whether in some cases British armament manufacturers have not shares in these ships; I cannot prove that—I have heard statements made—but I do know that the practice is going on now, and I should like to hear the views of the railway concerns and of the shipowning concerns, as well as the views of the Government, as to the reasons why this traffic is permitted to develop. I can give the right hon. Gentleman the names of vessels that have gone hundreds of voyages of this nature during the past year and a-half, and it is going on worse to-day than ever.
I have questioned the Board of Trade repeatedly on this matter. To-day I asked a question of the Board of Trade, but they refused to give me the names of the charterers. I happen to know the names, but the Board of Trade refused to give publicity in this House to the names of these patriotic charterers. I do not know why. I am told it has never been the practice to divulge these names, and I suggest to the right hon. Gentleman that he should put a watchdog or two on to the Board of Trade in this matter. The Board of Trade has the finest collection of officials who are unable to give any information on a subject of any Government Department.
Now I come more particularly to questions which may interest the right hon. Gentleman's own Department, and first there is the question of profits in armaments going on now. The Handley-Page Company can pay a dividend of 265½ per cent., the Hawker-Siddeley Company 40 per cent., the Bristol Aeroplane Company 22½ per cent., Short Brothers 30 per cent., the Fairey Company 10 per cent., and Vickers, the highest for the last 18 years, 10 per cent. What is the right hon. Gentleman going to do about that? I am well aware that the most spectacular increases which have taken place in recent months have been in commodities which are very largely outwith the right hon. Gentleman's control. I do not blame him for rises which take place, for instance, in rubber or commodities that are purchased outside the shores of this land, although even there he might at least have considered the proposition put forward repeatedly from these benches that we should have an Imports Regulation Board. Between 17th February and 2939 10th March zinc has jumped from £24 15s. per ton to £36 17s. 6d.; lead is up from £27 17s. 6d. to £36; tin is up from £230 10s. to £300 15s.; copper is up from £58 3s. 9d. to £76 per ton.
There is one point on which, I think, the Government are blameworthy in this matter. Suppose the right hon. Gentleman and his Front Bench were members of a town council committee dealing with street widening and the acquisition of property or land. If they made up their minds that it was in the public interest that they should acquire a particular property, say a block of shops, would they make that announcement first in the public Press and then go away and buy it? They certainly would not. Every hon. Member in this House who has been a member of a local authority would spurn such an idea at once, but that is precisely what the Government did. The Government first of all issued a White Paper declaring that they were going in for rearmament on a big scale, and then they proceeded to buy. To some extent the right hon. Gentleman, I understand, had made forward purchases, but I also understand that they have been almost infinitesimally small and certainly insufficient to prevent this great price ramp which has taken place on the market.
There is no use in saying that speculation is going on only to a very limited extent. Take papers like the "Financial News" and papers like the Rothermere Press, the "Daily Express," and so on. I have quotations from them all here, describing in detail the frenzied, frantic speculation that went on in the metal market immediately the Government's White Paper was published, and the right hon. Gentleman and the Government have not seen fit to take any steps in advance to protect the national interests, though that very announcement sent prices rocketing.

§ Mr. Bernays
I do not quite follow the right hon. Gentleman. Should we have armed in secret?

§ Mr. Magnay
Does not precisely the same thing happen with a town council when it has a housing scheme? Do not building materials at once go up?

§ Mr. Johnston
With regard to the first question, whether we should have armed in secret, in fact that is what has been 2940 done. The only thing that has been done openly is that the purchase of materials has been done in such a way as to give the profiteers a chance to make extra plunder. With regard to the second interruption, about what a town council would do in housing, it would do what every town council, every city council in the land, does. The majority decide, first of all, to buy, and they then instruct their town clerk to get a neutral lawyer, who will not be suspected of having any connection with them, to get an option on the property, and then they come out openly, get their authority from the council, and proceed to purchase.

§ Mr. Magnay
When the Labour Government decided on their housing policy they informed the whole country, and the consequence was that all building materials and wages went up.

§ Mr. Johnston
In 1924 very definite steps were taken by the Labour Government, under the late John Wheatley's scheme, to control prices, and very forward arrangements were made about labour, with the co-operation of Labour leaders. But I do not want to be led aside. It is true that Members now on the Government benches so disliked our measures for controlling prices, plumbers and house building that they went into the Lobby against them. However, as I say, I do not want to be sidetracked. The point that I am making is this, that the Government make a public announcement and send prices sky-rocketing, and to the extent that they have done that and failed to control the private enterprise speculators, they are blameworthy; but I would add that I agree that on foreign-produced commodities, such as nickel and so on, it is not within the control of this country alone, in a world shortage, to prevent prices sky-rocketing. We could, by means of an import board, have regulated the flow into our markets and prevented the speculation and plunder that take place inside this country from being operated.
I want to raise a matter that was mentioned at Question Time to-day. I refer to the offer made by the engineering firm of Ransomes and Rapier, of Ipswich, to supply shells on a no profit and no loss basis, and I want to give the House in chronological sequence what happened in this case. I am glad to see the Secretary of State for War here, for I am now 2941 referring in particular to the War Department. On 10th July, 1936, this firm, an old-established one of 70 years standing, who have carried out great public works all over the globe, got a request from the War Office to assist in the production of shells. Seven days afterwards the firm accepted the War Office request, but added that they insisted upon producing whatever shells they could on a no profit and no loss basis, as they declined to make any profits out of the national necessity. On 15th September the company sent in a firm offer. At Question Time to-day I gathered that a statement was made that no firm offer was sent in. A firm offer was sent in on 15th September. The price of the tender was 17s. 11d. per shell. At that time, to the best of our knowledge and belief, that price was 3s. 7d. cheaper than the price that was being tendered by other manufacturers. I do not say it was the cheapest price that was offered, but it was 3s. 7d. cheaper than that tendered by other manufacturers who got the contracts. I am informed that it was 9s. 1d. cheaper than the then Woolwich price.
On 24th September the firm were politely informed that their premises and plant were so good that it might be advantageous if they were used in the production of tanks. Again the firm said that they were willing to do whatever the nation wanted, but it was to be on a no profit and no loss basis. The price they had tendered for shells included all the expenses they believed they would require to incur, but at the instance of the War Office 10 per cent. was added as cover for emergencies which they could not calculate at the moment. The firm, however, were determined that if at the end of the contract they had made any profits out of that 10 per cent., those profits would go back to the Treasury. We have got to 24th September, when the suggestion was made that the firm should not undertake shells, but tanks. On 10th October they were told verbally that their price was favourable for shells, and that the contract would be placed with them. On 24th November they were told for the first time that their premises were not suitable on grounds of vulnerability. Being at Ipswich, I suppose, they were possibly more vulnerable to attack from hostile aircraft than if they were at, say, Woolwich or Deptford. This is the first time the firm were told that. 2942 They were also told that their price was now not the most economical. On 9th November, they had been told, "Thank you very much for your offer to deal with tanks on a no profit and no loss basis, but we have made all the arrangements we want for tanks, so you are off there, too."
The Admiralty give prices in this House as to its purchases of oil. The Air Ministry refuse, but a trade paper can write to the Air Ministry and get the figures and publish them. We are asking to-day for the production of the precise figures at the time when that firm made their offer in contrast with the figures offered by all the other firms who got contracts on the basis of these tenders. I am not arguing that this firm were the cheapest; I do not know. I am arguing that we ought to have the fullest inquiry by a Committee of this House, including representatives of the Opposition. We want to know in the national interest whether this firm of standing and repute, which makes a patriotic offer to produce munitions on a no profit and no loss basis, have had a square deal or not. We are entitled to know that. It will be no satisfaction to the Government or the country if that request is refused. it is not an unreasonable request that a Committee of this House should be permitted to examine the precise figures of all the tenders at that period and to report whether it be the case that this firm's offer for the use of their plant, machinery and energy and their patriotic spirit have been turned down by a Government which is more intent on standing up for private profit and private exploitation than it is on standing up in the national interest. I have not said anything about the increased costs which are beginning to be observable in the food market. An increased cost of food will begin to affect wages, and wages again will begin to affect prices, so that the basis of the Estimates for rearmament will most assuredly not be the actual costs six months hence.
I put it to the Government, first, that we should have an inquiry into this Ipswich business to satisfy the minds of Members of this House that there has been a square deal; secondly, that the Government should, as the Government were compelled to do in 1915, set up factories of their own as a check; thirdly, that they should take every possible step 2943 —not only some steps—to limit the profits and plunder in the armament industry. If we must have armaments, if we must go in for a huge programme of rearmament, let us not allow that programme to be conducted by profiteers without any conception whatever of the national interest, requiring armies of detectives, chartered accountants and watch-dogs of one kind or another to prevent them from robbing us in our hour of need. Because we take the line that the national interest is supreme and that private enterprise must give way to it, we ask the Government, even at this late hour, not to yield to the speculators in land, in money or in metals. Give us a committee of inquiry and let us have as united a nation as is possible in the production of armaments.

§ Sir Isidore Salmon
I venture to take part in this Debate, because I am Chairman of the Estimates Committee which presented its first report a few days ago. The right hon. Gentleman the Member for West Stirling (Mr. Johnston) seemed to base the whole of his argument on what happened in the last War, unless it be that he was taking for his text the headline of a newspaper which said, "A thousand per cent. profit on armaments." That was the headline in the "Daily Herald" on 23rd March. Such misrepresentations create a wrong atmosphere for those who read them really think, because they see them in print, that they are true. I would urge the House to study carefully the report of the Estimates Committee, which consists of Members of all sections of the House. It came to the conclusion, after listening for many days to evidence from the Director of Contracts of various departments that they were satisfied: that the methods followed are soundly conceived, are fair both to the taxpayer and the contractor, and they are of opinion, so far as an estimate can be formed, that they have been effective up to date in preventing profiteering at the taxpayer's expense.

§ Mr. Garro Jones
Who drafted the report?

§ Sir I. Salmon
I do not know if that observation is meant to be offensive—

Mr. Jones
May I draw the attention of the hon. Member to the fact that that report only deals with figures so far as 2944 they can be estimated? Everybody knows that when a report is drafted the exact wording by the draftsman, who is usually the Chairman, often gives it a meaning which may not be precisely the meaning of the Committee, although I do not say it was so in this case.

§ Sir I. Salmon
The hon. Gentleman is trusting to his imagination instead of to the facts. When it was drafted it was circulated to every Member of the Committee, on which the Labour party had a large number of eminent and competent persons. I should like to say here and now that that was a unanimous report. I do not like to hear hon. Members get up in this House and make statements without having first ascertained the facts. The right hon. Gentleman has made statements this afternoon which, when you investigate them, have no truth whatsoever in them. He started by saying that the great thing to do would be to set up national factories for the production of armaments. He then said that a certain firm had offered to produce armaments of a particular class at a particular price, and that the Woolwich price for them was 9s. 1d. more—that is, it is more under Government control. If ever there was any justification for assuming that because the Government are running a factory they can produce things cheaper, it has been entirely refuted by the statement of the right hon. Gentleman himself. He has provided the proof that what he has advocated cannot be carried out.

§ Mr. Johnston
Would the hon. Gentleman, who is the chairman of the Estimates Committee, permit me to remind him that national factories reduced prices by 40 per cent.?

§ Sir I. Salmon
I am taking the figures which the right hon. Gentleman himself mentioned.

§ Mr. Johnston
I can give other figures.

§ Sir I. Salmon
I am dealing only with the figures which the right hon. Gentleman has given us. I am within the recollection of the House. The right hon. Gentleman said, and made a point of it, that the Woolwich price was even dearer than that of the firm which offered to supply at cost price. Does the House realise what is the first thing which the Defence Departments have got to do, 2945 having regard to the Government's programme? It is not the case that there are a large number of munition-making firms in the country, far from it, and the Defence Departments have to go round and appeal to the patriotism of manufacturers to undertake the manufacture of armaments, even though it means giving up a part of their normal business. Hon. Members should bear in mind that firms only do it under great pressure, and because they are looking at the matter from the national point of view. It is not the case, as the right hon. Gentleman suggested, that directly it is a question of the safety of the country the capitalists are only out to make money without any regard to the interests of the country.
I want to demonstrate beyond all doubt that the premises on which the right hon. Gentleman has based the whole of his case are entirely wrong. The Government have had great trouble to get a large number of firms to curtail their normal business and go in for the manufacture of the things required by the Defence Forces, and when they have succeeded in persuading them to do so they have then said to the firms, "You will have to limit your profits." Not only do they say that, but they have organised a system of inspecting their books and checking their accounts on which I think they are to be congratulated. For the thoroughness with which the whole position has been taken in hand by the Defence Departments the permanent staffs deserve to receive the compliments of the House. The position has called for an enormous amount of care on the part of the Defence Departments. They not only look into the question of the prices that these firms newly come into the manufacture of armaments are to charge, but they go most meticulously into the question of overhead charges, a very important item; there is no half measures in the way they deal with it.
Not only do they deal with the accounts from all the different aspects. They know that whether a thing can be produced cheaply or not depends to a large extent on the way a factory is laid out, and the Departments are keen to see that these new firms do lay out their factories in such a way that they can produce as cheaply as it is humanly possible to do so. The right hon. Gentleman asked, "Why do not the Govern- 2946 ment institute a check by having their own factories?" I would remind him that the shadow factories which are being established will demonstrate beyond all doubt whether the prices at which other firms are supplying goods are cheaper or dearer than the prices at which they can be produced in the shadow factories. Those shadow factories are worked on an entirely different basis. The only money that the persons get is a percentage on supervision. The House and the country can feel certain that all precautions have been taken that could reasonably be expected. I do not say that if there had not been more time certain improvements could not have been introduced, but in the emergency in which we find ourselves there has not been time to sit down and go into many points which one would like to deal with. The large numbers who have to be trained to execute these very large orders cannot be trained all at once. As they gain more experience the smoother the machine will work.
I think I can say without any fear of contradiction that all reasonable steps have been taken and are being taken. The report of the Estimates Committee has made certain recommendations, and I feel sure that when the Defence Departments have had time to consider them they will bear them in mind in making future contracts and arrangements. The right hon. Gentleman rather suggested that because dividends were paid by certain firms they were profiteering, but the question must arise of what proportion the Government business they are doing bears to their ordinary business. It is absurd for anyone to say dogmatically that because a particular armaments firm or a firm which has gone in for the making of armaments ancillary to its normal business is paying a dividend it has necessarily made large sums of money out of the Government. By the very system that is in existence that is prevented. I do not want to weary the House by going into the details of how the Government are protected against such a thing occurring, but I ask those who criticise the Government for allowing profiteering to pay the Estimates Committee the compliment of reading their report, and then they will come to a different conclusion, and will not be content to rely on headlines in newspapers which state, "A thousand per cent. profit on armaments."

§ Mr. Johnston
I never said anything of the sort.

§ Sir I. Salmon
I quoted what a particular newspaper said, a paper which I am sure is read with great gusto by the right hon. Gentleman. It is the "Daily Herald."

§ Mr. Garro Jones
It may be that it is the hon. Member himself who is misleading the House. For every additional 10 per cent. which an armament firm Makes by way of income, its capital appreciates out of all proportion to the amount it gets in revenue, and the speculators may well make 1,000 per cent.

§ Sir I. Salmon
I do not see what that has to do with it. The hon. Member will mix up the price that the Government pay for armaments and the price the speculator pays for shares. He should keep the two things separate, because he must see that what the speculator pays for his shares is no business of the Government. The business of the Government is to see that the contractor does not make an unreasonable profit, and that they are doing in a very efficient way. The right hon. Gentleman, in answer to an interruption, referred to the great foresight of the late Mr. Wheatley as regards the protection which he gave to the country when he was a Minister in the Labour Government of 1924. It might interest the right hon. Gentleman to know this, that he entered into such an arrangement that it is scarcely credible that a Minister occupying his position should be guilty of entering into an arrangement that was so unbusinesslike; one cannot conceive it possible that a man occupying his position should have entered into such an arrangement.

§ Mr. Johnston
That is a mouthful, but we had better have something specific.

§ Sir I. Salmon
I do not make a statement of that kind unless I have some justification for it, and I say that if any reasonable person were to read the arrangements which Mr. Wheatley entered into he would say they were unbusinesslike. The right hon. Gentleman shakes his head, but he does not know what the arrangements were.

§ Mr. Johnston
As a matter of fact I do. I was the junior representative of the Scottish Office at the time, and know what all the arrangements were, and I know a great deal more about it than does the hon. Member.

§ Sir I. Salmon
Then it does not reflect credit upon the right hon. Gentleman's acumen. I am challenged as to the arrangements that were entered into. [HON. MEMBERS: "Tell us what they were."] The right hon. Gentleman himself says he knows what they were, and I say that if you read the arrangements that were made with a certain industry at that period you will find that those arrangements were anything but businesslike, but I should be called to order if I were to go into that question in any more detail. [HON. MEMBERS: "What are the arrangements?"] I will conclude by saying this. One hears a great deal from time to time as to the importance of competitive tendering. I think it is equally important to make sure that it is effective tendering, and hon. Members will observe that in the report of the Estimates Committee we go out of our way to call attention to that particular point.

§ Mr. Gallacher
What about Wheatley?

§ Sir I. Salmon
I must say this, in conclusion: If the Departments will take heed of some of the suggestions which we have made, as I am quite sure they will, I believe, in common with every other member of that Committee, that all reasonable precautions will be taken to see that the public are not being exploited.

§ Mr. A. V. Alexander
As Chairman of the Estimates Committee, could the hon. Member tell us what the Estimates Committee take as a fair and reasonable basis of profit?

§ Sir I. Salmon
May I call the attention of the right hon. Gentleman to a paragraph in the report which deals with that point? It says that it is difficult to lay down a hard-and-fast rule. Surely no one knows better than the right hon. Gentleman himself that, in dealing with a particular contract, whether large or small, you must take each of the factors into consideration, and it would not be to the interest of the State that a definite profit should be stated that the firm ought to make. As a matter of fact, the right hon. Gentleman knows that the Government are very careful to see that the profit should not exceed, shall we say, x [An HON. MEMBER: "What is it?"] There used to be contracts given where 10 per cent. was allowed to the contractor. The Government decided that that was a 2949 very bad principle, and I venture to say that they were right. Now they deal with it from the point of view of the value and the magnitude of the contract, and they consider all those factors before they satisfy themselves that the firm would receive a reasonable profit. They have also introduced this system, which I think is a very good one as an incentive to reduce prices: if they produce an article cheaper than bogey price the two sides—the Government on the one hand and the contractor on the other—share in the saving. I think this all goes to prove the businesslike way in which this subject has been approached.

§ Mr. Dingle Foot
I do not propose to follow the hon. Member who has just sat down into all the recommendations of the Select Committee on the Estimates, except to say this, that as yet they remain recommendations, and I do not think we have yet had any assurance that the very moderate suggestions they made are going to be carried into effect. It is evident that there is considerable cleavage of opinion on this subject, but I think that Members of all parties ought to be grateful to the right hon. Gentleman the Member for West Stirling (Mr. Johnston) for raising this matter this afternoon; because, although opinion on nationalisation and kindred topics may differ as between one party to another, I think members of the public belonging to all parties are very deeply concerned at the moment about the possibility of profiteering in arms. That is so for two reasons. First, the taxpayers of this country are being called upon during the next five years to shoulder an enormous burden for rearmament. It is a prospect that they contemplate with fortitude, not with enthusiasm; but I think that there would be very real indignation throughout the country and in all political parties if it were thought that some substantial part of that sum which has been voted, or is being voted, for rearmament in the next five years were going to be spent in inflated, profits for certain industries.
Secondly, I think I shall have the assent of all hon. Members to this—I do not think there was any feature of the last War which left quite so much resentment behind as the fact that a very few people were making fortunes while a great number had to be in the trenches. 2950 It has, I think, been the experience of all hon. Members, when attending meetings of their supporters in all parts of the country, that that has left behind a deeper feeling of bitterness than any other memory of the last War. I think it is perfectly true that that section of public opinion that does not normally support the Government has somewhat reluctantly come to the conclusion that a large measure of rearmament is unavoidable, and also that it is unavoidable that there should be some strengthening of the personnel of the Defence Forces. But there is, I think, a very general determination that the sacrifices of the many shall not on this occasion be made simply to swell the profits of the few. Those are general propositions which I think will command almost universal assent.
But the question I want to put to the House is this: Have we all the assurances on that question to which we are entitled? We have had one or two pronouncements recently on these matters from the right hon. Gentleman the Minister for the Co-ordination of Defence. Speaking in this House on 18th February, the right hon. Gentleman dealt with this matter and he said: I have been asked whether we are getting all we want as economically as possible. There is some suspicion that a Government Department enters into a contract a little wildly, without check and without supervision. Not a single contract is entered into on those terms. Where competitive tenders are impossible every tender -and contract is sublected to an exhaustive examination by the costing branches.—[OFFICIAL REPORT, 18th February, 1937; col. 1424, Vol. 320.] The right hon. Gentleman went on to stress the care which was exercised by the Defence Departments when they were examining the contracts. Only on Monday of this week the right hon. Gentleman returned to this question again and he gave a very similar assurance. He said: In every case where possible competitive tenders have been called for. In a great many cases a competitive tender is not possible because the equipment is specialised in one particular firm, but in cases where competitive tenders are obtained they can be checked in many cases as to costs by the experience of the Royal Ordnance Factory. But in cases where competitive tenders are not possible there is a most elaborate examination by competent accountants, by the costings staffs of the Services."—[OFFICIAL REPORT, 22nd March, 1937; col. 2647, Vol. 321.] 2951 Whenever this question has been raised the right hon. Gentleman has made that reply—that the Services concerned take the utmost care to inquire into these matters and see that no excessive profits are made. But it is precisely this method of checking which was described by the Royal Commission on Armaments Manufacture as not being sufficient. The Royal Commission was not as definite in all aspects of its report as some of us might have wished, but it was perfectly emphatic on this point. It said, in paragraph 137 (page 45): We think, however, that this is a subject which requires further consideration and attention by the Government. We do not think that it will be sufficient for the purposes we have indicated to ensure that the Defence Departments are themselves satisfied that the profits allowed to private manufacturers under particular contracts are fair and reasonable. Nor do we believe that a measure of taxation, such as the Excess Profits Duty which was enforced during and after the last War, will prove satisfactory to meet the essential objects in view. Under the scheme we have indicated in Chapter VIII control of prices would fall within the purview of the body we have suggested. It should, in our opinion, be an essential characteristic of whatever system of control be adopted that, while providing reasonable remuneration on a scale sufficient to ensure the co-operation of private industry in the service of Imperial defence, it shall be such as shall prevent excessive profit and at the same time satisfy the public that it does so. In other words they make it perfectly clear in this paragraph that they consider that the methods of the Service Departments are not sufficient. The Royal Commission proposed in Chapter VIII that there should be a separate body set up. Whether it be a National Armaments Board or something else, they want a separate body with a Minister answerable for it in this House, and they propose that it should be one of the chief functions of this new organisation to deal with the sort of matters we are discussing this afternoon. Dealing, on page 44 of the report, with the duties of such a body, they referred in particular to costings and the control of prices and the inspection and authorisation of all orders received from abroad by armament firms. In their view it was essential that these matters should be handed over to the new organisation which they wanted to see created.
I am afraid that hon. Gentlemen opposite must be tired of hearing questions 2952 asked from this side of the House about the Royal Commission's Report, but we shall continue to ask them until we receive some kind of answer. The Royal Commission's Report was made available to this House last October. We understood that it had been available to the Government at least a month before that. The Government thus have had at least seven months in which to consider the recommendations of that Royal Commission. If we were dealing with a matter for which a great deal of time were available, or if we were dealing with some academic question, that would perhaps not be a very long period, but here we are dealing with a question of urgency, and surely it is reasonable to ask that, after seven months, the Government should have made up its mind what it is going to do about the Royal Commission's Report.
I want to make a very brief reference to a matter which was raised by the right hon. Gentleman the Member for West Stirling—a matter which I ventured to raise at Question Time, that is, the negotiations that took place between the War Office and the firm of Ransomes and Rapier, Limited. I put down a question to-day because there had been considerable publicity given to this case in the Press, and I received an answer the effect of which was, first, that the contract was not given to this firm because there had been a lower tender; secondly, that this firm wished to be indemnified against any loss; and, thirdly, that this firm wanted its building to be paid for. I will come in a moment to the question of the lower tender, but if the information which I have received is correct—and I received it from the managing director of the firm itself—it is not the case that this firm ever asked to be indemnified against any loss they might make. The information which has been supplied to me is that the price they quoted was a firm price. If they had made a loss after that price was quoted the loss would have been borne by the firm. As regards the building, it was never arranged that their building should be paid for. There was, I think, some suggestion of that in the first place, but it was afterwards agreed, in the negotiations that were going forward, that if the contract were given, the building should be paid for out of the extra 10 per cent., and if, after that, there was any profit 2953 left over, as the right hon. Gentleman correctly said, this firm proposed to return it to the Treasury.
Now the right hon. Gentleman went through the correspondence, and I do not propose to go over the ground which he covered. It is perfectly true that negotiations between the War Office and this firm were going on for a considerable time. I think I am right in saying that the question of this firm's executing work on behalf of the War Office was first raised as early as the year 1935. When this particular question of the manufacture of shells was raised on 10th July of last year there were various negotiations. There was the offer that was made to carry on contracts without profit, and I would like to make one comment on the reply which was sent by the right hon. Gentleman the Secretary of State for War to that letter. In his reply he said: In view, however, of your expressed reluctance to undertake work of this nature I am unwilling to press you to accept a contract from my Department. I am not attacking the right hon. Gentleman for his attitude. I can understand what was in his mind, but it might have been as well, when he got an offer of that kind, for him to have considered the interests of the taxpayers. I should have thought this was the kind of offer which any Government Department would be only too glad to accept.
A little later, negotiations were reopened and, as the right hon. Gentleman said, a tender was in fact submitted. An interview took place on 20th October between the managing director of the firm and a representative of the War Office. The managing director was given to understand that his tender was favourable and that a contract would follow in due course. I am not suggesting that a contract was actually entered into, but am stating what was certainly the impression left upon the managing director's mind after the interview. There was no suggestion then that any lower tender had been put in; a comment was made that it was favourable, as regards the price. The next letter to which I want to refer is from the War Office on 28th October. I do not think this letter was quoted by the right hon. Gentleman. It was the first indication received by the firm that no contract, as regards shells at any raise, was to come their way. The Department wrote saying: 2954 It is not proposed to proceed with the proposal that you should undertake the manufacture of shells at this stage. That was all. It was rather a curt letter and nothing whatever was said in the letter about a lower tender having been received. No reason was given in the letter, and naturally, after the negotiations which had gone on, the firm wanted to follow the matter up. They pressed for reasons, and they received a letter on 24th November in which the reasons given were these: Firstly, it was said that the War Office could get shells more economically elsewhere. That was the reason given at question time to-day. Secondly, that the factory of this firm was more suitable for heavier work, although no heavier work, as we have heard, was given to them. Thirdly, the vulnerability of the town of Ipswich.
I would like to ask questions to which I hope the right hon. Gentleman will be able to give me replies. What was the first moment of time when the War Office received a tender for shells acceptable to them at a lower price than that tendered by Messrs. Ransomes and Rapier? Have any tenders been actually accepted at the same, or at approximately the same, price which they offered?

§ Mr. Johnston
Or higher.

§ Mr. Foot
Yes, or higher. Before I leave this question, I would make further comment on the letter of 24th November. If it is correct that at all material times, particularly September and October, lower tenders were being offered, that was a perfectly good reason, of course, for turning down this firm. but what is the relevance of talking about the vulnerability of Ipswich?

§ Mr. Johnston
While the hon. Gentleman is on that point, perhaps he will let me interpose a question. If Ipswich is vulnerable for shells, why on earth is it not vulnerable for tanks?

§ Mr. Foot
I agree. It seems that views as to the vulnerability of East Coast towns vary from time to time. The first correspondence between the War Office and this firm was as early as 1935. The question of manufacturing shells was first considered in July, 1936. Negotiations had been going on for months and people had gone down from the War 2955 Office to inspect the factory concerned. I visited the town of Ipswich very recently and, as far as I observed, it had not moved its position from 1936 to 1937. If the town was too vulnerable in November, 1936, for the manufacture of this form of shell or for the manufacture of tanks, why was not the same decision obtained in the month of July? In the intervening months this matter was being seriously considered by the War Office. If the War Office were going to turn the tender down because of the location of the factory, they might have thought of that in the first place before they put this firm to the trouble of inquiring into all these matters and preparing to carry out contracts on their behalf. Arising out of the point about vulnerability, may I ask where the contracts have actually gone? Are shells of this type being manufactured in London, and if so, is it the opinion of the War Office that London is less vulnerable to attack than Ipswich?
A separate matter to which I would like to refer was brought to my attention only to-day. It is the case of another firm, named Brookside Engineers, who have their factory at Westcliffe-on-Sea. Let me make it clear that this was not a firm which wished to deal on a no-profit basis. They were anxious to obtain orders for light engineering items, such as aeroplane parts, small shell caps and shell fittings. I would like to put before the House the history of their negotiations with the War Office. Negotiations between the firm and Supply Committee No. 1 of the Committee of Imperial Defence commenced on 21st March, 1936, and went on until 21st May. There were interviews and correspondence between the parties. A price was actually quoted in the month of May, I think, for supplying and machining a certain type of shell. On 21st May, the proprietor of this business was informed by letter from Supply Committee No. I that the correspondence was being passed on to the Director of Army Contracts and that it was expected that the proprietor would hear further from the Director. He did not hear anything further and, five weeks later, on 26th June, he wrote to Supply Committee No. 1 saying that he had heard nothing from the Director of Army Contracts.
2956 On the same date he saw a representative of the Supply Committee, who confirmed that the price which he had offered was satisfactory and who sent him to the Contracts Department. He did not get very much further there. On 3rd July, he received a visit at his works from the same gentleman representing Supply Committee No. 1. That gentleman suggested that if he were to obtain a contract it would be desirable that he should make certain additions to his plant. Those additions were immediately put in hand and were carried out at an expense of £1,000, as I am informed. It was also suggested that the proprietor of the business should visit Woolwich Arsenal in order to acquaint himself with the methods of making shells of this kind. That visit was also made. The proprietor spent a considerable time there. On 21st September he wrote to the War Office notifying them that the additions which they had specified or suggested—I am not putting it higher than that—had been made. He heard nothing more for a period of some five weeks. On 29th October he went to the War Office, having received no information, and he saw the members of Supply Committee No. 1 with whom he had been in communication. They told him that they were sorry to say that no contract was to be given to his firm.
Rather remarkable delay appears to have taken place in this case. Firstly the matter is passed to the Director of Army Contracts and there is a delay of five weeks, from 21st May to 26th June. Then it is dealt with only because the gentleman concerned goes to the War Office. When he has completed all his preparations there is a further delay lasting from 21st September to 29th October. He hears nothing whatever from the War Office or from any other Department connected with Service contracts. There may be some good explanation, but to the lay mind there appears to be a lack of coordination between Supply Committee No. 1 and the Army Contracts Department. It is unfortunate that somebody should be allowed to engage in considerable expense and make additions to his plant and then, without being given any reason, be told that he is not to receive a contract.
I have raised these two cases. The second embodies rather different issues. 2957 On the first, I hope a definite statement will be made because it is a matter which interests not only myself but many other hon. Members. Perhaps I might return again to the wider issues with which I started. The Government are embarking upon this great rearmament programme. If they are to have public support, outside the ranks of their ordinary supporters, they will have to satisfy public opinion that their programme is being carried out with as little inconvenience as possible to the industrialists who are co-operating with them, that it is being carried out without undue waste, friction or overlapping and, above all—on this point the public require to be fully satisfied—that every possible step is being taken to see that there shall be no profiteering out of the nation's necessities.

§ Mr. Radford
I entirely agree with the hon. Member for Dundee (Mr. Foot) that the country wants its defences in proper order, but requires that there shall be no undue expense or profiteering on the part of anybody, whether employers or employed. I should like to make that clear for the benefit of hon. Members of the Opposition. The right hon. Gentleman who opened this Debate was very concerned about the money that had been made by coal owners in the Great War, but he did not mention the £10, £12 or more per week that was being picked up by the workers in the industry.

§ Mr. Johnston
I began by saying that the representatives of the working class at the outbreak of war—that is, the Trades Union Congress, the Executive Committee of the Labour party and the General Federation of Trade Unions—sent a deputation to the late Lord Oxford and declared that they were ready to enter into a truce to have no increases of wages during the national necessity if the capitalists would agree not to exploit the nation. That offer was refused, but wages were not raised until long after the cost of living had made that rise imperative.

§ Mr. Radford
I was very interested to hear the right hon. Gentleman make that statement. But I heard an exchange between him and an hon. Member on this side as to dates, and I rather gathered, from the dates that I heard given, that it was somewhere near the end of 1915 that the offer was made. The right hon. 2958 Gentleman will remember that he quoted the OFFICIAL REPORT of November, 1915, or some such date.

§ Mr. Johnston
That was because the statement was repeated here in Debate by the late Sir Arthur Markham, and I thought that hon. Gentlemen opposite would be more inclined to believe Sir Arthur Markham than they would to believe me.

§ Mr. Radford
I do not think there is any difference between the right hon. Gentleman and myself. I think he was engaged in conversation at the moment when I began my speech; the only reference I made to labour was to say that all Members in every part of the House are opposed to the country paying too much for its rearmament programme; whether as a result of profiteering by contractors or as a result of unduly increased wages. I am sure the right hon. Gentleman will agree with me on that point. As to the case with which the hon. Member for Dundee has been dealing, I am not quite clear. Did the second firm he mentioned quote a price for the shells they were supplying and for which they received an order?

§ Mr. Foot
Yes.

§ Mr. Radford
I know nothing about the case, but they would probably be told, if they were not going to get an order, whether it was due to the price or to the unsatisfactory quantities they could deliver. I was very much interested in the discussion on the offer of Messrs. Ransomes and Rapier to supply shells at neither a profit nor a loss to themselves. The hon. Member for Dundee rather varied that later. He said that there was to be no profit, but he did not think they required to be indemnified in case of loss. I understand that this firm put in a quotation, and it is in question whether the quotation they put in was not the lowest at the time when it was put in, and whether it was not at some later date that a lower figure was quoted by another firm. But either the right hon. Gentleman the Member for West Stirling (Mr. Johnston) or the hon. Member for Dundee asked specifically that information should be given as to when the' lower tender was received. I want to submit to the House that there is no question of Messrs. Ransomes and Rapier having put in any tender at all. They 2959 quoted a figure which no doubt was their honest estimate of what the price would be which they expected would leave them neither profit nor loss, but it is not in the power of the most efficient engineering concern in Britain to know precisely how much any job is going to cost them when they embark upon it, particularly when it is work to which they are not accustomed.
The House must not run away with the mistaken idea that an offer to supply an engineering product at neither a profit nor a loss to the firm making it is of necessity a cheap bargain for the country. It is my privilege to be associated with many eminent engineering experts, and I know the factors that enter into these matters. In the motor car industry, for example, there are certain manufacturing Companies at the present time who, owing to the lay-out of their plant and the very expensive plant they have installed, can turn out a certain car at £200 which another motor manufacturing firm, with good plant but without the same lay-out and the same labour-saving appliances, cannot turn out for less than £300. Therefore, it is entirely erroneous to think that it would of necessity be economical for the country to buy engineering products at cost price from one firm because another firm working with a good margin of profit can supply the Government with such products at less than the cost price of the first firm. The right hon. Gentleman referred to the special factories that the Government put up, soon after the beginning of the Great War, for making shells, and I understood him to say that the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) had said that those factories brought prices down by 40 per cent.

§ Mr. Johnston
I was quoting the saving on the metal. I said that the special department of the Ministry of Munitions had saved the country £15,000,000 on metal, amounting to a 40 per cent. saving on the price of shells, as a result of the establishment of the national factories.

§ Mr. Radford
I am not surprised to hear that, because at the outbreak of war the factories of those firms who made shells were only capable of the tiniest output, and a number of engineering concerns in the country endeavoured to rectify the shortage from which our forces were 2960 suffering, by making something for which their factories were not laid out and to the making of which they were not accustomed. Obviously, therefore, apart from any question of profiteering, the cost would be out of all proportion to the costs in a factory specially laid out for shell making.

§ Mr. G. Hardie
Since the existing factories at that time were inefficient, and the nation put in plant that was efficient, does the hon. Gentleman mean to say that the country was justified in making good the loss incurred by those factories as compared with the national factories?

§ Mr. Radford
I have no idea what particular arrangements were made by the Ministry of Munitions at that time, and whether they still wished firms who were making shells at perhaps an expensive cost to continue in production, in order that the country might get the shells even though they were costing a higher price than those which were produced more economically in the Government factories. I only bring that in because the right hon. Gentleman seemed to think that the reduction of 40 per cent. was brought about by the establishment of these national shell producing factories at a time when there was blatant profiteering on the part of those who were already making shells. I am sure that the basis of his argument is unsound. I know that people making shells would be glad to get the best price they could, but the reason for the saving was that factories were put up which were specially designed and laid out for multiple production of shells, and it is multiple production that brings down the cost. The right hon. Gentleman himself said that the figure which Messrs. Ransomes and Rapier estimated would be the price. without profit or loss to themselves, was 17s. 11d., while the price at Woolwich was, I think, 27s. and some other firms quoted 3s. 7d. more than the 17s. 11d. estimated by Messrs. Ransomes and Rapier. It seems to me very probable that a corrected invoice would have had to come in, raising the 17s. 11d. to a good deal higher than 23s. 6d., without imputing any kind of dishonourable motive to Messrs. Ransomes and Rapier, seeing that it was work to which they were not accustomed.
There is another point which has not been raised in this Debate, but which 2961 has been raised on various occasions to prove that there is profiteering by the regular armament firms. The right hon. Gentleman the Member for Hillsborough (Mr. A. V. Alexander), who, I see, has just returned to his place, will correct me if I am wrong, but I think I have heard him give examples of some well known armament firms whose shares have advanced during the last few months. Nothing could be more misleading than to say that it is proof of excessive profits because the shares of some company well known to the public were standing on the market at about 2s., and are now 15s., while their par value is only 5s. Hon. Members will recollect that during the dreadful times that intervened just after 1931, when the country had been at the mercy of hon. Members opposite, and in particular of the then Chancellor of the Exchequer, who entirely controlled their trade policy, the industries of iron and steel, shipbuilding, and armaments as well, were all in the very depths of depression. In the case of one company whose name I have heard the right hon. Gentleman quote in this connection, their shares used to be £1 shares, but they wrote them down so that every ordinary shareholder got a shillingsworth of ordinary shares for each £1 share that he held previously. That was the firm of Cammell Laird and Co., Limited. They wrote down their assets and their share capital by about £3,500,000. They wrote down their investment in the English Steel Corporation, which had taken over their armament and steel works, they wrote down their investments in the Metropolitan Carriage and Wagon Company and in the English Electric Company. Altogether they wrote £3,500,000 off their assets and £3,500,000 off their share capital, thus reducing the shares to the equivalent of 1s. each, and five of them were consolidated into a 5s. share. They stand now at somewhere about 15s. I heard the right hon. Gentleman point to the fact that 5s. shares were now standing at 15s. as a proof that the country realised, or at any rate thought, that the armament firms are now making pots of money—that they are profiteering—

§ Mr. A. V. Alexander
I must correct the hon. Member. I am not complaining at all about his line of approach, but he is not quoting me correctly. The firm to which I referred was that of Vickers, and 2962 not Cammell Laird, and I pointed out that towards the end of the War period they increased their share capital, without any new subscription, by the issue of a bonus of 200 per cent., and that in writing down their share capital they merely wrote it down to the figure at which it stood before that bonus of 200 per cent. was issued. Their shares, the par value of which was 6s 8d., are now being quoted on the Stock Exchange at 54s., or 34s. higher than the unit value of the shares before the issue of the 200 per cent. bonus at the end of the arms profiteering of the War.

§ Mr. Radford
The right hon. Gentleman is now dealing with another company, but I do not think I am mistaken in saying that I have heard him quote Messrs. Cammell Laird—

§ Mr. Alexander
No.

§ Mr. Radford
I said at the beginning that no doubt if I was wrong the right hon. Gentleman would correct me, but the fact that a 5s. share is now standing at 15s. is no argument that profiteering is going on. Hon. Members pick out certain firms which have written down their capital in bad times to ridiculous levels, and say, if their shares rise to a higher value, that it is proof of profiteering. I am sure that the Government will not allow any profiteering, but will keep the closest watch on the costings of all firms who are manufacturing for them, unless there are other manufacturers who are making the same product, who are not in any ring, and whose quotations can be used as a check. But there are certain things, for example armour plate, as to which it would be inequitable merely to allow the bare cost of production plus a small percentage of profit, because the firms that own such plant, which is tremendously expensive, have had to keep it in working order ready for any national emergency over a period of 15 years, getting hardly a single order. It would be quite inequitable for the country to depend on private enterprise keeping plant and factories in existence ready to save the nation if an emergency came and then to say, "We will have the fruits of these people's patience and prevision," without giving them reasonable prices to cover the interim costs of their idle plant.

§ Mr. Alexander
I am sure the hon. Member does not want to mislead the House. Some of us have had experience of the fighting Services If he does not Know, he ought to know that, during the period when armaments were not being ordered to any great extent, subsidies were given to the firms to keep the armoured plate plant in existence. The hon. Member ought not to leave that out of account in presenting his argument.

§ Mr. Radford
I am glad to hear that it was done. If it was done and done equitably, my point does not arise, but I wished to put it forward because I am equally strong on fair play for the concerns involved and for the prevention of profiteering, whether by limited companies or individuals and whether it comes under the capitalist head or the labour head.

§ The Secretary of State for War (Mr. Duff Cooper)
It will probably be for the convenience of the House if I now reply to the one particular case which concerns the War Office and which has been raised by the right hon. Gentleman and also by the hon. Member for Dundee (Mr. Foot). In the first place, there is a grave divergence of statement between them. The right hon. Gentleman, with whose account of the case I do not quarrel in any way, said that the firm of Ransomes and Rapier proposed to undertake this contract on a no profit no loss basis. The hon. Member for Dundee says, on the contrary, that they were never claiming to be indemnified for loss. Does he really maintain that this was the proposition with which they came forward to the War Office: "We will lay down a plant for the manufacture of a line of goods which we have not manufactured since the War and, if we make any profit, we will return the whole of it to the War Office and, if we make any loss, we are prepared to bear it all ourselves?"

§ Mr. Foot
They quoted a price which they thought quite sufficient to cover them, and sufficient even to cover the cost of the additional buildings that they would need, so that they were quite certain that there would be some margin. They suggested that they should return that margin to the War Office. The War Office, I think, saw technical difficulties in the way. The firm then suggested that such margin as was left should be returned direct to the Treasury.

§ Mr. Cooper
The hon. Member has not dealt with the point. He says that if there was a profit it was to be returned to the War Office, but if there was a loss the firm would face it all. Of course they did not.

§ Mr. Johnston
Is it not the case that in the course of discussion it was suggested that they should put 10 per cent. on to their estimated price, that that 10 per cent. would adequately cover any possible chance of loss and that with this 10 per cent. they were prepared to bear the loss?

§ Mr. Cooper
No, that is contrary to my information. It was throughout on a profit and loss basis. I have not the business experience of my hon. Friend the Member for Rusholme (Mr. Radford), but I do not think that in business dealings one would look very favourably on a proposition which seems so much too good to be true. People come forward and say, "We will take all the loss and we will refuse to take any profit." The fact of the matter is that no contract was ever made, and no firm tender was put forward. It was an estimate. They estimated how much it would cost. At that time it happened that we were obtaining shell bodies slightly cheaper than that price, but we did not anticipate that we could obtain many more at that cheap price. In the opinion of my advisers the estimate the firm put forward was much too low and they felt convinced, with much more experience than the firm could possess, that it would cost much more than they anticipated.
Then the Director-General of Munitions Production visited the firm at Ipswich and discussed the matter with them. He did not understand that they were particularly anxious to take up this new line. They had made it abundantly clear in their original letter to me that they were not keen to do it. We were obtaining sufficient supplies from other parts of the country. He also saw the works of the firm in question and in his opinion those works were suitable for the construction of heavier material, such as tanks. He then went into details—there was some question of the date of delivery, and so on—and decided that it would be a mistake to employ this firm in this particular branch of manufacture, but at some future date it might be suitable if they could undertake the construction of tanks. That proposition is still 2965 under consideration and has never been dismissed. When hon. Members ask why Ipswich is a dangerous place for the construction of shells but not for the construction of tanks, the answer is very simple. For the construction of shells it was necessary to set up new plant and, when you are setting up new plant, the question whether the locality is suitable for the plant is, naturally, of great importance. Other things being equal, you do not choose a place near the East Coast but, if the plant already exists, that is a strong argument in, favour of constructing them in that situation and the consideration of vulnerability diminishes. That is the short and simple answer why it did not play a large part in our considerations when it was a question of the construction of tanks on premises already existing and with plant at the disposal of the firm.

§ Mr. Johnston
Did I understand the right hon. Gentleman to say, on the question of tanks, that this firm were informed that their offer was not declined, but that the matter was still under consideration?

§ Mr. Cooper
Exactly.

§ Mr. Johnston
Is the right hon. Gentleman aware that the firm is in possession of a letter, which I have seen, declaring that there was no question of tanks being ordered now—that you were already well supplied?

§ Mr. Cooper
At the present time.

§ Mr. Johnston
Let us be quite clear about this. How can the matter be still under consideration if you have already advised the firm that you are supplied?

§ Mr. Cooper
There are no contracts going out for the construction of tanks at present. As I explained in introducing the Army Estimates, we are now awaiting plans and designs and the results of experiments with new tanks. When the question of issuing new contracts for new designs of tanks comes up, this firm will certainly be considered. As to the other case that the hon. Member raised, of which he gave me no notice—

§ Mr. Foot
I did not hear about it until to-day.

§ Mr. Cooper
I heard about it only a few minutes ago, so the hon. Member will not expect me to give him an answer, but I 2966 am glad that he raised it, for this reason. It is an ordinary case and not a case of one of these firms who do not want to make profits. It is a case of an ordinary business firm which is out to make a reasonable profit. It shows that it is not only the non-profit firms which are unjustly treated, in the hon. Member's opinion, by the War Office. I should like to ask him and the right hon. Gentleman what they think is at the bottom of all this. When there is a crime there is always a motive. He spoke as if he wanted to get at the facts, as if there was something wrong going on. Does he suppose that the War Office really look with an unfriendly eye on a firm which does not want to make a profit? Does he really think that the extremely efficient civil servants—his right hon. Friend next him knows how efficient they are—would prefer to pay high rather than low prices? They have to present their account to the Public Accounts Committee. Does he imagine that they are not anxious to save money? What on earth does he suppose can have been the motive of the officials concerned if a mistake was made in this instance? Really, when hon. Members suggest that there is a crime it is up to them to suggest what is the motive for the crime. I will look into the other case that the hon. Member put forward. Cases of this sort are brought to my notice from time to time, just as often by our friends as by hon. Members opposite, which at first sight seem cases of gross injustice and incompetence on the part of the Department. But when I have looked into them I have not found one in which the Department was in any way to blame when the facts of the case have been accurately stated.

§ Mr. Foot
With regard to Messrs. Ransomes and Rapier, it was on 28th October that they were notified that the Department was not going to give them a contract for the manufacture of shells. There followed some correspondence, but it was not till 24th November that they were told either that shells could be got more economically elsewhere or that Ipswich was unsuitable. Why was it that those reasons were not forthcoming until 24th November?

§ Mr. Cooper
I have not all the papers in front of me but I cannot see that it is extremely material to the case. Obviously, when an estimate is not accepted by a 2967 Government Department, the reason is that the Department does not think it in the interest of the country to accept it. Whether they need give the reasons for their decision to the firm is open to question. That there should be a slight delay of a month is not of much material importance.

§ Mr. Johnston
We are not accusing the right hon. Gentleman of any corrupt motive but, in view of the public concern that has been aroused by this case, and the possible consequences to the Treasury, in view of his own statement that this old-established and reputable firm, with a thousand employés, makes a specific offer to turn out shells at that price, which the right hon. Gentleman says his advisers told him was much too low, will he agree to lay a paper or, failing that, to have an inquiry. [Interruption.] A copy of the correspondence will serve. I have seen the correspondence. Other hon. Members and legal men have seen it.

§ Mr. Cooper
I am anxious to meet the right hon. Gentleman but I cannot understand why there is this tremendous public apprehension. He has brought up one case, and the hon. Member for Dundee (Mr. Foot) has brought up another, where some injustice seems to have been done. I can assure him that these cases are numerous. If we were to have a public inquiry and papers laid every time that even a real tender, not an estimate, were refused and turned down, and if hon. Members must be informed exactly what the alternative prices were, a great deal of public time and money would be wasted. I am sorry that I cannot give the right hon. Gentleman that promise. I am willing for him to come to the War Office at any time to see all the papers and to put them at his disposal, as there is nothing to conceal. He is aware that it would be contrary to practice to state exactly what is being paid. It would not be in the interests of the State that we should do that. To suggest that there is anything underhand or corrupt—

§ Mr. Johnston
No.

§ Mr. Cooper
Then what is the right hon. Gentleman suggesting? Simply an old-established firm of good repute has put forward an estimate which does not 2968 commend itself to those who are best able to judge whether it is a good estimate, and, therefore, it has been turned down.

§ Mr. Johnston
We are not alleging corruption at all. We are alleging a very wide divergence of conception of the public interest. The right hon. Gentleman and his friends specifically stand for the right of private enterprise to make a profit. They honestly believe in it, and they fight for it. We, on the other hand, do not believe in it.

§ Mr. Radford
Will the right hon. Gentleman permit me—

§ Mr. Deputy-Speaker (Captain Bourne)
I must remind hon. Members that we are not in Committee.

§ Mr. Johnston
There need be no unnecessary heat about the matter; it is a great question of public interest.

§ Mr. Deputy-Speaker
I allowed the right hon. Gentleman to ask a question. He has already exceeded his right to speak.

§ Mr. Ellis Smith
It is proposed to spend during the next five years in this country approximately £1,500,000,000 on armaments. It was admitted the other day that at least £150,000,000 of that sum would go in direct profit, and it is in regard to that matter that I want to address the House. Twelve months ago I put a series of questions upon this subject to the Prime Minister, the Chancellor of the Exchequer, and other heads of State Departments. The following is typical of the questions I put: To ask the Under-Secretary of State for Air whether he will consider the effect of the recent speculation in aircraft shares when asking for Estimates in the future? The answer I received was: The market valuation of aircraft companies' shares has no effect on contract prices."—[OFFICIAL REPORT, 4th March, 1936; col. 1370, Vol. 309.] I ask the House whether there is any Member present who really believes that.

§ Sir Walter Smiles
Yes, I do. I think that the Stock Exchange has the most curious ideas of the value of shares.

Hon. Members
Hear, hear!

§ Mr. Smith
"Hear, hear," say several hon. Members, which indicates that they 2969 are in complete agreement with that answer. I have before me a copy of the "Economist," dated 29th February, 1936, giving an analysis of the valuation of the shares of the main armament manufacturers of this country. I will give a few typical examples. The Fairey Aviation Company 10s. shares were quoted on 1st April, 1935, at 23s., in October of the same year they had increased to 26s., and in February, 1936, they had gone up to 37s. The Hawker Aircraft shares were quoted at 25s. in April, 1935, and at the present time they stand at 35s. Hawker Siddeley shares of 5s., which were quoted at 25s., at the present time stand at 35s. The Bristol Aeroplane Company shares of 10s. each were quoted on 1st July, 1935, at 57s. 6d., and at the present time they are 62s. One could go on giving instance after instance, showing the great increase in the prices quoted on the Stock Exchange. Hon. Members opposite said that they agreed with that answer. Let me examine how the speculation and increase in share values affect the public, and the working class, with whom I am mostly concerned. On the average, £100 invested in armament shares in 1932 is now worth approximately £500. Where has this increased value come from?

§ Sir Frank Sanderson
Is not the hon. Member aware that, when an aircraft company issues a 5s. share, it does not, in fact, offer that share at 5s., which is merely its nominal value? It offers the share to the public at prices varying from 20s. to 30s., and the capital of the company is the amount which the company receives for the 5s. shares.

§ Mr. Smith
The explanation given by the hon. Member is the usual explanation of financial editors who write in newspapers, which are determined to support this kind of policy and the policy of the Government.

§ Mr. Crossley
rose—

§ Mr. Deputy-Speaker
I really think that we shall get on better if hon. Members are allowed to make their own speeches, and then other hon. Members can answer them.

§ Mr. Smith
I want to repeat, in order that the House can follow the analysis and my interpretation of how this kind of thing affects the country, that £100 invested in armament shares in 1932 is 2970 now worth approximately £500. I used to be employed in a section of industry which was being run as efficiently as possible. The hon. Member for Rusholme (Mr. Radford) in his speech indicated clearly that he is not familiar with modern methods of running industry. Had he been so, he would have known that in this country, particularly in the heavy industries, there are the most efficient methods of costing it is possible to put into operation. Some of the captains of industry are so concerned about the overhead cost of this efficient costing system, that they are very much afraid that they are getting their industries top-heavy under this system. They have been forced to embark upon this efficient costing system because of the keen competition with which they have had to contend during the last 10 years in particular. The result is that overhead charges are greater than these industries expected that they would have to bear.
In the industry with which I am familiar, and which was being run as efficiently as possible, a great financier, Dudley Docker, came along some time ago, and made an offer for the industry which was being run as efficiently as possible. Immediately he bought these shares their value on the Stock Exchange went up to a very great extent. This is my point of view with regard to how this kind of speculation affects industry. Dudley Docker purchases, say, shares that were standing at £100 for £500. Is he, therefore, going to be satisfied with the same return on the £500 that previously would have been paid on £100? Dudley Docker immediately goes into the workshops, and gets the directors around the board. Many of these men are as decent as any of us. They have had the responsibility of running the industry with the object of bringing about the best possible results. Dudley Docker takes the chair and all the specialists and managers of the different departments are lined up. Dudley Docker lays down the law that in future this particular industry will have to increase production to such an extent that it will enable him to get a return on the £100 shares for which he paid £500. That is the way it affects the employed in industry, and that is the way it will affect this country also.
I would be prepared to go upon any platform in this country, among any people, and, provided there were time, 2971 I would be able to state the effect upon the people of this country of this kind of speculation which is now taking place, and I guarantee that, despite the political prejudice of people against me, most of the people would be prepared to accept the explanation which I should be able to give. How will it affect us in other ways? We are to be taxed for armaments. We on this side of the House are quite prepared to shoulder our responsibility for the defence of this country, if need be.
Time after time, in resolutions, manifestos and pamphlets, the movement of which this party is a section has stated that it is prepared to accept responsibility for the defence of this country. This reminds me of some of the experiences which some of us had during the last War. I shall never forget a speech which was made by the late Mr. Bonar Law, Member for one of the Glasgow Divisions. He played a great part in this House and in the running of the War. The time came when the country had great difficulty in raising loans, and in one of his speeches Mr. Bonar Law said: Never let it be said that you willingly gave your sons and withheld your money. At that time the casualties were mounting up and thousands of men were being killed and maimed. The Government were finding difficulty in financing the loans which they were launching because the financiers were holding out for the higher interest they knew they would get if they held out. The result was that Mr. Bonar Law had to make a big appeal to the country. He addressed meetings in order to rally public opinion behind the Government and to demand that the loans should be made. That is how we were affected during the last War, and we are being affected somewhat similarly at the present time.
These speculations affect the price of raw materials. The effect is shown in the rising costs of steel, pig-iron and many other materials required for the manufacture of armaments. The right hon. Member for West Stirling (Mr. Johnston) said that he did not blame the Government altogether for the speculation that is taking place in raw material throughout the world, but I charge the Government with having a certain amount of responsibility for the great speculation that is taking place in connection with 2972 the country's need of raw materials for the armaments industry. The galling fact is that four years ago Germany was buying large supplies of raw materials from this country, such as nickel, petrol, wool, cotton and rubber. As a result of these bulk purchases by Germany the price of raw materials went up, and the speculators got busy on the Stock Exchange. Germany having purchased large amounts of raw materials from Britain, forced Britain to re-arm and we are having to purchase our raw materials at the enhanced prices caused by Britain being prepared to supply raw materials to Germany. It is a disgraceful business, and the people of this country will have to pay heavily for it. They will have to earn the enhanced value between the £100 share and the £500 share.
The Chairman of the Estimates Committee speaking recently, said that it was pure misrepresentation on the part of the newspapers to state certain things. Then he quoted from the "Daily Herald." I wish he had been in his place now, because I should like to point out that the "Daily Herald" is not the only newspaper that has said what he quoted. The "Manchester Guardian," the "Daily Express" the "Evening Standard" and many other newspapers have said it. I have here a copy of the "Evening Standard" which I got from the wastepaper basket in this House on the day the White Paper was issued. Here are the headlines: "Defence Loan"; "Armaments Shares." I am fairly observant, and I watched a certain number of hon. Members in the Reading Room to see to what page they turned when they opened the newspapers.
During the last War there was a great armaments king resident in this country, Sir Basil Zaharoff. This armaments king controlled the armaments industries in five countries and made millions of pounds out of this country during the last War, afterwards spending thousands of pounds on the Riviera. The Italians wanted Italian munitions, the British wanted British munitions, the French wanted French munitions and the Germans wanted German munitions, and Sir Basil Zaharoff arranged to supply them all. That is typical of the intrigue, the manoeuvring and control of these big armaments manufacturers, who have no claim to patriotism at all. It is the common people of this country who are the 2973 real patriots. The armaments manufacturers are really internationalists and have no boundaries. They are prepared to manufacture for anyone at any time provided they can make a profit on what they are manufacturing. Sir Basil Zaharoff received from the Electric Boat Company, by acting as their agent, £13,000 in 1936, £6,000 in 1927, £18,000 in 1928, £7,000 in 1929, and £15,000 in 1930. I should like to know how many Sir Basil Zaharoffs there are carrying on in this country at the present time. Hon. and right hon. Members opposite claim to be great supporters of the Empire and want to do all they can in order that the great Empire of which this country is the centre can remain an instrument for peace and for the welfare of the people of the world. I would draw their attention to the report of the Estimates Committee, in which there appears the following statement: Your Committee recommend an extension of the system of direct purchase of raw materials. I hope the Minister for the Co-ordination of Defence will note that statement. Let me give the House a few interesting facts. A little off the North of Australia there are two fairly large islands, which contain the best and the most easily worked iron ore deposits in the world. They are composed of solid iron ore. The small States of Queensland and West Australia considered taking over those islands two years ago but they found that the proposition was too big for them, just as the problem of dealing with the floods at the present time is too big for the catchment boards. Just as it is the Government's responsibility to deal with the floods, so the two Australian States mentioned, considering that the proposition was too big for them, referred the question to the Government, being of opinion that it was a Government responsibility. The Government did not act, and a Japanese Company stepped in. Then the Government became concerned and took steps to prevent the Japanese Company from controlling the island, and a way out was found. British financiers from London financed a company, which enabled them to begin to exploit these islands. Now Japan is taking all the iron ore from those islands, and all the scrap from Australia, and there is great danger of several Australian steel works having to close 2974 down because of the lack of iron ore and scrap in Australia.

§ Lord Apsley
I presume the hon. Member is referring to Yampi Sound.

§ Mr. Smith
That is so.

§ Lord Apsley
Does the hon. Member say that the Japanese are working the iron deposits there?

§ Mr. Smith
I thank the Noble Lord for interrupting me, because I do not want any misunderstanding. I want to deal with this matter clearly, so that the Minister and the Government will give attention to it. If we are to call again upon the Colonies and Dominions to support us in the way they supported us during the last War we shall have to give them much greater satisfaction in the future than during the past few years. What I said was that a London financial company had financed a company to exploit these iron-ore reserves, and as a result they are now mining these ores, which are going to Japan. If hon. Members have any doubt about the matter I may say that I received a report only this week from friends of mine in Australia, where they are so concerned about the question that it is being taken up by a number of State Governments. Public opinion is very much concerned about it. There is a great shortage of iron-ore in our own country. Several steel works in the West of Scotland and in the Special Areas in particular are held up because they cannot obtain supplies of iron-ore, and some are held up for lack of capital because it has not been a business proposition to sink capital in those companies because-of the operation of the cartel. The time has arrived when, in accordance with the recommendation of the Estimates Committee, we should embark upon a large-scale policy of obtaining our raw materials from the Dominions and Colonies in order that this country can supply itself with all the necessary raw materials at as small a cost as possible.

§ Mr. Assheton
I had not intended to, intervene in the Debate, and I hope the House will excuse me if my remarks are somewhat disjointed, but I felt that one or two points made by the hon. Member opposite called for a certain amount of criticism. He seems to be under the 2975 impression that the price of shares in a company has some relation to the price of the product which the company sells. I do not know whether he has ever taken the trouble to look at the price of the stocks of the various railway companies. If so, he will observe that the stock of the Great Western Railway Company, which is paying a dividend, is standing higher than the stock of the London and North Eastern Railway Company which, unfortunately, on its junior stocks is not paying a dividend. Nevertheless, it costs just the same per mile to travel from here to Newcastle as to travel from here to Bath.

§ Mr. Alexander
Parliamentary fare.

§ Mr. Assheton
Yes I agree, a Parliamentary fare. Then may I give another example? If the hon. Member gets a cup of tea at Messrs. Lyons he will pay no more than if he went to the A.B.C. Messrs. Lyons is a very efficiently managed concern, whose shares stand at about £6 and they pay 22½ per cent. dividend. Their management compares more favourably than the A.B.C. who pay only 5 per cent. Nevertheless, the price of the products which they sell is no higher. Therefore, I do not think it is possible to prove anything from the fact that a company is paying a high rate of dividend or that its shares are standing at a high level. It has to compete for orders in the markets of the world or of the country, and it can only succeed by selling its goods at prices which compete with those of the goods sold by other companies.

§ Mr. Alexander
The record of the iron and steel industry in this country between 1919 and 1921, when they were trying to sell their goods in the world market at a price which would give a return on their enormously inflated share capital, was very largely responsible for the slump that came, and the disastrous period that followed.

§ Mr. Assheton
I would not deny that, but I do not think it has any bearing on the argument I was putting.

§ Mr. Alexander
The hon. Member does not want it to have any bearing on it.

§ Mr. Assheton
I would like to refer to the case of Ransomes and Rapier, which 2976 was mentioned by the right hon. Gentleman the Member for West Stirling (Mr. Johnston), who I am sorry is not here at the moment. I appreciate very much a great many of the gallant attempts which he makes in the House and elsewhere to attack share-pushing, and I hope hon. Members on all sides of the House will assist him. On this particular occasion, however, I think the right hon. Gentleman is really barking up the wrung tree. The firm of Ransomes and Rapier is a very admirable firm which manufacture sluices and other products. It approached the Government apparently, and suggested that it might make shells. There is absolutely no reason for supposing that, because a firm is ready to make shells for the Government and to make no profit out of them, that is a good bit of business for the Government to undertake. It might well be that one firm could produce shells at 20s. and make a loss, and another firm produce them at 15s. and make a very handsome profit. I believe the whole argument on which the right hon. Gentleman the Member for West Stirling and the hon. Member for Dundee (Mr. Foot) made their case was based on a fallacy. The fallacy was that because a firm goes to the Government and says it is going to make no profit on a contract, therefore the price which that firm proposes to charge is the right price. Nothing of the kind. Prices do not depend on the cost of production.
The hon. Member for North Aberdeen (Mr. Garro Jones), speaking the other day about the price of copper, said that the production cost was £25 a ton. I draw his attention to the fact that the price of producing copper varies enormously from one part of the world to another. It is possible to produce copper in the new mines in Rhodesia infinitely cheaper than it is possible to produce it anywhere in America. A company producing copper in Rhodesia might be paying a large dividend, whereas another company producing copper elswhere might be making a loss, and the company in Rhodesia might still be able to sell its copper cheaper than the other company. The cost of production bears no relation to prices, and prices are governed by the law of supply and demand.
I would like to say a few words about the prices to which shares in armaments 2977 firms have risen. I am not for one moment going to commend speculation in armament shares or in any other shares, but I think it is only fair to point out that a great many of these concerns which are now being enabled to make good profits and to pay good dividends have, for a great many years, been making no profits and paying no dividends. The fact that Vickers' shares are standing at 34s.—which I think was the figure quoted by an hon. Member—must be considered in conjunction with the fact that only five years ago the same shares were standing at 5s. As long as there is a capitalist system, one must expect to have profits and losses. When losses are being made and when the producer is in the unfortunate position of being at the mercy of the consumer, hon. Members opposite do not grumble, but when the opposite situation obtains and there comes a time when profits become more easy to make and losses less easy to make, then naturally shares rise and profits are made.
The capitalist system, if I may be allowed to say so, is a system which certainly makes it possible for the community to get some sort of idea as to what is the right price to pay for goods. An hon. Member opposite spoke about Government factories being some guide as to the cost of production, and he proceeded to quote the fact that at Woolwich shells were being produced at 9s. 1d. more expensively than they would have been produced according to Ransome and Rapier's price. That is an argument which shows that costs at the Government factories are not really a very reliable guide as to what the right costs ought to be. I think we are very fortunate in having in this country a capitalist system which enables the Government to obtain a better idea of what the right price should be.

§ Mr. Garro Jones
I shall not detain the House for very long, since I gave my views in general on this question in a recent speech in the House; but there are two matters of vital importance which I wish to bring to the attention of the Minister. We have just heard a statement about speculation from the hon. Member for Rushcliffe (Mr. Assheton), who, I believe, is a stockbroker, and another one from the hon. Member for Stoke (Mr. E. Smith), who, I believe, 2978 is a pattern-maker. I must say that I prefer the version of speculation of the pattern-maker to that of the stockbroker. I believe the hon. Member for Rushcliffe, who was speaking about false analogies, made a gross false analogy himself when he tried to compare the customer buying a cup of tea with the shareholder buying a share—

§ Mr. Assheton
That was not the analogy that I was trying to draw. I was trying to show that because the shares of one armaments firm might be standing at several times their par value, that was no indication that the prices which the firm was charging to His Majesty's Government were any higher than the prices being charged by some other firm which was perhaps not even able to make a profit.

§ Mr. Garro Jones
The position when the shares of the firm stand at much above par value, however they have reached that position, is that there is a tremendous drive on the directors of the firm to maintain that inflated standard of earnings. That was the point so clearly made by the hon. Member for Stoke. The burden of our charge against the Government is that they do nothing in connection with this speculation in shares. We know precisely what happens. If a firm charges only a little too much, an extra 10 per cent.—which I believe in the armaments world is looked upon as a small additional earning—that increases the capital value of its shareholding by 100 per cent., and that means that it is making 110 per cent. additional money—

§ Mr. Assheton
indicated dissent.

§ Mr. Garro Jones
The hon. Member does not agree. If I have £100 of shares in an armaments firm and I am getting 10 per cent. on them, if the earnings increase to 20 per cent. and my holding increases to £200 in value, and if I sell my shares on the Stock Exchange, then I am making zoo per cent. capital appreciation and 10 per cent. on my revenue. That is what is being done to-day in armaments shares. What happens, in two or three years' time, is that the new shareholder who has the shares is left with shares which he has bought at 100 per cent. capital appreciation, the annual meeting is held, times are more difficult, the pressure brought upon the board of 2979 directors is almost irresistible and the result is that there is a drive upon labour, upon reducing costs and increasing prices to the public. It is a most pernicious system which allows that to take place.

§ Mr. Assheton
If that were the case, surely Messrs. J. Lyons and Company would now be charging twice as much for their cup of tea as the Aerated Bread Company.

§ Mr. Garro Jones
Those firms do not operate on the same basis as the armaments firms. I will tell the hon. Member why. I do not want here to give a testimonial to J. Lyons and Company, but I will give credit where it is due. They have built up their service to the public on the basis that their prices are lower than the retail prices of articles elsewhere, and if an article at J. Lyons and Company is shown by their accountants to make more than a certain percentage of gross profit, the price to the public of that article is immediately lowered. That is not happening in the case of armaments firms.

§ Mr. Remer
Is the hon. Member aware that as a rule increased profits are not from increased profits on the articles, but very largely from an increased turnover?

§ Mr. Garro Jones
But if the increased turnover is caused by the Government fulfilling a national need, I say it ought not to be used to increase the profits of armaments manufacturers. Moreover, efficient though the firm of Lyons may be, I would like to see its attitude towards its employés overhauled. I would like now to refer to the firm of Ransomes and Rapier. Here we come right to the root of the question of armaments profits. The Secretary of State for War asked what was the charge against the Government; what were we suggesting was the motive of the Government in not allowing that firm to make armaments without a profit? I will formulate the charge in perfectly frank terms. I accuse the Government specifically of declining to accept this offer to make armaments without profit because of the embarrassment it would cause to all other private manufacturers of armaments. The precedent would be awkward. It is of no use the Minister for the Coordination of Defence or other hon. Members smiling for they know that to be true.
2980 What have the Government done to appeal to the patriotism of armaments manufacturers? Have they asked them to make armaments without profits? We know what is possible in that way. Only a few years ago the country, supposed to be in a dire crisis, wanted to convert enormous amounts of its War loan. There was a tremendous blast of patriotic propaganda in all the newspapers for the purpose of persuading people to convert their War loan at a sacrifice of income. The Government succeeded in doing that. What attempt has the Minister made to appeal to the patriotism of armaments manufacturers to follow the example of Ransome and Rapier and to make armaments without profits? I venture to say that the Government will never make that appeal, for the reason I have stated, that they do not wish to cause embarrassment to those of the armaments manufacturers who desire to make excessive profits.
The Secretary of State said that the fact that an armaments firm was prepared to make armaments without a profit did not of itself mean that the Government would get those armaments at an economic price. That is true. No one suggests that the Government should allow anybody willing to make armaments without profit to make them; all we say is that if they are willing to make armaments without profits and the price is an economic and competitive one, they should be allowed to do so. I can assure hon. Members that in the case of Ransomes and Rapier the price was an economic price. The price at which they offered to make these shells was 17s. 11d. I have seen the whole correspondence, and their offer was a firm offer to make shells at that price, without any recourse at all in respect of losses. That was the price fixed after they had shouldered the risk of losses, and I challenge the Secretary of State for War to deny it. I have seen the papers only to-day. I have discussed the question with responsible directors of the firm, and, as I say, they quoted a firm price of 17s. 11d. for shells, without recourse beyond that amount to the War Office, if their costs proved higher than they estimated.

§ Mr. Cooper
That is contrary to the information which I received, and contrary to the statement made by the right hon. Gentleman who opened this Debate.

§ Mr. Garro Jones
I assure the right hon. Gentleman that he must have misunderstood what my right hon. Friend said, because I myself was able to place in my right hon. Friend's hands, just before he made his speech, a statement to the effect that the figure which I have mentioned was without recourse, and that information I received on the highest authority. Moreover, 17s. 11d. was much below the prices which you were actually paying for shells at that time. I know that you had offers, in one or two cases, to make shells at prices a little lower but you were paying more than 17s. 11d. for shells at that time. You declined this offer and it is evident through the whole correspondence that you became uneasy and suspicious about this possible precedent, and put off this firm on one excuse after another. First it was the vulnerability of the site, then it was that they could make tanks easier than shells, then the price and so on. I charge the Government specifically with having put this firm off because they wanted to prevent embarrassment to other manufacturing firms.
There is another point, and that is the secrecy which surrounds all these questions of armament manufacture. Why should not we be told the prices which are being paid for shells, guns, bombs, petrol and other materials? What is the use of pretending that it is not in the public interest to give us that information. The Government know very well that that information is on the desk of every contractor, every morning. The steel-makers have it, the shell-makers have it, the aircraft makers have it. The only people not to have that information are the Members of this House whose business it is to protect the taxpayer against having to pay too much. Only the other day a question was put to the Air Ministry asking how much they paid for petrol, and the answer was that it would not be in the public interest to give the information. But the Admiralty gives such information, and when a trade paper wrote to the Air Ministry a few weeks later asking for the information, it got it.
The Government are taking refuge behind this practice of secrecy, in order to conceal from the House matters which this House might criticise. I have put down a question to be asked to-morrow, requesting the Prime Minister to state the 2982 principles upon which the Government refuse information regarding the prices paid for armaments. We know that in almost every sphere armament contractors are hand-in-glove with each other and know the prices at which they are going to tender. Out of 41 tenders for steel, 40 were of exactly the same amount. I make an appeal to the Government, because I can assure them that if they fail—and they are failing—in the measures they are taking to protect the country against profiteering in armaments, there will be short shrift for the Ministers who are found responsible and the Government which is found responsible. There is yet time to grapple with this problem but the only way to do so is by taking this industry under public control. That alone will save them from the wrath of the people when the true facts are known.

§ Mr. Crossley
The hon. Member for North Aberdeen (Mr. Garro Jones) had four points in his speech. He started by attacking my hon. Friend the Member for Rushcliffe (Mr. Assheton) for exposing the fundamental fallacy into which the hon. Member for Stoke (Mr. E. Smith) had fallen in confusing speculation in shares on the Stock Exchange with the prices of the products of our manufacturers. I wish to have this point made clear, because I am certain that hon. Members on this side of the House feel just as strongly as hon. Members opposite about it. The whole country feels intensely on this point and everyone is anxious that there shall never again be profiteering in armaments, comparable with what happened in the last War, and that this armament programme shall be carried out at fair prices, and not more than fair prices. But I cannot see that people who take the risk of buying materials at the prices which these firms have to pay—many of them only partly engaged on Government contracts, and very largely engaged on large civil contracts as well—should not receive a fair return. The actual price at which aeroplanes, for instance, are sold must depend on such factors as he cost of labour, the cost of raw materials and other costs of that description, and those who have taken the risk to which I refer are entitled to a reasonable profit.
The hon. Member's second point was, what had the Government done to appeal 2983 to the patriotism of armament manufacturers and induce them to make armaments without profit? I doubt whether the Government at the present time would make any complaint of the patriotism of the armament manufacturers. I do not say whether the motive is patriotism or not, but I do assert that most of the armament manufacturers in this country, most of whom are civil firms and many of whom are putting themselves to considerable inconvenience to make armaments, are serving a patriotic end. What the Government have done is something different from what the hon. Member suggests. The Government have said: "We shall go most carefully into the cost of all the articles that you produce and that we demand, and we shall see that you do not make more than a reasonable profit on those articles." I do not think that is an unreasonable attitude on the part of the Government. It appears to me to satisfy the general demand of the country that a reasonable profit should be allowed to a firm which, when all is said and done, without a reasonable profit could not hope in the future to meet periods of bad trade.

§ Mr. Alexander
Will the hon. Member tell us his idea of a reasonable profit? I understand he has experience in engineering.

§ Mr. Crossley
I assure the right hon. Gentleman that I have no connection whatever with any kind of engineering, but, generally speaking, I would suggest that 5, 6 or 7 per cent. would be, on the whole, a reasonable profit.

§ Mr. Alexander
On capital or turnover?

§ Mr. Crossley
On capital. If the right hon. Gentleman looks into the experiences of most engineering firms since the War he will find, I imagine, that very few of them made a profit of any kind over a period of 10 years, and that many of them went out of action. I should imagine that the main cause of the rise in the shares of many of these companies is not the fact that they are making unreasonable profits, but the fact that for the first time for many years their turnover is satisfactory. The hon. Member for North Aberdeen then went on to refer to the firm of Messrs. Ransomes and Rapier and the price of 17s. 11d. per 2984 shell. But the hon. Member is only trying to fight a rearguard action on this question—and he is awfully good at that —because the Secretary of State for War has replied to every point raised in that connection. Surely the first interest of the Government in its armament programme is to have suitable factories in suitable places. If this factory is not suitable, if new construction is necessary before shells can be manufactured, as I understood from the reply of the Secretary of State for War, then surely it is not unreasonable to say, "We propose to hold this factory in reserve for the manufacture of heavier war materials when we desire them later on." It strikes me as a matter of public policy, and nothing else. As regards the competitive prices of these shells and the shells from other firms and from Woolwich Arsenal, I am not qualified to give an opinion.
The last point which the hon. Member for North Aberdeen raised was that the House should have control over this expenditure. Surely the means by which the House exercises control over public expenditure is that provided by the Estimates Committee and the Public Accounts Committee. I am not an expert on Procedure, but I have always understood that both those Committees can at any time call for any papers concerning any subject of Government expenditure, that they are composed of Members of all parties and that they are able to look into all these questions. I also understand that on this very question there was a unanimous opinion in the Estimates Committee that the Government had selected the right way of controlling prices in connection with the armament expenditure.

§ Mr. Garro Jones
The report of the Estimates Committee contains about eight positive recommendations of steps which they say the Government must take in order to make their supervision effective, and therefore they cannot have intended to congratulate the Government on having done so already.

§ Mr. Crossley
I definitely understood from the speech of my hon. Friend the Member for Harrow (Sir I. Salmon) that the report of the Estimates Committee contained a general approval of the means by which the Government intend to control expenditure, but if they have, 2985 as the hon. Gentleman says, made several other recommendations, that only shows that the control of this House is more effective than the hon. Gentleman would have us believe.

§ Sir W. Smiles
My experience of the question of contracts of this kind goes back to the Boer War period. I can remember my father talking at home about the difficulty which his firm then experienced in getting on to the War Office list, and I believe that a new firm still has great difficulty in getting on to that list. I have, therefore, some sympathy with Messrs. Ransomes and Rapier, who, apparently, have been going through exactly the same experience as that which my father's firm went through about the year 1899. An hon. Member opposite referred to the value of shares upon the Stock Exchange in relation to the price of the articles produced. My experience is that the value of shares on the Stock Exchange has no relation to the profits of a firm or to the cost of the production of the commodity in question.
I would ask hon. Members to look up the financial papers of two years ago and observe the price at which rubber shares then stood. They were almost being given away. They are 10 or 12 times the price to-day at which they then stood, and I do not suppose anyone would impute to the people concerned that they have pushed up the price of rubber because of armaments or war. Not only rubber shares but other shares as well have jumped in the same way, and anybody who thinks that prices on the Stock Exchange are a reliable guide in the buying of shares is liable to have his fingers severely burned. An hon. Member opposite mentioned the case of the iron and steel industry in 1919 and 1920. I would ask hon. Members also to look up the prices of the shares of iron and steel firms in 1919, 1920 and 1921 and compare those prices with the prices at which they stood 10 years later, in 1931.
The directors who control these vast engineering industries are not all supermen. Some of them make tremendous mistakes. Marshalls, of Gainsborough, established a huge engineering works in Calcutta on which they spent more than £500,000, and it hardly ever turned a wheel. There was another firm, Combe, 2986 Barbour and Combe, a big amalgamation of tube machinery people, and they also established a huge works. The shares jumped from 10 rupees to 18 rupees, but afterwards they could not be given away for two annas. The advantage of the capitalist system is that when there is a slump the shareholders have to pay, and when there is any profit the Government take one quarter of it. That is the great safeguard of the taxpayers in this country, and everyone of us wishes that we could go into business on the same principle. I ask the Secretary of State to cast his eye over the correspondence relating to new firms who want to get on the War Office List. I dare say there is a great deal of heartburning in the matter, and there may be efficient, young firms who, because of some want of influence or the inability to send the right sort of letter, never seem to be able to get a Government contract.

§ Sir T. Inskip
I have few observations to make, because I was able to make some general observations on profiteering in relation to armaments on Monday. Everybody shares to the full the opinion of the right hon. Member for West Stirling (Mr. Johnston) in their dislike of any idea that excessive profits are to be made out of the rearmament programme of the Government. I have used the word "excessive" because it is only fair to recognise that hon. Gentlemen opposite would prefer to see a complete system of nationalisation, a world in which they dream it would be possible to eliminate profits and the incentive to profits. I should have thought that the experience of recent years had gone to show that that dream is likely to remain a dream as long as human nature is what it is.
Assuming that nationalisation of the armament industry is not possible, then we must give private industry a fair rate of profit, and that was the conclusion which the Royal Commission reached. I do not suppose the party opposite, if they predicate, as I do, the existence of private industry, would suggest that it can be carried on without a fair rate of profit. Therefore, the question is, what is a fair rate of profit? The White Paper issued a year ago was clear on this matter. I need only remind the House of paragraphs 57 and 58, in which it was stated that His Majesty's Government had given 2987 a great deal of time and thought to this matter, and that, while they realised it was important to retain the good will of industry, the Government were determined to set their mind to every possible plan for preventing higher prices than were justified. The question must immediately arise whether the Government published these expressions of intention in good faith or not. I gathered from one speech a few moments ago that anything the Government do or say is regarded as not being in good faith, but I am not sure that view would find acceptance even in the ranks opposite.
Assuming the view to be that the Government are sincere in what they have said is their intention, the question is whether the methods they have adopted so far are satisfactory. The right hon. Member for Stirling recognised that the Government have taken some steps which, so far as they go, are satisfactory. That admission is very welcome, and none the less welcome because it could not fairly have been withheld. The Government have taken a good many steps. If I may give an illustration which is familiar to the House already, from speeches by the Chancellor of the Exchequer and from answers to questions asked of myself and of other Ministers, the Government have determined that no rate of profit in the shape of a percentage On the volume of orders shall be allowed to contractors. In other words, they are to be given a rate of profit which is to be determined after exact estimation of the costs, including oncosts, having relation to the capital employed, having relation to the turnover—that is important—and having relation also to the volume of the order and the likelihood of a repetition of the same order.
These are all considerations which may properly govern the determination of a fair rate of profit. I am not thinking only of the upward rise in profits when I speak of a fair rate, I am thinking of the downward movement also. When you consider all these factors properly and reasonably you are likely to arrive—as far as the human mind ever can arrive at the answer to a rather vague and difficult question of this sort—at a fair rate of profit. The question now arises whether the Government, with all their good intentions, have taken to themselves 2988 the assistance necessary to do what is very difficult. The right hon. Gentleman rightly said that, however much you may desire to ascertain oncosts, there are 100 dodges for getting round them. I do not think anybody is more familiar with the dodges than the able and experienced accountants whom the Government are now employing in large numbers in the various departments. I wonder who it is that we ought to employ to prevent contractors from making unreasonable profit? I know only two classes of people who can be trusted to carry out this duty—one, the people experienced in the various branches of industry, and the other, Government servants who are selected with the well-known impartiality that governs the appointment of civil servants.
I do not know anybody else who could do this work. Either you must call in the outsider from industry, and set a thief to catch a thief, as hon. Members opposite would put it, or employ your own gamekeeper, your civil servant. The first expedient has been ruled out by the right hon. Member for Hillsborough (Mr. Alexander), because on 24th February, 1936, when this rearmament programme was in contemplation, he asked the Prime Minister whether he would take care, in order to retain public confidence, not to give way to pressure to put in charge of this kind of work, industrial magnates who have profited much in the past from subsidies of the Government?"[OFFICIAL REPORT, 24th February, 1936; col. 31, Vol. 309.] In other words, do not let any of these rascals who have made excessive profits come in and manage it for you; manage your business yourself, without assistance.

§ Mr. Alexander
But you are retaining just that type of person.

§ Sir T. Inskip
No, indeed we are not. Does anybody suggest that Sir Hardman Lever, Mr. Judd or Mr. Ashley Cooper have ever made profits out of the Government's programme? I should be surprised to hear that a distinguished civil servant like Sir Hardman Lever has ever made a profit out of the Government's programme.

§ Mr. Alexander
I said you are retaining as your advisers on the programme people who come in that class of person.

§ Sir T. Inskip
Yes, we are retaining advisers on the programme, but now I 2989 am dealing with the question of costs. If the right hon. Gentleman is agreed that it is undesirable to bring in what I call the industrial magnates to put out these contracts and arrange the terms, the only other persons that the Government can use are the civil servants. We have reinforced, as I said on Monday, the staffs of each of the Service Departments with as competent and experienced men as we could possibly get. Is there any hon. Member opposite who would say we have been wrong in taking those steps? I am sure that hon. Gentlemen, who are so sincerely anxious to prevent profiteering, would applaud what the Government have done in that respect. I agree that these gentlemen have to be very much on the qui vive to discover these dodges. The right hon. Member for Stirling said that one of the most frequent expedients for getting round the rules likely to be imposed is the practice of writing down unduly the capital Value of assets. Does the right hon. Gentleman really think that these costings accountants, who are brought up and trained in the special branch of their profession, are not fully alive to that? I have it in these papers before me as one of the matters which, of course, they would observe.
It may be that, being human, they might overlook particular cases, but it is no good saying that the Government are not taking the best steps they can to prevent undue profiteering. I fully accept what has been said by one hon. Gentleman, that if the Government turn out in the end to have failed it will go hardly with the Government and with Ministers concerned. I am perfectly prepared to accept that responsibility, and I should not be so foolish as to be making these observations if I knew well that when the veil was lifted I should be found to be a rogue and vagabond, as the hon. Member for North Aberdeen (Mr. Garro Jones) charged the Government with being. He makes such extravagant charges that I think even his own colleagues regret the extreme lengths to which he goes in charging corruption. I am not going to mention the case of Ransomes and Rapier because it has been dealt with by the Secretary of State for War.

§ Mr. Johnston
What is the right hon. Gentleman's own view about that?

§ Sir T. Inskip
I am bound to say that the case my right hon. Friend made was unanswerable, given the fact, which he assured the House is the fact, that there was no undertaking to bear any loss that might accrue in the execution of the contract. That, the House will see, is critical. If Ransomes and Rapier quoted the price of 17s. 11d., and were prepared to return any profit realised on the transaction, it was, of course, a firm tender, but I thought the whole hypothesis was that there was no firm tender.

§ Mr. Johnston
That is absolutely denied.

§ Sir T. Inskip
I know hon. Members deny it, but I know nothing about the case except what the Secretary of State has stated.

§ Mr. Johnston
Would the right hon. Gentleman, as Minister for the Co-ordination of Defence, go so far as personally to inquire into that point, and if he is satisfied that this firm did make a firm offer and was prepared to bear the loss, including the 10 per cent. increase, will he be prepared to see that the whole matter is ruthlessly inquired into?

§ Mr. MacLaren
May I assure the right hon. Gentleman that it was a firm offer? I have seen the documents.

§ Sir T. Inskip
I have referred to my right hon. Friend the Secretary of State for War, and I have said that my knowledge of the facts is limited to what I heard him say, but I thought my right hon. Friend made a very fair offer when he said to the right hon. Member for West Stirling that if he would be good enough to take the trouble to go to the War Office, he should have the whole of the documents in the War Office relating to this matter laid out for his examination.

§ Mr. Johnston
But we have seen them.

§ Sir T. Inskip
Perhaps the right hon. Gentleman did not see everything. It is possible in this world that the right hon. Gentleman may not have seen everything, even though he may have been told in good faith by somebody that he has seen everything. I think it is a fair offer that the right hon. Gentleman should go to the War Office, and if it would give him any greater pleasure or satisfaction, I will go with him.

§ Mr. Johnston
I accept that offer.

§ Sir T. Inskip
Very well. If the right hon. Gentleman and I go together, I will look at the documents while he looks at them, and this difference on a question of fact can be disposed of. If there are any other considerations, no doubt they will be discovered in the course of the examination. The right hon. Gentleman will not expect me to go with him to the War Office this side of Easter. I hope this particular case can be disposed of in that way, but I wanted just to say one word about the line which the right hon. Gentleman took in quoting, as another sample of his hypothesis that the Government are allowing excessive profits to be made, a recent prospectus of the amalgamation of several firms for the production of machine tools. I know nothing about the firms, except that two or three of them are known to me by name, as they are to him—firms of the highest repute. What they did, I gathered from the statement made, was to issue 4s. shares at 5s., and some hon. Members seem to have assumed that there was, somewhere or other, an illicit profit of 1s. per share. I am sure the right hon. Gentleman does not think that, but some of the speeches that are made seem to suggest that when a company issues a shares at 30s., in some way or other it is getting 10s. more than it ought to get. Of course, that is a complete fallacy. The right hon. Member for Hillsborough, I think, was a member of the Committee that considered the recent Companies Bill upstairs, at great length. There we considered, three or four years ago, a proposal to abolish the statement of any par value of shares as having no importance at all, because the importance of having a share in a company is to know that you own 1,000,000, or 1,000, or 100 shares, so as to get your proportionate rate upon the profits that are made. The fact that a company calls it a £1 share or a 4s. share does not matter at all. If a company gets 5s. for what is called a 4s. share, it is getting 5s. of capital which the company takes and uses in its business.
So far as speculation on the Stock Exchange is concerned, the Stock Exchange may be well advised or not, but when the right hon. Gentleman quotes half a dozen aeroplane firms, and mentions Handley-Page declaring something 2992 like 264 per cent. dividend, I would remind him that these profits have absolutely nothing to do with the Government's armament programme. I only wish I thought they had, because that would show that so much work had been done in producing aeroplanes for the Government's rearmament programme that my right hon. Friend the Member for Epping (Mr. Churchill) would not sometimes have to make the speeches which he does as to the slowness of the execution of that programme. I know nothing about the Handley Page Company. I am not even fortunate enough to have a share in it, but I understand that the company has an enormous trade in civil aeroplanes and that a very valuable invention is associated with that company. The fact that these profits have been made in the past year seems to me to prove a thesis contrary to that put forward by the right hon. Gentleman, namely, that armament firms, some of which may now be engaged in making aeroplanes for the Government, have other resources or that they make considerable profits from their ordinary trade outside the Government's rearmament programme, because when the years which have been closed, in respect of which these dividends have been declared, were passing, the Government's programme had only to an infinitesimal amount come into the picture. Next year may show a different picture, and then, no doubt, it will be possible to use any profits made as an argument.
I think the House must accept, if I may respectfully say so the statement which the Government have made so often—and I will not repeat what I said on Monday—that questions connected with the control of raw materials and world prices are worth consideration. My hon. Friend the Parliamentary Secretary to the Board of Trade will no doubt speak with greater authority than I can on those questions, but I think the right hon. Gentleman was right in admitting that where an article has a world price, you cannot expect the Government to restrict that price by artificial measures. It is true that the Government might in theory buy an enormous quantity forward, not only for their own requirements in the ordnance factories, but also for the people who are their contractors or sub-contractors, but I should be very slow indeed in thinking that any Government which took that course would be 2993 right. It may be that it requires further consideration now, but I am not sure whether this is quite the time. But I hope and trust that speculators will have one or two bumps which will enable more reasonable prices to be quoted in the markets for these articles.
Hon. and right hon. Members opposite cannot get over the fact that in many of these raw materials and commodities there is a world shortage. They may regret it as much as I do, or even much more than I do, if that is possible, but they cannot get over the fact. If we were a home-producing country with all these corn-modifies, we could control prices, but there it is. We have to take, unfortunately, the consequences of a world revival in this respect, and much higher prices are being charged. I repeat the assurance which I gave on Monday, that the Government believe that they are taking all possible steps to carry out the promise which they gave to the House in the White Paper 12 months ago.

§ Mr. Alexander
I am anxious that we should go on with the Debate, and I do not want the Minister for the Co-ordination of Defence to leave before we have finished what we have to say about armaments. It may be inconvenient, when we are dealing with the kind of topic which has been the subject of this Debate, if we are not to have the advantage of a subsequent reply from either the Minister himself or somebody else who can speak directly with regard to the expenditure required by the fighting Departments.

§ Sir T. Inskip
In answer to the right hon. Gentleman, I have, of course, to make engagements, and I have one made for to-night which I must, if I can, keep. It is in connection with my duties, and I had proposed that my hon. Friend the Parliamentary Secretary to the Board of Trade, who knows all about these commodity prices and similar questions, would answer for me, and that the House would then acquit me of any discourtesy in leaving at this stage.

§ Mr. Foot
May I put a point to the right hon. Gentleman before he goes? As he knows, this question of the control of profiteering by Government Departments was dealt with by the Royal Commission on Armaments, which made a most emphatic recommendation that a special body should deal with this matter among 2994 other matters. Are the Government yet in a position to say what their attitude is towards that recommendation?

§ Sir T. Inskip
That is another question, and, as I said on Monday, any question as to any announcement of the Government's decision on the Royal Commission's report should be addressed to the Prime Minister.

§ Mr. Alexander
We are in a difficult position. We are not in Committee, but speaking in full House, and we want to interrogate the Minister.

§ Sir T. Inskip
But the right hon. Gentleman, I am afraid, cannot, under the Rules of the House, interrogate me. I cannot myself speak a second time, except with the permission of the House, but I do not think it is anything unusual, in a Debate of this sort, when we are not in Committee, to allow another Minister to make the second speech.

§ Mr. Alexander
Our complaint is that there are four Defence Ministers, and the Parliamentary Secretary to the Board of Trade is not one of them.

§ Mr. Speaker
It is true that the House is not in Committee and that the Minister cannot speak again except by leave of the House, a leave which is sometimes too readily given. If such leave is not given, some other Minister must be deputed to reply.

§ Mr. Alexander
Perhaps it will be convenient if I start to say what I have to say now in regard to some of these matters, so as to enable the right hon. Gentleman the Minister for the Co-ordination of Defence to get away for his appointment. In any case, if I might open what I have to say to-night with regard to the last point that he dealt with in his speech, namely, the question of forward buying, we can get no answer from the Parliamentary Secretary to the Board of Trade with regard to the Defence Departments and their forward buying. Certainly it is no defence of the Government's position simply to refer to speculation and to the very severe handicap to our Defence programme of the rising prices of basic commodities and to say that we do not happen to produce those commodities here.
2995 We do not take that kind of answer when we think of tin. Here is the Secretary of State for Air. First of all, he was at the Board of Trade, and then, when he got out of office, he became chairman of a great tin combine. Then he got back into office, became Secretary of State for the Colonies, and arranged an agreement for the restricting of the output of this exceedingly valuable metal. Then you come to a position where you get the Government up against it. They are supposed to be in the extremity of need in regard to armaments, and we are told that the speculation in this article is caused by a shortage, a lack of world supplies. Yet one of the important Defence Ministers was chairman of a tin combine, and then, when in office, he helped to put through the agreement which restricts output. What is the good of giving us that kind of excuse for the rise in price of one of the most important things required in the armaments programme?