HC Deb 04 July 1938 vol 338 cc59-104

Order for Second Reading read.

4.0 p.m.

The Chancellor of the Exchequer (Sir John Simon)

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

The purpose of the Bill, as the House knows, is to confirm an agreement between His Majesty's Government and the Government of Turkey which is to be found in the Schedule to the Bill. The agreement is one of three agreements signed at the same time, on 27th May, 1938, and the three agreements are connected and have to be considered in relation to one another. They were all made the subject of Parliamentary publication and are to be found in three Command Papers with successive numbers—5754, 5755 and 5756. The agreement in the Schedule is the only one of the three which needs Parliamentary confirmation. Under this agreement the Government undertake to advance by way of loan to the Turkish Government such sums, not exceeding £6,000,000, as may be payable by the Turkish Government under contracts concluded by them for the purchase in the United Kingdom of material necessary for the defence of Turkey. Hon. Members will see that that is the substance of Article I of the scheduled agreement. These advances so made will bear interest at 1 per cent. above the Bank Rate, with a minimum of 3 per cent. up to 1st January, 1943, and thereafter at a rate certified by the Lords Commissioners of the Treasury to be the rate appropriate for a loan of similar term guaranteed by His Majesty's Government, with a minimum of 3 per cent. That is the substance of the first part of Article II. Those advances, together with approved interest, are to be repayable in equal half-yearly instalments over a period of 10 years, 1952 to 1962. I shall explain later why the year 1951 has been chosen. Of course the Turkish Government has the option to repay the advances at any time earlier.

With regard to the nature of the material which the Turkish Government intend to purchase if this agreement is authorised, I should explain that they are to purchase it in the United Kingdom, and the material is such that it may be supplied without in any way delaying or interfering with our own Defence needs, and that the Service Department concerned is fully in agreement with the arrangements contemplated. In any case, as the House will notice, if they examine the terms of the agreement, the agreement applies only to such contracts as are concluded with the prior approval of the Government of the United Kingdom. As I have said, this agreement was signed at the same time as two other agreements with the Turkish Government and has to be considered in connection with them. The surrounding circumstances which led up to the signing of these three agreements can be thus stated:

In the first place, from the political point of view this country is glad to feel that the friendship which exists between the United Kingdom and Turkey rests on a secure and solid basis. Both countries have the same objective, the preservation of the peace of the world. Their friendship is not directed against any other country. Both the United Kingdom and Turkey desire to be strong for the purpose of improving and furthering the prosperity and standard of living of their own people. The friendship between this country and Turkey is very firmly based. The whole trend of Turkish policy in recent years justifies from the political point of view the proposals embodied in this agreement. Turning to the economic side, those who have studied the matter I am sure will confirm me when I say that the Government of the Turkish Republic during the last 16 years have made quite remarkable progress in their programme of reorganising the economic life of the country, of promoting domestic industry and of utilising the country's very considerable mineral wealth. In December last the Turkish Government adopted an economic programme, elaborate and very carefully thought out, providing for the intensive and orderly development of the mineral wealth of the country and for the promotion of the export of other Turkish goods. Minerals in the soil cannot, of course, be developed and exploited rapidly. All that needs months and years of preparation and very considerable capital expenditure. That is the circumstance which explains another of the agreements in this trinity, the one which provides for advances through the Export Credits Department.

Let me say a few words about the situation in Turkey as regards its internal financial administration. The Turkish Government undoubtedly have achieved very notable success in that department. They are one of the few countries, one of the very few Governments in the world which have succeeded in these difficult times in maintaining a balanced budget, and for that reason a Chancellor of the Exchequer may be allowed to look at them with some admiration. But as regards what is called technically the capacity to transfer, the Turkish position since the economic depression of 1931 has been somewhat difficult. In order to preserve the stability of the Turkish currency the Turkish Government decided that it was necessary to conduct their foreign trade with a large number of countries by means of bilateral clearing arrangements. Turkey has been completely successful in maintaining the stability of her currency, but some of the clearing arrangements, many of them indeed, have not worked with complete satisfaction. In the Anglo-Turkish clearing there are at present arrears amounting to about £1,500, 000.

This is rather a technical matter. I think I understand it rightly when I say that Turkey has not succeeded in selling to us enough to provide the sterling which Turkey needs for its purchases from this country. Thus Turkey's capacity to transfer payments in foreign exchange at the present time is very limited, but as soon as more progress is made in carrying out the economic programme which Turkey has recently adopted, there is good and solid ground to hope that the situation in this respect will improve very greatly.

I thought it right to give the House briefly, but I hope clearly, some account of the matter from those three points of view—political, economic and currency—because the arrangements we have made in these three agreements have to be read together, and these special circumstances afford the explanation of the three Agreements which were signed on 27th May.

The Anglo-Turkish guarantee agreement does not require statutory authority. It is dealt with in Command Paper 5754. That agreement relates to guarantees up to a total of £10,000,000 in connection with the exports to Turkey of United Kingdom goods which are required for development within the framework of the Turkish economic programme. Those guarantees can be given by the Export Credits Department under their existing powers and no further legislation is required to confirm that agreement.

The second agreement of the three, Command Paper 5756, which is supplementary to the agreement of September, 1936, regarding trade and clearing, provides for improvements as regards the Anglo-Turkish clearing to which I have referred, and effect has been given to that by the Treasury Order which is dated 15th June last. That Order requires the approval of Parliament and in fact is to be found on the Order Paper to-day.

Now we come to the remaining agreement with which this Bill is concerned. It relates only to armaments, Command Paper 5755, and is to be found in the Schedule to the Bill. But, all the same, these three arrangements all form part of a single scheme in so far as they all have as their origin and justification the economic programme of the Turkish Government, which on the one hand requires capital goods, and on the other hand should in a year or two's time afford sufficient resources for these repayments both of the amounts covered by the guarantee agreement and the further credits provided in the armaments agreement. That is all subject to the passing of this Bill.

If the House is interested in the details, hon. Members will see in the Schedule, on page 5 of the print, in line 5, that the agreement was signed in duplicate on 27th May. Looking back to Article 4, at the bottom of page 4, hon. Members will see a provision that the agreement shall be ratified and the instruments of ratification exchanged at Angora, and that the agreement shall enter into force from the date of the exchange of ratifications. We shall be ready to exchange ratification very shortly after the authority of Parliament is obtained. I promised earlier to refer to the fact that repayments are timed to begin in 1952. The reason is this: The repayment of the credits covered by the guarantee agreement (the export credits agreement) should be completed in the year 1951. That would happen first. That is why the armaments credit agreement provides that the repayment of the credit for defence material should be completed between the years 1952 and 1962.

Mr. Benson

Are there any details laid down as to the repayment of the £10,000,000 credit?

Sir J. Simon

If the hon. Member will refer to Command Paper 5754, that is the one concerning the Anglo-Turkish Guarantee Agreement, he will see the position, but if it is necessary that point can be dealt with by the Secretary to the Overseas Trade Department.

Sir Arthur Salter

The right hon. Gentleman has referred to the Schedule which has been agreed between the Turkish Government and His Majesty's Government, but I do not see it on the Paper. I cannot find it.

Sir J. Simon

That, no doubt, is the point put by the hon. Member for Chesterfield (Mr. Benson) which I did not at the moment apprehend. I agree that it is relevant, and perhaps the best way will be for the Secretary to the Overseas Trade Department to deal with it. I must make the observation that the transaction embodied in this Armaments Credit Agreement is admittedly an exceptional transaction, but it is justified we think, and we hope the House will also think, by the circumstances to which I have referred. The usual practice when armaments are supplied by this country to other countries is that this country expects to be paid in cash, or if they are supplied by private manufacturers here then, of course, the terms of payment are such as may be arranged between the foreign Government and the contractors. That is the usual practice and there is no reason to depart from it in the ordinary case, but, as I have said, the combination of considerations which I have summed up to the House do, we think, justify the present admittedly rather exceptional arrangement.

I should like to add, in conclusion, that it has been a matter of special satisfaction to His Majesty's Government that it has been possible to conclude this agreement with Turkey. It does not mean, of course, that His Majesty's Government have in any way overlooked the desirability of promoting to the greatest possible extent our financial and economic relations with other foreign countries. That, of course, is a matter outside this Debate altogether, but, nevertheless, it is a matter which is and will continue to be considered by the Government. These things cannot be dealt with on the basis of any fixed precedent, general formula or special rule. There must be in each case a consideration of the circumstances, as they particularly affect each separate country. I apprehend that it will not be in order for me to develop that aspect of the matter at greater length as it is not relevant to this Bill, but it may be sufficient for me to emphasise that it is not the desire of His Majesty's Government, and it can be safely said that it is not the desire of the Turkish Government, that the agreements successfully concluded between them should be regarded as other than that of a general policy to promote international economic relations.

Mr. Stephen

Do I understand that this agreement means that the budget of this country is to be unbalanced to an additional amount of £6,000,000?

Sir J. Simon

No. It will mean that these advances are made on the terms of this agreement as other advances are made, and except in that sense it will not have that effect.

4.19 p.m.

Mr. Dalton

This Bill suggests a number of very diverse reflections. In the first place, we are asked to assent to a new procedure in so far as the Money Resolution is to be presented after the Second Reading of the Bill. Therefore, we are not unduly limited by a tightly drawn Resolution in discussing the general principles of the Bill. That we welcome. It is due to a decision of this House that this new procedure has been adopted. It represents another example, for which we may be grateful in these times, of the successful resistance by Parliament to an attempted undue encroachment by the Executive. The second consideration the Bill raises is its financial aspect. This relates to the export credits and guarantee arrangements. This is a device introduced since the War, and it has been introduced here on a considerable scale. It illustrates the decadence of the City of London. The Chancellor of the Exchequer has told us of the strong financial and economic position of modern Turkey, and yet if trade is to be done with this prosperous and progressive country, the ordinary agencies of private finance are inadequate or unwilling to carry the risks, and, therefore, the Government have to come in.

I make no complaint of the Government's intervention and activities in these matters, but I would point to the corollary. To-day the spirit of the old merchant adventurers seems to be dead. In the old days persons desiring to trade with Turkey would not have come to the Government and asked for the backing of a Government guarantee. We have here to-day another illustration of the general truth that our financiers to-day prefer the palm without the dust; the rake-off without the risk. They seek safe profits, guaranteed by the Government. Under this provision you are socialising the risks, but not the profits. There will no doubt in future be many more examples of Government guarantees and guidance of trade, and I think we shall have to draw the proper conclusion, that, if we are to socialise the risks we must socialise the profits as well.

The third consideration which this Bill suggests is that, in so far as the effect on trade is concerned, it is quite clear that, owing to a lack of enterprise which now prevails among private traders, the Government have effectively intervened to increase trade. That is to be welcomed. International trade has got into a jam, and as private agencies have not availed to lift it out, therefore the Government are effectively intervening to make a considerable amount of work in this country. We welcome that, although we regret that private traders have failed to blaze the trail. Bi-lateral arrangements of this type, with countries politically friendly to us, may be one of the best steps we can take at the present time in promoting that revival of international trade, which we all desire, and strengthening those countries which are properly minded towards the large issues of international policy.

That brings me to the fourth consideration, the bearing of this arrangement on foreign policy. Although it is the Chancellor of the Exchequer who has introduced the Bill it is quite clear that this is an act of foreign policy. The Government have almost wrecked the League of Nations. The Chancellor of the Exchequer did not mention the League of Nations this afternoon, nor did he men- tion the obvious fact, which is one of the reasons why my hon. Friends do not intend to oppose the Second Reading of this Bill—the fact that Turkey is an extremely loyal member of the League of Nations. That is a fact not worth mentioning by the Chancellor of the Exchequer. The Prime Minister made a long speech on Saturday dealing much with foreign policy, but he did not once mention the League of Nations. Lest there should be any misunderstanding this afternoon let me again say that we are profoundly disturbed by the track which British foreign policy is following. Indeed, unless such a policy as is hinted at in this Bill is pursued much more persistently and intelligently and on a larger scale, we may find ourselves in a very serious situation.

I am anxious not to travel too far into generalities about foreign policy, but I would ask what are we doing here? We are helping Turkey to arm herself. That is the intention of these provisions. That may be wise. It probably is. This is a new precedent. Arms were deliberately excluded by Parliament from the Bill authorising export credits and, therefore, this Bill is to put this particular operation in order. You are helping Turkey to arm herself, and of that general intention we make no complaint. But are you sure that there are not other States whom you should help to arm, perhaps more urgently, than Turkey? You have not even allowed, let alone helped, Spain to arm herself, and, passing to the Far East, are you sure that a Bill which should take priority over this is not a Bill allowing China to arm herself in order to resist the aggression of Japan, which, if pursued, may well threaten the whole structure of the British Empire? Are the Government sure that their priorities are right? May we hope that if the House of Commons passes this Bill designed to help Turkey to arm herself, the Government will follow it up by another Bill designed to help China to arm herself? I believe that persons who have been giving serious attention to these matters are not irrevocably or unanimously against such a Bill being introduced.

Turkey, I repeat, is a loyal member of that League of Nations which members of the Government no longer even mention. It has been placed on the list of things which are unmentionable. Turkey is a loyal member of an unmentionable organisation, and that is a factor which has weighed heavily with my hon. Friends in deciding not to oppose the Second Reading of the Bill. Turkey was defeated in the last War, but none the less has adjusted herself to the conditions of the new chapter which opened after the War, and has shown an admirable psychological example to certain other countries. We were all glad to read lately of the settlement arrived at after some friction in respect of the Sanjak of Alexandretta, which is yet another valuable proof of the desire of the present Turkish Government for conciliation and friendly discussion with her neighbours the French and Syrian Governments. So far as the Eastern Mediterranean is concerned, Turkey is undoubtedly a force making for peace and against possible aggression. In 1935 this country had the pledged support of Turkey when it was mistakenly supposed in Turkey that the speech made by the present Home Secretary at Geneva was something more than an electioneering calculation.

In 1935, when it was thought that this country was going to take the lead in defending the Covenant of the League against violation by the Italian Government in respect of Abyssinia, the Government of this country had Turkey wholeheartedly on their side. At that time we had with Turkey, as we had with Yugoslavia and with Greece, a tight pact of mutual guarantee against aggression, which was very valuable during those difficult months. Then, in order not to offend Signor Mussolini, the Government threw away that pact. They threw away Turkey at that time in order not to offend Italy. We would much have preferred that pact of mutual guarantee between this country and Turkey to have been developed and generalised among other States members of the League in Eastern and South-Eastern Europe. Instead of doing that the Government retreated, even from the one-half movement they had made towards the proper organisation of collective security; and since that time all that part of the world, Eastern and South-Eastern Europe, stretching down to the extreme end of the Balkan Peninsula and the territory of Turkey, partly in Europe and still more in Asia, has been in doubt and demoralisation because those countries do not know where the British Government stand. I hope that the Measure now before us indicates and forecasts a rather firmer stand in those parts of the world, where we have many potential friends if only we looked as though we were desiring their friendship and were prepared to organise and build up a great system of mutual benefit through trade and mutual benefit through security against aggression from whatever bullying Power might otherwise take advantage of what seemed to be weakness.

The new Turkey has a good record in the respects which I have mentioned in addition to its record of economic and financial reconstruction which the Chancellor mentioned. The new Turkey, moreover, was one of the first States to recognise the need for friendship with the new Russia. For a long time the relations between Angora and Moscow were more cordial than the relations between any two Powers in the Eastern part of Europe and Western Asia. Turkey gave the lead in seeking to bring the Soviet Union into effective co-operation with her neighbours, a lead which might well have been followed by others, and in that respect too, the present rulers of Turkey are realistic judges of what Powers stand for peace and what Powers stand for other things. They have in this respect given an example which is worthy of being followed.

I should like now to say a few words about geography. Turkey is a key State in the Eastern Mediterranean geographically as well as in other respects. Let the House consider for one moment, if the Dardanelles had been in the hands of our friends in the last War, what a changed chapter of history would have been written. If the Dardanelles, from the beginning of the last War, had been in the hands of our friends, that war could barely have lasted two years; we should have saved millions of human lives, we should have saved many of the most precious of the lives that were lost, including those magnificent Australians and New Zealanders who were battered to pieces on the Dardanelles—we should have saved all that, and we should have kept contact all the time, through the Black Sea, with Russia. It is only necessary to compare the tragedy of what occurred with the possibilities of what might have been to realise the immense importance of a friendly Turkey in years to come. This country's position in the Western Mediterranean is not so strong that the Government can afford, as indeed they have shown by introducing this Bill, to be indifferent to the possibilities of support in the Eastern Mediterranean. Spain, as far as the British Government can influence the issue, is being handed over as rapidly as possible to General Franco, supported by German and Italian forces. The Government are selling out in Spain. Gibraltar is commanded by enemy guns.

Mr. Godfrey Nicholson

On a point of Order. Is there any limit to the range of subjects that can be discussed on this Bill?

Mr. Dalton

Further to the point of Order. I submit to you, Sir, that I am speaking of the geographical conditions in the Mediterranean. I am arguing that recent events in the Western Mediterranean have rendered it especially desirable that our position in the Eastern Mediterranean should be safeguarded. That proposition I am relating to the Bill.

Mr. Speaker

I do not think the hon. Member for Bishop Auckland (Mr. Dalton) is out of order. Of course, the Bill being one that deals with Turkey, the Debate must be confined to the question of how it affects Turkey. The hon. Member was in order in dealing with the geographical position.

Mr. Benson

Further to the point of Order. This Bill introduces a very novel principle and I respectfully submit that hon. Members are entitled to argue for or against that principle, not only as it applies to Turkey, but as to whether it should or should not be extended to other countries.

Mr. Speaker

No, hon. Members would not be in order if they did that. The conditions are so totally different that the same arguments as are applied to Turkey on this Bill could hardly be applied to other countries.

Mr. Benson

Assuming that there are other countries to which the arguments that apply to Turkey would also apply, would hon. Members be within your Ruling if they referred to those other countries?

Mr. Speaker

No, not on this Bill. In this instance, hon. Members must confine themselves to Turkey.

Mr. Dalton

I thank you for your Ruling, Sir, and I assure the hon. Member for Farnham (Mr. Nicholson) that I was moving as rapidly as he would permit me from West to East. I reassert, under the shield of the Ruling which has just been given, that this is a geographical question within the Mediterranean, and it is idle, in considering the strength of the case for this Bill, to ignore the state of affairs not very far away at the Western end of that sea. I have briefly indicated the great concern which hon. Members on this side feel, and which I believe is felt by many hon. Members opposite, although they may not be so vocal or explicit, about the way in which in the Western Mediterranean the British Empire is rapidly being counted out. Gibraltar, I repeat, is menaced by enemy guns. Malta, in the judgment of many experts, would be utterly untenable in the event of war. Therefore, let us look at the Eastern Mediterranean, and consider what harbours of refuge for harassed British ships can be found in that part of this inland sea. Our position in the Western Mediterranean has been so seriously compromised that we must try not to lose Turkey as well. No doubt that was in the mind of the Cabinet when they authorised the presentation of this Bill. I congratulate them on having at least that minimum of sagacious appreciation of the Mediterranean position. If collective security is to be built up again, and if, to quote a phrase which I have used before and which was adopted by the Labour party at their last annual conference, we are to have that emphatic superiority of armed force on the side of States loyal to the League as against aggressors, then we shall need, among others, a well-armed and friendly Turkey, a member of the League and loyal to her obligations under the League, as indeed we shall likewise need other countries in Eastern, South Eastern and Central Europe, which, in pursuance of your Ruling, Mr. Speaker, I will not name or further discuss.

A future Labour Government, seeking to rebuild the ruin which this Government has made, will need such a Turkey, well armed, friendly and loyal to the League, and it will desire to co-operate with such a Turkey when the time comes for the right hon. Gentleman the Chancellor of the Exchequer to cross the Floor, as well as to move southwards from Spen Valley. For that reason, because in those days we shall need this aid, my hon. Friends will not oppose the Second Reading of this Bill. We hope that this Measure will be followed up. I have in my possession a remarkable book, by a most prolific writer—"Bloodless Invasion" by Paul Einzig. It was sent to me, and no doubt to many other hon. Members. It deals with the Turkish question and allied questions of German penetration, political and economic, in parts of Europe reaching towards Turkey. I hope it will be widely read, for whether or not one agrees with all of it, it is most relevant to these matters. It is a very clear statement of what is taking place, and of those practices, particularly by the present rulers of Germany, against which we hope the Government are going to guard and against which I suspect they are seeking to guard, in the particular case of Turkey, in introducing this Bill. For if the Government had remained as inactive in regard to Turkey as they have in regard to many other countries in that part of the world, Turkey would before long had been brought effectively within the German orbit.

This Bill illustrates a new line of departure; it is an act of foreign policy, and it is an act of financial and economic policy. In itself, provided it forms part of a clearly co-ordinated plan for restoring the sovereignty of the League and the forces of collective security, it is welcomed by hon. Members on this side. We have no confidence that it will be properly used in that connection by this Government, for they have let us down too often before; but we believe that it is, in itself, apart from the intention that may be in the mind of the Government, a wise Measure and that it might be one of the foundation stones of a new building which another Government, more loyal to the League, might build hereafter. Therefore, we shall not oppose the Second Reading.

4.42 p.m.

Mr. Boothby

I do not know whether the hon. Member for Bishop Auckland (Mr. Dalton), in his concluding sentences, was making an appeal to the Chancellor of the Exchequer to join the next Labour Government as Chancellor of the Exchequer if and when hon. Members opposite come into power, but in any case, I am sure that all hon. Members enjoyed his jovial speech, and are very glad that he has welcomed the agreement with Turkey. The hon. Member rather contradicted himself, because he started by complaining very bitterly about the lack of enterprise on the part of our traders and manufacturers in not having themselves built up, unaided, an international trade with Turkey and other countries. He said that before the War our traders would haves had enough enterprise to have concluded whatever arrangements were necessary for doing profitable trade with Turkey without appealing to the Government for help. In his concluding passage, however, the hon. Member pointed out that if the British Government did not show some form of activity in regard to trade with the countries of Central and Eastern Europe, we should very soon lose the whole of it to Germany.

Mr. Dalton

That is another illustration from another angle of the same thing—a lack of enterprise and confidence on the part of the people now engaged in our financial arrangements.

Mr. Boothby

I submit that under present conditions it is not possible for private manufacturers and traders in this country, without any support or assistance from the Government, to compete unaided against Field-Marshal Goering and the whole of the tremendous apparatus he has built up in Germany, with the whole resources, financial and economic, of the State marshalled behind him. I do not think it can be said that British traders are really lacking in enterprise if they cannot compete against those methods. I take Germany as one example, and it would not be in order for me to go into all the methods that are adopted there, but I endeavoured to outline them in the House in a recent Debate. I submit to the House that in present conditions, when there is so much economic control in Europe by the Governments of all countries—and I certainly do not exclude Russia—when there is also an international situation which, until quite recently, was extremely tense, and when there are still carried over from the crisis of 1931–33 a large number of commitments in respect of many European countries which are still frozen, it is very difficult indeed for any private organisation, however powerful, to break its way through and restart trade.

I, for my part, welcome the agreement warmly as I think the whole House does. At least, it reminds us that there is a good as well as a bad side to international affairs. During the last few months many of us have been inclined to think of the foreign situation solely in terms of bombs and guns and war, and other horrors of that kind. But there is a good side to international affairs. There is such a thing as international trade, upon which the industrial greatness and prosperity of this country was founded and built up, and it is a good thing that His Majesty's Government are taking this constructive step, which, I hope, may be the first of many to help us to regain our international trade.

Many people say nowadays that we ought to cut out Europe altogether and concentrate upon trading with our own Dominions and Colonies. They say that we ought not to risk our money in countries like Turkey and the other countries of Central and Eastern Europe. But we must not forget that there is a tremendous potential purchasing power in those countries, based upon their populations, if upon nothing else; and we cannot afford to ignore them. Turkey is a thickly populated country and there are other countries with populations just as great, whose lack of purchasing power is only temporary. Those countries are at the present time suffering from dire poverty, but if given a chance they could be made great consuming markets which might, in the long run, benefit not only this country but our Dominions as well.

I, therefore, venture to suggest that the Government will do good both to this country and to the Empire as a whole by concentrating some attention upon the great populations of Central and Eastern Europe. It is said in some journals which have been critical of this agreement that we shall only lose more of our capital by it, in the way that we have lost so much capital in the past. There are two sides to that argument. Although we have from time to time lost considerable amounts of capital by the investments which we have made abroad during the last 50 to 100 years—in South America for instance—we have reaped in profitable and thriving trade and industry far more value out of those investments than we have lost. We cannot hope to exist as the centre of a great Empire, or to sustain this enormous, largely artificial, population, unless we have a great international trade. I congratulate the Government upon having taken this step—as I have said I hope it will be the first of many—to open up trade in this most valuable part of the world.

One of the difficulties, as the hon. Member for Bishop Auckland pointed out, is that in order to "unfreeze" existing commitments, to pay interest upon such loans as they have received, and to pay for such goods, capital goods particularly, as they desire, these countries must be able to sell some of their goods in this country. It is to that problem, I think, that His Majesty's Government are now directing their attention; and it is very important, because, as long as you had the frozen commitment to which the hon. Gentleman referred in respect of Turkey, it was impossible for private manufacturers or anybody else to open up a profitable trade with Turkey. Exactly the same thing applies to-day, in the case of Poland and Rumania, where you have in rather different forms similar frozen situations which, by the judicious expenditure of not more than a few millions of pounds could be liquidated, thus opening up the way for the further extension of credits—medium-term credits from the Export Credits Guarantee Department—and for trade on a considerable scale.

There is one final observation I would make. However much you may arrange to purchase from these countries, however much you may extend your export credit guarantees, however much their Governments may be prepared to meet you, there remains one tremendous risk which will deter private traders and manufacturers in this country to a large extent unless it can be overcome. This is a purely political risk—the risk of a European war. If a European war comes, we shall all be more or less "done in" anyhow; and I suggest that the Governnment might consider the possibility of some method of guaranteeing manufacturers and traders in this country, under this agreement and similar agreements, against that risk of war which weighs so heavily on their minds at the present time. If they try to insure against it privately they will have to pay such large premiums that Turkey will have to pay a great deal more for the capital goods which she receives than would otherwise be the case.

It seems to me that no private organisation, no private insurance company, under existing conditions, can afford to run the risk of insuring on reasonable terms against the possibility of an outbreak of war in Europe. That, at least, is a risk which I think His Majesty's Government might well take, because, after all, it is up to them to avoid a European war. They know the risks much better than anybody else, and I believe if they were prepared to insure some of our traders and manufacturers against that risk, not even the hon. Member for Bishop Auckland would say that that was undue or indefensible support of private enterprise by the Government of this country. That kind of insurance represents just the kind of Government assistance to industry which would be most valuable at the present time. I would remind hon. Members once again that we are no longer living in those palmy pre-war days, when private traders and manufacturers could compete with each other on equal terms and let the best man win. We are up against some very formidable economic organisations to-day, and unless some effective support is given to them by the Government, I do not see how we can expect British traders to compete against the forces which confront them on the Continent of Europe.

4.53 p.m.

Sir Percy Harris

Twenty years ago if a proposal of this character were put before the House of Commons it would have been considered impossible. But the world is changing rapidly and ideas are being adapted to new circumstances. If a Bill of this kind had been presented to the House before the War or even a few years ago, it would have been regarded as a first-class Measure. The Bill establishes a precedent and, according to conventional ideas, a rather bad precedent. Encouraging a foreign country to purchase armaments in this country shocks our ordinary susceptibilities.

Mr. Boothby

Liberal susceptibilities.

Sir P. Harris

The susceptibilities of most of us, though perhaps not those of the hon. Member for East Aberdeen (Mr. Boothby). But, as I say, we have to face the world as we find it and at a time when every section of the House, and especially the Government, are speeding up our armaments, we have to look with favour on a country which is putting itself into a defensive state in order to co-operate with us and—if we must be realists let us put it frankly—keep up the balance of power in the Mediterranean. The hon. Member for Bishop Auckland (Mr. Dalton) was right in drawing certain lessons from the contents of the Bill, but as far as we are concerned we do not propose to place any obstacle in the way of its speedy passage through the House.

There are just one or two remarks which I desire to make upon it. The right hon. Gentleman the Chancellor of the Exchequer referred to three most interesting White Papers and in so far as they aim at stimulating trade, naturally, hon. Members on these benches view them with favour. We agree with the hon. Member for East Aberdeen that one thing which is needed to put the world in order is to stimulate and restore trade. When our rearmament programme is completed we must inevitably be faced with unemployment and economic pressure. We on these benches have constantly argued the need for taking a long view and of taking every step to stimulate our export trade in particular and reopen the channels of world trade. I suggest that these White Papers should not be isolated but should be made part of a concerted policy which will recognise the importance to this country of trade in Central Europe. The other day some hon. Members on this side were pointing towards the Balkans as an area which presented great potentialities for that trade which our manufacturers so badly need. I am glad to-day to find the hon. Member for East Aberdeen taking a wider view than some hon. Members opposite take, of the potential markets for our manufacturers and traders.

The idea that was being spread a year or two ago was that we should concentrate all our efforts on the Dominions and divorce ourselves from the Continent not only as regards international affairs but as regards trade. That obviously would be a thoroughly unsound and bad policy. This very remarkable document, the Anglo-Turkish Guarantee Agreement, aims at providing methods to enable Turkey to liquidate the debts which are to be incurred under this Bill. There is a very novel provision here. I think it is almost without precedent. We are setting up a company with a board of directors, one director to be appointed by the Eti Bank, one director to be appointed by the Department—I assume the Overseas Trade Department—and one director or such greater number of directors as may be agreed, to be appointed by the Bank and the Department jointly. That is of some interest and is a novelty.

A peculiar feature of the agreement is that it sets out certain commodities in which this new company is to trade. They are metals, mineral ores and concentrates, coal and—I hope the House will mark this—wheat, timber, raw cotton, fresh fruit and vegetables. That list of commodities is very significant. It suggests a departure from the narrow Ottawa policy. It is a recognition that Great Britain cannot depend solely on the Empire for the prosperity of its industries and manufactures, but has to look to new markets in order to keep up the great trade with which it has always been associated. For that reason only, the Bill has more than ordinary significance. It suggests a new alignment and a new recognition of this country's interests in Central Europe and the Continent generally not only as regards foreign policy but in relation to trade prosperity. I hope the Bill will go through all its stages without difficulty, and I think if hon. Members look behind its Clauses to the policy which it involves, they will recognise that it represents a great new departure, firstly in its acceptance of the principle of giving credits to a country for the purchase of armaments in this country, and, secondly, and more significant, in its recognition of our dependence for our prosperity on world trade.

5.0 p.m.

Major Sir Ralph Glyn

The Parliamentary Secretary of the Department of Overseas Trade and the Chancellor of the Exchequer must be very pleased at the reception of these proposals, and I think the House should congratulate those who have been responsible for facing realities. One is delighted to think also, after the speech of the hon. Member who spoke from the Front Bench opposite, that those in Turkey who have laboured so long for friendship with this country will feel that we are united and party differences are dropped, and that the one thing we wish is to see the old-established trade and association with the Turks the settled policy of this country once again. In passing I would like to mention that the hon. Gentleman who spoke from the Front Bench opposite rather complained about the lack of enterprise on the part of British merchants in trading with Turkey. I remember I was in Stamboul not very long after the War when the edict came out that no more tarbooshes should be worn by Turkish subjects. There were three British naval officers who had given up the Navy and assumed the bowler hat and were looking round for some trade, and they telegraphed to England and had sent out tons of felt hats. These they sold at very remunerative prices, because none of the porters was allowed to appear the following day unless he had a European hat, and the shops in Constantinople were entirely unable to meet the demand. That was an example of British enterprise which I think was respected by the Turks, who much preferred to pay an ex-British naval officer a good percentage on the hats they had to buy rather than be forced to buy them from the nationals of some other country.

There is another thing that we should never forget. What a vast difference it would have made had the Dardanelles been open to the Allies throughout the War. One of the reasons why they were not open was the short-sighted policy of the Government at that time in seizing two battleships which were building here; if they had not done that those battleships would probably have been used by the Turks as our Allies in the last War. That is a matter of speculation. But I am perfectly sure that under the new regime in Turkey we can look forward to a stable form of government in the hands of men who look to this country once again to set the example of honest dealing and honest trading, because those who have dealt commercially with Turkey have never found them, any more than they have found Chinese, dishonest in their methods. They understand us, and we understand them. And this Measure has come only just in time. It is not only Field-Marshal Goring, as the hon. Member for East Aberdeen (Mr. Boothby) mentioned, it is Dr. Schacht who has been a considerable factor in bringing trade to Germany, both in the Balkans and in Turkey, and it is absolutely essential that the Government should take a hand and provide a sort of umbrella over British traders, so that they may carry out their business effectively.

There is one other matter to which I would like to draw the attention of the Secretary of the Department of Overseas Trade. We all recognise that this scheme is bound to take a little time, and I want to refer to the system of blocked credits and the clearance scheme. As the Chancellor of the Exchequer stated just now, there is no less than £1,500,000 of blocked credits at the present time, and it would be very interesting to know whether any scheme can be devised whereby those could be liquidated. The tendency, I am afraid, will be to block those credits all the more until the periods of the contracts are fixed up. There are only two ways in which restrictions of clearances can be removed. One is by increasing the exports of Turkish produce to this country, and hence I imagine that the Committee mentioned by the hon. Baronet opposite, the Member for South-West Bethnal Green (Sir P. Harris) has been set up in order to expedite those sales. The other is by giving assistance to shippers here, British exporters, who otherwise would be shipping goods out to the importing districts of Turkey only to find that those goods would be held by the Customs indefinitely until the clearing block is raised. I think it is essential that the exporters here, before goods are shipped, should have some organisation through which they can learn what is the state of congestion in the Turkish Customs, in order that those goods shall not be shipped and suffer demurrage and loss.

Mr. Boothby

Is it not a fact that the provisions of these three agreements in themselves will automatically remove the present clearing arrangements?

Sir R. Glyn

That was not mentioned by the Chancellor of the Exchequer.

Mr. R. S. Hudson (Secretary, Overseas Trade Department)

That is a separate matter which comes up on the next Order—the clearing Order—and I propose then to go into the matter.

Sir R. Glyn

That is all right so long as it is explained, because nothing does the trade of the country so much harm as when Turkish firms order British goods and there is an inability to receive them. It is absolutely essential that a clear statement should be made to-day showing that there will be no further difficulty, and that this block of £1,500,000 will be liquidated.

The last point I wish to mention is this. It may be, and perhaps it is, a good thing that all the effort of introducing a special Bill on each occasion should be continued as a normal practice, remembering that under the Export Credit Facilities Acts armaments are not allowed to come within the purview of those Acts. But I do feel that the times are now tremendously changed since the first of those Acts was passed. At that time we all hoped that disarmament would be the general practice of the world, but to-day we cannot hope that there will be any very immediate reduction of armaments. Surely it is a matter of prime importance that British manufacturers, under full Government control—I think that is essential—should have equal chances with those of other countries, notably Germany, in order that the countries of the Balkans and the Middle and Far East should at any rate be able to order their supplies from this country without any difficulty.

Unless there is some amendment of these Acts it will always be necessary, I take it, to introduce legislation of this character, and it might be worth while to ponder on the advisability of amending the Export Credit Facilities Acts with every intention of keeping control and preventing any abuse of that power. Those who have recently visited the Danube or Turkey or the Far East report that the restrictions placed upon our great industries, both for the supply of ships and other prime articles that are useful in time of war, have placed an immense amount of trade in the hands of those who would be very glad indeed to see peaceful penetration lead to something more active. There is nothing more useful to an invading army than to enter into a country and find that all the armaments of that country are of their own manufacture and can be turned round very rapidly and used against the very people who have bought them from them. That is a matter not of party politics; it is a matter that affects foreign affairs. I am quite sure that the condition of the world to-day is such that if those countries who arm, not for aggression but for the maintenance of peace, are prevented from acting as allies and friends of those who have the same objects, we are doing the cause of peace not much good, but a great deal of harm.

5.10 p.m.

Mr. Arthur Henderson

I hope that His Majesty's Government, if they listened to the appeal of the hon. Baronet the Member for Abingdon (Sir R. Glyn), who has just spoken, will at any rate consider very seriously before they agree to our country becoming a free supplier of armaments to the rest of the world. It may be that in special cases a country which has proved its loyalty to the League, as Turkey has, a case may be made out for entering into such an agreement as the House is discussing this afternoon. But is it not a tragic commentary on the present international situation that we should be discussing such an agreement to-day? Not so many years ago it would have been inconceivable that the British House of Commons would be called upon to sanction agreement granting a loan to another country for the purpose of purchasing armaments. But whether we like it or not, we have to face the present international situation. His Majesty's Government, I think, have to bear a large share of the responsibility for the present international situation. But that does not help. We have to realise that there are powerful countries which, in complete disregard of their treaty obligations, are carrying on policies of aggression against countries weaker than themselves. We have in fact, whether we like it or not, returned to the system of power politics, with its doctrine that might is right and that a nation which is powerful enough to enforce its will upon another nation will seek to do so, especially in some parts of the world.

I welcome this agrement only because it seeks to help Turkey, a nation which has remained loyal to the League during recent years. After all, there is no use in deluding ourselves: Germany at the present time is seeking to carry out a policy of expansion towards the East, not only in the Danubian area but also in the Balkan area, to which Turkey itself belongs. We had an example of that following the Montreux Conference. After Turkey had decided to re-fortify the Dardanelles Messrs. Krupp, the great German armament firm, tendered for the work at a very very low price, and Turkey was, I think, fully entitled to accept that extremely low tender. In fact, Turkey accepted a much higher tender put in by a British firm. I believe that the explanation is, not that Turkey was anxious to do a favour to a British firm, but because of the political repercussions of this aspect of German policy. We know that throughout the Danubian countries and the Balkan countries Germany has to-day secured between 40 and 50 per cent. of their total trade, and I suggest that such a high percentage could not be justified on any economic, commercial or financial grounds. Germany has attempted to carry out her economic policy not only with regard to Turkey, but with regard to the other Balkan States and the States of the Danubian area, by seeking to grant them long term credits. I believe that it is on record that offers have been made to all those countries, including Turkey, to grant them credit extending up to two years. Reference has also been made to the supply of armaments by Germany to these countries. The hon. Baronet the Member for Abingdon, who made the reference, did not tell the House that the armaments which have been supplied by Germany are almost entirely second-hand.

Therefore, it seems to me that we have to make a choice. We can take the point of view of the isolationist school and say that what takes place in Turkey or anywhere else is no concern of ours, and that if Germany is allowed to extend her influence in Eastern Europe it will cause her to leave Western Europe alone. I believe that to be a dangerous and shortsighted point of view. On the other hand, we may take the line, which I think is exemplified by the agreements we are discussing, and seek to assist the Danubian and Balkan countries to maintain their economic independence. I hope, therefore, that it will be possible for His Majesty's Government to extend the policy which is exemplified by this agreement to the other countries in that part of Europe, and that it will be possible for them to grant some form of economic assistance, not only by credits, but by the direct Government purchase of their products. Hungary, for example, is well able to supply large quantities of wheat. At present 75 per cent. of her supply goes to Germany, and it has become a matter of common knowledge that, in spite of her desires, she is becoming drawn within the German economic and political orbit.

Cannot His Majesty's Government take a leaf out of the book of the Germans by sending prominent Members of the Government to visit these countries? We have the example of Dr. Schacht, who paid visits to the Danubian countries and the Balkan countries, and I am not sure whether he did not get as far as Turkey. He had his pockets full of unsigned contracts and when he returned to Berlin they had been completed. I suggest to His Majesty's Government that they might well follow the example of the Germans and make some attempt to stabilise economic conditions in that part of the world. I believe that not only is that necessary in Turkey and in the other Central European and Danubian States, but we have to give some demonstration that this country is interested in the problems of that part of Europe. The fate not only of Turkey, but of Greece, Hungary, Czechoslovakia, Rumania and Yugoslavia will depend on the degree of collaboration between those countries and the Western Powers, including our own country. It is not because we desire to isolate Germany that we seek to strengthen the economic independence of those smaller countries. It would be the finest thing that could be done by the great Powers of Europe—Germany, Italy, France, Russia and this country—if they could come together and by agreement seek to give a measure of economic assistance to those small countries by a reduction of customs duties, by the provision of alternative markets for their products, so as to enable them to maintain their economic independence, whether in respect of Germany or of any other single Power.

I therefore, to that extent, welcome this agreement, because I believe it will strengthen the ability and power of Turkey to resist the economic penetration of any single Power. It is not that this country desires to restrict the legitimate trading activities of Germany; it is merely because we believe we are far more likely to stabilise world peace if all the nations of Europe, great and small, are able to retain their independence and their national economy and not become pawns in a game of international economic policies. For these reasons we on this side of the Committee will not, I hope, vote against the agreement.

5.21 p.m.

Captain Alan Graham

I should like to congratulate the Government sincerely on the conclusion of this agreement. Not only does it revive and consolidate that old friendship with Turkey which somehow has always seemed spontaneously natural, but it is undoubtedly an important contribution to the stabilisation of the whole position in the Near East. It does not strike me as being essentially a new departure, least of all as a departure from the policy laid down at the Ottawa Conference, as suggested by the hon. Baronet the Member for South-West Bethnal Green (Sir P. Harris). As one who took a very humble and minor part in that conference I should like to point out to him that the basic idea of the Ottawa Conference was not to ignore or to throw over trade with foreign nations, but simply to find one certain point of economic refuge for what trade there was still to be found in a world where world trade was foundering in an economic whirlpool. That point of refuge was provided by our Empire.

Turning, however, to this Anglo-Turkish Agreement, the question whether or not we are to obtain the fullest possible advantage from it will depend largely on the action of the Board of Trade. The conclusion of the agreement will increase the available carrying trade between the Near East and Britain. Other nations more favoured by geography in that connection, such as Greece and Italy, have been in the past very much quicker to take economic advantage of any changes that have been created by political acts in Europe than we have. Perhaps the most glaring example was the expulsion of the Jews from Central Europe by Herr Hitler, which has benefited to an enormous extent the carrying trade of the Lloyd-Triestino Line. Anyone travelling by that route to the Near East cannot fail to notice ships filled to the utmost capacity with Jews travelling from Trieste to Palestine, and Jewish traders coming back from Palestine in them with their trade. The Lloyd-Triestino Line was very quick to take advantage of that position. Our own Board of Trade needs, in view of the world position of our trade, to be equally quick to assist our shipping lines to compete with other lines more favoured both by their own Governments and by geographical contiguity to these points of trade.

Last year the Greek Government were eager to deliver themselves from the position of economic helotry to Germany to which they found themselves bound. If we were to take the whole Greek tobacco crop, which would amount to only 2 per cent. of the consumption of tobacco in this country, we should not only deliver Greece from that condition of economic dependence, but would insure Greece taking a much larger proportion of goods from this country than is the case at present. The Board of Trade, for some reason as yet unexplained, did not bring the necessary pressure to bear or give what assistance it might, towards achieving that valuable and important end which I have good reason to know was intensely desired by the Greek Government. Therefore, I suggest that it is very much the concern of the Board of Trade that we should not lose in that way the valuable fruits to our carrying trade that should properly accrue to this country on the conclusion of this present agreement. We all know how the spread of political ideas and the ideals of our own civilisation are bound up with an increase of trade.

The new Turkey seems to have turned its newer gaze very far away and definitely away from Asia, and while territorially consolidating itself much more in Asia than in Europe, it seems, as regards its ideas, to be turning almost entirely westward and not eastwards as before. It is far more open than ever before to permeation by the highest ideals of Western civilisation. This is a moment in which to press forward those ideals about which we care through the British Council and other vehicles for the spread of those ideals to which we attach so much importance. So that not merely on economic grounds alone, but on political grounds, and still more on grounds of strengthening those forces on which we believe the future progress of the world depends, we welcome the conclusion of this agreement.

5.28 p.m.

Mr. Bellenger

I hate to disturb the harmony of the proceedings which has been manifest in all parts of the House, but I wish to offer a few critical observations on this Bill. I suppose that it is part of the duty of the Opposition to offer constructive criticism, even though Government Bills bear on the face of them the hall-mark of righteousness. My hon. Friend the Member for Kingswinford (Mr. A. Henderson) in lauding the travels of the Governor of the Reichsbank, made a suggestion that we should emulate that example. Perhaps he had in mind sending our own Chancellor of the Exchequer, or perhaps the Governor of the Bank of England. If the suggestion extends to the Chancellor I should find myself in considerable disagreement with my hon. Friend because I seem to recollect that the Chancellor is more happy on home ground than on foreign territory. The House ought to observe that the hon. Baronet the Member for Abingdon (Sir R. Glyn) said the initiative and the energy that have been displayed by Germany in exerting pressure by economic efforts on other countries are probably more due to the powers of Dr. Schacht than to those of Field Marshal Goering. Dr. Schacht's abilities are, if I may say so, knowing some little about them, very potent from a financial and economic point of view.

The hon. Member for East Aberdeen (Mr. Boothby), in paying his tribute to this Bill, rather indicated that this £6,000,000 was, as it were, a traveller's sample, that it would result in opening up to this country a large amount of Turkish trade and that we should be almost inundated with repeat orders from Turkey. I have some doubt about the reliability of that forecast. In my opinion—and it is only my opinion, although one hon. Member said it was shared by certain financial organs—this £6,000,000 which will be used to finance the supply of munitions to Turkey will be largely in the nature of a subsidy to Turkey. I can quite understand the expediency of helping Turkey with her armaments, or rearmament, if that is part of the Government's settled foreign policy, but do not let us be under any illusion, because if we examine this agreement critically from a financial and economic point of view I do not think all those benefits will flow from it which have been predicted by certain hon. Members. In that respect I should have welcomed a little more enlightenment from the Chancellor.

The hon. Baronet the Member for Abingdon threw out a suggestion, which is a serious one, though I do not know whether it will meet with the Chancellor's approval, that the Export Credits Act should be revised and extended in order that monies advanced under that Act could be utilised for the purpose of supplying munitions to foreign Powers. The House knows very well, Germany's policy of providing armaments for certain other countries, but if we ever do extend the principle, which we are adopting this afternoon, of utilising British taxpayer's money for the financing of large shipments of arms and munitions to foreign Powers, the result will not be for the benefit of British trade in the end but will lead to the disintegration of British trade, because those armaments can be used for only one purpose eventually, and that is war, which all are agreed is the last thing we want.

I was pleased to hear the Chancellor say that the friendship between the United Kingdom and Turkey is firmly based. I wonder on what instrument that friendship is based. Is it based upon any treaty with this country, or is it based on that wide instrument the Covenant of the League of Nations, because my hon. Friend the Member for Bishop Auckland (Mr. Dalton), in saying this afternoon that we on this side would not oppose this Bill, did it on the specific ground that Turkey was, and presumably is, a loyal member of the League of Nations, and therefore we could support this Bill because it was providing munitions to another loyal member of the League. As to the Chancellor's remarks about the internal position of Turkey and her balanced Budgets, perhaps I may be allowed to make a few observations on those points presently.

We shall all agree to a certain extent upon the expediency of the Bill introduced this afternoon. The effect of the Bill will be that we shall enter into competition with Germany in order that we may be able to ensure that Turkey will be our ally in the Eastern Mediterranean when the next conflict comes. I think it is purely on those grounds that we are asked to support this Bill this afternoon. The remarks about £10,000,000 credit being advanced under the Export Credits Act opening up large areas of trade to this country I rather doubt, and I shall have a few figures to give to show that we cannot expect to export large quantities of goods other than munitions. I was pleased to hear the Chancellor say that this export of munitions will not interfere with our own rearmament programme, and I should have liked him to indicate the type of munitions which will be exported, because hon. Members in all parts of the House have expressed some concern as to the state of our own rearmaments, and if we are to export weapons like antiaircraft guns we should feel a little more concerned about giving approval to this Bill. Obviously we do not want to know all the individual things that will be exported, but I certainly think the Government should give some indication of the type of munitions, and whether they will include aeroplanes.

To come to the financial position of the Bill, I should like to ask whether this £6,000,000 which is to come out of the Consolidated Fund, will necessitate any new issue or how the money will be provided with which to finance these munitions, and whether it will all be expended in this financial year or over a longer period?

Sir J. Simon

If the hon. Member looks at Clause 2 of the Bill he will see how the borrowing will be authorised.

Mr. Bellenger

I understand that it is to be raised under an Act of 1919, but will that necessitate any loan being floated in addition to the Government's own measures of taxation introduced this year, and their Defence Loans?

Sir J. Simon

No. Under that Act we already have authority to raise the money by loan, and the effect of Clause 2 is to say that the exercise of authority under that Act to raise money by loan shall extend to this purpose, so there will not be any special issue.

Mr. Bellenger

So I understand that although it is not contemplated that there will be any special issue this £6,000,000 will form part of some issue or other for purposes other than this particular purpose. When I come to examine the rate of interest, which at present is 1 per cent. above bank rate, that is 3 per cent., and I understand is to last for the next five years, I am inclined to criticise the interest. It may sound something of a paradox that an hon. Member on this side should criticise interest rates as being too low, but we have to deal with the facts as we find them under the capitalist system, and I suggest that 3 per cent. interest for the next five years on the money to be advanced to Turkey is rather a low rate of interest. The Government's recent £80,000,000 Defence Loan was a 3 per cent. loan, issued at 98 and repayable at par in 1958. There was one feature of that loan which is, perhaps, novel in view of the terms of this loan, and that is that interest was to be paid to the subscribers immediately and during the whole of the currency of the Defence Loan, but in this case we are asked to lend this money at 3 per cent. nominal interest and the interest is not to be collected till 14 years hence.

I have heard that the reason why we shall not start earlier to get our interest on or to redeem this loan of £6,000,000 is that there will be a prior loan of £10,000,000 to be used for exports under the Export Credits Act. That seems to be putting the cart somewhat before the horse, because the goods which will be exported under that £10,000,000 loan will be of more substantial value than the munitions which we are to export under the loan to be raised by this Bill. The munitions which will be exported will have no value whatever, certainly not after 14 years, when Turkey starts redeeming the loan. I suggest that this loan and the £10,000,000 loan will result in the bolstering up of Turkey's exports, perhaps to the disadvantage of British exports. The Chancellor referred to the trade position of Turkey and to her budgetary position. One hon. Member asked how the £1,000,000 odd now frozen in Turkey was to be thawed. I have seen the view expressed that those frozen assets in Turkey will be thawed by those who own those assets being enabled to buy Turkish goods, to export them and to sell them abroad, and to realise the proceeds for the purpose of unblocking their own frozen assets in Turkey.

When we come to the trade position of Turkey, hon. Members opposite, who number bankers among them, will know that bankers, even when they lend to their most favoured customers, generally want some form of security. What is the security that Turkey is offering for this £6,000,000 for armaments? It may interest the House to know that 40 per cent. of Turkey's exports consist of tobacco. There has been a considerable increase in the exports of tobacco in the last year, the rise being from £T20,000,000 to £T41,000,000. The Chancellor mentioned something about the development of Turkey's mineral resources, and I wish he could have given a few figures as to how they have been developed to show what security there will be for the British taxpayer's money. Other main staples of Turkish production with two exceptions have decreased considerably during the last year, and the export surplus dropped from 15½ million Turkish pounds in the first two months of last year to nearly 2,000,000 Turkish pounds in the first two months this year. It would seem therefore, that Turkey's favourable trade balance is depreciating very considerably.

Next I have one or two questions to ask on the Anglo-Turkish Comptoir Limited and the Anglo-Turkish Commodities Limited. We understand that these companies are to operate the export and financing of munitions under the Bill. I should like the Chancellor of the Exchequer to explain to us a little more carefully what will be the exact position of these two companies. I understand that there will be Government directors, or at any rate directors subject to Government control, on the boards of both the companies, and I should like to ask the right hon. Gentleman whether it will be in order later on to question him in the House of Commons as to the activities of the two companies.

We appear to have reverted to a somewhat pre-war position. It is not a question of supplying our future allies with munitions for League of Nations purposes; we are now engaged in selecting certain allies, either in Central Europe or farther afield, as under the old system known as the balance of power. What we are trying to do at the present time is to encircle Germany economically by such methods as this. I am not going to say that Germany has not been responsible to a certain extent for the methods that we are adopting, but the methods are not conducive to peace, certainly not from the long point of view. So far as the old balance of power model goes they may have some deterrent effect upon Germany, and, if they do, that is all to the good, but I am not one of those who believe that the policy which we are pursuing is the right one in the long run. We have to pursue an entirely different policy. Although my hon. Friend has stated that we do not intend to oppose the Government on this occasion, I do not agree that the policy which the Government are adopting in the Bill and which has been advocated this afternoon will be conducive to long-term peace.

5.47 p.m.

Mr. G. Nicholson

I very much regret the tone and the content of the speech to which we have just listened. I noticed the same tone, although more judiciously expressed, in the speech of the hon. Member for Kingswinford (Mr. A. Henderson). I am certain that I shall have the Government with me in saying that the purport and the purpose of the agreement are economic and not political. It seems to me that the Opposition are obsessed with politics and with the idea that the basis of the action of the British Government must always be part of an anti-Fascist and, in particular, an anti-German struggle. I cannot imagine anything more inaccurate, more injudicious and more unnecessary than to interpret every economic activity of the Government as part of an anti-German encirclement policy. Besides being far from the truth, such an interpretation must do a great amount of harm on the Continent. I am sorry to speak so strongly about the matter, but it seems to me absolutely deplorable that such speeches should be made.

Mr. A. Henderson

Does the hon. Gentleman say that any part of my speech was directed to the point that this agreement demonstrated a desire to encircle Germany?

Mr. Nicholson

I did not take down the hon. Gentleman's speech, but I think it is within the recollection of the House that he took that line, and I think the hon. Gentleman will find it in the OFFICIAL REPORT. I admit that I thought at the time that he was unaware of the tendency of his remarks, but I think he will see that the trend of them was that this agreement was part of an anti-German policy.

Mr. Henderson

Will the hon. Gentleman tell me what I said?

Mr. Nicholson

I regret that I did not take down every word of those remarks, but I am within the recollection of hon. Members of this House——

Sir John Withers

Hear, hear——

Mr. Nicholson

One hon. Member, at any rate, agrees with me. The hon. Member who spoke last asked whether the understanding between England and Turkey was based upon support for the League of Nations or upon any Treaty instrument; surely every form of good understanding between countries must be based upon a community of interests. It is in this case. This agreement is based upon the fulfilling of our reciprocal needs. I regard it primarily as an economic agreement, and the Turkish Government so regards it also. We have something that they want and they have orders which will go a long way in relieving unemployment in this country. I congratulate my right hon. Friend from the bottom of my heart upon the Bill. It is a good Bill. Incidentally, somebody ought to extend those congratulations to the respective Ambassadors, the Turkish Ambassador in this country, and our own Ambassador in Angora.

However, I did not rise in order to add to the stream of benevolent platitudes that have flowed round the right hon. Gentleman this afternoon, but to express the opinion that the time is ripe for a great movement forward, so far as we are concerned, in the Balkans, and not only by this method of guaranteeing credits to the Governments of certain countries. I have reason to believe that a great volume of opinion in Balkan countries is in favour of wide, active, British participation in the industries of those countries. My hon. Friend the Member for East Aberdeen (Mr. Boothby) stressed the point that the introduction of a Bill like this was not proof that British commercial enterprise was less ambitious than in the past; that is true, but it is proof that British commercial enterprise is hampered by the political instability of the present time. If we are to reap full benefit of the pro-British feeling which is common in so many Balkan countries there will have to be active help from the Government. I hope that one of the results of the harmony displayed in today's Debate will be that the Chancellor of the Exchequer will not lose sight of this aspect of our economic policy.

The feeling in Balkan countries is partly genuine pro-British feeling and partly fear of other countries; but most of all, it is a tribute to the stable conditions which obtain in London. I think that many Balkan industries and industrialists are anxious to place some of their funds in this country and are anxious to get Britain interested in those industries, not only because they hope, I suppose, that active British participation will give them some form of protection in the event of political disturbances, but because they have been thinking that British participation will be of value to them from the point of view of the stability of their funds and of their businesses. It will be easy for the right hon. Gentleman to find out whether I am right in saying that there is a great volume of opinion of that kind in the Balkans. If he will make inquiries through diplomatic and commercial channels he will find that that is the case, and if he does so, I most earnestly beg him to look upon the Bill as only a first step in the right direction, and to remember that there are other ways in which the trade of the Balkan countries can be encouraged besides the way of direct loan to the Balkan Governments.

5.56 p.m.

Mr. T. Johnston

I am sure that I am expressing a feeling of regret which is experienced by many hon. Members that the hon. Member for the Oxford University (Sir A. Salter) has not seen fit to take part in this Debate. He has spent a long time at the League of Nations, and as a result of his experiences in dealing with foreign loans and lending he wrote a remarkable book. I am sure that the hon. Member who has just addressed the House has never read that book. It is a book entitled "Recovery."

Mr. Nicholson

Of course I have read it. I remember an interesting passage was that what Europe needed most was more gentlemen like Mr. Kreuger.

Mr. Johnston

A strong point made by the hon. Member for Oxford University in that book was that practically every penny has been lost of all foreign lending to Governments for the two years 1927–28—I speak from memory—that had not been recommended and backed by the League of Nations. He recommended, and I thought it was a very wise recommendation, that future lending of this kind should take place only if it had the backing of the League of Nations. We are now out of those conditions, and are back in the era of power politics. My hon. Friend who spoke a moment or two ago was right in saying that we were lending credit to this particular country, not because it is a loyal member of the League of Nations, but because it is within our orbit at the present moment, and we hope that these munitions will be used not against us but on our side. If that prediction is to be fulfilled the results will be rather different from what happened in the last War. On 3rd December, 1913, the "Times" carried the following paragraph: A contract was signed to-day with the Armstrong-Vickers group for the reorganisation of the Turkish Naval dockyards. The Government hands over to the Armstrong-Vickers group the arsenal and the docks on the Golden Horn, with all the existing machinery and buildings. It likewise provides for a naval base at Ismid. The English group finds the capital for the exploitation of the works, and supplies the technical knowledge and control essential to the success of the undertaking. That was in 1913. Whatever we provided then and in the early part of 1914 was, singularly enough, not used to defend us or to assist the Allied cause a few months later, but was used to blow to blazes and smithereens forces from Australia, New Zealand and this country.

I hope that the convictions and expectations expressed this afternoon will have a more fortunate outcome so far as this country is concerned than upon the last occasion, when English financiers, moneylenders, guarantors of loans and English munitions exporters, engaged in an adventure in Turkey. When the hon. Gentleman and his Friends are speaking of matters of this kind I beg them not to be so exact in their estimates of their own invulnerability. When my hon. Friend said that this was another adventure in power politics and that we were arming the Turkish Government because we hoped that the Turks and their armaments would be on our side in the next war, he was just as historically right as the hon. Gentleman who sought to chastise him was historically wrong.

Mr. G. Nicholson

I am sorry to interrupt the right hon. Gentleman. Of course I was not objecting to any remark like that. If we arm other people, naturally we hope that the arms will not be used against us. What I was speaking about was the tendency—I said it was almost an obsession—on the part of the Opposi- tion to believe that the sole function of British policy is to play a part in the anti-Fascist struggle. In speeches from the other side the Bill has been represented as an attempt to counterbalance German activity in the Near East and in Europe. Such suggestions are injudicious and inaccurate. I do not think that is the basis of British policy. That interpretation can be placed upon it, but it is wrong to do so.

Mr. Johnston

I must leave the facts to speak for themselves. In effect, His Majesty's Government are providing Turkey with £6,000,000 for armaments, and they are doing that because they believe it to be in the interest of this nation that those armaments should be provided for Turkey and not for Germany. We have lent money to Germany and Austria before, and one reading of the crisis of 1931 was that the lending of money to Austria aggravated and intensified the position and brought about the financial explosion. I do not wish to say any more about armaments except to point out that the hon. Member who spoke about Greece and Turkey—I am sorry he is not here at the moment—omitted to tell the interesting story of how we sought to sell dreadnoughts to Turkey and Greece, how Turkey had to raise the money for her dreadnoughts by public subscription, how they were built in this country, and how, because they were not paid for, we took them back. The same commercial traveller went to Greece and said, "You see that Turkey is buying dreadnoughts; you had better buy some too"; and Greece also bought some. The hon. Member, in giving us his impression of recent historical events in connection with Greece and Turkey, might have remembered that incident.

We have decided that we shall not oppose this Measure in the Division Lobby. Some of us have made that decision with a very heavy heart. But the argument is that Turkey is in the League, and that, therefore, for what it is worth, this is a League act, it is a step in collective security for what it is worth. It may be. I have some reason to believe that it is not quite so true as it would have been if the loan had been made after it had been approved by a committee of the League of Nations. That is not the case. This is a direct loan from manufacturers in this country; some big firms in this country have got the British Government to O.K. their loan. In my view there is very little League of Nations endorsement on this loan, and I feel that we shall be lucky if some of these munitions are not in turn used against us, as was the case with the former loan for the rearmament of Turkey.

Mr. Harold Nicolson

The agreement in December, 1913, was not for munitions, but for a graving dock, and it is most unfair and ungenerous to say that actual munitions were ever delivered and were ever used against our people at that time. If the contract had been proceeded with, that might have been the case, but it is unfair to make the suggestion now.

Mr. Johnston

I know that Armstrong-Vickers——

Mr. Nicolson

They built the graving dock.

Mr. Johnston

They were building an arsenal. I can understand hon. Members in any part of the House who say that we ought to stand by the League of Nations alone and provide no armaments for any other Powers; and I can also understand hon. Members opposite who say they do not care two hoots for the League of Nations, they are going to arm Turkey. But let there be no hypocrisy about it. An attempt has been made this afternoon to convey the impression that we are arming Turkey purely for commercial reasons, and not for any political reasons connected with the growing power of Fascism in Europe, but that is not my view.

Mr. Boothby

It is the Opposition who have talked about the League of Nations; we have not talked about the League of Nations.

Mr. Johnston

That is my complaint—that hon. Members opposite have not talked about the League of Nations, that the whole thing is divorced from the League of Nations.

Mr. Boothby

Hear, hear!

Mr. Johnston

The hon. Member now says, "Hear, hear." I beg of him to have his quarrel with the hon. Member who sits below him. I think we ought to have from the Government—we have not got it from the Council of Foreign Bondholders in this connection—a full and clear statement as to whether there are any outstanding loans due by Turkey to this country. For my part, I am for spending whatever credits we have in order, first, to develop the buying power of people in this land, before they are spent on munitions of war abroad, and at any rate I think we ought to know whether there are any previous loans unmet, dishonoured, owed by Turkey to this country. I am not saying that that would necessarily be a mark against Turkey, when we remember the extraordinary methods of British railway financiers in getting the poor Turks to enter into contracts at so much per mile, and then running the railways zig-zag in order to make a big mileage.

Mr. H. Nicolson

It was German financiers who did that.

Mr. Johnston

I am not going to abandon that statement for one second. I can refer the hon. Member to exact proof, in the Library of this House, of my statement that British railway corporations got contracts in pre-war Turkey to build railways at so much per kilometre or mile, and, instead of running the railway direct from one point to another, ran it zig-zag in order to get a bigger payment under the contract. Those railways have never paid, and never will pay. Men like Mr. H. N. Brailsford and others have written books on the subject, and the facts have never been disputed to this moment, nor are they disputed now.

There was lent to Germany in the years 1927 and 1928 2,000,000,000 dollars from America and this country, or £400,000,000. That was five times the total amount which they were called upon to pay as reparations, and which they did not pay. Who were the brainy people who did this kind of thing? Not the representatives of the Opposition, but the financier class who rule and dominate this country. For my part, I am not happy at all about any Measure promoted by this or any other Government which, with a minimum of explanation, hands over to foreign countries credits for the purposes of munitions of war. It may be that there is a reason for it embedded in anti-German politics; it may be that this is our only method of putting up a struggle against Fascism in Europe. But, in a land where we have not sufficient credits to build houses for our people, to drain our swamps, to cleanse our rivers, to purify our atmosphere, I think that there is only one explanation for granting to a foreign country this credit for munitions of war, and that it is a political explanation which hon. Gentlemen opposite are not too happy to avow.

6.11 p.m.

Sir Walter Smiles

I promised to speak for five minutes only, and I hope that hon. Members opposite will not say that I have been a hypocrite for that length of time. During the week-end I have discussed this question of loans to Turkey with many people, and I have been blamed, as other Members of Parliament have been blamed, for the loan which we made to Austria, a great part of which we shall probably never see again. But, at the time when we made the loan to Austria, I took the responsibility, with other Members of the House, either of voting for or of voting against the Measure; I voted for it and have my responsibility for the result. If the Opposition Members abstained from voting to-day, they will go down to history as having been in favour of this loan to Turkey just as much as I, who have every intention, if it goes to a Division, of voting for it. Friends have pointed to me the amount of money which British financiers have lent, have wasted, have lost in every corner of the world. If it were returned, I suppose there would be no National Debt in this country, and it would probably be the greatest possible embarrassment to us—just as much an embarrassment as it would be to America if we started paying off the American War Debt now. At any rate, I feel that we are lending this money with the object of getting an ally in the Near East, and it is for that reason, not being a hypocrite, that I support this loan.

Speeches have been made about the encirclement of Germany, but nobody talks about the encirclement of our Near East ally—the encirclement of France. I consider that at the present moment France is in far more danger of encirclement than Germany is. [Interruption.] I am giving my own opinion, and we on this side have just as much right to be nervous for our friends as anyone else in the House has. The right hon. Gentleman the Member for West Stirling (Mr. Johnston) spoke about a well-known book written by the hon. Member for Oxford University (Sir A. Salter). But at times books which are worth reading have been written by people who are not Members of this House. One of them, published within the last few months, is "Insanity Fair." I suggest that, but for some of the facts mentioned in that book, this loan of £6,000,000 would not be being made to Turkey to-day, and, after all, it is only the price of one day of modern war. The right hon. Gentleman mentioned Vickers-Armstrong, and the contract they made with Turkey in December, 1913. That was only some seven months before war broke out, and Vickers-Armstrong could not have done a great deal of work under that contract. I am quite prepared to admit, however, that in the last War large quantities of munitions and many guns manufactured in this country were used against us and shot down British soldiers; and it does not make very much difference afterwards whether the projectile that killed a man was of foreign or British manufacture. It is to be hoped that our diplomacy in preventing war in the future is going to be better than our diplomacy was in 1913.

Other books have been written pointing out, that, if we had used a little intelligence and tact, we might have had Bulgaria and Turkey on our side instead of against us.

I think it is a very wise plan to try to make friends with Turkey at this moment. I assume that our Foreign Office know exactly what Turkey wants, because, after all, Turkey lost a great deal of territory by Bagdad and in Palestine and Syria at the end of the last War, and I am hoping that they are not going to make claims, as Germany is doing at this moment, once they get our munitions, for the return of those territories. In that case our last state would be worse than the first; but, realising all the facts and dangers of these munitions, which might be used against us, one reason why we should have Turkey as our friend is we want nothing from Turkey: we do not want one inch of her territory; and, seeing that we have this honest intention, it is a good thing to lend money to our friends, both in order that they might defend themselves and for the encouragement of trade with this country. If it comes to a Division, I shall take my full responsibility in going into the Lobby in support of the Government.

6.17 p.m.

Miss Ward

I shall be very brief indeed, but I should be less than human if I did not seize this opportunity to intervene in the Debate. If I recollect correctly, we on the North-East Coast have been since 1933 trying, within our limited powers, to press the Government to adopt the very line they have now embodied in this new agreement. If I may, without impertinence, express this view, may I say that if we had had an agreement of this kind at the time when the North-East Coast and other parts of the country were starving for work we would not have had the differences on foreign policy which have been expressed by my hon. Friends above the Gangway? I am not going to give away any trade secrets or say on what lines we had hopes of obtaining orders from Turkey, but I wanted to take this opportunity of congratulating my right hon. Friend on the decision which has been come to at last by the Government, and to ask whether this indicates an alteration of policy.

That is to say, when we have done with the Turkish Agreement are we likely to initiate any other schemes with other countries in Europe? It seems to me that that might be a very useful policy to pursue. That is the question I really want to ask; but, again, I should be less than human if I did not refer to the somewhat lordly attitude of the Board of Trade when people like myself ventured to suggest, as I have said, over a period of years that something might be said for entering into agreements of this kind. We were always told quite definitely that the Government had no intention of ever entering into any such agreement. I take very great comfort from the introduction of this Bill, because it is an indication to me that when back-bench Members—I am not saying this from my own point of view alone, but I include everybody concerned in this—have a good idea, with responsible knowledge gathered from industrialists, if one prods long enough and hard enough one may arrive at a successful conclusion. I hope that in future when suggestions relating to trade are put forward by responsible industrialists, people who know their own business and how important it is to get trade abroad, the Government will listen and take action a little earlier than they did on this occasion.

Mr. Benson

Will the Minister let us know the rates of repayment under the Government guarantee?

6.21 p.m.

Mr. R. S. Hudson

We have listened to a number of interesting speeches from all parts of the House, and I think I should be justified in claiming that the balance of opinion is in favour of the proposal contained in the Bill The front Opposition Bench were, shall I say, clever in endeavouring to get the best of both worlds, because the first speech, from the hon. Member for Bishop Auckland (Mr. Dalton), was in favour of the Bill, so that if things go all right he will be able to say that the Labour party were in favour of the proposal, while the speech of the right hon. Gentleman the Member for West Stirling (Mr. Johnston) was critical, so that if things go wrong he will be able to say that the Labour party criticised the Bill. Apart from that we may claim that there has been general approval.

Several hon. Members have given reasons which to them appear to justify our bringing in the Bill. Some said that it was in order that we might claim Turkey as an ally; others, that it was an endeavour to secure ourselves against a potential enemy in Germany. Let me repeat what my right hon. Friend said: that the origin of this Bill lay in a desire to help the economic development of Turkey. Ever since Ataturk got control he has been pursuing a policy of economic and industrial development in that country. It is very largely as a result of his personal drive that so much progress has been made. As my right hon. Friend the Chancellor of the Exchequer pointed out, one of the difficulties that the Turkish Government are meeting with at present is the fact that they have not got sufficient exports to pay for the goods, including munitions, which they wish to import. That is the basis of the difficulty that arose over our clearing agreement. I shall have a word to say about that in moving the next Order on the Paper. It is that difficulty in finding markets, the fact that they wish to import far more than they export, especially to this country, that led them to come along last year and explore with us the possi- bility of developing their industries, their raw materials, their minerals, along lines that would enable them to get the chance, the probability, of developing an export trade to this country. That really is the answer to the question that has been put to me by a number of hon. Members in all parts of the House, "Why, if this is good for Turkey, do not you extend the system to other parts of Europe, especially the Balkans and Central Europe?"

Mr. Stephen

There is one point on which I would like information. On page 5, the agreement says: The said commodities are metals, mineral ores and concentrates and coal. Does that mean that when the agreement comes into operation the British Government are going to assist a coal selling agency to sell Turkish coal in the British Empire?

Mr. Hudson

That is part of the export credits arrangements. I was saying that the question of extending this arrangement to other countries had been raised. We are perfectly aware of the situation in those countries and their desire to extend their markets, and possibly their desire not to be entirely dependent on one particular country. But the difficulty they are up against—I will not deal with it except very briefly, as it would be out of order—which differentiates them from Turkey, is that already we provide very large markets in this country for their products. If you take these Central and South-East European countries together, you will find that they sell to us at present twice as much as they buy: in other words we are very materially helping them at present; whereas in Turkey it is the other way around. I am not saying that we are neglecting the problem of Central and South-Eastern Europe, but obviously the solution is not the same as in the case of Turkey.

Some other hon. Members, particularly my hon. and gallant Friend the Member for Abingdon (Sir R. Glyn), asked why we could not extend the Export Credits Department and include munitions. Again, I think it would he out of order to go into that in too great detail. But, briefly, the reason is that the Export Credits Department was set up, as hon. Members know, and consolidated last year, in order to help British export trade on a purely economic basis; and in order to ensure that the risks which are ultimately guaranteed by the Consolidated Fund of this country are of a proper nature each individual transaction is revised by an advisory committee consisting of leading business men and others. Once you begin to bring questions of the export of munitions into the picture questions of politics inevitably come in, and it is not fair to ask a committee of business men to advise on questions of politics. It is for that reason that we have decided—and, I hope the House will think, rightly decided—to limit the question of export credits entirely to ordinary commercial work. We have shown by the Bill that where we think it right we do not hesitate to come forward with specific sanction.

The only other point I think I need dwell on is the question asked by the right hon. Gentleman opposite as to what is happening to our bondholders. I noted with pleasure the new interest on the Front Opposition Bench in the welfare of rentiers and foreign bondholders. The right hon. Gentleman will find in the papers dealing with the Clearing Amendment Order that provision is made for the chief British bonds. After a Second Reading has been given to this Bill, we have to deal with the Clearing Office Amendment Order.

Mr. Bellenger

Can the right hon. Gentleman indicate in any way the types of munitions to be exported?

Mr. Hudson

No, Sir, I cannot say what the types are at present, for the very good reason that I do not know the details, nor, indeed, I think do the Turkish Government know the details.

Mr. Maxton

Do not those who are likely to supply these articles know the types of munitions?

Mr. Hudson

I do not know.

Mr. Maxton

Does the right hon. Gentleman mean to say that they would undertake to produce arms that they were not capable of producing.

Mr. Hudson

We have not undertaken to produce any arms at all.

Mr. Maxton

I mean Vickers-Maxim.

Mr. Hudson

We are to guarantee orders placed by the Turkish Government for munitions.

Mr. Maxton

The hon. Lady the Member for Wallsend (Miss Ward) knows that some of the fellows up there are going to make these things, and, therefore, there is somebody in this country who knows. Cannot we know, if it is not secret and we shall not get into any trouble with the law, the nature of the things which Vickers-Maxim are going to supply?

Mr. Hudson

I do not know yet, and to the best of my advice the hon. Lady does not know what munitions or what particular arms are to be supplied, but we have the safeguard that the contracts are to be approved by this Government. Therefore the House may take it that the Service Department will not allow any contracts to be placed in respect of any arms of which they disapprove or which would have a deleterious effect on our own rearmament policy. We have to face that problem. The hon. Gentleman the Member for Chesterfield (Mr. Benson) asked me whether I could say what were the dates and amounts of repayments under the export credit guarantees. They will start in 1939, £20,000; in 1940 £280,000, rising in 1945 to £970,000, and, ultimately, in 1951, to £1,320,000.

Mr. Stephen

Can the right hon. Gentleman say whether the £10,000,000 will operate as a charge on the Turkish coal-selling agency in the British Empire.

Mr. Hudson

No, Sir. The proceeds of any coal sold by the Turkish Government will be paid into the sterling account in London as security for the repayment of loans.

Mr. Bellenger

Must the financial transaction go through London?

Mr. Hudson

The headquarters of the Anglo-Turkish Commodities Company are going to be in London and therefore the Turkish Government will do the business through the Anglo-Turkish Company. I hope that that clears up the various questions which have been put to me, and I venture to think that the ultimate sanction of this agreement will be that this country and Turkey have come to an agreement to their future economic interests.

Question, "That the Bill be now read a Second time," put, and agreed to.

Bill read a Second time.

Bill committed to a Committee of the Whole House for To-morrow.—[Major Herbert.]