HC Deb 24 March 1939 vol 345 cc1601-17

11.9 a.m.

Mr. Pethick-Lawrence

I beg to move, in page 2, line 2, after "interest," to insert: at a rate not exceeding two and three-quarters per cent I hope very much that the Government will see their way to accept this Amendment, which seems to me to be fully in accord with what we take to be their intention with regard to this Bill. Personally, I cannot see that our Amendment is in any way contrary to anything which the Government have hitherto done, and I regard it as a proper assertion by the House of Commons of its control in this matter. What is the position? As I understand it, these two British banks put up a certain sum of money to be used as half the basis of what is, in effect, an exchange equalisation fund. They are guaranteed against ultimate loss by a provision which I am not dealing with at the moment, and which is not in any way called in question. They are also provided with interest on the amount which they put up, by the two banks that are called the Chinese banks, and in so far as the earnings on the sterling which they advance are not otherwise met, the Chinese banks undertake during the first year to make up the interest to 2¾percent.

The British Treasury come in only if the Chinese banks fail to carry out their obligations, and I take no exception to the provision that the British Treasury should be called upon to stand the racket of the 2¾percent. if the Chinese banks fail to implement their bargain to the full extent.

This agreement only lasts for a certain period—I think 12 months—but it can be renewed by agreement of all the parties after that period. As I understand the position it may be the desire of the parties to vary this figure of 2¾ percent. in making a prolonged agreement after the period of 12 months has elapsed. The Government say that this in their opinion, might involve having to come to this House again, and they think it wiser not to specify the rate of interest in the Bill. I cannot see the force of that argument. The banks are getting, not a high rate but a reasonable amount of interest. This is, of course, in the nature of a short-term loan, and there are certain British short-terms loans at present available. There are the 2½ per cent. loans standing today in the market at about 95. Therefore, 2¾per cent. is a reasonably fair profit which these banks are expecting to make in providing this money.

Further, though this whole transaction is undoubtedly designed primarily for the benefit of British and Chinese traders, and indirectly for the Chinese Government, I do not think anyone can possible deny that the British banks who will be called upon to take part in it will gain their bit out of the improved trade which is expected to arise from the transaction. Therefore, the profit of 2¾ per cent. interest, which they are to get directly under the Bill is by no means the end of the advantage which accrues to them from this machinery. Moreover, there is nothing in the Bill to prevent the banks, by arrangement with the Chinese banks, if it should be really necessary at the end of the year, raising the rate of interest slightly. My Amendment does not say that the Chinese banks shall not increase the 2¾ per cent. at the end of the year. All it says is that the Treasury shall not guarantee more than 2¾ per cent., and, for the life of me, I cannot see why the Treasury should guarantee more. I think that will adequately meet the requirements of the banks. It is in accord with the usual procedure of this House that we should fix the liability of the Treasury in these matters, and it seems to me quite unnecessary to leave this margin.

The right hon. Gentleman, speaking on this issue the other night, said that we could rely upon the Treasury to make a good bargain. I am one of the last people in this House to throw any aspersion or doubt on the integrity of the Treasury or on its intention to protect the Exchequer. At the same time the ultimate control of finance rests, not with the Treasury, but with this House, and I think it is only reasonable that the House, in passing this Measure, should fix the amount of interest guaranteed by the Treasury. That does not necessarily, I repeat, fix the amount of interest which will be paid to the British banks, because the first claim for the payment of interest is made on the Chinese banks, and that claim will almost certainly be met, whatever the agreement may be, because China and her banks have a very high reputation for fidelity to their pledged word. Therefore, I hope very much that the Chancellor of the Exchequer will say that, after looking at this Amendment, he has come to the conclusion that the Government are prepared to accept it, but if, for some reason which does not commend itself to those who sit on this side of the House, he stands out for his original Bill, I shall ask my hon. Friends to divide on this Amendment.

11.18 a.m.

Mr. Tinker

Since the discussion the other night I have read the speech of the Chancellor of the Exchequer on that occasion to find out exactly where we stand in regard to this matter. He tried to assure us that there is very little likelihood that we shall be called upon to pay anything at all. In fact, he tried to assure us that there was no likelihood of it, because the Chinese people have the reputation of meeting their responsibilities, but he went on to say—and this is what we have to consider this morning: If, for any reason, the Chinese banks fail to pay this interest to the British banks, the Treasury, by the terms of the Bill, will guarantee payment of what is short in that interest to the British banks."— [OFFICIAL REPORT, 20th March, 1939; col. 1045; vol. 345.] That is the implication which we have to meet this morning, and in view of world events it is just as well that the House of Commons should be put right on this matter. My right hon. Friend was not quite satisfied that we are not involved in guaranteeing more than 2¾ per cent. I should have put a much lower figure than 2¾ per cent. in the Amendment if it had been my Amendment, but we sometimes in a party have to obey the lead given to us, and therefore I support my right hon. Friend's Amendment, but I say that in a matter like this we want to be quite sure that we shall not be involved in anything more than this amount of interest, and that if it drags on further the British taxpayer will not be called upon to pay any excessive demand over and above 2¾ per cent. My right hon. Friend is very anxious to know what the position will be, and I hope the Chancellor of the Exchequer will be able to assure us that whatever happens we shall not be involved in more than the rate of interest mentioned in the Bill.

I would like him to tell us, if he can, that there is a possibility of its being reduced to something less than that, because it seems to be very hard on the taxpayers that they should have to assure this interest being paid, without any loss at all, and not have the amount limited in the Bill. It is a very good thing for the British banks to be given this very high rate of interest, and I trust the Chancellor of the Exchequer will be able to give us some assurance on this point. I am not at all satisfied with this matter, and I confess that I am very much upset about it. I can see that we must agree to it, but I do not like it, and I want to make my protest, so far as I am able, on the whole business.

11.21 a.m.

The Chancellor of the Exchequer (Sir John Simon)

Any question of the control of public finance, whatever be the size of the sum involved, is a matter of importance, not only to the Treasury and the Government, but to the House of Commons as well, and I do not suggest that there is any reason to complain because the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) has raised this question. At the same time, while I pay all due tribute to his experience, both generally in the discussion of financial matters, which we know is great, and during the time when he served in the Treasury, I am sure he will be good enough to consider what I say without any previous commitment, because there really is, I think, very good ground for keeping the Bill in its present form. As regards what the hon. Member for Leigh (Mr. Tinker) said, I would remind him that it was made quite plain on the occasion of the Second Reading of the Bill that there was a universal feeling in this House that what we were trying to do in this Bill was a good thing to do and was in the real interests of peace and of showing our desire to support what ought to be supported. I would ask the hon. Member not to forget that, because it would not do for it to be said that we look on the whole thing with great suspicion merely because a particular Amendment is moved to a Clause of this kind.

This is the situation as I believe it to be. I accept, I may say, entirely the very clear and candid statement of the right hon. Gentleman opposite as to what is the arrangement at present made. The provision is exactly as he stated it, that the Chinese banks make themselves responsible, by agreement, for paying this rate of interest, 2¾ per cent., on the contribution made by the British banks. The contribution is£5,000,000, and 2¾| per cent. on that is£137,500, so that£137,500 is the sum that the Chinese banks undertake to pay if necessary to the British banks, who, after all, are putting into the fund£5,000,000, or securities representing£5,000,000, and necessarily, therefore, to that extent are standing out of any possibility of that money being employed in the ordinary course of their business.

What will happen at the end of 12 months is, of course, uncertain, and none of us can say. One would hope that by that time the great difficulties through which China is struggling will have lessened. One would hope that this fund will serve a useful purpose and help the Chinese currency, and we are pretty confident that it will help very materially, but it is conceivable that the arrangement may have to continue, and, as the right hon. Gentleman quite correctly said, it may be that if the arrangement has to continue, some sort of adjustment may have to be made—it might be in the composition of the body which is going to control the equalisation fund, or in some other way.

Of course, when we come to the question of guaranteeing a sum of money, it becomes important for the House of Commons to decide whether we should fix this amount of£137,500 so that it cannot in any way be exceeded without another Act of Parliament, or whether we should take the other view, which is that if it turns out that there was such a change in the prevailing rates as required and justified some adjustment here, that adjustment should be made by a modification of the agreement. Sometimes we all of us tend to claim to speak on these matters with a great deal of confidence as though we really did know what has been the past practice of the House of Commons in matters of this sort, I made inquiries before this Clause was drawn because this very point occurred to me before the Bill was introduced, and I am the last to desire to introduce looseness in our financial arrangements. I make the assertion on the authority of the Treasury, that there is no instance in which Parliament has authorised the Treasury to guarantee a rate of interest in respect of which somebody else is primarily liable where Parliament has thought fit to fix that rate of interest instead of leaving it to the Treasury to do their best, except, of course, in cases where the rate has been fixed for the whole duration of the loan.

This is a matter of£5,000,000. Hundreds of millions have been raised and the Treasury have had the duty of finding or guaranteeing the interest on the loan. I am informed that there is no instance in which, except where agreements as to the rate of interest were made to cover the whole period, Parliament has said, "We must fix in this Bill the rate of interest, which is the rate now arranged, and we must insist that there must be a new piece of legislation with all its stages if circumstances hereafter develop in which that rate of interest should probably be changed." Therefore, the right hon. Gentleman will see that we have not been doing this in ignorance or without due regard to Parliamentary traditions. I certainly would not willingly surrender any scrap of the ordinary supervision which Parliament exercises over these things. But it would be unfortunate if now in this Bill to assist the stabilisation of the Chinese currency we were to say for the first time that if anybody hereafter comes forward and satisfies the Treasury that the rate ought to be three per cent. in two or three years' time, there would have to be a new Act of Parliament and we should have to go over the whole thing again.

As I have consulted the authorities and have since examined it myself, I hope the Committee will see that we are not in this matter being lax or careless. It is not unreasonable if the House of Commons really take up this proposal with good will, as I am sure they do, to say, "A perfectly clear arrangement has been made now. It will involve 2¾| per cent. to be paid by the Chinese banks—because, of course, the Chinese Government are behind these Chinese Government banks— to the British banks, but the rate of interest may conceivably, one or more years hence, be modified. In order that this thing may go through, the British Treasury, with the authority of the British Parliament, guarantee that the Chinese banks will pay that interest." We shall not be called upon to fulfil this engagement if the Chinese Government continue in their practice of fulfilling their obligations as in the past. I have the greatest possible confidence that the Treasury will not be called upon to fulfil this guarantee because the Chinese Government are doing their utmost to fulfil their engagements, and will continue to do so. There is no country in the world which has shown a greater effort to deserve the reputation of being an honest bargainer than the Chinese.

I would ask the Committee in the circumstances whether they do not agree, on the whole, that it is right for us to follow what I believe to be the usual and universal practice, and say that in a case where the rate of interest has not been fixed for the whole period we authorise the Treasury, if it should become necessary, to agree to the precise figure which ought from time to time to be imposed. I have no reason to believe that it will be altered, and I should not consent to altering it unless the circumstances changed, but nobody can say that in the course perhaps of two or three years the circumstances may not change. Whatever is done would be reported at once to the House of Commons. We do not want to do anything behind anybody's back. I am only following the course that has been mapped out for me by my predecessors.

Mr. Wedgwood Benn

The right hon. Gentleman says that what is being done is in accordance with precedents so far as he knows. I understand from Subsection (3) of Clause 1 that any sums will have to be made good from the Consolidated Fund. This House has not the same control over the Consolidated Fund as it has over moneys provided by Parliament. Will the right hon. Gentleman say whether in the precedents he has mentioned any loss has been made good out of the Consolidated Fund, thereby depriving the House of an opportunity of dealing with the matter?

Sir J. Simon

I am much obliged to the right hon. Gentleman for calling attention to that point. I am told that that is the language which is always used. It has been so in the earlier cases.

Mr. Benn

But it does deprive Parliament of the opportunity of criticism.

11.33 a.m.

Mr. Tinker

We do not object to the Chinese banks having to pay 2¾per cent., but what I feel concern about is that if they should fail to meet their responsibilities we should have to meet that high rate of interest, and I say that we ought not to be called upon to pay more than we pay to the ordinary British investor. In the case of the Post Office Savings Bank we pay 2½per cent, interest, and I do not see why we should incur a greater liability in this case. I am wondering whether the right hon. Gentleman has any means at his disposal by which he could say, if the Chinese should fail to meet their obligations, that all that we should be called upon to undertake is the same liability as we have to our own people.

11.34 a.m.

Sir J. Simon

I think it would be difficult to state that in the language of a Statute, but the hon. Member may be comforted. Whatever the shortcomings of any Government or any Chancellor of the Exchequer, the Treasury is quite certain to be as keen as the hon. Member himself would be to see that the amount would be at the lowest possible rate. The point is that the future is, for all of us, uncertain. No one can really say whether two or three years from now the figure which the hon. Member regards as adequate will be the proper figure. I am most unwilling that we should make more of this point than we need, because it almost suggests that we are contemplating a change, and I am not contemplating anything of the kind. It would be a departure from the ordinary practice and load Parliament with unnecessary work if we said that whenever there had to be any change we must have another Act of Parliament.

11.35 a.m.

Mr. Pethick-Lawrence

In my original speech I said that I should ask my hon. Friends to divide in favour of this Amendment unless the Chancellor of the Exchequer gave reasons which seem to me adequate, and therefore I will make a brief reply. Apparently the Chancellor of the Exchequer bases his whole case upon precedents. I have not had the time or the opportunity to look into those precedents to see whether they really are cases which are on all fours with this particular proposal. They may be, and the Chancellor of the Exchequer thinks they are. I did not base my Amendment upon precedent. I did not say that the proposal in this Bill was unprecedented. I said that the House of Commons ought to retain its right of control, and when the right hon. Gentleman says that it may be appropriate to alter the rate of interest and all the rest of it, it really means, put in hard terms, that if affairs either in China or at home get worse, the British banks may take advantage of that position to put up the rate of interest. I am not making any criticism of the banks, but that is what it really amounts to, and I see no reason for allowing that. I believe the rate is quite adequate now, and if the Agreement had been made to last for longer than a year the banks would have been perfectly well satisfied with 2¾ per cent., which is a

Motion made, and Question proposed

rate in accordance with the short-dated loans which we have, and, in fact is a slightly better rate than prevails at the moment. I see no reason why I should withdraw this Amendment, and I shall ask my hon. Friends to vote for it.

11.37 a.m.

Mr. Annesley Somerville

The Amendment does lay down a good principle. There is a growing tendency for Departmental Bills to contain provisions which leave the Department with very wide powers, and this is an instance of it, but this is a very special Bill for a very special purpose which is approved by the whole House, and the Chancellor of the Exchequer has given convincing reasons why this Amendment should not be inserted. In particular, he has given the reason that the Treasury would be the last agency to grant a high rate of interest. For this reason I shall vote against the Amendment.

Question put, "That those words be there inserted."

The Committee divided: Ayes 33: Noes 72

Division No. 70.] AYES. [11.39 a.m.
Alexander, Rt. Hon. A. V. (H'lsbr.) Grenfell, D. R. Quibell, D. J. K.
Attlee, Rt. Hon. C. R. Griffiths, J. (Llanelly) Ritson, J.
Barnes, A. J Hills, A. (Pontefract) Smith, T. (Normanton)
Bellenger F. J. Jenkins, A. (Pontypool) Thorne, W.
Benn, Rt. Hon. W. W. Lunn, W. Tinker, J. J.
Benson, G. MacMillan, M. (Western Isles) Viant, S. P.
Brown, C. (Mansfield) Messer, F. Williams, T. (Don Valley)
Daggar, G. Morgan, J. (York, W.R., Doncaster) Wilson, C. H. (Attercliffe)
Dobbie, W. Noel-Baker, P. J. Windsor, W. (Hull, C.)
Edwards Sir C. (Bedwellty) Pearson, A.
Gardner, B. W. Pethick-Lawrence, Rt. Hon. F. W. TELLERS FOR THE AYES.—
Gibson, R. (Greenock) Poole, C. C. Mr. Whiteley and Mr. Mathers.
NOES.
Agnew, Lieut.-Comdr. P. G. Hannah, I C. Royds, Admiral Sir P. M. R.
Allen, Col, J. Sandeman (B'knhead) Haslam, Henry (Horncastle) Samuel, M. R. A.
Allen, Lt.-Col. Sir W. J. (Armagh) Heilgers, Captain F. F, A, Seely, Sir H. M.
Bossom, A. C. Heneage, Lieut.-Colonel A. P. Shepperson, Sir E. W.
Bower, Comdr. R. T. Hope, Captain Hon. A. O. J. Simon, Rt. Hon. Sir J. A.
Brocklebank, Sir Edmund Hewitt, Dr. A. B. Sinclair, Col. T. (Queen's U. B'lf'st)
Brown, Rt. Hon. E. (Leith) Hulbert, N. J. Smithers, Sir W.
Browne, A. C. (Belfast, W.) Hunloke, H. P. Somerset, T.
Bull, B. B. Lambert, Rt. Hon. G. Somerville, A. A. (Windsor)
Cary, R. A. Liddall, W. S. Spears, Brigadier-General E. L.)
Cazalet, Thelma (Islington, E.) Lindsay, K. M. Stuart, Hon. J. (Moray and Nairn)
Clarke, Colonel R. S. (E. Grinstead) Mabane, W. (Huddersfield) Tasker, Sir R. I
Clydesdale, Marquess of Macdonald, Capt. P. (late of Wight) Thorneycroft, G. E. P.
Conant, Captain R. J. E. Makins, Brigadier-General Sir Ernest Turton, R. H.
Crooks, Sir J. Smedley Margesson, Capt. Rt, Hon. H. D. R. Walker-Smith, Sir J.
Dorman-Smith, Col. Rt. Hon. Sir R. H. Markham, S. F. Wallace, Capt. Rt. Hon. Euan
Drewe, C. May hew, Lt.-Col. J. Ward, Lieut.-Col. Sir A. L. (Hull)
Dugdale, Captain T. L. O'Connor, Sir Terence J. Waterhouse, Captain C.
Edmondson, Major Sir J Orr-Ewing, I. L. Watt, Lt.-Col. G. S. Harvie
Evans, E. (Univ. of Wales) Perkins, W. R. D. Whiteley, Major J. P. (Buckingham
Fremantle, Sir F. E. Petherick, M. Williams, H. G. (Croydon, S.)
Gledhill, G. Raikes, H. V. A. M. Windsor-Clive, Lieut.-Colonel G
Goldie, N. B. Ramsbotham, H.
Grimston, R. V. Rosbotham, Sir T. TELLERS FOR THE NOES.—
Hacking, Rt. Hon. Sir D. H. Rowlands, G. Major Herbert and Mr. Munro.

"That the Clause stand part of the Bill"

11.47 a.m.

The Financial Secretary to the Treasury (Captain Euan Wallace)

I wish to trespass upon the time of the Committee for only a very few minutes in order to put right some remarks which I made in the early hours of Tuesday morning, in so far as any hon. Member, on reading the OFFICIAL REPORT, may think that I had in any way misled him. The relevant passages are in Columns 1080 and 1081. It is conceivable that some hon. Members might not be entirely clear on the subject of audit, and I am most anxious that hon. Members should fully appreciate the position.

The question asked by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) was whether the Fund itself would be audited annually by the Comptroller and Auditor-General. I am not sure whether I made the position sufficiently clear in my answer that the accounts of the Fund will not be audited by the Comptroller and Auditor-General because these are the accounts of a Chinese currency fund. They will, I understand, be audited by a British firm of chartered accountants although, of course, the final decision in these matters will rest with the Management Committee after it is set up, which cannot be done until Parliament has passed this Bill. While the Accounts of the Fund will not be audited by the Comptroller and Auditor-General, he will have access to the auditor's reports and to all other information in regard to the operation of the Fund. That information has to.be furnished to the Treasury under the arrangement contemplated by the Bill and the Treasury will, of course, make available the information to the Comptroller and Auditor-General. What really happens is that periodic reports are furnished confidentially to the Treasury, and are available to the Comptroller and Auditor-General. They are not made public, but the Public Accounts Committee will get reports from the Comptroller and Auditor-General. I hope this explanation makes the position clear and that hon. Members will now let us have the Clause.

Mr. Pethick-Lawrence

It is clear that the right hon. and gallant Gentleman has slightly modified what he said on the previous occasion, and I take it that the modification does not apply in any way to what will happen when the account is wound up. In that case the audit will, I take it, be by the Comptroller and Auditor-General particularly in relation to any contribution from the Treasury which may have to be made at that juncture.

Captain Wallace

In that case a full report will have to be made; when the Fund is wound up the Comptroller and Auditor-General will receive the report of this firm of chartered accountants who have audited the account. The Comptroller and Auditor-General would not, therefore, do the audit himself, but he would have access to the report of the auditors, which really comes to the same thing.

Mr. Pethick-Lawrence

The point is rather a technical one. What I want to be clear about is whether the Comptroller and Auditor-General will, if and when the British public has to pay anything from the Exchequer, have such information as will enable him fully and adequately to check the accuracy of the figures involved so that he can judge whether the amount which the British Exchequer is being called upon to produce is, in fact, correct.

Captain Wallace

Yes, I think that is absolutely clear.

11.50 a.m.

Mr. Bellenger

The right hon. Gentleman has made a clear exposition of what the case may be, and it is this: the British taxpayer may be called upon to pay up to£5,000,000 for the guarantee which we are now giving, but will have only a limited right to investigate the accounts of this exchange fund which may involve the taxpayer in a loss of£5,000,000. The right hon. Gentleman knows that in the case of the British Exchange Equalisation Fund, which is for the purpose of keeping the British£sterling on a level keel, this House has full control through the Public Accounts Committee. [AN HON. MEMBER: "NO"] Well, I will read the right hon. and gallant Gentleman's own words from the OFFICIAL REPORT: There certainly will be periodic reports … They would be presented in much the same way as our Exchange Equalisation Fund to the Comptroller and Auditor-General.— [OFFICIAL REPORT, 20th March, 1939; col. 1077, Vol. 345.] Now, 1 understand, the right hon. and gallant Gentleman has modified that statement this morning, but I say to him that the control that this House has over the British Equalisation Fund, which is a somewhat similar fund to this equalisation fund which is now about to be set up— although our own Fund is much larger than the Chinese one— ought to be just as complete over this account. I put it to hon. Members who are concerned with the taxpayers' interest that we are being asked to give an unlimited guarantee up to£5,000,000, and that in return we shall have only a limited chance of seeing that the operation of this Fund is carried out in the best possible manner for the British taxpayer and not only for the Chinese dollar. Therefore, I regret the statement which the right hon. and gallant Gentleman has made this morning.

Sir J. Simon

May I say one word—

Mr. Robert Gibson

Before the right hon. Gentleman replies, may I draw attention to one point? My hon. Friend has suggested that the ultimate liability may be only£5,000,000, but does the Bill not envisage the payment of interest, which will depend, as has been said from the Treasury Bench, upon circumstances, and is the ultimate liability, therefore, not only the payment of£5,000,000 but the payment also of interest which may be very high, according to the circumstances from time to time?

11.53 a.m.

Sir J. Simon

Being for the time responsible, I take the deepest interest in securing that there shall be no misunderstanding. Hon. Members opposite have spoken as though this account were closely analogous to our own Equalisation Fund. I agree that in both cases they are in the nature of an account for ironing out undue fluctuations of currency, but the right hon. Gentleman will be the first to appreciate that there is a very great difference between them. The Exchange Equalisation Account is a British account, a purely British Government account, and everything that goes into or comes out of it is purely a British concern and nothing else. It is a rather different situation when you have what you may call a hybrid account—an account which cannot be called a British account and which is set up to assist a foreign currency. I believe that the Comptroller and Auditor-General will con- tinue to discharge, as he does with great strictness, the primary duty entrusted to him, that is to see that British money, our money which the taxpayer pays, is not paid away without statutory authority, but is disposed of properly and when he has doubts to inform himself of the circumstances. If there are any circumstances calling for comment he will make a report upon it, and the Public Accounts Committee will have that report. Of course, if there is any question of our being called upon to implement our guarantee, it will be essential for the authorities set up in this country for the purpose to see that the conditions are such that we really are liable. We have to bear in mind that this is not a British fund, and, therefore, is not really to be treated as a second Exchange Equalisation Account of our own. It is a hybrid fund, if you like, set up for a special purpose. But at the proper time and in the proper circumstances the constitutional authority will have to be exercised, if we ever have to find any money to implement the guarantee, to see that it is done strictly in accordance with the Act of Parliament.

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

Clause 2 ordered to stand part of the Bill.

Preamble agreed to.

Bill reported, without Amendment.

Motion made, and Question proposed, "That the Bill be now read the Third time"

11.57 a.m.

Mr. Bellenger

I desire to say a few words on the Third Reading, and I shall attempt to be brief. I am concerned at the nature of the Bill, as will be evident from some of the points which I have put during its earlier stages and in Committee. The Chancellor has just told us that he is confident, or at any rate that he has considerable confidence that there is a great possibility, that we shall not be called upon to implement our guarantee, and he gave as one reason for his confidence the fact that hitherto the Chinese Government has faithfully observed its obligations. I say at the outset that I quite agree with that statement; but the question for the Chancellor to consider is whether the Chinese Government will always be able to fulfil its obligations in the future as it has in the past. I should like to quote to the Chancellor of the Exchequer some remarks made by the Chairman of the Hongkong and Shanghai Banking Corporation at the annual meeting of the Corporation which was held quite recently. This is one of the banks which are going to administer the fund, and my quotation is apropos of the point about the Chinese Government being able to carry out its obligations. The Chairman of the Corporation said: You can read between the lines how difficult and tense a time exchange bankers had throughout the first nine months of the year"— that is to say, the year 1938. Even now there is an ever-present fear of what I may call 'external influences.' The Tientsin and North China exchange market has particularly suffered from these 'external influences,' and the outlook there remains under this cloud. What, in effect, does that mean? It means that the Chancellor's confidence is somewhat misplaced, because, if these external influences operate more intensively in the future than they have in the past, it is possible that our trade with North China, which this Bill is beng introduced ostensibly to assist, may gradually pass away. I do not wish to put any obstacle whatever in the way of assisting the Chinese Government. It is interesting to note that the League of Nations have declared Japan, which is now waging war against China, to be an aggressor State, and the League of Nations suggested that financial help should be given to the Chinese Government. But they did that some time ago, and it is rather late in the day for the Government to come forward and suggest that we should give a guarantee up to£5,000,000. I suggest that this is rather a puny effort, and that, if we really want to help the Chinese, it would have to be put on a bigger scale than that. It seems to me that, if we are to help nations like China which are now suffering under foreign aggression, we should mobilise our resources on a much bigger scale than this.

I would ask the Chancellor, with reference to his remarks about China always fulfilling her obligations, what has happened in the case of other countries, like Czecho-slovakia, who will probably have to repudiate all her loans. Government and otherwise; and what has happened in the case of the Dawes Loan and the Young Loan? We have had to exert pressure on Germany in order to get our interest on these latter. How lone that is to last I do not know. On the Second Reading, great play was made by the Chancellor on the effect that the Bill would have in assisting Lancashire trade, and I know that that had a considerable influence with hon. Members on this side of the House as well as on his own side. But might I quote to him some further remarks made by the Chairman of the Hongkong and Shanghai Banking Corporation quite recently? He said: Significantly enough there has been a great increase in the export of raw cotton to Japan, from 234,000 quintals in 1937 to 964,000 quintals last year. I think that is conclusive evidence that it is not Lancashire which is likely to benefit from this Bill, as the Chancellor told us on the Second Reading, but the probability is that Japan will be one of the beneficiaries of our 5,000,000 guarantee.

Sir J. Simon

Is the hon. Member in favour of the Bill?

Mr. Bellenger

Perhaps I may be allowed to develop my speech in my own way. Although sometimes we do not criticise the principle, we can certainly criticise the Bill itself. The Chancellor has done that himself in days gone by, so I hope he will allow me a little indulgence to-day. I promise him that I shall not be too long or too severe in my criticisms. I suggest to the Chancellor that the arguments he has put before the House in favour of granting this£5,000,000 guarantee to China are based on a false assumption that it will benefit British trade to the extent which he thinks it will. The Bill has been received with pagans of praise from his own side, and a certain amount of modulated approval from this side of the House, but I suggest, particularly to hon. and right hon. Members on this side of the House, that this is not the way to help British trade with China. I agree entirely that we should help China in the difficulties which she is encountering at the present time, but I believe, whatever the Chancellor may say, that this is an effort to bolster up certain interests but not primarily to help British trade.

12.3 p.m.

Sir John Simon

I should like to make one observation. The hon. Gentleman says, if I understand him aright, that I do not think that circumstances are likely to arise in which we should be called upon in respect of any portion of this guarantee. I certainly hope that we shall not, but the observation I made was particularly made with reference to the guarantee of the payment of interest. I would like, before we pass from the Bill, to put it on record that, as will be obvious to the hon. Gentleman, the Chinese Government have a record which justifies us in thinking that they will indeed pay the interest they have promised to pay, and I hope that that is not an observation which will come under the criticism of the hon. Gentleman. Whether or not we shall find ourselves called upon under our guarantee in respect of the main sum must, of course, necessarily be determined on whether the fund does or does not succeed in maintaining the position of the Chinese currency. I personally think that, in the opinion of the House as a whole, this is an effort which is well worth making, and, therefore, I will not pause to inquire whether the view of the hon. Gentleman is that the sum is unduly small or unduly large, or that the arrangement in not likely to benefit our trade but is likely to benefit Japan. The hon. Gentleman, has, in fact, imagined a very large number of alternative and mutually destructive propositions.

12.5 p.m.

Mr. Pethick-Lawrence

I agree with my hon. Friend behind that it would have been well if earlier we had taken active steps in support of China. Nevertheless, I know quite well that this proposal is one which is supported and greatly desired by the Chinese Government. I believe that, inadequate as it may be, it is well worth our doing, and I hope that this Bill will have a unanimous Third Reading.

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

Bill read the Third time, and passed.