BANK FOR INTERNATIONAL SETTLEMENTS

HC Deb 13 October 1942 vol 383 cc1572-600

Motion made, and Question proposed, "That this House do now adjourn."—[Captain McEwen.]

Mr. G. Strauss (Lambeth, North)

I want to raise upon this Motion for the Adjournment the question of the report recently issued by the Bank for International Settlements and our present relationship with that body. A number of Members, including myself, asked some Questions to the Chancellor of the Exchequer on 1st October, and the Chancellor gave a full and frank answer. As far as that answer went it was reassuring. It was at least satisfactory to know that our directors and representatives on the Bank for International Settlements have not had any contact or negotiations with the German directors on that body. But there were quite a number of points which it was quite impossible to deal with by Questions and answers, and I raise the matter to-day so that many fears and suspicions which are in our minds about the Bank may be dealt with when there is more time and when the Chancellor will have ample opportunity to give a fuller answer to the Questions we wish to put to him.

We frankly have suspicions about the Bank for International Settlements, because of the history of the Bank in the past and in particular in view of the behaviour of that Bank at the time when the German army occupied Prague. The Bank was then instrumental in handing over to Germany £6,000,000 of Czech gold, which it had deposited with the Bank of England in this country. The House will remember the very strong protests that were made from all quarters on that occasion. The House will probably also remember that it was only possible to drag the truth about these proceedings from the Government at that time with very great difficulty. Every effort seemed to be made to hide that transaction from us. Therefore I- suggest that it is an obligation on the House to-day to consider very carefully the recent activities of the Bank for International Settlements, and to consider whether in present circumstances we are wise to remain associated with that organisation.

The history of the annual report recently issued by the Bank is rather peculiar. Apparently this report, a very long document running into over 200 pages, was first presented to a general meeting of shareholders—I do not know of whom they consisted—on 8th June of this year, by the President of the Bank, an American named Mr. McKittrick. On 4th September, there was a Press conference in Basle, where the Bank is situated, and the contents of the report were given to the Press. On 5th September, the German Press reported some extracts from this report, obviously with great glee, because the extracts presumably confirmed many of the desires of the German Government. Anyhow, we can be certain that the Press would not have given such prominence to this report of the Banks for International Settlements unless it had been favourable in German eyes.

On 17th September some of the German papers arrived in this country, and the reports appearing in those papers were copied by some of the financial journals here. Considerable public interest was aroused, but it was not until 1st October that the matter was raised here in Parliament. We were then assured by the Chancellor of the Exchequer that nobody in this country was in possession of this report and that neither the Treasury nor the Bank of England knew anything about it. Afterwards, the Chancellor of the Exchequer was good enough to say that there had been a mistake and that actually the Ministry of Economic Warfare had a copy. Up to that time, 1st October, the Bank of England, which is closely associated with the Bank for International Settlements, had apparently no knowledge of this very important report, and, as far as we know, had taken no steps to obtain a copy. The House will be aware that on the directorate of the Bank for International Settlements sit Mr. Montagu Norman and Sir Otto Niemeyer, although these gentlemen, we are told, have not recently taken any part in the activities of the Bank.

The first question one would like to ask is how it is that, after all that period, and a fortnight after the Press had carried at some length extracts from the report, the Bank of England had, on 1st October, apparently no knowledge at all of the report. One would like to ask the Chancellor of the Exchequer whether the Bank had taken any steps to obtain the report or to make any investigations to see what was being said in the name of the Bank for International Settlements, and, presumably, in the name of the directors of that Bank. If the answer is that the Bank of England took no steps, were not interested, in the report of the Bank for International Settlements, I suggest that it is an example of public irresponsibility which is positively staggering. But our real concern in this matter is this: This survey—and the report is very largely a survey of international affairs—has been issued by an organisation on which this country is represented by very distinguished bankers but which, in fact, is under the control of the Nazis That is obviously a very dangerous and even serious situation.

The right hon. Gentleman the Chancellor of the Exchequer, in reply to a Question by the hon. Member for Stoke (Mr. Ellis Smith) the other day, said that the Bank for International Settlements was only under the control of Germany to the extent of 50 per cent. I cannot understand where he got that figure, because to-day he answered a Question put to him by the hon. Member for Ipswich (Mr. Stokes) and gave the names of all the central banks for various European countries who own the shares, and the number of shares owned by each bank. It is perfectly clear from that answer to-day that over 70 per cent. of the shares under the control of the central banks are in the possession of the Germans, either directly or indirectly, because these banks have come under the domination of Germany during the last two years. So this bank is quite definitely under the control of the German Government.

Moreover, I suggest to Members that they should look for a moment at the directorship of the bank. There are 16 directors; two of them are neutral, two of them are British, and 12 of them are either German, or represent countries under German domination. The Chancellor of the Exchequer has told us that this report has been drawn up by the president of the bank, Mr. McKittrick. I would be the last person to suggest that Mr. McKittrick is in any way biassed or that his integrity is not absolute, but I suggest that a report of such great length and complexity could not be drawn up by one man. The president of the bank may well be the sole person who takes responsibility in the matter, but in point of fact it must have been prepared by many other people in the bank. In view of the fact that some of the contents have been welcomed so very much as useful propaganda by the German Government, one has a right to wonder whether the manager of the bank, a German, Herr Hechler, did not take a prominent part, at any rate, in drawing up some parts of that report.

There are two parts of that report which have been pounced upon by the Germans to help them in Germany m their propaganda, and which have been quoted at very great length in their papers, and which I submit to the House are so objectionable that they provide very strong reasons for us to dissociate ourselves entirely, not only from the report, but from the Bank which produced it, and which may produce more, and even more unhelpful reports in the future. The first item pounced upon by the German Press for publication was that dealing with interest rates. The German Government have boasted that they have been able to reduce interest rates in their country. Recently they have been forced to increase them, because they found very great difficulty in getting the public to lend the Government money. They have been forced to increase their interest rates, and it has been very awkward. They have had great difficulty in explaining this necessity. It is therefore natural that they are quite delighted when the Bank for International Settlements comes along with a report which puts forward theoretical justification for the raising of interest rates, based on facts which, I submit, are quite untrue. The report of the Bank for International Settlements suggested, on pages 15 and 16, that there is a worldwide movement for increasing interest rates in almost every country. I am sure that that is not true; but, naturally, the German Press hit on this, and carry this story as a justification for the increase of interest rates in Germany.

The second thing is even more serious. The report lays down principles for a post-war economic system. The House will agree that it is very dangerous for a body with which we are nominally associated—and, in the eyes of the world, rather closely associated—to issue a report laying down post-war schemes of reconstruction. The Bank for International Settlements is known throughout the world for, not only very close Nazi associations, but its Nazi domination. We have our directors still on the board, and that bank produces in its annual report proposals for setting up the economic basis of a new Europe after the war. That, I think, is very serious. It suggests to the German people that there is some form of collaboration between the Nazis and the Allies whom they are supposed to be fighting. It may give them hope of a peace arrangement between some elements in this country and in Germany. The facts can be easily distorted by the German propaganda machine so as to make the people of Germany believe that somewhere in this country appeasement still lives—if not in this country generally, in banking circles. Even more harmful might be the effect on public opinion in the rest of the world, if people see this body issuing such proposals and no action taken by the British Government. I hope that there will be some action by the Government to dissociate themselves completely and effectively from this body, seeing that the report and the action taken by the Bank must be quite out of accord with the general attitude of the peoples of the United Nations, who are determined to fight the enemy and not to associate with the enemy in any possible way, least of all in drawing up at the present stage of the war even the outline of a scheme for economic agreement after the war.

I think that something more than a public disclaimer is necessary. That disclaimer has been made by the Chancellor of the Exchequer, who said that we were not responsible for the report, and that it had been issued solely on the responsibility of the American President of the Bank. A far more convincing gesture is necessary to show our emphatic disapproval, not only of the document, but of the Bank for International Settlements in producing the document in this way. I do not know what good grounds we can have for associating any longer with the Bank for International Settlements. The Chancellor of the Exchequer said the other day that there were good national reasons. What in the world are those good national reasons? Have we got large moneys invested with the Bank, and are we likely to lose them if we dissociate ourselves from it? The Chancellor answered that question to-day, when he said that the British Government have deposited with the Bank 26,500,000 reichsmarks, which is a little over £2,000,000, and that no interest, is paid on that amount. If that money is to-day in the hands of the Axis nations, whether we dissociate ourselves with the Bank or not it will remain in the hands of the Axis nations, and nothing will bring it back to us.

If that money is not in the hands of the Axis nations, why should we not dissociate ourselves from the Bank? The money is presumably still in our hands. Unless the Chancellor of the Exchequer is able to give us something more concrete than he has in the past, there does not appear to be any financial reason why we should remain associated with the Bank for International Settlements. If our object is merely to get reports from the Bank of what is happening, we can leave our interests very well in the hands, as I suggested the other day, of the Swiss banks. Unless the right hon. Gentleman is able to suggest some justifiable reason, which he has not been able to do up to now, why we should maintain directors on the Bank and why we should have people on the managerial staff of the Bank, the proper thing to do is to dissociate ourselves from the Bank as quickly as possible. We get the worst of both worlds. We are associating with the Bank in the public mind but apparently are not responsible for any of its actions or of the actions of the President of the Bank. What a ridiculous position.

The difficulties that exist to-day may become worse. There may be other reports issued by the Bank. We do not know what it is going to do in the future. We have Montagu Norman and Otto Niemeyer on the Bank nominally as directors but apparently not responsible for anything. The only satisfactory conclusion of this problem is a clean break with the Bank, and I very much hope that the Chancellor of the Exchequer will to-day tell us that he is going to do that or will give very good reasons why not. If we made such a break, it would provide irrefutable evidence to the world of our attitude to the report which has been issued, and no one could possibly accuse us of talking behind anybody's back to the Germans. Moreover, if we had this break with the Bank and dissociated ourselves entirely from it, I am sure that such an action would be popular in this country with the memory of the Czech-gold affair and the shameful manner in which the Bank for International Settlements at that time acted as Hitler's agent to get Czech gold from London back to Germany. I am certain that if we dissociated ourselves completely from the Bank, it would meet with the whole-hearted support of the people of this country.

Mr. Hutchinson (Ilford)

The House has listened with great interest to my hon. Friend's criticism of the Bank for International Settlements, but I cannot help feeling that much of the criticism which he has directed against that institution really arises not so much from his objections to what the Bank is doing to-day, but rather from the suspicions which its conduct has aroused in his mind in the past.

Mr. G. Strauss

Both.

Mr. Hutchinson

My hon. Friend says that it was the history of the Bank that had aroused his suspicions, but when one looks into the history of the Bank, it is quite clear that its original parenthood, at any rate, was unimpeachable. It came into existence as the child of most respectable parents. It was one of the instruments for facilitating international transfer under the Young plan, which, the House will recollect, enjoyed the approbation of the late Mr. Philip Snowden and the Labour Government of that time. So that if it fell away from the paths of righteousness, the falling away took place at a later stage in its history. My hon. Friend's argument really proceeds upon the publication of the last report of the Bank. It is not so much anything which the Bank has done or failed to do to which he objects; it is to certain passages which have found their way into the Bank's annual report and which have apparently aroused certain approbation among newspaper men in enemy countries. My hon. Friend says that having regard to the history of this institution and to the fact that it has now seen fit to put into its report something which has excited the praise of enemy journalists, we ought forthwith to withdraw from it and have no more to do with it.

If my hon. Friend had been able to come to the House and point to something which this institution had done which was of an unneutral character, or which was directly or indirectly prejudicial to any British or pro-Allied interest, I think we should all have known very well what to do. But my hon. Friend's argument does not go anything like so far as that. I have no doubt he has made most exhaustive inquiries into the recent activities of the Bank for International Settlements. If there had been anything unsavoury in what the Bank has been doing, no doubt he would have been able to come to the House and tell us all about it in the greatest possible detail. But one of the most significant things about his speech is that the only criticism he has been able to direct against the Bank is based solely upon two passages in its annual report.

That report, I understand, was the work of its American chairman. Before we take the drastic step of withdrawing altogether from this Bank, which, at the outset, was such a useful and innocuous institution, the House will require some rather stronger case for doing so than my hon. Friend has been able to put forward. I can see no reason why we should withdraw our representatives from the Bank for International Settlements, but I can see several good reasons why they should remain there.

The first reason is this: My hon. Friend, as he says, is very suspicious of the Bank. He says, "Here is an institution which is capable of mischief." That may be perfectly true, although he has not been able to point out any particular act of mischief of which the Bank has been guilty. He says," Here is something that may be used to our prejudice." If that is the case while the composition of the Board of Directors of the Bank is as it is at present, how much more would it be the case if we withdrew our representatives and left this institution entirely in the hands of our enemies. Surely, that would mean that we should be simply running away from it and, for what it is worth, handing it over to those who would undoubtedly use it for the purposes of the Axis countries.

Mr. Loftus

My hon. Friend assumes in his argument that the two British directors are a check on the actions of the Bank, and therefore, they are participating in its proceedings.

Mr. Hutchinson

I am not assuming that they have taken part in the transactions of the Bank. What I am suggesting is that their presence on the Board is a restraining influence on the other members of the Board, whether they actually take part in the business of the Bank or not. Suppose that we withdraw our representatives, are we going to leave the American President of the Bank alone, surrounded by the representatives of the Axis countries? My hon. Friend was not able to tell us what is the position of the United States Government in the matter. I assume that the President of the Bank is not a representative of the United States Government, but we do not know whether they are willing, and, indeed, we do not know whether they are able, to withdraw him from his present position. Until we know a little more about that, I suggest that it would be very unwise for us to withdraw our representatives, even if they are only sleeping partners, and leave the American President of the Bank alone surrounded by the representatives of enemy countries and countries which are at present controlled by the enemy. This Bank for International Settlements was, at its birth, a highly respectable and highly useful international institution.

Mr. MacLaren (Burslem)

No bank can be.

Mr. Hutchinson

The hon. Member says that no bank can be. As I listened to the hon. Member for North Lambeth (Mr. G. Strauss), I felt that if this institution had been called by some other name and had not been called a bank, it might have been less likely to arouse the suspicions of some of my hon. Friends. At any rate, this Bank started its life as a very useful instrument for international transactions. Some of us hope that the time will come when its usefulness will return, and when that time comes it will, I think, be a great advantage that we should have an institution of that sort, available for all those transactions which we may require it to carry out when the war is over. It would be a pity now if we were to do something which would destroy altogether the international character which it still possesses by reason of the fact that our representatives, in name at least, are still members of the Board. We should do much better to allow this particular sleeping dog to continue in his present harmless slumbers, in the hope that at some future time he may be aroused again to a useful period of wakefulness.

Mr. Mander (Wolverhampton, East)

I always regard with reluctance any proposal to do away with an existing international organisation. I quite agree as to the highly respectable parentage of this body, but even criminals in the early years of their lives are often very estimable persons, and the more one looks into the history of this organisation the more doubtful one becomes whether it is wise for us to remain associated with it. It seems to me that the Bank for International Settlements does not realise that there is a war on. They are acting as if things were exactly as they were in pre-war days. The chairman is the national of a country at war with Germany, and the manager is a German. They are nationals at war with each other, but they are sitting there day after day co-operating in the management of the Bank. It is a nauseating spectacle to my mind. There are British representatives, but the attitude of those who defend the Bank is that they take no part whatever in it. They are doing no harm and they have no influence; they are wholly detached. But my hon. and learned Friend has told me quite a different story. He says the prestige and distinction of the British representatives are so great that though they are in this country and are not in contact with the Bank, they put the fear of God into the President and those who are operating it from day to day. It is clear, therefore, that they are playing their part and certainly exercising influence of some kind.

Mr. Hutchinson

My argument was that they may have a restraining influence on the other members, and I pointed that out in conjunction with the fact that the hon. Member for North Lambeth (Mr. G. Strauss) has not been able to point to any unneutral act that the Bank has committed so far.

Mr. Mander

I may have put it in more picturesque and stronger language, but it is really the same thing. The hon. Member cannot see anything that the Bank has done wrong, but surely the mere fact that you have a United States citizen, our ally, sitting and working alongside a German is quite enough to do a great deal of harm to the Allied cause throughout the world and to arouse the suspicion that we cannot be terribly serious about certain aspects of the war if we permit a thing of that kind to go on. I understand that there are also two British subjects on the staff working with a German manager, and taking his orders. It seems to me a sorry spectacle.

Sir Patrick Harmon (Birmingham, Moseley)

Is there any evidence produced in the course of the report that he was in consultation with any of the other directors of the Bank?

Mr. Mander

The idea, of course, is that it is the American President of the Bank who is doing all the work of the Bank entirely on his own responsibility, but we have been told that in some sort of indefinable way the British directors are in the background exercising a certain amount of influence, and, if they do, we may be quite sure that the German directors, whether they are there physically or not, are also exercising a certain amount of influence, particularly on the German manager.

I do not think it can possibly be said that the different national interests, British and German, are wholly detached from the operations of the Bank. I should have thought it was desirable for the American President to resign and make way for some neutral who could be generally trusted to take an objective view and not allow the Bank to come out with proposals with regard to the post-war world. A person cannot be on a board and say he will not go to meetings and have nothing to do with it. We cannot escape responsibility of some kind nor can the Germans, and I should have thought that in the circumstances it would have been much wiser for the British and American representatives to have come out.

What is the reason for desiring to remain in? My hon. Friend was not far from the truth when he suggested that it was because we had a certain amount of money invested in the Bank, and the Chancellor is naturally interested in finance wherever he can see it, even in the most exceptional places. After all, when we win the war we can do what we like with Europe, with the Bank or anybody else. We can dictate our own terms. It is a mere illusion, and a banker's illusion, to imagine that by associating with this Bank we are protecting our financial interests in any way. My right hon. Friend should look further into this difficulty and see whether he feels that at this stage we should remain in any way associated with a body which presents a united front among enemies and allies, working together in the financial sphere and putting forward some scheme for the post-war world. It seems to be all wrong and I hope we shall put an end to it.

Mr. Hely-Hutchinson, (Hastings)

The hon. Member for North Lambeth (Mr. G. Strauss) based a good deal of his fears and suspicions about the Bank for International Settlements upon what he described as this very important report. If, by any chance, that report was not particularly important in the relevant sense of the word, a good deal of his case would fall to the ground. I think that one of the strongest currents of feeling which has prompted this discussion is that general feeling of suspicion about anything that carries the name of bank. It has often been a source of wonderment to me that those who become most excited when banks are mentioned are generally those who in the natural course of their lives have had least occasion to have practical connection with banking. It do not think that this Debate about the Bank for International Settlements, as evidenced by the speeches we have heard from the other side, has been any exception to that general rule. Members of Parliament are not unique in this respect. Even the most spiritually-minded persons exhibit the same symptoms as we may observe from orations we have recently heard at places as far apart as Bradford and the Albert Hall. In passing, may I say that I did happen to notice in the newspapers that the ceiling of the Albert Hall was giving way? I do not know whether it is possible that some of the things said there the other afternoon proved too much for the structure of that solid Victorian building.

Mr. McKinlay (Dumbartonshire)

It is the first time the Lord has been inside the place—that is why.

Mr. Hely-Hutchinson

As my hon. and learned Friend and namesake the Member for Ilford (Mr. G. Hutchinson), for whose excellent speeches I so often get the credit, has said, we have to consider this matter objectively, and there appear to be two points at issue. One is the assets, the money interest that we or our nationals have at stake in this Bank, both our stock interest and our deposits. Will those interests be benefited by our getting off the Board of the Bank, or will they be harmed? I should have thought that in so far as our interests can be protected by having British representatives there, we should be better off if we keep representatives there. But if we do not, what is proposed? Is it suggested that we should hand our representation over to the American chairman, and ask him to look after those assets for us? If so, I should imagine that he would say, "Thank you for nothing." And we cannot, after all, in any way control the decisions which our American friends may take with regard to this Bank.

The second point is the question of whether the Bank for International Settlements is likely to be a useful instrument in post-war times. Certainly, even with the most uninformed minds, one would think it is likely to be, but it is rather a technical matter, and I should think that the Chancellor of the Exchequer would, naturally, be guided by expert opinion thereon. I should imagine he would naturally consult the Governor of the Bank of England, and possibly people in the Treasury like Lord Keynes and Lord Catto, who really do know something about this subject. I hear some signs of dissent, and I have no doubt, for instance, that the hon. Member for Lowestoft (Mr. Loftus) would desire the Chancellor to consult His Grace the Duke of Bedford and Major Douglas.

Mr. Loftus

Can the hon. Member quote any speech or any statement I have ever made in my life advocating the policy of Social Credit? I challenge him to do so. I challenge him also to withdraw his statement if he is not able to give the quotation.

Mr. Hely-Hutchinson

I have in mind a number of cases where the hon. Member has advocated the doctrines which are set forth by a body called the Economic Reform Club, which I think is largely associated in most people's minds with the principle of Social Credit.

Mr. Loftus

The Economic Reform Club advocates no specific remedy of any kind, and its lists of vice-presidents and supporters include all classes of economists. I again ask the hon. Member to substantiate his charge or to do the usual thing and withdraw it.

Mr. Hely-Hutchinson

I think that matter will have to settle itself by reference to the OFFICIAL REPORT. To sum up this whole matter, it appears to be rather in the nature of a storm in a tea cup. I hope that my right hon. Friend the Chancellor of the Exchequer will so regard it, will dismiss it quickly from his mind, and charge his mind with the very much more important matters which we have asked him to undertake in connection with the winning of the war.

Sir Patrick Hannon (Birmingham, Moseley)

I think in justice to the President of the Bank for International Settlements that a statement which is embodied in the very opening of its report ought to be made known to the House. The President there says: In its activities the Bank has always adhered to the spirit of scrupulous neutrality which it laid down for itself in the autumn of 1939, avoiding all transactions whereby any question can possibly arise of conferring economic and financial advantages on a belligerent nation to the detriment of another. In fairness to the author of the report, who, as far as one can gather from the context, prepared the report entirely on his own authority, that qualification ought to be brought to the notice of the House. It is said that the post-war policy suggested in the report is not favourable to the interests of this country.

One of the dominant considerations for this country at the close of the conflict will be the adjustment of our international trade. This report is very exhaustive in many respects and is very educational to those who have gone over the graphs which have been prepared and over the figures, which have been brought up to the end of March of the present year. It will be a distinct advantage to this country if we retain our membership of the Bank for International Settlements. The small part taken by the Bank of England at the present time in the activities of that organisation is of no consequence, but after the war it will be most important that this country should be represented upon it.

Mr. Bellenger (Bassetlaw)

I always feel when I take part in Debates on high finance that I am somewhat at a disadvantage. We have had the wisdom of the hon. Member for Hastings (Mr. Hely-Hutchinson) who seems to be an authority on these matters and who, indeed, occasionally works overtime on Sundays in giving the readers of "The Times" his views. We represent the British taxpayers and I have an idea that the taxpayers have some interest in the Bank for International Settlements. Therefore, we may be forgiven if we take a certain amount of interest in the subject, although it may not be the most enlightened interest. Is that our fault? I do not think so. Here we have the Chancellor of the Exchequer, the representative of the taxpayers of this country. Yet on occasions when we have tried to obtain some enlightenment from him in this House, he has affected to know nothing whatever about the doings of the Bank for International Settlements. When we questioned him recently about the report of the Bank for International Settlements he said he knew nothing about it. Now we know that the report was all the time in the hands of the Ministry of Economic Warfare. Whatever be the upshot of this Debate, perhaps the Chancellor of the Exchequer will allow us to suggest he might co-operate a little with other Departments of the Government before he comes to this House to deny all knowledge of these subjects. He should consult other Government Departments, in which case he might be able to give us a little more information.

What is the report which we are discussing? I regret to say that we know very little about it. Of course, the Chancellor of the Exchequer knows nothing about it. Perhaps he may have got some enlightenment since he has been consulting with some other Government Departments. [HON. MEMBERS: "It is in the Library."] If we want to know anything about the report we must turn to the German newspapers, and in particular to the "Frankfurter Zeitung," which hon. Members will know is a very well-informed German newspaper. Long before this matter was discussed in this country this paper with all the disadvantages of the censorship that prevails, had very extensive reports and summaries of this report. I suggest that we are entitled to know something more about what is going on in the Bank for International Settlements, for this reason: We are substantial shareholders of the Bank for International Settlements. I have very little to do with limited companies, public or private, but I had always understood that shareholders were at any rate entitled to know something from the directors as to their operations in the shareholders' interests. It seems to me we know nothing, or very little, about what the Bank for International Settlements is doing.

I agree that when the Bank was originally set up it had a useful function. In effect, it was an international clearing bank, and obviously as we were taking part in international trade we had a very vital interest in it. What disturbs me is to find that Germany is the largest shareholder in this Bank. What also disturbs be is to find that of the total number of shares issued, of which we hold I think something like 19,772, the United Nations in the aggregate control some 47,000 shares and the Axis nations some 152,000 shares of the Bank for International Settlements. Is there any international trade at present between the United Nations and the Axis nations? If so, I could quite understand that there would be a very good reason for the Bank for International Settlements functioning. But I understood it was prohibited by the law of this country for British nationals to have any dealings with enemy nationals.

The report so far as I have seen it, or extracts from it, to a large extent enunciates views with which I should be very much in agreement. I have no fault to find with some of the views it expresses on after-war trade. I think they are most enlightened views. The only doubt that remains in my mind is how far does Germany, through its German directors, subscribe to those views. I cannot believe for one moment that the German directors and the German interests agree wholeheartedly with the views which have been expressed by the American President of the Bank for International Settlements in this report. Therefore, I think it is the bounden duty of the Chancellor of the Exchequer to give this House a little guidance, to tell us a little more about the mysteries of this Bank and not merely to wash his hands of the whole affair like Pontius Pilate—as he has apparently done when questioned in this House. I want to know what is happening to the 26,500,000 Reichmarks which belong to this country. It is a strange thing incidentally that we should have our investment in Reichmarks; I should have thought they might have been in something more substantial than that, dollars perhaps, or what about the pound sterling? Where are the Reichmarks invested, and if they are invested in Germany, what is happening to these deposits? It is up to the Chancellor to enlighten this House a little more than he has done.

I do not want to raise any question of a mare's nest. I want to examine the matter from the same angle as my hon.' Friend the Member for Hastings (Mr. Hely-Hutchinson) did—the cold financial angle, the utility purpose of the Bank for International Settlements—and to dissociate from it sentiment and winning the war and all that sort of thing. Facts are what we want. The Chancellor of the Exchequer has been very chary of giving us facts when we have pressed him in this House. My hon. Friend the Member for Ipswich (Mr. Stokes) and my hon. Friend the Member for Stoke (Mr. Ellis Smith) have put questions to him. We have extracted some information, but only under great pressure. There used to be another international institution, which also had something to do with Finance, and with morals as well. That was the League of Nations. The League of Nations was founded on an excellent theory, far more excellent than that of the Bank for International Settlements. That theory is in abeyance for the duration of the war, apparently, for very good reasons. If the Bank for International Settlements is to remain for the duration of the war, with our directors on its board, we want to be quite sure that any statement of policy issued by the Bank, whether signed by an American president or subscribed to by the German director, coincides with the policy of His Majesty's Government. I believe there is too much going on at present which this House would repudiate if it knew all the facts. I want the Chancellor of the Exchequer, as one of his colleagues on the Treasury Bench once said, to "come clean" with the House and to tell us something of the facts, about which the House and the country must, otherwise, remain in darkness unless they turn to the German newspapers.

Mr. Ellis Smith (Stoke)

This is a democratic assembly, where we can pool our ideas, in order to reach mutually-accepted conclusions. In the development of democracy in this country, we have been prepared to give one another our pledge to do our duty in accordance with our understanding of that development. But to be addressed in the superior manner adopted by one hon. Member today is not conducive to that democratic method of debate. The hon. Member spoke strongly, and I want to speak equally strongly. I am relatively young, and yet for the second time in my life we are involved in a world war. Let me assure the hon. Member and all who agree with him that we represent forces in this country and in the world at large that are gathering strength. We have had the benefit of the educational facilities now available to the ordinary people of this country. We cannot go into this matter to-day, but many of us would welcome an opportunity of threshing it out with people in any part of this House who adopt that superior attitude. I understand that the German Press reported on the Bank for International Settlements before we knew anything about it in this country. If that is so, this House is vitally concerned. I and other hon. Members received a letter from the Chancellor, dated 3rd October, 1942. I do not want to read the whole letter, but here are the relevant passages: It is the fact that neither the Treasury nor the Bank of England have received or have seen a copy, but I find that the Ministry of Economic Warfare had one. This is the only copy that: has been received so far as I have been able to discover, and it has only just been brought to my notice. I readily accept that, but it calls for some explanation. It is an indication that in the fourth year of the war effort there is not the co-ordination between the Departments there ought to be and that there is a certain amount of inefficiency, and it certainly calls for an explanation. This report gives, on the back of it, the names of the directors, and only four of these can be described as neutrals in this war. In addition, several of the executive officers of this Bank for International Settlements are bound to be opposed to this war. Perhaps the Chancellor will take that cynical smile off his face. [HON. MEMBERS: "Order."] It is time that that was said, because we have had to put up with it too much during the past 12 months when considering questions, as many of my hon. Friends will agree. We are entitled to ask whether these people are meeting in any way and whether, if it is true that the directors are not themselves meeting, their representatives are meeting, and are communications taking place between the Nazi Powers and the representatives of our own people? On page 5 of the report the President says: I its activities the Rank has constantly adhered to this principles of scrupulous neutrality. I would ask the right hon. Gentleman or any Member of this House whether he believes that. There can be no neutrality with the Axis; therefore we ought not to be associated with them in this way. We should not even allow our names to be published along with the names of Nazis in this report.

Sir P. Hannon

Would the hon. Gentleman say in what respect there has been a departure from the neutrality defined by the President?

Mr. Smith

I will deal with that later I find from the report that the French Government have paid as occupation costs an amount exceeding all the budgetary expenditure of France. How can there be strict neutrality on the part of representatives of a country which is responsible for carrying out a policy of that kind? The Nazis have broken every international obligation, and yet the Chancellor of the Exchequer has answered Questions in this House to the effect that he believes that they observe the strictest neutrality. We all heard the recording of the speech of the Prime Minister last night. It was a scathing indictment of the Nazis. It was a good speech. But how can we applaud a speech of that kind and at the same time try and reconcile this report? How can we applaud a speech of that kind and yet at the same time say that this Bank has observed the strictest neutrality?

An answer which the Chancellor has given to a Question on this subject was: I am satisfied that the Bank conducts its affairs on the basis of strict neutrality. There cannot be strict neutrality of any kind where the Nazis are involved, and it needs some understanding, and will need some explaining to the people of this country, why we should be associated with a Bank that is dominated by the Nazis or with representatives of the country dominated by them. The Bank for International Settlements gave us a nasty blow in 1939. Many of my hon. Friends will remember the great controversy that raged in the House just prior to the handing-over of the Czechoslovakian gold reserves. I suppose some people would describe that as maintaining strict neutrality. A study of the Bank's report facilitates an examination of the British economic position, and in a war in which we are fighting for everything that is worth while we should not be associated, as I have said, with an institution that is dominated by enemy representatives and which facilitates an examination of the British economic position. We ought immediately to withdraw from it.

I remember a former President of the Board of Trade introducing the Bill which made it illegal for industrial concerns to maintain their relationships with enemy countries. Members on the other side who are directors of industrial concerns remember that immediately on the outbreak of war all relations of an industrial character had to be broken off. We all remember how we suffered as the result of the pre-war cartel arrangements with certain big concerns in Europe.

It being the hour appointed for the interruption of Business, the Motion for the Adjournment of the House lapsed, without Question put.

Question proposed, "That this House do now adjourn."—[Major Sir James Edmondson.]

Mr. Ellis Smith

We are still suffering as a result of these arrangements, particularly as regards aircraft. How can the Chancellor reconcile the introduction of such a Bill as that with the statement that our financial arrangements should be maintained through this Bank? I remember in 1936 the jeers and sneers we had to contend with when we raised a certain issue regarding Ribbentrop. Now it is obvious who was right. The Anglo-German Naval Treaty and the activities of Ribbentrop were a victory for German diplomacy just as this is a victory for German diplomacy, and in my view it should be repudiated in unequivocal terms. I thought I was the last speaker before the Chancellor, but as I believe other Members want to address the House, I will conclude by saying this: After the war we shall be faced with a serious economic situation throughout the world. In the view of the movement to which I belong and the people in the country, the only way forward will be by a policy of economic co-operation. That policy ought to be based upon an understanding that is being worked out now by the United Nations. There is a conflict between a policy of that kind and the policy contained in this report. Had there been more time I would have dealt with this matter in more detail, but I want to say, in conclusion, that I believe the people of this country, when they know that we are still parties to the Bank for International Settlements, will be satisfied with only one action, and that is the complete severance of our relations with this Bank on which the Nazis are represented.

Mr. Loftus (Lowestoft)

I intervene in the Debate for two reasons. In the first place, I want to put a point to which I hope my right hon. Friend the Chancellor of the Exchequer may be able to reply. We have been told that this report was drawn up by the President of the Bank for International Settlements, an American citizen. I understand that the term of office of the President of the Bank is nearing completion, and I want to put this point. Supposing that his successor is a neutral or a belligerent whose sympathies are heavily with the Nazi system, and supposing that the next report is drawn up by such a President merely as Nazi propaganda, what will be our position then, having two directors closely associated with the British Government on the Board of the Bank?

I had not intended to intervene in the Debate. I have not, for a certain reason, had the opportunity of speaking in this Chamber for some six months, and I did not intend to speak just yet, but I am compelled to do so by the attack made upon me by the hon. Member for Hastings (Mr. Hely-Hutchinson). It was quite unprovoked. I was sitting here quietly and then simply intervened to ask one question of the hon. and learned Member for Ilford (Mr. Hutchinson), and the hon. Member for Hastings suddenly attacked me. I cannot understand why. He is a bank director. In my speeches in this House, and in my writings, I have gone out of my way to testify to the ability and integrity of the management of the joint stock banks, The hon. Member accused me of being an advocate of the solution known as the Douglas Social Credit system. In my first speech in the House I made it clear that I did not advocate that solution, and since then I have made that clear in speech after speech. Then I challenged the hon. Member to withdraw or substantiate his charge. He attempted to do so. How? He said I was vice-president of the Economic Reform Club, which advocated the Douglas Social Credit system. I share the vice-presidency of the Economic Reform Club with distinguished Members of the Upper House—Lord Northbourne, Lord Sempill—and also with Lady Snowden, and others. The constitution of that Club specifically lays down that it does not advocate any particular solution. I told the hon. Member I have been a Member of the House longer than he has. I have never known an hon. Member who made a charge and who, when challenged to substantiate or withdraw it, has not withdrawn or definitely proved his charge. I must say that I am surprised that the hon. Member did not behave in accordance with the usual great traditions of this generous House.

The Chancellor of the Exchequer (Sir Kingsley Wood)

I am sure that we all welcome back the hon. Member for Lowestoft (Mr. Loftus). While I do not want to intervene in the controversy, I know that he has had a very severe time during his absence from the House, and I wish to say how glad we all are to see him back again.

I welcome the opportunity of saying a few words on this matter, not because I think the country is disturbed about it, but because I think that if the reports of the Debate were circulated without any reply from me, there might well be some misapprehensions about the position. What we have to consider to-day is whether any circumstances have arisen which should cause us to sever or alter our association with the Bank for International Settlements as at present constituted and conducted. What is the present position as I know it and as I am advised? Since the outbreak of the war, having regard to difficulties which must naturally arise from the constitution of a Bank of this kind, the conduct and control of the Bank have been and are to-day in the sole hands of the President of the Bank, an American citizen. [An HON. MEMBER: "Is he a partner in Higginsons? "] I could not say. He has occupied this position for nearly three years.

Mr. Mander

Is there not a German manager?

Sir K. Wood

There may be a German manager, but the conduct and control of the Bank have been his sole responsibility and duty. This gentleman has our complete confidence. We believe that, all the way through, he has adopted a policy of strict neutrality, and we believe he has honestly and faithfully pursued and effectively achieved that policy. No transactions have taken place since the war between the Bank of England, acting as a member of the Bank, and the enemy central banks forming part of the institution. There have been no business relations whatever between them. The Bank to-day in fact only carries on what may be called routine business, and the ordinary transactions which take place having regard to the circumstances of to-day. The Bank is so situated that no transaction has taken or can take place under the present arrangements which would confer any economic or financial advantage on a belligerent nation to the detriment of another.

Questions have been put to me regarding the directors, the possibility of conversations between them and matters of that kind. Since the outbreak of the war the directors have never met, and the British directors have no contacts direct or indirect or any association whatever with the enemy directors. What is the position of this country? I am only concerned with this matter from the point of view of the best interests of this country. We have considerable and substantial interests and rights in the Bank under the International Trust Agreements between the various Governments. There is the British deposit amounting to between £2,000,000 and £3,000,000. The Bank of England also have a shareholding of about £4,000,000, of which 25 per cent. has been called up. Our association with the Bank obviously brings no economic or financial advantage to the enemy. It is certain, as I said in answer to a Question to-day, that Germany pays interest to the Bank, and from the Bank's assets, of which that interest forms a part, we receive a dividend.

Why has this matter arisen again at the present time? It has been going on for two or three years. As I understand it, it is because of the issue of the recent report of the Bank. The hare was started by a writter in one of the financial papers, who obviously could never have seen the report as a whole, suggesting that the report would create a great stir in political circles, that it was wrong for British and Allied nationals to be associated with Germany and other Axis Powers in elaborating a report on post-war conditions, and that by so doing the British directors had considerably exceeded their powers. The same writer also found—and I think he is the only one who has been successful, perhaps more successful than my hon. Friend who opened the Debate—allusions in the report which could be said to favour Germany. I am glad to observe that no other paper has adopted such a view. I do not think there is any justification for any of those statements. There has been no political stir except what my hon. Friend has been able to accomplish today. The directors have had no association whatever with this report. As appears on the face of it, the report is that of the President alone. It is his sole responsibility, and no one else has had any concern with it.

I had an opportunity, as have hon. Members, of looking at the contents of the report. I should say, speaking generally, that there is nothing exciting or exceptional in it and certainly nothing to which exception can be taken. One can take passages here and there into which anyone who wanted to make trouble might possibly introduce some meaning which is critical of this country. On the other hand, it might very well be said that this report contains passages which propound ideals and objects which are diametrically opposed to German objects and policy. I was interested to observe this morning the comments of one of the well-known writers in the "News Chronicle." He said that he had had access to a long summary of the document, and wished to say a word about it. He recites how at the beginning of the report the American President at the Bank stated that the Bank had constantly adhered to the principle of scrupulous neutrality which it laid down for itself in the autumn of 1939, and says that on reading the extracts available to him he can detect in the document no signs whatever of even the slightest departure from this attitude of scrupulous neutrality. I think anyone who looked at it from an unprejudiced point of view would say that that was a very fair statement of the position. In answer to my hon. Friend opposite, who put the question to me, I certainly see nothing in the report—and I do not know whether he does; I do not think he does—which would cause us to vary or to alter our previous policy in connection with the issue of this report of the Bank.

I do not think it is material, but I shall be glad to answer the question about the issue of the report to the Press. As I understand it, the Bank for International Settlements, in accordance with their normal practice, gave out to the Press in Switzerland a summary of the report on 4th September. I suppose they held the usual Press conference and that all the Press were there, and I take it that it was as the outcome of that conference that the German Press reported the matter in their papers. I think that whatever correspondents of the British Press were there did not see that there was anything very exciting in this report, and, so far as I am aware, they gave no publicity to it. Of course, that was a matter entirely for them. Having read the report myself, I can understand that serious readers, those who are interested in a matter of this kind, would naturally prefer to see the whole of the document. At any rate, what happened was that they had the usual Press conference, and our own Press representatives there evidently did not see that sinister light in the report which other people have seen. As to copies of the report reaching this country, again I do not think that is a matter of very great importance. I did state in the House, what I understood to be the case, that no copy of this report had reached this country. At any rate, I had not seen it, and the Bank of England had not seen it.

Mr. Stokes (Ipswich)

Price, Water-house and Company had seen it.

Sir K. Wood

It turned out afterwards that one of our Departments had a copy of it. They had not informed me of the fact, thinking, I expect, that I had a copy when I had not one. There is nothing very exciting about that, either. In order that any doubts on this matter may be quieted, if it is possible to quiet them, let me say that I am informed that at about the same time as the Press summary was given out by them, the Bank for International Settlements posted copies of the report to this country. Some few weeks later they posted copies to Germany, the intention being that the copies should arrive at both central banks at about the same time. I hope nobody is going to complain about that. It only means that the post has been slow, delayed or something of that kind. In fact, the copies that were sent to the Bank have not yet arrived.

I was asked about the shareholding of the Bank. I do not think that that has any relevance to our attitude, although we are concerned with the preservation of our own assets. I gave an estimate, on the basis of the original distribution of the shares, that the Axis interest would be in the neighbourhood of 50 per cent. Since the war some of the central banks have been transferred to this country and the status of others is doubtful. Therefore, estimates can legitimately vary on this matter. The exact proportion, whether it is 50 per cent., 60 per cent. or 70 per cent., is, from my point of view, immaterial. In fact, the shareholders have no rights of control under the constitution of this Bank, in the sense that they are not at the general meeting; and the general meeting does not elect the Board and does not control the policy of the Bank.

My last few words to those who are interested in this matter are that, in my judgment, nothing would be gained and much might be lost if we attempted to sever our relationship with the Bank, as at present controlled and constituted. The neutrality of the Bank has been maintained by the control of the President and by our membership. It might very well go if we went. If we were able to withdraw our directors, it would obviously be easy for the persons concerned, particularly if the American President of the Bank were to disappear, to call a meeting of the directors and for the assets to be dealt with very differently from the way in which they are being dealt with to-day. I can, at any rate, say that if we were to withdraw, the position of the President would undoubtedly be affected. There would be every prospect then of the whole of the assets of this Bank falling entirely into the hands of the Axis. There is no way, under the constitution or otherwise, by which we could ask the Swiss to look after our interests in this connection.

There is another aspect of the matter which I hope the House will consider. Some of our smaller European Allies, in particular some of the countries occupied by Germany, might very well be liable to suffer loss, in consequence of our withdrawal. They might have their interests imperilled, just as we should have our interests imperilled, if we withdrew, quite apart from the possible loss of the Treasury interest in the Annuity Fund and the shareholding of the Bank. Under these circumstances, the Bank might very well become an Axis-controlled institution. The Germans would be able to put pressure upon it which would imperil all its assets, and Germany might find means of using them for her own war purposes—not only those invested in Germany, but those in other countries, and our retirement would in fact remove the most effective safeguard that the Bank's substantial holdings in Europe will continue to be administered according to strictly neutral principles and for strictly neutral purposes, and we would run the risk of a hitherto neutral institution of not inconsiderable wealth becoming an enemy institution with all its consequences.

I would only say this, in conclusion, to my hon Friends: I have emphasised throughout that this is our policy, so long as the Bank is constituted and conducted as at present—and I need hardly assure the House that I have no interest other than to see that those of our country and our Allies are served—and I will see this matter is carefully watched. If there were any important changes or alterations, the matter would undoubtedly be reviewed again, and any decision that might be arrived at would have to be arrived at in the: light of any new position that might arise. I feel quite confident myself that in present circumstances we are serving our best interests and those of our Allies in the policy we have taken up, and cenainly nothing has happened, either in the report or in the events of the last few days, in my judgment, to make us alter our present policy and the way we conduct our affairs in relation to it.

Mr. G. Strauss

May I ask one short question, because the Chancellor apparently contradicted himself in his statement, and I think we want to be clear? I understood that he said the deposits at the Bank earn interest in Germany or elsewhere and that that interest helps to pay Great Britain interest on our deposits at the Bank. [HON. MEMBERS: "No."] I am sorry if I am mistaken. That would be in contradiction to the answer he gave.

Sir K. Wood

If the hon. Member will put a Question down, I will certainly answer it.

Question, "That this House do now adjourn," put, and agreed to.