§ 2.14 p.m.
§ Mr. Molson (The High Peak)
May I begin by apologising to the Minister of State if I leave before the conclusion of his speech, but it is because I have a long-standing speaking engagement in the country which I am anxious to keep. There are many projects before the country for the general improvement of our social and economic life. I am as anxious as any optimist in the House that after the war we shall not be worse off than we were before the war, and that our standard of life should not be any lower. But there are some results which are following from the war which will make it necessary, if we intend to regain even the 2314 standard of living we enjoyed in 1938, to increase our exports to a level far above those which were reached in the year 1938. in that year the excess of our imports over our exports was £388,00,000, that is, so far as goods were concerned. Income from the services of our shipping and commissions of various kinds, especially banking and insurance, amounted to £135,000,000, so there was an adverse balance of trade of £250,000,000. The interest upon overseas investments, which we as a nation inherited from past generations, brought us in £200,000,000. In order to make up the remaining gap of £50,000,000, we were already, in 1938, selling our overseas investments at the rate of about £50,000,000 a year. So, before the war, we were living upon capital to the extent of £50,000,000 per annum.
The changes that have been brought about by the war are of a very serious kind. Lord Kindersley estimated that the nominal value of our overseas investments in 1938 was £3,725,000,000, and the White Paper laid before this House at the time the Chancellor of the Exchequer opened his Budget this year showed that what had been liquidated in order to buy the food, the raw materials and armaments required during this war, amounted to £3,128,000,000. So if it be permissible to subtract what capital assets we have liquidated daring the war from the nominal assets we possessed before the war, there now remains to us about £597,000,000. As a matter of fact the position is not really quite as favourable as that, because the estimate for 1938 was based on the nominal value, and a very large proportion of our overseas investments were already not worth as much in the market as their nominal value. The position is probably more unfavourable also, because what we have sold in order to meet our commitments in the United States of America and elsewhere have, on the whole, been the best of the foreign investments we held, so that the estimate of £597,000,000 remaining to us is probably more favourable than the facts really warrant.
In addition to that it has been stated by Lord Keynes in the United States that there have accumulated against us in this country sterling credits owing to other countries, amounting approximately to 2315 £3,000,000,000. Therefore, if it be permissible again to deduct our sterling liabilities from our remaining overseas assets, it would suggest we are in deficit to the extent of £2,403,000,000. This, no doubt, is what the Washington correspondent of the "Wall Street Journal" had in mind when he said, in a message quoted in to-day's "Financial Times," that this country is now "broke." If that be the case, that we have these great liabilities, it is not only a matter of prudence for us to try to conserve such of our overseas investments as remain to us, but it is an obligation of honour upon us in the interests of those to whom we owe very large sums of money.
I have raised this matter to inquire what is the attitude of His Majesty's Government to this whole question. I had at one time thought it was a matter on which the Treasury would have replied, but I am glad to see here my right hon. Friend the Minister of State, who no doubt will be able to reply on their behalf as well as on behalf of the Foreign Office. But the Chancellor of the Exchequer is deeply interested in these overseas investments, and for two reasons. In the first place he is interested for the purpose of balancing his Budget. When we have Income Tax at the standard rate of 10s., he can expect to derive for the support of his Budget 10s. in every from the dividends paid. Therefore, from a purely Budgetary point of view, he is very much interested in the preservation of our overseas investments, and in ensuring that they remain or become revenue producing.
There is another responsibility which the Chancellor of the Exchequer has which makes him still more interested in these overseas investments. He has to see to it that this country as a whole has enough in the way of foreign currencies to buy the food and the raw materials and everything else which we have to import from overseas, and I do not think it is only in time of war that he will have to maintain a control over exchange. At the present time the whole of the income in Canadian dollars which is received by residents in this country is acquired by the Bank of England. The owners of these Canadian securities receive sterling in this country, and the Canadian dollars are available to His 2316 Majesty's Government for the purpose of buying food, munitions and everything else which has to be imported from Canada. Exactly the same applies in the case of all these other investments, and particularly in the case of South America, from where we import so much of our food. Therefore the Chancellor of the Exchequer is interested in this matter, not only from the point of view of his Budget but also from the point of view of the foreign exchange which it makes available for the purchase of our imports.
In spite of these two facts, I must say that down to the present time, I cannot see that His Majesty's Government have taken any Very great interest in the protection of our overseas investments. There exists at the present time the Council of Foreign Bondholders, and within the comparatively narrow scope of its activities it has done all that it can. I am not quite sure how much support it has obtained from the Foreign Office, but the scope of its activities is limited to the bonds that are issued by foreign Governments. It is not concerned with debentures issued by foreign companies, nor is it interested in investments in railways. I am asking this afternoon that the Government should state it to be their policy to give reasonable support and protection to the investments which this country holds in overseas countries.
Although I have indicated the limits of the scope of the Council of Foreign Bondholders, I shall not preclude myself from giving examples which fall within its realm where, as at present advised, I cannot see that His Majesty's Government have given the support which might have been expected. Let me take in the first place the case of the Republic of Costa Rica. The Government of Costa Rica has been in default since 1937. In 1939 the imports of that country were only half the exports, and therefore there must have been ample sterling exchange available to cover the service of that debt. What steps have our Government taken to insist upon the Government of a country which has benefited so much from the market this country provides, paying its debts? The Council of Foreign Bondholders, in its report for 1943, said:The Costa Rica Government has shown no inclination to negotiate a settlement.2317 Has any pressure been brought to bear upon the Costa Rica Government by His Majesty's Government? Similar considerations apply in the case of Brazil and Salvador. A rather different question arises there. A debt has been owing in dollars to the United States of America. These issues were admittedly junior to the debts owing in sterling to this country, and in the negotiations that have taken place, the results of which have been put into effect, the junior dollar issues have been brought in pari passu or even superior to the sterling debt. Again J would ask what the Government have done about that.
I pass from South America now to Spain. There is there a large company called Barcelona Traction. It is a Canadian company, but the debentures are sterling debentures which were raised in this country. There has recently been an increase in trade between Spain and this country, and we are given to understand also that General Franco and his Government are anxious to show their good will towards us. In spite of that fact a junior peseta debenture has received payment of interest upon it, while the sterling debentures which are held in this country have not been paid. I come to the most striking case of all, the Argentine. There is a Government which has always had an extremely good record. In the case of the railways the position is entirely different. Let us for a moment look at their record. This country has made savings and has sent them out to the Argentine in the form of steel rails, rolling stock and locomotives, all manufactured in this country. As a result of the development—
§ Mr. Molson
The point I was trying to make is that individuals have saved money in this country, and have lent it in the City of London, and the actual export has taken the form of steel rails from Middlesbrough, and rolling stock and locomotives, which has given employment to our people in the North of England. As a result there 2318 has been a development of virgin parts of the earth, which has been to the advantage of this country as an industrial country, and to the advantage of the Argentine, which has thereby been developed. Food from the Argentine has been made readily available to the markets of this country, and those industrial workers who produced the locomotives and the rolling stock have subsequently been fed by the food from the Argentine. The Argentine has benefited from that investment in the Argentine. The investor in this country was entitled to expect an interest on his savings invested in that way. The Chancellor of the Exchequer benefits from the interest obtained upon those savings.
§ Mr. Cove
Is it not a fact that this was one of the risks taken by private capital in investments abroad? This is the risk of ordinary capital investment. It was not the Government of Great Britain who invested abroad, it was private individuals. I thought that one of the glories of capitalism was that it was prepared to take these risks, in the interests of progress.
§ Mr. Molson
The hon. Member has made two points, one of which I thought I had dealt with earlier in my speech, when he may not have been present, and, as to the risks, I am coming to them. Perhaps the hon. Member will then be able to put his point—if there is one left for him to put. The present position is that the present market value of the nominal investment of £250,000,000 in the Argentine, is one-third of that amount, about £85,000,000. I come to the question of why there has been no interest paid upon either the ordinary or the preference shares while all the debentures except one are subject to a moratorium. There are various reasons. I suggest that they are due to a somewhat unreasonable attitude on the part of the Argentine Government. The first is a refusal to allow an increase in rates. In the case of the Buenos Aires transport, the rates which are being charged in 1944 are the same as those which were charged in 1914. I think the hon. Member for Aberavon would agree that it is a little difficult to ask any enterprise, whether privately owned or nationalised, to bear the increased burdens of the last 30 years while allowing it only the same income as it had in 1914
§ Mr. Shinwell (Seaham)
Would it not have been much better for British industry, and for the industrialists and the investors on whose behalf the hon. Member is making a case, if they had invested their savings in the Empire, which, incidentally, I understand is the policy of the young Tory group?
§ Mr. Molson
I would not disagree with the hon. Member for Seaham (Mr. Shinwell). I have listened to some of his recent speeches about Empire development with an enthusiasm which has made me anxious that he should cross the Floor. Surely such a stout and resolute supporter of British industry and of national interests would agree that, where this development has taken place in the past, we are entitled to ask that our Government should ask the Argentine Government to accord fair and reasonable treatment to the investments?
I pass from the increase in rates to a case of exchange discrimination. In the Argentine they have introduced differential rates of exchange, which are unpleasantly reminiscent of the technique of Dr. Schacht. Instead of having pounds and pesoes sold against each other at the same rate of exchange, for whatever purposes the currency was required, there was a controlled price of 13.5 pesoes to the pound. If it were desired to obtain pounds sterling in order to buy British coal—I have an idea that very good steam coal comes from the Aberavon constituency—there, the—