HC Deb 23 April 1947 vol 436 cc1205-14

Motion made, and Question proposed: That the Clearing Office (Spain) Amendment Order, 1947 (S.R. & O., 1947, No. 590), dated 31st March, 1947, made by the Treasury under Sections r and 3 of the Debts Clearing Offices and Import Restrictions Act, 5934, a copy of which Order was presented on 3rd April, be approved."—[Mr. Glenvil Hall.]

Mr. Driberg (Maldon)

Before we approve this Order, could my right hon. Friend tell us a little about it, and what are its implications? Does it bind us in closer commercial and friendly relations with General Franco? What is it all about?

1.9 a.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

This Order removes the obligation at present placed upon United Kingdom importers to pay their debts to the Anglo-Spanish Clearing Office. That Clearing Office was first established in 1936 under a payments agreement to collect debts due to United Kingdom creditors from Spain. Of course, during the civil war, the Clearing Office was suspended, but it was revived in 1940 by an Anglo-Spanish Trade Agreement. That Agreement has now been superseded by a Monetary Agreement and an Order has been made which is similar in kind to one made recently in respect of Turkey. Agreements have in the past two years, been made with most other European countries in very similar terms.

The agreement is quite a good one from the point of view of this country, particularly now that we have the Exchange Control Act on the Statute Book. We a re now able to control currency transactions between this country and Spain under the provisions of that Act, through the banks, which is a much more convenient method than was previously the case under the Clearing Office arrangements, through imports in the normal way. The agreement provides that each Government shall hold £2 million worth of currency of the other country, and, in addition, the Spanish Government have undertaken to hold an extra sum in sterling. In the next few years, this is going to be of great benefit to us. We import quite a number of things from Spain which are necessary to our economy. For example, we import iron ore, including high grade ore, pyrites, potash, mercury, cork, and other raw materials, to say nothing of foodstuffs like oranges (including oranges for marmalade), dried fruits, tomatoes, sherry, onions and various other things which come to us from Spain, and which we are very glad to have and will continue to want for some years to come.

Finally, may I quote a passage from a speech made by my right hon. and learned Friend the President of the Board of Trade dealing with this matter. Last year, when our relations with Spain were under discussion, he said: It is the policy of His Majesty's Government to develop and expand their export trade with all foreign countries. Notwithstanding the character of the present Spanish régime, on which the views of His Majesty's Government have been made known, this policy holds for Spain also. We import from Spain a quantity of foodstuffs and other commodities which are essential to our economy Therefore, as the agreement is a favourable one, and as we get from Spain a number of imports which we badly need at the present time, I hope that the House will agree to this Order. The Order does not do away with the Clearing Office entirely, because there are still some debts to be cleared through it, but it will, in the main, be superseded by the new Monetary Agreement which I have explained in broad outline to the House.

Mr. Driberg

Before my right hon. Friend resumes his seat, could I ask him—although, of course, we are glad to get these imports—whether he would not more gladly get them from a Republican Spain than from a Spain controlled by the bloodiest and meanest Fascist tyranny that still exists?

1.14 a.m.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

The Financial Secretary has said that this agreement is favourable to ourselves. I do not wish to' go into the politics of it, because that is something outside this Order, but I would suggest to the right hon. Gentleman that there are a great many factors in this agreement which are far more favourable. I would ask the House to consider some of them tonight. In the first place, we are now abrogating the agreement which set up the Clearing Office in 1936 and whose working was substantially amended in 1940. We are asked in this Order to leave it to His Majesty's Government, in consultation with the Spanish Government, to settle all outstanding debts. I think that the Financial Secretary might have told us something about the position in regard to the debts at present in the Clearing Office.

I spent some time this afternoon in the Library trying to work through all the Clearing Office Orders, and it seems to me that it would need quite a lot of disentangling to get the position back to normal. We should be told something of the position which His Majesty's Government wish to take with this Order, what they propose to do, and what is the sum which they hope to receive or may have to pay. I would like the Financial Secretary to tell us what is actually the credit or the debit with the Clearing Office, what His Majesty's Government propose to do with it, what negotiations they have had with the Spanish Government, and what is their proposal in this matter.

The next question is, why have the Government agreed to this rate of exchange? The rate of exchange set out is 44 pesetas to the £. No one who has any knowledge of the true value of the Spanish peseta would imagine that such a rate is favourable to this country. It is utterly unfavourable, and represents something like 50 per cent. of the true value of the £ against the peseta in the free market. Why have the Government agreed to this rate of exchange? What justification have they? With whom have they consulted? Why have they done this, which is penalising the trade of this country with Spain? I would like the House to remember that we have a great adverse balance of trade with Spain at the moment. I think I am right in saying that in 1945 our adverse balance of trade was something like £1 million, and that in the last year it was £9 million. That adverse balance could be materially affected by getting a proper rate of exchange for the peseta. Why has nothing been done about it? Why do the Government say it is favourable to accept this rate of exchange?

I pass to the item called the equalisation account. Under that, as I understand it, in Spain and in England there is to be set up a fund which at no time is to excede £2 million in credits due to either nation. If it goes above that sum, gold is to be made available to the country which has that credit. If that is so, how do His Majesty's Government think this agreement is going to be favourable to them? The Financial Secretary has reinforced my fears by saying we need goods from Spain badly. I do not think the Financial Secretary would be prepared to tell the House that we can anticipate a favourable balance of trade. Yet we agree that £2 million shall be the maximum balance of credits to be held by either country, and that anything beyond that has got to be provided from gold. If we take the figures in the Trade and Navigation Account, we see that it means this country has to provide £8 million of gold each year to General Franco in exchange for trade. Does the Financial Secretary consider that a satisfactory bargain for this country? If so, why? It may well be that there are considerations outside what I have said.

The agreement goes on to say that sterling balances shall be payable at any time by His Majesty's Government in full or in part by the payment of gold. I hold no brief for General Franco. All I would say—and I hope hon. Members will not misinterpret what I am saying—is that I would much rather have General Franco than Mr. Negrin. But why should we make this sort of agreement about the settlement of sterling balances with Spain of all countries? How can we afford to pay off Spain when we have an adverse balance of trade, and when we have this convertibility liability? Where are we to get the money from? If this is the way we are to deal with hard currency and our gold reserves, no wonder we shall be faced with an economic crisis in the next few months.

Finally, I want to raise one question on Article 9 of this agreement, which says that, as soon as possible, we are to make an arrangement for the convertibility of current trading debts into, not only currencies outside the Spanish area, but, particularly, hard currencies. What does the Financial Secretary estimate this will cost this country in this financial year, which will be only a part year, and in the first full financial year after this agreement comes into operation? We on this side of the House have tried to bring home to His Majesty's Government that these financial agreements they are making about convertibility, these clauses they are putting in about sterling balances, and these arrangements they are making for paying gold over when they have an unfavourable trade balance, are things which are draining the very lifeblood away from this country.

Here, above all, is a case where we are doing it to Spain, which, in view of her political record, is, I think, a country which should have no prior consideration in settling our payments. Spain did nothing to help the United Nations during the war. When I hear the Financial Secretary say he considers this agreement satisfactory to His Majesty's Government, I can only come to the conclusion that His Majesty's Government have no real intention to try to face the grim situation with which we are faced, in which it is necessary for us to guard our dollars and gold with the utmost care, and to try to see ourselves through the very difficult years that are coming. I must say, I should be very loath to see this Motion pass the House unless some Member from the Front Bench opposite can give us a much more satisfactory reason than those advanced by the Financial Secretary.

1.22 a.m.

Mr. David Eccles (Chippenham)

I have some interest In this agreement, because, on behalf of the Minister of Economic Warfare, now the Chancellor of the Exchequer, I negotiated the agreement of 1940, which took five months. That agreement is now being replaced by the one which we are discussing tonight. It is a very interesting fact that, I suppose, the only right hon. Gentleman—I would almost say the only Minister in the world—who has the distinction of lending to General Franco is now borrowing from one and the same man: that is the Chancellor. I would point out that it has worked very well until now. I have, I suppose, as intimate an experience of General Franco and his Government as any other hon. Member, having struggled with them on behalf of my Minister day in and day out for months. I do not wish to say anything about a foreign Power, except that I am glad that I have exchanged my job and am now an hon. Member of this House.

Under the agreement of 1940, which is now being altered, Britain collected the whole of the debts owed to private persons in this country previous to the civil war breaking out in Spain. No other country in the world, with the possible exception of Portugal—and I am not sure whether that is an exception—was paid by the Franco regime what they were owed before the civil war. They did not pay Germany, and Germany fought for Franco in the civil war. Franco Spain did not pay Italy. They have not paid the United States, in spite of the oil squeeze which the United States have put on from time to time. But they did pay the whole of their pre-civil war debts to this country. In addition to that, they have repaid the £4 million which the Chancellor instructed me to lend them in the first winter of the war.

We now find a new situation. The debts are being repaid, and we are now in debt to Spain. I am not quite sure that my hon. and gallant Friend the Member for the New Forest and Christchurch (Colonel Crosthwaite-Eyre) has got the gold part of the case right. The fact that Spain has to put up gold if they withdraw, but we do not—

Mr. Glenvil Hall

It is not £2,000,000.

Mr. Eccles

There is a slight advantage to us in this matter. The whole essence of the agreement is, how much sterling will General Franco's Spain be willing to leave in London? It is not very easy to get people to increase their sterling balances at this moment. That brings me to the excellent point raised by my hon. And gallant Friend, that the amount of sterling which we give to Spain, as a result of this agreement, will be greatly increased because of the ridiculous rate of the peseta. I think I am right in saying that His Majesty's servants in Spain use a rate very different from that of 44 pesetas to the pound. The cost of oranges, potash, or iron ore is steady. Wages are fixed. They have gone up—not as much as they might have done—but they have gone up very much. We have to cover the whole of that peseta outlay. We were faced with this problem in the war, but we then did something which I am glad we cannot do now. We had the United Kingdom-Commercial Corporation, through which things were sold to Spain in exchange for what we got from Spain, and we doubled the prices of some goods that were sold to Spain to compensate ourselves far the wretched rate of exchange. We cannot do that now because the United Kingdom Commercial Corporation is wound up. So there is no way of offsetting or bolstering up our own prices under what is a totally false rate of exchange.

I welcome trading relations with Spain. I do not think we can mix these things up with politics. We need potash for our agriculture. It would be absurd to refuse it because we do not like the politics of the Spanish regime. On the other hand, I should like to get it at the proper price. I do not wish that we should pay too much for it. If we put up the rate of exchange at less than the true comparative value of the pound to the peseta, that will happen. We are entitled to some explanation on that point. We have to be careful not to pile up more claims against London than is absolutely necessary. I think the Government have done right to encourage this agreement. It is quite right to regularise trade with Spain. They have done well to get another country, politics apart, to leave sterling here. But the rate of exchange is a mistake, and I wonder whether something could be done about it.

1.29 a.m.

Mr. Hollis (Devizes)

As my hon. Friend has shown, the Financial Sec- retary has very effectively refuted a most unfair slander that was directed against His Majesty's Government at some of the Easter week meetings of the trade unions, if I read my newspapers aright. The Socialist Government were attacked on the ground that they were financing General Franco. It is quite clear that General Franco is financing the Socialist Government. The Financial Secretary is perfectly right to refute that slander. My hon. Friends have shown that it is not possible for us to provide Spain with a volume of goods equal to those we need from Spain. Therefore, we are making no complaint that an agreement has been reached. But I join with my two hon. Friends in wondering whether it was through mere incompetence that we had to get into debt to General Franco, and whether we are getting into debt to an entirely unnecessary extent. The only other point upon which I would like an assurance from the Financial Secretary is the old question of the United States raising any objection to these arrangements. When the Argentine Agreement was before us, it will be remembered, my hon. Friends and I asked some questions of the Chancellor of the Exchequer whether objections had come from the United States. When the questions were asked objections had not been delivered. Therefore we were told that no objection had been made, but later representations were made by Mr. Snyder and the Chancellor assured the Americans that such things would not occur again. Therefore I presume that it has been made certain that the United States are not taking exception to anything in this Agreement. I would be grateful if the Financial Secretary could reassure us on that point.

1.32 a.m.

Mr. Glenvil Hall

I will briefly answer the main points which have been put to me. It is true that there are two rates of exchange obtaining in Spain. I understand that there is what is called the tourist rate of exchange at 66, but there is also the official rate which is embodied in this monetary agreement, namely 44 pesetas to the £1. That rate, in spite of what has been said tonight, is comparable with the rate in which transactions are made with the United States and other countries. I cannot say any more than that. It is my view that the representatives who made this agreement, fixing, as they did by mutual agreement, a rate of 44 pesetas to the £1, were not doing anything unfair or out of line with the rates which obtain between the Spanish Government and other countries. I think the hon. Member for Chippenham (Mr. Eccles) answered for me the question put by the hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) about the gold deposits. So far as the advantage—and there is one—is concerned, this country is to be allowed to import on credit over and above £2,000,000, and to that extent the advantage is all on our side.

Colonel Crosthwaite-Eyre

Is it not a fact that once that limit is exceeded all current debts have to be paid in gold?

Mr. Glenvil Hall

It is not a definite obligation, but provision is made in one of the articles for a deposit of gold to be made in the Institute or the Bank of England as the case may be. I hesitate to contradict the hon. Member for Chippenham. It is true that he did on behalf of the Minister of Economic Warfare, now the Chancellor of the Exchequer, undertake certain missions in the autumn of 1940. But it was not the present Chancellor of the Exchequer who actually made that agreement. It was made in March, 1940, when the Chamberlain Government were in power, and some months before the present Chancellor joined the Coalition Government to become Minister of Economic Warfare. The hon. Member for Chippenham answered one of the questions put by the hon. Member for New Forest and Christchurch. As he told the House, he negotiated on behalf of H.M. Government certain loans to the Spanish Government to the tune of some £4,000,000, and the amount owed by the Spanish Government was about £5½ million on loans and the servicing of loans, and £8,000,000 for commercial transactions. All these have been liquidated, and payment for current transactions are being made as we go along.

Colonel Crosthwaite-Eyre

I do not want to interrupt, but I would like to know if, as from the date that this Order comes into force, the Financial Secretary will tell us what is the balance for or against this country on that date.

Mr. Glenvil Hall

So far as old transactions are concerned, they have been paid, and we are now starting, in one sense, with a clean sheet. There are no outstanding debts as a result of the agreement made in 1940.

I was asked what the position is today. At the moment, it is impossible, of course, to give exact figures, but the imports from Spain to this country are running at something over £10,000,000 a year, and there are expectations that they may run to £25,000,000 in sterling. What the exact figure will be it is impossible to say at this juncture. One final question put to me was what was the attitude of the United States, and whether we were contravening any agreement which we have come to with that country. The answer is "No." This agreement is very similar to agreements made with other European countries, and the Order is almost identical with the one we made in the case of Turkey, with whom we had previously a similar clearing office. If the United States Government had any objection, or knew of any matter to which they could have taken exception, they would have expressed it earlier on the other agreements which were similar.

Mr. Driberg

Before he finishes, can my right hon. Friend say one word to indicate that he realises that economics cannot be completely separated from politics; that he hopes that trade agreements will also be concluded with Socialist countries; and that His Majesty's Government still detests that bloodthirsty little louse General Franco?

Mr. Glenvil Hall

We are trying desparately hard to make an agreement with Russia and we have a trade delegation in that country at present. This agreement has nothing to do with General Franco, or the present régime, as such, in Spain. It is a pure trading agreement between one country and another.

Resolved: That the Clearing Office (Spain) Amendment Order, 1947 (S.R & O., 1947, No. 590), dated 31st March 1947, made by the Treasury under Sections 1 and 3 of the Debts Clearing Offices and Import Restrictions Act, 1934, a copy of which Order was presented on 3rd April, be approved.