HC Deb 26 February 1947 vol 433 cc2197-233

2. "That an additional number of Land Forces, not exceeding 65,000 all ranks, he maintained for the Service of the United Kingdom at Home and Abroad, exclusive of those serving in India on the Indian Establishment, during the year ending on the 31st day of March, 1947.

3. "That a Supplementary sum, not exceeding £50,000,000 be granted to His Majesty, to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1947, for expenditure beyond the sum already provided in the grants for Army Services for the year.

[For Schedule, see OFFICIAL REPORT, 18th February, 1947, Vol. 433, C. 1038.]

Motion made, and Question proposed, "That this House cloth agree with the Committee in the said Resolution."

10.1 p.m.

Mr. Grimstan (Westbury)

I beg to move, in line 1, to leave out "£50,000,000," and to insert £49,999,909."

If hon. Members will look on the Order Paper at the other two Amendments in the names of my hon. Friends and myself, which I should like to discuss at the same time—in line 27, leave out "and insert" £19,999,900,"and in line 28, leave out" £150,000,000," and insert "49,999,900,"—they will see that this reduction is directed to the item in the Supplementary Estimate on page 13, which reads: "Balances Irrecoverable and Claims Abandoned." We had a discussion about this during the Committee stage. I should like to refer hon. Members to the Explanatory Note in the Supplementary Estimate, which says that this sum of money is required in order to …hake provision for substantial losses incurred on accumulation of surplus marks and schillings… We had a Debate upon this during the Committee stage, and we were not satisfied with the reply given by the Secretary of State for War. For that reason, I then gave notice that we would raise the matter again during the Report stage. That is why this reduction is now moved

I think this very large sum of £20 million, which now has to be found by this House, was presented very casually in the Supplementary Estimate; and, in fact, during the presentation of the Supplementary Estimate the item was not even mentioned. As I shall endeavour to show, we indict the present Administration for allowing this racket to assume scandalous proportions, and for which we have now, apparently, to find this money. Some hon. Members who were then present will be familiar with the Debate during the Committee stage. Therefore, I only wish to reiterate briefly how these losses arose. They have been incurred through paymasters finding themselves in possession of marks and schillings very much in excess of the pay which was issued to the troops. This came about through practically universal speculation on the part of the troops, and also, I gather, of others as well. The right hon. Gentleman, in referring to this, said that everybody was in, what he described as "this merry game."

The right hon. Gentleman also stated that it started in the time of the Coalition Government when the troops first got into Germany. Well, that may be so; but I cannot, and do not believe, that it could at that time have assumed these enormous proportions. First, the non-fraternisation order was then in existence, and that would, I think, had impeded these transactions to some extent. But, in any case, if it started then, the present Administration stands all the more to blame for allowing it to develop, and for taking no effective action until a year after they assumed office. That is our indictment of the Government—that a whole year was allowed to elapse before effective action was taken to check this practice. No mention was made of the matter in the House until 10th May, 1946. I want to remind hon. Members of the statement that was then made. It was in the form of a written answer to a Question. I do not know whether the Question was originally put down for oral answer or not, but the answer was a written answer. It concludes with these words—and be it noted, the thing had been going on then for over a year: I have, however, thought it proper to inform the House of my plans and at the same time to give the troops provisional notice of the change."—[OFFICIAL REPORT, 20th May, 1946; Vol. 423, c. 34.] In other words, it more or less said, "Well, chaps, you are going to have another two months to get on with this, and then I am going to stop it." A weaker sort of announcement it would be difficult to imagine. There was no word of condemnation, incidentally, in the statement. But I found that in Austria the practice was still going on in September—that is, four months after this statement was made. I want to refer to a paragraph in the Fourth Report from the Select Committee on Estimates, a sub-committee of which visited Austria in September, 1946. I propose, if the House will forgive me, to read an extract. It will not take very long, and it sets out the position in Austria as it was then. This was what they reported: The troops are paid in schillings, provided by the Austrian Government. It would be expected that the amount paid out to the troops would exceed the amount received back through the Army canteens and shops, and that, therefore, Austria would be meeting the cost of pay. In fact this is not the case, as, owing to speculation in canteen goods, the receipts are in excess of the amounts issued as pay. As the goods in the canteens are supplied largely from the United Kingdom and therefore cost sterling, there is a net loss which falls on Army Votes. The same state of affairs used to exist in Germany, but a voucher scheme was instituted there during the summer— the summer following the statement of May, 1946, I have referred to— to protect the British taxpayer from the effects of such speculation. It is intended to introduce a similar system in Austria "— and this is the point— and Your Committee consider that this should be treated as a matter of urgency. There is a sub-committee of this House reporting four months after this statement that the matter had, in fact, not been treated as a matter of urgency in Austria Where these losses were still occurring. The fact is, as I have said, that during a whole year this Administration, in the first year they held office, allowed this racket to continue and increase, and then gave two months' warning to the troops that they were going to stop it. In those circumstances I must say that it is hardly surprising if these malpractices did not appear as venal in the eyes of the troops, when they were treated in that way by the Administration.

I want the right hon. Gentleman to tell us if this £20 million is the extent of the losses. Is it the whole bill, because he told us that there are other Services involved? I believe some personnel of the Control Commission are involved, and I presume that by "other Services" he means the Royal Air Force. I want to know if this £20 million is the whole loss that has been incurred—it may be un- fortunate for him, if it is so, that it has all fallen on Army Votes, and that he is the Minister who has to answer to this House for it—or are we to be treated to some more shocks later on, and to find that this is not the total amount of the losses? After the past handling of this affair, the right hon. Gentleman can hardly be surprised if we question his assurances that the evil has been stamped out, and wonder if they really are correct.

I turn now for a moment to another aspect of this matter, and this raises the question whether these losses should really fall on Army Votes, and hence on the British taxpayer, at all. I raise this because of certain questions and answers which were given in the Public Accounts Committee at their meeting on 11th April, 1946, about a month before the statement in the House to which I have referred was made. It emerges from the questions and answers, and from the proceedings in the Public Accounts Committee, that these mark notes and schilling notes were printed in the United States, and we only paid for the printing of the notes and nothing for their face value. It also emerges from these proceedings that the notes fall to be redeemed by Germany. I want to quote a specific question and answer from this sitting of the Public Accounts Committee. There are many columns on this matter in the Report of the Public Accounts Committee and I cannot quote the whole of them, but only give a certain extract. I wish the House to understand that. My hon. Friend the Member for Rye (Mr. Cuthbert) put this question: What I was trying to get at was this, that there will be a certain number of mark notes put down in our account that we have expended in Germany. When the time comes to repay, there will be no question of a difference in exchange. We shall get back the equivalent in sterling that we spent in making the marks? This is the answer from the permanent official who was present: No, those notes are in Germany and the Germans will ultimately hold them all. The redemption of them, therefore, will, automatically fall upon the German Government. They will have nothing to do with us at all. Those notes will exist in Germany and will be legal tender in Germany. The British people will not be concerned with them, nor the British Exchequer. I must confess that I do not understand this. I want to know how it is reconciled with the statement that the Paymasters have accumulated large balances of marks which will be a direct loss to the Exchequer when, in the answer to this question, we are told that these notes have nothing to do with the British Exchequer at all. I want an explanation, because frankly I do not understand it. There is another extract I wish to quote. Another member of the Public Accounts Committee asked: Is there any control of or limit to the number if notes issued, or the amount issued for 'irmy purposes? The answer given was: Yes. There is exactly the same control as is exercised in this country for the issue of sterling to the Army or anywhere else. The controls are exactly the same in Germany. In view of what has happened, it appears to me that this control must have broken down, and I want to know a good deal more about that. I find this whole business very disquieting.

10.15 p.m.

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

Before the hon. Member passes from that subject, would he make it quite clear whether he is referring to Allied Control marks or Reichsmarks?

Mr. Grimston

The only word used is "mark." The reference in the first case is to marks which were printed in the United States. Frankly, I do not know the answer, because neither Reichsmarks nor Allied Control marks are referred to by name. The question is about marks only. [Interruption.] Perhaps the hon. Member would repeat that remark which I did not hear.

Mr. Turner-Samuels (Gloucester)

The hon. Member was not intended to hear it.

Mr. Grimston

I find this whole affair very disquieting, but some Members opposite appear to treat with levity the loss of £20 million. We are uneasy as to whether this £20 million is the actual extent of the loss, and whether those losses may not still be taking place. We are very uneasy as to whether the present system of vouchers is really effective. There is no doubt that in the course of time this matter will be thoroughly probed by the Public Accounts Committee, but that, I understand, will not be for a year or 18 months. I think that the size of the loss and the gravity of the position is such as to call for an immediate inquiry, and I want to know what the right hon. Gentleman has to say on that subject. In conclusion, I think the way this matter has been handled, both inside and outside the House, reveals a lack of grasp and a standard of administration which is lamentable. It is the responsibility of the present administration, and it has resulted in enormous losses to the taxpayer, the extent of which we do not really know at the present moment. It is for this reason that I and my hon. Friends are seeking to reduce the Vote.

Mr. Cuthbert (Rye)

I beg to second the Amendment.

I am worried about this matter, firstly, because this has been referred to by the Secretary of State for War as a "merry game" being played by our Servicemen in Germany, and, secondly, because of the issue of the other kind of marks by ourselves. We are told that the Services are to blame for this loss. I think that if we go into what actually happened in Germany, we shall find out that this "merry game" started with our own Government. We are told that Servicemen in Germany or in Austria, cashed a certain amount of their salaries there, and received a certain number of marks. With these marks, they went either into N.A.A.F.I., or some other canteen, and purchased cigarettes. They then sold these cigarettes for German marks, for possibly ten times the amount of marks that they had received in order to buy the cigarettes. We are told that this loss is due to the fact that these men went to a post office, or possibly the N.A.A.F.I., and either bought postal orders or savings certificates and sent sterling home. I say that this has nothing to do with the original Exchequer, operation of the money which the men drew for their sterling salaries. They were possibly carrying out what we on this side believe in—a little personal private enterprise. Any excess they made was remitted home.

I maintain—and this is where I blame the Government—that the Post Office should have covered the operation. No one can make me believe that a comparison could not have been made between the amount of marks given to Servicemen for the sterling part of their salaries, and those marks that must have been remitted to post offices in Germany. Any business man would tell you at once that you do not get over-bought to an enormous extent with any foreign currency, without thinking what you will do eventually. Something could have been done at that time. The marks could have been covered. That was what was in my mind last year when I took up this point in the Public Accounts Committee. It was in April, 1946, that the Public Accounts Committee asked the question which my hon. Friend the Member for Westbury (Mr. Grimston) read to the House tonight, and it was a month afterwards, in May, that the Government felt that some action should be taken. It was two or three months afterwards that they decided to pay our troops in Germany in the form of vouchers. It is, therefore, a rather curious coincidence that someone should have dropped on that after it had been referred to in the Public Accounts Committee. I believe that this was not "a merry game," but that a red herring has been drawn across our path.

We must remember that tie notes were printed in America, and issued without any backing. In the Public Accounts Committee, I asked who would eventually redeem these notes. The answer was as my hon. Friend has just read out—the German Government. I would like an answer on this matter in connection with the redemption of these mark notes rather than on the "merry game" which the troops are supposed to have played by way of private enterprise. The marks issued were' probably different from Reichmarks but marks of any kind were currency in the country at that time, whether they were issued by ourselves, or the marks current in Germany. I think that is the real reason for these debts coming through now, for which the British taxpayer is asked to pay. We had a definite reply that there would be no cost to the Exchequer, and, therefore, no cost to the British taxpayer on foreign exchange loss or the redeeming of these particular notes. I am worried about that, and I hope that an answer will come from the Minister. I feel that this is another instance of either ignorance or in competency in dealing with such an important question as that of foreign currency being used by this nation to pay our troops and in regard to the recovery necessary eventually to put the matter right.

The Secretary of State for War (Mr. Bellenger)

I cannot complain of the assiduity with which hon. Members have pursued what appears to be a very serious leakage, and, indeed, is a very serious leakage, entailing a substantial loss to the British taxpayer. It is the duty of the House of Commons to watch carefully and faithfully the expenditure of the Government in all respects. I am glad to hear that I have a little sympathy from the hon. Member for Westbury (Mr. Grimston) when he commiserated with me, to a certain extent, on my having to answer for the depredations of others besides the Army.

Hon. Members may have noticed recently a letter in "The Times" which rather took me to task for giving the impression that this £20 million was solely the result of the black market speculations of the Army. It was not. Included among those who contributed to this loss were the other two Services, although I presume in a lesser degree, because they had smaller numbers of officers and men in Germany; members of the Control Commission, who had the same facilities as the troops for speculating; officers and other ranks of the Dominion forces; civilians of voluntary organisations; and all those others who had access to the British canteens.

I do not want to ignore the responsibility that lies on the Army. I think that I stressed, when I last spoke on this matter in Committee, that this was immoral. But I tried to show, and I was supported to a large extent by the hon. Member for Westbury, that I believed that a majority of these transactions were of a small nature by a large number of troops, and that I would not condemn too easily the officers and men of all the Forces, who had borne the burden and heat of the day, when they found a chance of making easy money quickly. Others besides them have done that, and it is my duty to defend the Army, unless I am convinced that the Army is doing something that is morally entirely reprehensible. I think that the degree of illegality is something which, although it cannot be excused, might be understood by those who understand the conditions' under which the soldiers operated at the time of their active operations and immediately afterwards.

10.30 p.m.

Earl Winterton (Horsham)

May I ask a question on the procedure of the House? We are told that this large sum, which we are asked to vote tonight, includes the defalcations of other Services. If so, why is it on the Army Vote? It is the first time the Army Vote has been asked to bear the cost of other Services. How does he reconcile this with the ordinary Rules of procedure of this House?

Mr. Bellenger

The reason I am answering for everybody is that the Army acted as general bankers and much of this money came from the canteens which the Army controls. The German Reichsmarks were paid through the canteens and then were converted into sterling as, indeed, they had to be. However, I think it would be best if I gave the House as frank an account as I possibly can of what did happen. The hon. Member for Westbury asked me whether this £20,000,000 represented the whole of the losses incurred in this way. It does not. I do not think I shall have to come and ask the House for a further approval, but, nevertheless, this £20,000,000 is part of a larger sum, the greater part of which, £38,000,000 was written off in the Army account for 194546. So far as I can estimate, the total loss amounts to £58,000,000. [Interruption.] I am trying to give the House the facts as I have investigated them. I had not the honour of presenting the Estimates last year, but £38,000,000 was written oft in last year's Estimates.

Obviously the Public Accounts Committee, which is the appropriate Committee to examine these matters, will have to go into this loss in greater detail than the House can hope to do tonight on the Report stage of the Supplementary Estimates, but the delay will not be as long as the hon. Member for Westbury anticipates. It will not be eighteen months before the Public Accounts Committee get down to investigating these in detail. I understand they should be dealing with the matter very soon—I believe in April—and I think the report will be presented to the House by July. Of course, if it is necessary to do so, they could even make an earlier report. The matter will be dealt with in greater detail when the officers of the War Office will be there to be examined by hon. Members of this House.

Of that £58,000,000, the sum of £13,000,000 was due to losses in Dutch currency, £41,000,000 to losses in relation to German currency, and £4,000,000 in relation to Austrian currency. With regard to the £13,000,000 in Dutch currency, hon. Members might wonder why we have not recovered that. I can only say, if I am in Order in doing so, that it was agreed by my right hon. Friend the Chancellor of the Exchequer that it should be written off as part of the general financial winding up of the war. Holland had been overrun by the Germans, and had been occupied for a considerable period, and I rather think that what happened at the end of the war, when not only the British Army but also the American Army overran Holland, many of the Dutch people, starved of goods, lost faith in their currency and got rid of it to the troops and others who came into their country. The surplus arose out of speculation in sterling notes; it arose out of speculation in Continental currencies, which I have outlined; and it arose from the loot captured from Germans and from German pay offices. Regrettable as it may seem things like that do occur in war when troops overrun all sorts of organisations. When our troops overran Continental territory they captured large numbers of German marks, which were, presumably, there for paying the troops and buying things in the country. I regret to say that our troops, having come into the possession of a large number of German Reichsmarks so easily, proceeded to convert them back into sterling.

They also derived loot through the captured marks from the banks in the territories which they took in the course of operations. Perhaps that answers in part at any rate the question asked by the hon. Member for Westbury, who mentioned that in the report of the Public Accounts Committee an official of the War Office, when asked who was going to redeem these marks—and I have not had the opportunity of looking up the relevant passage in the report—replied, "The German Government." That was true in relation to the German Reichsmarks which we controlled, that is the German Reichsmarks in which we had to pay our troops, because that was the legal currency of the country in which the troops were stationed. Unfortunately, the depredations arose from a large number of free Reichsmarks in the pockets of the Germans, who proceeded to exchange those Reichsmarks with British troops or British civilians and not only with them but also with others because this was not confined to the British alone but people of other nationalities were concerned, too—for what were mainly canteen goods. It also arose from the sale of captured enemy property as well as British property.

There was one source of supply which the War Office could, not control and that was the cigarettes which were sent out from this country I believe duty free by British civilians to their friends or relations overseas. Therefore, I am going to suggest that if there is to be any condemnation of British troops and those engaged in this illegal operation, condemnation must also fall on those of the British public who sent out large quantities of cigarettes, which they must have known were not for the personal use of the troops. That is where a large part of the operation lay, because while we could control N.A.A.F.I. supplies, we could not control the parcels of cigarettes which were sent out from this country, and a large proportion of this loss was incurred because the cigarettes then and now were the real currency in Germany. I may say in that respect that as soon as that was realised—in September, 1945, I think it was—not I but the Treasury put a stop to these cigarettes being sent overseas duty free. That had a very considerable effect on the transactions which were going on in Germany.

Brigadier Peto (Barnstaple)

In the computation of this large sum of £58,000,000, has account been taken of the, fact that the Allies attached to another Command were also implicated in these transactions, and to what extent are they also guilty—if that is the word to be used—of illicit trading? That includes the Poles, the Czechs, the Belgians and others. Are they all implicated in this, or is it only British troops we are taking into consideration?

Mr. Bellenger

No, Sir. All of them—if they had access to British canteens.—and of course the Poles would naturally have had access to British canteens—were responsible. I cannot apportion the illicit profits as between the different Allies. but they were all implicated.

Mr. Bowles (Nuneaton)

May I interrupt my right hon. Friend? It was rather a shock to the House when he seemed to blame the parents and friends of soldiers who sent cigarettes. He seemed to assume that they knew that this malpractice was going on. Will he clear that up? It seems to be rather an unfair attack on the parents in question. If they are now presumed to have known about that, a fortiori the War Office should have known about it.

Mr. Bellenger

What I am saying is that if the House is going to condemn the recipients of the cigarettes, they must implicate also those who were sending, not hundreds but thousands of cigarettes from this country to the troops overseas and who must have known that they were not for ordinary consumption by the recipients of the parcels. They must indeed, I say they did know what was going on. I do not want to blame anybody. As I understand the hon. Member for Westbury, he is trying to fasten the whole of this on His Majesty's Government and this present Government, but I am going to show that this has deeper roots. Up to the time when the zones were formed, we were under the joint command of S.H.A.E.F. and it was very difficult indeed for us to take the drastic action which we ultimately took without the approval of those with whom we were working. I can best illustrate my point in that connection by saying that when we did decide to take what was a very drastic step—as I hope I shall show in a few minutes—we did it in advance of our Allies. The American Government, who were also involved in these losses—possibly bigger losses than we had to face—did not take the step we did, namely, changing the currency, until six weeks after we did it, and the French Government did it six months afterwards.

As I understand it, the gravamen of the charge of the hon. Member for Westbury is not—although I take it he condemns them for their actions—that the troops and others were the culprits, but that His Majesty's Government were the real culprits for not stopping this earlier. I shall attempt to answer that indictment, as he called it. The history of these illicit dealings goes right back to the days when we first landed in Italy. I believe those were days when this Government did not have control. In the days when our troops first landed in Italy, very big profits were made there. But because we were able to return the Italian lire in the form of payment of wages to Italian civilians we were able to work off the accumulated—

10.45 p.m.

Earl Winterton

On a point of Order. We are listening to the right hon. Gentleman with interest. Presumably, if he discusses the loss in which the British taxpayer is involved—the loss of lire in Italy we shall be in Order if we follow him in that matter?

Mr. Bellenger

I am not suggesting that there was any loss. I am trying to show that there was no loss in Italy, but by way of illustration that the indictment laid—

Earl Winterton

My point was whether we should be permitted to discuss the interesting argument which is being put by the right hon. Gentleman regarding lire in Italy.

Mr. Deputy-Speaker (Major Milner)

Unless some portion of this particular sum concerns lire, quite clearly that subject cannot be discussed.

Mr. Bellenger

I think the noble Lord misunderstands the point I was making. I was not trying to show that we lost Italian lire in Italy but, by way of illustration, I was trying to show that the indictment laid by the hon. Member for Westbury against the present Government was not complete, because the speculation, or the method of speculation, went right back to the days when our troops landed in Italy.

Earl Winterton

I must raise my point of Order again. That is exactly my point. It is not hostile to the right hon. Gentleman but obviously if he is to discuss what happened about lire in Italy, it must be open to us, on this side of the House, to go into the story from the beginning. I ask formally whether we can discuss this matter.

Mr. Deputy-Speaker

I understand that the Estimate before the House relates only to marks and schillings, not lire. On the other hand, I gather that the right hon. Gentleman was not endeavouring to deal with lire transactions as such but to show how a certain practice began. He would appear to be in Order in doing that.

Mr. Bellenger

I was asked a question by the hon. Member for Westbury as to whether this £20 million represented the total loss. If I am to answer, I must tell him the whole story. I have told the House that the £20 million we are discussing tonight is not the whole story. In answering his question, I thought that it was only courteous and frank to tell him that it was part of a larger sum. I will not pursue the illustration of Italy, except to say that these transactions went right back to the days of the landings in Italy, and that therefore what happened, namely, speculation by troops and others, took place not only in the days of this Government, but also in the days of the Government of which the hon. Member's Party formed a majority.

Mr. Grimston

The indictment is for allowing losses to the British taxpayer to develop to such an extent. As the right hon. Gentleman has said that there was no loss in Italy, that provided an example for the present Administration.

Mr. Bellenger

The hon. Member can take no comfort from that. It was only an accident that there were not heavy losses in Italy, and those losses could have been put down to the Government in which his party was the predominant partner. I do not want to pursue that matter now, except to tell the House that the reason that the Government was not indicted, was because these lire were pumped back into Italy in a way in which it was not possible to pump back the German marks into Germany.

This is not the first time, of course, that speculations of this nature have arisen. They have arisen before, though I do not want to give illustrations unless I am pressed to do so. They arose at the end of, or during the first world war; and as late as 1935 in Hong Kong. It is very difficult to stop these things happening when armies overrun conquered countries. We did take reasonable steps to stop it. First of all, when the operation in Normandy was planned, a special part of the joint S.H.A.E.F. Staff was set up to deal with these things. It was not possible to issue to the troops, at any rate at that time, a special currency. They had to be paid in the currency of their own country—and I want the House to observe this—or in the currency of the country in which they were serving. I have made, as far as I can, an investigation into the method by which we, I believe, stopped this business. I have not found any precedent for the manner in which we did stop it. That manner was to issue an entirely new currency called B.A.F.V.S. I cannot find any precedent for paying a British soldier in currency which was not legal tender. And indeed, before we took that drastic step, which we did because the problem was becoming so large, we had to take the opinion of the Law Officers of the Crown, we had to get the permission of the Chancellor of the Exchequer, and we had eventually to get a Royal Warrant to cover the issue of these B.A.F.V.S.

I want to make it clear here, because a misconception has arisen as a result of the first Debate, that the amount of losses incurred by the troops and others purchasing savings certificates is very small. The war savings movement, which operated in the Army as well as among civilians, and which has provided so many honest savings, was responsible for only a small part of the losses, a very small part indeed. The main loss, I should imagine, arose from the purchase of postal orders, which the troops and others were able to buy. They were much more negotiable than the war savings certificates. A stop was put to large purchases of postal orders earlier on. For instance, in January, 1945—and the House should note these dates, in view of the date of the announcement by my predecessor in May, 1946, that we were going to issue a new currency—the troops were prevented from buying postal orders except up to the amount of pay drawn at the pay table on that day. This step resulted in a sharp decline in the amount of postal orders purchased by the troops—1by the troops only be it noted. They were the only ones over whom the War Office had complete control. The amount per man per month after that order was issued dropped from 17s. 6d. to 8s

It was known that these transactions were b takiner place, and, although they very difficult to stop without changing the currency, it was thought that it could be controlled. For instance, it was hoped that it would be possible to pay the troops in Reichsmarks, because there were large numbers of them out there. These Reichsmarks came into the paymaster's office. Indeed, that went on satisfactorily, so that there was no debit balance, if I may put it that way, against the Government, until early in 1946, when the surpluses of Reichsmarks amounted to £4½ million. That figure gave an indication of the size of the problem, and it was soon afterwards—in March, 1946, I think—that the matter was brought to my attention and I gave approval for the issuing of a new currency.

Mr. Grimston

Can the right hon. Gentleman say if that £4½ million was apparent in January, and that the matter was brought to his attention in March?

Mr. Bellenger

No. In fact, it was apparent in February and in March I was asked to give approval to a new currency. It took something like two months or more to prepare that new currency. One has to remember that it had to be proof against forgery and hon. Members who are more versed in the matter of preparing a currency than I, will know that currency notes have to be very carefully drawn, and a special paper has to be prepared, and then special printing has to be done in order to avoid as far as possible the chances of forgery. It is interesting I think to know that there are—I am told—many forged sterling notes circulating on the Continent at the present time.

I am asked why it was that two months' notice was given to the troops and others before this new currency was introduced. I think, apart from the physical delay in the preparation and printing of the notes and their distribution, there is a reason. It is that many troops had in their pockets Reichsmarks which they had legally acquired, and it would have been very unfortunate if, by one stroke of the pen, we had declared all that currency non-legal and issued immediately a new currency. There would have been in the aggregate large sums of marks honestly earned which would have been unconvertible, and I think although the effect was undoubtedly to give a greater opportunity for those who engaged in these illicit dealings to increase their holdings, the fact remains that, on balance, we decided to give this notice and I think we ought to have given notice.

Earl Winterton

When the right hon. Gentleman says "honestly earned" does he mean part of the men's pay?

Mr. Bellenger

Yes. There are also other ways in which the British soldier can earn an honest penny. Soldiers, I believe, indulge in games of cards—not necessarily the high-brow games of bridge, and they may earn a little.

Mr. Grimston

Does the statement made in May last refer to B.A.F.V.S.?

11.0 p.m.

Mr. Bellenger

Yes. The announcement on 26th May, 1946, by the former Secretary of State for War, referred to the new currency known as B.A.F.V.S., which is now circulating in B.A.O.R. I have endeavoured to be as frank as I can in this matter. The House wants me to apologise for not having gone into greater detail when introducing this Supplementary Estimate. We are all so wise after the event. Perhaps we should have decided to use these at the start. [HON. MEMBERS: "Hear, hear."] Well, as I say, many of us can be wise after the event—as, indeed, I hope the Conservative Party is after the Election of 1945. We can all learn our lesson when we know what the lesson consists of. However, I have not attempted to hide anything from the House on the Report stage and in conclusion I would say that I do not think that any Government can be condemned for not taking these revolutionary and drastic steps of changing the currency, and of paying the soldiers in currency, which was not legal tender. This had never, as far as I know, been done before. It was only in these desperate circumstances when the problem got out of all control, that we had to do it, and we did it.

A question was asked me as to whether my assurances that we had stopped this were good. Well, I can say no more to the House than that I hope we have stopped it. I think we have, because there are no accumulated balances now that we know of. But in conditions such as are operating on the Continent at present, when people are starving and want to get access to stores which are only in our hands, they take all the opportunities they can, both honest and dishonest, of getting hold of those stores, and the temptation, even today, to British troops and others all over the world, who are in possession of and guarding valuable stores, is exceptionally great. I am glad to tell the House that, on the whole, the British Army's honesty of conduct is as good as it has ever been in the Army's history, but when cigar ettes were such al. easy way of earning quick profits, it does not surprise me that all those with access to cigarettes took advantage of making some money on the quiet. It is most regrettable that the British taxpayer has to pay for it, but that is the purpose of this Supplementary Estimate, and I hope it is the last one of its kind.

Mr. David Renton (Huntingdon)

I think the House would have had no reason to complain about the starting of the "merry game," or to complain if it had gone on for, say, a fairly short time, before it was detected. The gravamen of the complaint is that it went on for a very long time after it had been detected, and that very large liabilities accumulated which the taxpayer is now being asked to pay. I am sure the House is grateful to the right hon. Gentleman for his candid statement that altogether £58,000,000 was involved, but we have to remember that £58,000,000 is equivalent to 9d. in the off Income Tax, and 9d. in the off Income Tax in the past year or so would have been a very welcome aid to national recovery. We have listened—if I may say so on behalf of the House as a whole—with interest, patience, but considerable misgiving to the explanations of the right hon. Gentleman, and it seemed to me to be quite invalid, and a complete evasion of the issue, that he should refer us back to certain speculations in Italy. It was not quite worthy of the right hon. Gentleman himself that, in referring to those explanations, he should contradict himself.

In the first place he said it was an accident that there was no loss in Italy; he then went on to say that the Coalition Government should have been asked to bear some of the loss. But was there a loss, or was there not? There was a further contradiction in his statement as to what he believed to be the origin of the "merry game." He told us with regard to the loss of £40,000,000 worth of marks in Germany, that the whole thing started in the necessary circumstances and misfortunes of war, because our own soldiers managed to get hold of Reichsmarks, to put it bluntly, as loot. That is hardly surprising, but when he referred to the £13 million of Dutch currency, I think he did a slight injustice —I hope unintentional, and I should like to give him an opportunity of correcting himself—to a very gallant nation. He said that he presumed that it started in Holland because the Dutch lost faith in their own currency. That is the first time I, personally, have ever heard that the Dutch ever did lose faith in their currency; indeed, it is remarkable the quickness and the zeal with which that country started the task of postwar reconstruction as soon as the war had come to an end; and I have never heard personally—I stand open to correction—that the Dutch ever lost faith in their currency. The truth was that the Dutch were hungry for cigarettes, as everybody in Europe was. They found an easy way of getting them. The authorities—I am not laying blame at this moment—made it possible.

A further attempt of the right hon. Gentleman to lay the blame at the feet of somebody else was his remark that all this started in Germany back in January, 1945. As the right hon. Gentleman will remember the sequence of events, we were in occupation of only a very small part of Germany in January, 1945. It can hardly be that the problem had reached any dimensions at all until well after V.E. day.

Mr. Bellenger

What I said was that it was in January, 1945, that the troops were prevented from buying postal orders up to more than a certain amount, namely, the amount that they had drawn at the pay table.

Mr. Renton

I am much obliged to the right hon. Gentleman, and I accept what he says. His own statement goes to confirm that at any rate the "merry game," as it has now come to be known, had not really started until a much later date, and if I may refer the right hon. Gentleman to a very illuminating statement which he made on an earlier occasion when this matter was being discussed, it does seem that the main cause of the trouble was the snowball which was gradually built up by means of the N.A.A.F.I. and other canteens. Here I come to the crux of the whole matter. If after, shall we say, the N.A.A.F.I. had accumulated £1 million worth of marks which they did not know what to do with, somebody had stepped in, the British taxpayer would not have had to write off £58 million. He would have had to write off £57 million less. We should perhaps not be here tonight; we would have accepted the explanation that before this matter had reached large proportions, it had been discovered, and we were being asked to write off such loss as could not have been prevented.

What I am saying tonight is that this is a loss which could have been prevented by somebody. Frankly, I am not so certain we ought to make too much political capital out of this. I am not sure that the right hon. Gentleman himself personally knew about it. I am not so certain that his predecessor knew about it, but somebody—and it was somebody pretty high up in the War Office, for whom, first one of them, and then the other, was responsible—most certainly did know it, and it is because the War Office was in a position to save the taxpayer this money, and it is because the right hon. Gentleman and his predecessor are, under our Constitution, responsible for what happened in the War Office, that we on this side of the House have no other alternative, in our duty to the British taxpayer, than to protest at the failure of the War Office, and to refuse to vote this sum.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

I, too, admired the candid speech of the Secretary of State for War, but I confess it left me much more puzzled than I was before he rose to speak. In the first place, is it not a fact that the redemption of all the currency that has been used in the countries under discussion is their responsibility, and not ours? So far as I know, we are not responsible for any amount of marks, lire, francs, or schillings that we may require. For instance, if the Minister wants a given number of marks to pay our troops in Germany over any period, those marks are supplied by the Central German Bank. Equally the Treasury and the War Office have absolutely no responsibility far conducting any deflationary process that may be necessary as a result of expenditure on occupation. I remember, when I was serving in the Forces, a man, not a member of the British Forces, hawking around a sackful of German paper money which he was prepared to dispose of to the highest bidder. But that money, no matter how much was put on to the market through this illegal process, could not Cause any extra cost to this country.

I was mystified by what the Secretary of State said about control of the N.A.A.F.I. Obviously he must be able to control the N.A.A.F.I., because all allocations of goods going to canteens in Europe have to be submitted to, and approved by his Department. If he had any idea that this sort of black market was going on, why did he allow goods to go to these canteens far in excess of normal troop requirements. About nine months ago, I asked the Minister of Food a question in relation to soap rationing. He assured me that there was careful scrutiny of allocations to the N.A.A.F.I. If tonight the Secretary of State is right there has been no scrutiny, because they have provided three or four times as much as any normal person would possibly want. It is no good the Secretary of State apologising unless he can assure us that there is no fear of a repetition, and that only sufficient supplies go out there for the real and genuine needs of our Forces in Germany.

I would like to ask what action has been taken by the War Office with the paymasters. The right hon. Gentleman said that this black market was known after the last war. It is a fair assumption that the War Office should have taken some early steps to guard against a repetition of it. What instructions were issued to paymasters? I can follow the right hon. Gentleman's process of thought as regards the soldier gathering to himself an illegal quantity of currency. I can see how he can double or treble what he gets over the pay table. But how does he get this back into sterling? That has never been made clear. The right hon. Gentleman told us about postal orders, but nothing about allotments. What steps did the War Office take to see that allotments and remittances did not exceed a given percentage of each man's pay? I spotted this trouble for myself in Italy, and with a certain amount of pride in the Navy, we immediately took steps to see no person could send back more than a given percentage.

11.15 p.m.

Mr. Bellenger

We took the same steps in the Army. Obviously a man could not remit through the normal channels without sending postal orders, and he could not allot to his dependants more than he was entitled to earn in pay.

Colonel Crosthwaite-Eyre

I am much obliged. If the allotment was stopped, and the average of the Forces for postal orders was only of the order indicated, I cannot see how this amount has grown up to such a large sum, or how this foreign money, in fact, became converted. There were, as we know, pound notes floating around Europe, but I am certain the Secretary of State is not going to tell us that a large portion of this loss was due to pound notes. This is inconceivable. They were difficult to get hold of since they were treasured by the population, and they commanded a much higher price than a man could hope to get for them either in exchange, or when he got back home. I must say I am mystified as to how this foreign currency managed to get back to this country. There has obviously been a gross leakage, but it was said that when a leakage was discovered it was stopped. Yet £58,000,000 has disappeared, and the Secretary of State has given no indication of how it disappeared.

The Secretary of State said that when they introduced a new currency two months' notice was given. But surely this makes nonsense of the Measure. Look what happened when the Belgians changed their currency. The existing note issue was froze and no one could exchange more than a certain percentage of it. If they wanted to change any more, they had to prove to the banks that they were legally entitled to it. Why could that not have been done? No hardship would have been caused to anybody. Any member of the Forces would have been entitled to a percentage to keep him going, but if he had more, he would have to explain to the Paymaster how he got hold of it and justify it. If that had been done, instead of allowing it to drag on for two months, we should not have to bear this large loss.

Mr. Bellenger

That was done, and they were not allowed to transfer more than a certain amount without a certificate from the commanding officer.

Colonel Crosthwaite-Eyre

The Secretary of State did not say that in his original statement. If that was done, what notice was given to the troops of the introduction of this currency? Obviously, unless it was done suddenly and without prior notice, the same effect would be achieved as if two months were allowed to drag on. I feel that it is a very bad blot on the Government's record that this debt was allowed to accumulate. The steps taken were not taken in time, and were weak and half-hearted, and no satisfactory explanation has yet been given of how this foreign currency was converted and how this strain on our finances has occurred.

Mr. Braddock (Mitcham)

This is a sad story, and I do not think that any real excuse can be made for what has been going on. But I do not think that in this case we can dare to be or can afford to be too righteous about this sort of thing. After all, these men on the Continent were doing what most people in this country in the past have been prepared to do. If people saw the opportunity of getting money for nothing, without work, they snatched at it; it has been regarded as a part of the system. As the seconder of this Amendment said, this is a little private enterprise. Why blame these people for indulging in private enterprise? This is one of the prices we have to pay for war, and it is not by any means the greatest or most terrible price. War brings this sort of thing with it, automatically, right through the whole scheme. War is and always has been an opportunity for contractors and speculators to make easy money. Therefore, I suggest that we take this lesson to heart and recognise that this is merely one example of the sort of thing that is liable to happen not only under war conditions but under peace conditions, when the great incentive is supposed to be above all things, to make a profit at any price. These men on the Continent lived their young lives under those conditions. It is obvious that those who were in command over them and to whom they should have looked for an example, have been carrying on the same wicked campaign. [Interruption.] Oh yes they have; I know that they have made a bit as well, for they were in the swim. We are all to blame. Right through the peace we have been supporting this kind of thing. Personally I hope that this very dramatic example will bring home to the people of this country the stupidity, the weakness and the folly of this sort of business.

Brigadier Low (Blackpool, North)

Having listened to the hon. Member for Mitcham (Mr. Braddock) I must take up a few moments of the time of the House to contradict what he has just said. Surely he can distinguish between private enter- prise which is within the law, and private enterprise which is directly contrary to the law. I was horrified to hear the Secretary of State for War standing up at the Despatch Box and defending the direct contradiction of orders. He knows perfectly well that orders were made making this traffic entirely illegal, and it is something of which this House should be ashamed, that the Secretary of State for War could stand up before it, and defend members of the Army who were breaking those orders. I cannot stress that point too strongly. The Secretary of State for War has informed us in the first instance—

Mr. Bellenger

Let us get this matter right. I am endeavouring to get the Army to obey orders, and sometimes I am not helped in that respect by certain hon. Gentlemen opposite. [Interruption.] I say that again, and may I ask the hon. and gallant Member for North Blackpool (Brigadier Low) to say in what respect I encouraged the troops to disobey orders?

Brigadier Low

The right hon. Gentleman said that he was not going to condemn the men for indulging in this trade. I suggest to him that he is at any rate condoning a breach of the orders which were issued in his name.

Mr. Bellenger

Perhaps I was not as severe as some hon. Members in saying that the British Army had caused the taxpayer this loss, in a criminal fashion. What I attempted to do was not to condone their offence, but to mitigate it.

Brigadier Low

I am very glad to hear the right hon. Gentleman say that he did not condone this offence. I am sorry to take up any of the time of the House on this matter, but it strikes me as being of some importance. I come to my next point. The right hon. Gentleman told us and I hope we may hear more facts about this—that others besides the Army were engaged in this business. Indeed, I think that has been said before, that the two other Services were engaged in a presumably lesser degree. Surely it is the right hon. Gentleman's responsibility to know whether it was in a lesser degree or a greater degree? Does he not know the facts? They must be available by now. He then told us that Dominion Forces and some of our Allies were engaged in it. Could he be more explicit on matters concerning the Dominion Forces and the Allies? We should have some further explanation, and if it is impossible to give an explanation, I suggest that on that and one or two other points there is great need for further inquiry—[HON. MEMBERS: "Hear, hear."] This matter of £38 million which has been sprung upon us—

Earl Winterton

£58 million.

Brigadier Low

If I may make my point, we knew of the £20 million and there is £38 million extra. Why is it that the right hon. Gentleman or other Members of the Government have not told us about this £38 million earlier during their tenure of office? Why have they not come forward and explained it—

The Financial Secretary to the War Office (Mr. John Freeman)

On a point of Order, Mr. Speaker, May I ask your guidance, without any hostility to the hon. and gallant Member? In his speech my right hon. Friend answered a direct question from the Opposition Front Bench as to whether the figure of £20 million was the total incurred. He answered out of courtesy to the Opposition Front Bench. Is it in Order for the Debate to range over all sorts of other things, which are not the subject of this Supplementary Estimate?

Mr. Speaker

I am not clear where the other £38 million comes in. I thought it was in the last Army Estimates, and therefore had been passed by this House and finished with.

Earl Winterton

Further to that point of Order, Mr. Speaker—[Interruption.] I suppose I may make a point of Order. If I am not allowed to do so, I must ask for the' protection of the Chair. Further to that point of Order, may I say that the right hon. Gentleman devoted a considerable portion of his speech to the question of the £38 million, though he did not go into it in detail. It would be very hard if we could not refer to the £38 million.

Mr. Speaker

I understand that the £38 million was passed in the last Estimates; the House has had an opportunity of debating the £38 million and the matter is therefore finished. I understand that is what the Secretary of State has now said. It is not now in Order to debate that matter.

Brigadier Low

My point was—I do not know whether it is in Order, but perhaps I may put it to you, Mr. Speaker—that though the right hon. Gentleman told us that it did appear in previous Estimates, what did not appear was that this £38 million was relevant to black market operations by our troops and civilians in Europe. That has never appeared in writing, or in an explanation from the right hon. Gentleman opposite, at any time during this Parliament. That was the point I was trying to make.

The right hon. Gentleman has tried to cast the blame for some of these losses, if not all of them, and for some of this practice, if not all the practice, on predecessors of his, whether on his side of the House or on this. From the facts that he has given us, I suggest that it is clear that these operations never assumed the proportions which this Supplementary Estimate shows they have recently assumed, until well into the middle of last year. The right hon. Gentleman told us that in February of last year he was informed that there was a loss of £4,500,000—that is, one-fifth only of the total covered by this Estimate. How can he therefore come to us and say that it is all due to something which happened before? Let us examine what steps were taken by the right hon. Gentleman to put a stop to this. It is clear that if he was informed in February that the loss was £4,500,000 and it was impressed upon him that this loss might increase, it was incumbent upon him urgently to take steps to put a stop to this situation. He tells us that it took two months to prepare new currency notes which would be proof against forgery. Is that an example of urgent action by the right hon. Gentleman opposite? I would ask hon. Members if they could not get, not full currency notes but suitable notes in the form of cheques printed more quickly than that? They are not full currency notes, current throughout the world. Surely some steps could have been taken, as an urgent matter. In actual fact, I think it took from February until September or October before these notes were current in B.A.O.R. As it appears at the moment, that is an example of gross neglect. If the right hon. Gentleman can show us, as the result of an inquiry, that there were reasons, perhaps the House will be satisfied.

It seemed to me that at the beginning of this Debate this evening hon. Gentle men opposite, particularly below the Gangway, were treating this matter with jocularity. It must have become apparent, when the right hon. Gentleman announced that the sum involved amounted to £58 million, and might be even more, that this is not a matter for jocularity. Perhaps, as one of my hon. Friends has just suggested, those hon. Gentlemen who have treated this matter lightly really do consider pounds, shillings and pence to be meaningless symbols. But I hope that the House will give this matter their closest consideration, and that the right hon. Gentleman, or his hon. Friend, will tell us, before this Debate ends, that there will be further examination of this matter, either in the form of a public investigation or an inquiry by this House.

11.30 p.m.

Major Legge-Bourke (Isle of Ely)

The right hon. Gentleman has been at some pains to widen the field a good deal in so far as the responsibility for illicit trading is concerned. I ask him to give us a clearer definition of it. He gave the impression, first, that he condoned this in the wider field. My hon. and gallant Friend the Member for North Blackpool (Brigadier Low), has since drawn from him the statement that he was not attempting to condone the offence but rather to modify the condemnation. I quite appreciate that. The fact is that in his original contribution tonight, he has suggested that practically everybody in B.A.O.R. and the Allied Control Commission are concerned in this. That is something into which the House should look, because I am not at all satisfied that it covers so many people. He went on to say that, in particular, those who had access to British canteens were concerned. When he was interrupted, he replied that in that case, there were some Czechs, Poles and people of other nationalities concerned.

I would like to know, first, why he mentioned members of the Allied Control Commission. Were they included among those who used N.A.A.F.I. canteens? The reason I ask him that arises out of another report to that which has been quoted tonight—the Second Report of the Select Committee on Estimates. It was shown, by one of the witnesses before that Select Committee, that there were certain people who, working under the Allied Control Commission, or likely to do so, might well be included in this category. I am trying to narrow this down and to get at the real responsibility for this actual trading, to which a good deal of attention has been paid. Evidence was given before the Select Committee on Estimates, that in addition to the civilian staff provided for in that Estimate—referring to the civilian staff of the Allied Control Commission—up to 8,350 posts of various grades might be filled by personnel of the Armed Forces, and charged to Service Votes. Earlier in the same Report it had been shown clearly that the temptations open to members of the Allied Control Commission were greater than the temptations open to the British troops. The only point I want to make is, that the right hon. Gentleman has included the whole of the Occupying Forces in a rather sweeping way, also their relatives in England who sent the cigarettes. I believe this can be narrowed down to comparatively few people out of the total number in Germany at the time.

In the second place I would point out that the right hon. Gentleman tried to bring in what had happened in Italy, and made a somewhat political point at the end of his speech. I think his party has been particularly insistent in saying that it wishes to be judged by results. However fortunate previous Governments may have been, I suggest that they too must be judged on results in this case. I do not think previous Governments came to the House with the original or Supplementary Estimate, saying that £20,000,000 should come out of the pockets of the taxpayers in order to meet illicit trading purchases by troops overseas. I hope he accepts that argument.

Thirdly, he has made, I submit, a very wild charge tonight against troops from the Dominions. Although there may be some justification for it, he has not given us much ground on which to decide whether the charge is justified or not. In any case, I think the House should know whether any steps have been taken to recover the amount involved from the Dominion Governments concerned. The British taxpayer should not be expected to bear the whole charge of this illicit trading conducted by troops from the Dominions.

The hon. and gallant Member for the New Forest (Colonel Crosthwaite-Eyre) raised the question of how this loss arose in relation to the Post Office. I do not know whether the Government Front Bench will give me a little attention, because I think this is a matter which should be of interest to the right hon. Gentleman. I think it is important tonight that we should try to discover where the original responsibility lay. While I entirely endorse what my hon. and gallant Friend the Member for North Blackpool has said, what we went to get at is the source and origin of this business. I believe the origin was not among the British troops. The Government's responsibility surely was in the printing of the notes which were circulated. These notes, as I understand, were printed without any backing whatever, and evidence given in the Committee on Public Accounts shows that the only charge on these notes was the cost of printing them. Surely what has happened is this, that these postal orders have been presented, and there has been no backing for the marks from which they were changed. I suggest that there lies the responsibility in this matter, and that it is the fact that these marks had no backing which has led the country into this shocking debt.

The right hon. Gentleman was bold enough to say that as soon as he was aware of this matter he took very prompt action, and he went back to January, 1945, to support his case. He has tried to pin responsibility for some of it on to the previous Government. Admitting that they were aware in January, 1945, of a certain amount of loss being involved, and that certain steps were taken to prevent an excessive number of postal orders being sent home, in spite of the fact that that had been appreciated, it was not until 5th November, 1946, that the British expenditure in Austria was reported on by the Select Committee on Estimates, which recommended what my hon. Friend the Member for Westbury (Mr. Grimston) said in his opening speech. He stated right at the beginning that the Select Committee on Estimates had said in their Report, which was published on 5th November, 1946, that exactly the same thing was happening in Austria in schillings as was happening in Germany in Reichsmarks. If the right hon. Gentleman had been aware of what was happen- ing in Germany he should, one would suppose, have been suspicious of what might happen in Austria. Yet it took him from the time he took office until November, 1946, to find out what was happening in Austria, and it seemed abundantly clear from that that he was equally unaware of what was happening in Germany. These vouchers, we hope, have stopped a certain amount of expenditure. But the Secretary of State for War has, in a very airy sort of way, put the blame on the whole of B.A.O.R. and other troops for this loss. The real responsibility, I suggest, lies with the Government, and however hard they try to pin this on previous Governments they cannot absolve themselves from this responsibility.

Earl Winterton

I stand at this Box tonight in a rather queer position for me—the position of being an appellant. I am going to make an appeal to the Government on this important matter. We on this side of the House do not often pay compliments to the Government, but we with right hon. and hon. Members opposite accept the fact that this is to be regarded as a serious matter. They regard it, think, as seriously as we do and we are grateful for what has been said. Here is a situation, not merely a question of whether the Government are to blame or not, but a situation in which the House of Commons if it is to do its duty must exert itself. Let us look at the history of the matter. I do not want to make an attack on the Financial Secretary to the War Office who is a justly popular junior Minister of this House, but I would say by way of obiter dictum that when dealing with these Estimates he never even referred to this matter at all. That was the first step.

11.45 p.m.

The next step was that the Secretary of State for War made reference to it. The right hon. Gentleman dealt with the 213 million but it was not until tonight that we learned, also by way of obiter dictum, that this was not the end of the matter. We had not heard that we had already had a loss of something like £38 million, so that the total is £58 million. The right hon. Gentleman opposite may smile, but nobody will smile at the observation which I am going to make. It is this. It is a pretty serious thing that we should be asked, late at night, to discuss part of a dishonest transaction which has resulted in a loss to the British taxpayer of £58 million which, I understand, represents something like 9d. in the £ on the Income Tax. That is not the most serious part of the thing. The right hon. Gentleman referred to lire in Italy. Apparently, the Financial Secretary to the War Office rather objected to his referring to it, because he subsequently got up and raised a point of Order as to whether we could discuss lire. Apparently in Italy, where there was a similar loss of lire under the Coalition Government—I do not want to make a party point tonight—means were found of dealing with the matter, and the money was, as he expressed it in a not very elegant, but a very helpful and useful phrase, pumped back into Italy.

We on this side, among other questions to which we have sought and have not received answers, want to ask this question: Is there no way of making the German and Austrian people responsible for this huge sum of money? Is there no way of getting it out of them? Are we, as representatives of the British taxpayers, calmly to accept tonight a situation that here are 20 million badly needed in this country—[Interruption.]—does anybody object to that?—and that there is no way of getting it back from Germany or Austria? The hon. Lady opposite may think it is a mistake, but I think the majority of people in this House would say that we ought to try to get it back.

I am an appellant tonight, and I shall carefully avoid saying much more, because if I do, I may cease to appear in that role. I make a most earnest appeal—I speak for everyone on this side of the House, and for my right hon. Friend the Deputy-Leader of the Opposition, with whom I have been in private conversation—and I say that if ever there was a case presented in the House which required a Select Committee of investigation, here is that case. There should be a Select Committee to inquire into the whole thing. I make no charges, because I do not know who is guilty. It may have been the Commander-in-Chief, it may have been the humblest private soldier, but somebody is responsible for the loss of this vast sum of money to the British taxpayers.

There is another very serious side to the charge. The right hon. Gentleman, tonight, told us—I did not raise a specific point of Order at the time, although I might have done so—that, although the whole of this particular amount of £20 million is going on to the Army Estimates, a lot of it was not incurred through misbehaviour of members of the Army at all. He told us that some of it was incurred through the action of sailors and airmen, and some through the action of civilians. It may be, as an hon. Gentleman opposite said, that one should have in one's heart a feeling that this is the result of war conditions, but whether it is or is not the result of war conditions, the fact remains that the British taxpayer is being mulcted of this enormous sum of money, that we are asked tonight calmly to pass this Supplementary Estimate, and that no mention has been made that a single person has been punished for that. I hear the most alarming stories of people who have made money in this way—not only private soldiers, but others—and not a single person has been punished. I make a most earnest appeal to the right hon. Gentleman—and I may say that I believe it is an appeal which would be backed up by public opinion irrespective of party throughout the country—to announce tonight that he will appoint a Select Committee of inquiry into the whole of these transactions—not only this particular Supplementary Estimate, but the whole £58 million which has been lost.

The Minister of Defence (Mr. A. V. Alexander)

The noble Lord the Member for Horsham (Earl Winterton) has been a Member of the House for a great many years, and he has not spoken in any way which is contrary to those traditions which are well recognised and understood by those who have been for a long time Members of the House. On such occasions it is never the desire of the Government, who understand the feeling of the House, to try in any way to hide any of the details and facts which led to the presentation of such a case as has had to be presented in connection with this Supplementary Estimate for the year 1946–47. We have no need and no reason to hide anything from the House.

The various points which have been made have, been dealt with, both tonight and on the previous occasion, by my right hon. Friend the Secretary of State for War. I would like to say, in reply to the noble Lord, who referred to the Financial Secretary to the War Office just now, that it was in no way any fault of his that on the previous occasion when the Estimate was discussed in Committee, he did not actually refer to this matter. I say that because I do not want a junior Minister to have any particular blame apportioned to him in the minds of the House with regard to his handling of the statement. Because it was known that the Secretary of State would intervene later, on that particular issue, he did not refer to it.

Many other detailed points have been made, but perhaps the House will pardon me if, acting upon the tradition of the House in this matter, I address myself at this stage to the specific appeal which the noble Lord has addressed to me. This House of Commons is sometimes criticised from outside because of its extraordinary rules and regulations, and the number of Committees which it sets up at the beginning of a Session. The fact is, of course, that it checks a great many of what might become public scandals by its care of its rules and by the steps it takes to set up its machinery. In regard to matters of this kind, there is a Select Committee which is capable of dealing with the matter and of bringing in any report of emphasis upon points to the notice of the House. The hon. and gallant Member for the Isle of Ely (Major Legge-Bourke) quoted from Reports both of the Public Accounts Committee and of the Select Committee on Estimates to strengthen his case for attacking the Government's responsibility in the matter. I would say this to the noble Lord: first, it is quite clear that the House is entitled to all the information it can get on the matter, and to make its judgment; secondly, it must surely economise to the greatest possible extent it can in the time of hon. Members and of the setting up of committees. I am assured that the full facts about this matter—more than can be stated in the short time of, say, a speech in this House —will be in the hands of the Public Accounts Committee, with the report of the Auditor-General, within about 14 or 15 days from now, and within a week or two after the Easter Recess, I should think, the Accounting Officer of the War Office will be appearing before the Public Accounts Committee and will, as always, offer himself for complete and technical examination by the Members of the House.

I should imagine that the right hon. Member for North Leeds (Mr. Peake), the former Financial Secretary to the Treasury, who is chairman of the Public Accounts Committee, will take with him full knowledge of the points which have been raised by hon. Members from all sides of the House during the course of both the Committee and Report stages Debate on this Supplementary Estimate. Then, in the course of that examination, and the Report of the Public Accounts Committee, if there are specific matters which should again be brought before the House, they can be, because the Government have nothing to hide in this matter but want all the facts to be known to all the hon. Members of the House, I submit that is the proper way to deal with the matter. We shall be only too happy to place all the facts that we have at our disposal before the Public Accounts Committee in that way. I think that really meets the spirit of the appeal of the noble Lord, and therefore I think that we might go to a decision upon this matter.

Mr. Eden (Warwick and Leamington)

I am obliged to the right hon. Gentleman for meeting what he, as an old Parliamentarian, feels to be the desire of this House. What we really feel is that we

want this matter probed. It is not a heresy hunt. A large sum of money has disappeared at great cost to the taxpayer, and we ought to know about it. I am obliged to the right hon. Gentleman for his proposal. I think that ought to be considered. It may well meet the situation; I do not know. I am not quite certain from memory what power the Public Accounts Committee has for the examination of witnesses—

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


Mr. Eden

Is that so as regards the chairman?

Mr. Glenvil Hall

Yes, he can send for any witnesses and examine all documents.

Mr. Eden

I am much obliged. I do not want to go beyond that point. Our only desire is for the fullest information. If that can be obtained we shall be satisfied; if not we may have to ask for some other opportunity to raise the matter.

Question put, "That '£50,000,000 stand part of the Resolution."

The House divided: Ayes, 194; Noes, 88.

Division No. 93.] AYES. [11.58 p.m
Adams, Richard (Balham) Crawley, A. Hannan, W. (Maryhill)
Adams, W. T. (Hammersmith, Sputh) Crossman, R, H. S. Hastings, Dr. Somerville
Alexander, Rt. Hon. A. V. Daggar, G. Henderson, Joseph (Ardwick)
Allen, A. C. (Bosworth) Gaines, P. Herbison, Miss M.
Alpass, J. H. Davies, Edward (Burslem) Holman, P.
Attewell, H. C. Davies, Harold (Leek) House, G.
Awbery, S. S. Davies, Hadyn (St. Pancras, S.W.) Hoy, J.
Ayrton Gould, Mrs. B. Davies, S. O. (Merthyr) Hutchinson, H. L. (Rusholme)
Baird, J. Deer, G. Irving, W. J.
Bechervaise, A. E. Delargy, H. J. Janner, B.
Belcher, J. W. Diamond, J. Jager, G. (Winchester)
Ballenger, Rt. Hon. F. J. Dobbie, W. Jones, Elwyn (Plaistow)
Berry, H. Driberg, T. E. N. Jones, P. Asterley (Hitchin)
Bevan, Rt. Hon. A. (Ebbw Vale) Dugdale, J. (W. Bromwich) Keenan, W.
Bing, G. H. C. Dye, S. Kenyon, C.
Blackburn, A. R. Ede, Rt. Hon. J. C. Kinghorn, Sqn.-Ldr. E.
Blenkinsop, A. Edwards, W. J. (Whitechapel) Kirby, B. V.
Blyton, W. R. Evans, John (Ogmore) Lewis, A. W. J. (Upton)
Boardman, H. Evans, S. N. (Wednesbury) Lewis, J. (Bolton)
Bowles, F. G. (Nuneaton) Ewart, R. Lindgren, G. S.
Braddock, Mrs. E. M. (L'pl, Exch'ge) Fairhurst, F. Logan, D. G.
Braddock, T. (Mitcham) Farthing, W. J. Longden, F.
Brook, D. (Halifax) Fletcher, E. G. M. (Islington, E.) Lyne, A. W.
Brook? T. J. (Bothwell) Forman, J. C. McLeavy, F.
Brown, T. J. (Ince) Foster, W. (Wigan) Macpherson, T. (Bamford)
Buchanaa, G. Fraser, T. (Hamilton) Mallalieu, J. P. W.
Burke, W. A. Freeman, Maj. J. (Watford) Manning, C. (Camberwell, N.)
Carmichael, James Ganley, Mrs. C. S. Manning, Mrs. L. (Epping)
Champion, A. J. Gibbins, J. Mathers, G.
Clitherow, Dr. R. Gibson, C. W. Medland, H. M.
Cobb, F. A. Gilzean, A. Mellish, R. J.
Cocks, F. S. Glanville, J. E. (Consett) Mitchison, G. R.
Collindridge, F. Greenwood, A. W. J. (Heywood) Monslow, W.
Collins, V. J. Grey, C. F. Morgan, Dr. H. B.
Colman, Miss G. M. Grierson, E. Morris, P. (Swansea, W.)
Comyns, Dr. L. Griffiths. D. (Rather Valley) Moyle, A.
Cooper, Wing-Cmdr. G. Hale, Leslie Murray, J. D.
Corlett, Dr. J. Hall, W. G. Nichol, Mrs. M. E. (Bradford, N.)
Corvedale, Viscount Hamilton, Lieut.-Col. R. Nicholls, H. R. (Stratford)
Noel-Baker, Capt. F. E. (Brantford) Shurmer, P. Titterington, M. F.
Paget, R. T. Silverman, J. (Erdington) Turner-Samuels, M.
Palmer, A. M. F Silverman, S. S. (Nelson) Ungoed-Thomas, L.
Parker, J. Simmons, C. J. Usborne, Henry
Paton, Mrs. F. (Rushclifle) Skeffingtan, A. M. Vernon, Maj. W. F.
Paton, J. (Norwich) Skinnard, F. W. Walkden, E.
Pearson, A. Smith, C. (Colchester) Watkins, T. E.
Peart, Capt. T. F. Smith, S. H. (Hull, S.W.) Weitzman, D.
Plaits-Mills, J. F. F. Snow, Capt. J. W. Wells, W. T. (Walsall)
Porter, E. (Warrington) Solley, L. J. West, D. G.
Porter, G. (Leeds) Soskice, Maj. Sir F. Whiteley, Rt. Hon. W.
Price, M. Philips Sparks, J. A. Wigg, Col. G. E.
Proctor, W. T. Stamford, W. Wilcock, Group-Capt. C. A. B
Pursey, Cmdr. H. Steele, T. Wilkes, L.
Randall, H. E. Swingler, S. Wilkins, W. A.
Ranger, J. Sylvester, G. O. Willey, F. T. (Sunderland)
Reid, T. (Swindon) Symonds, A. L. Williams, J. L. (Kelvingrove)
Roberts, A. Taylor, H. B. (Mansfield) Williamson, T
Roberts, Goronwy (Caernarvonshire) Taylor, R. J. (Morpeth) Willis, E.
Robertson, J. J. (Berwick) Taylor, Dr. S. (Barnet) Woodburn, A.
Ross, William (Kilmarnock) Thomas, D. E. (Aberdare) Woods, G. S.
Royle, C. Thomas, Ivor (Keighley) Wyatt, W.
Segal, Dr. S. Thomas, I. O (Wrekin) Yates, V. F.
Shackleton, Wing-Cdr. E. A. A. Thomas, George (Cardiff) Younger, Hon. Kenneth
Sharp, Granville Thorneycroft, Harry (Clayton) TELLERS FOR THE AYES:
Shawcross, C. N. (Widnes) Thurtle, E. Mr. Michael Stewart and
Shawcross, Rt. Hn. Sir H. (St. Helens) Tiffany, S. Mr. Popplewell.
Agnew, Cmdr. P. G. Galbraith, Cmdr. T. D Peto, Brig. C. H. M.
Amory, D. Heathcoat Grimston, R. V. Prescott, Stanley
Baldwin, A. E. Hare, Hon. J. H (Woodbridge) Price-White, Lt.-Col. D.
Barlow, Sir J. Naughton, S. G. Prior-Palmer, Brig. O.
Bennett, Sir P. Henderson, John (Cathcart) Raikes, H. V.
Birch, Nigel Hinchinghrooke, Viscount Ramsay, Maj. S.
Boles, Lt.-Col. D. C. (Wells) Hogg, Hon. Q. Rayner, Brig. R.
Boothby, R. Hollis, M. C. Renton, D.
Bossom, A. C. Hudson, Rt. Hon. R. S. (Southport) Roberts, H. (Handsworth)
Bower, N. Hurd, A. Roberts, Maj. P. G. (Ecclesall)
Boyd-Carpenter, J. A. Joynson-Hicks, Hon. L. W. Ross, Sir R. D. (Londonderry)
Bromley-Davenport, Lt.-Col. W Kendall, W D. Sanderson, Sir F.
Buchan-Hepburn, P. G. T. Lancaster, Col. C. G. Scott, Lord W.
Byers, Frank Langford-Holt, J. Shephard, S. (Newark)
Challen, C. Leggn-Bourke, Maj. E. A. H. Smith, E. P. (Ashford)
Channon, H. Lindsay, M. (Solihull) Spence, H. R.
Clarke, Col. R. S. Lloyd, Selwyn (Wirral) Stoddart-Scott, Col. M.
Clifton-Brown, Lt.-Col. G Low, Brig. A. R. W. Strauss, H. G. (English Universities)
Cooper-Key, E. M. Lucas, Major Sir J. Taylor, C. S. (Eastbourne)
Crosthwaite-Eyre, Col. O. E Lucas-Tooth, Sir H. Teeling, William
Cuthbert, W. N. Mackeson, Brig. H. R. Thomas, J. P. L. (Hereford)
Dodds-Parker, A. D. Macmillan, Rt. Hon. Harold (Bromley) Thorp, Lt.-Col. R. A. F.
Dower, E. L. G. (Caithness) Maitland, Comdr. J. W. Wheatley, Colonel M. J.
Drayson, G. B Manningham-Buller, R. E. White, J. B. (Canterbury)
Brews, C. Marlowe, A. A. H. Williams, C. (Torquay)
Eden, Rt. Hon. A. Marsden, Capt. A. Willoughby de Eresby, Lord
Elliot, Rt. Hon. Walter Morrison, Maj. J. G. (Salisbury) Winterton, Rt. Hon. Earl
Fox, Sir G. Neven-Spence, Sir B. Young, Sir A. S. L. (Partick)
Fraser, Maj. H. C. P. (Stone) Nicholson, G. TELLERS FOR THE NOES
Fyfe, Rt. Hon. Sir D. P. M Nutting, Anthony Mr. Studholme and
Major Conant.

Question put, and agreed to.