ARMED FORCES, EUROPE (CURRENCY LOSSES)

HC Deb 21 July 1947 vol 440 cc868-944

3.37 p.m.

Mr. Grimston (Westbury)

I beg to move: That this House doth agree with the Second Report of the Public Accounts Committee, and expresses its regret that the Secretary of State for War did not disclose in Committee of Supply on 18th February the full extent of the losses incurred by the Exchequer. I think it will be within the recollection of the House that the immense losses through currency operations in Germany and elsewhere—a loss amounting to £58 million sterling—shocked both the House and the public when they came to light. They came to light during the Debates in Committee of Supply and on Report on 18th and 27th February this year on a Supplementary Army Estimate. Perhaps I may remind the House that in the course of those Debates, my noble Friend the Member for Horsham (Earl Winterton) asked for a Select Committee to be appointed to go into the matter. In response to this request, the Minister of Defence suggested that the matter would shortly be coming before the Public Accounts Committee and that that was the appropriate body to make the investigation. That, of course, was accepted at the time. We now have the second Report of the Public Accounts Committee, dealing with this matter, and if it is not presumptuous of me to do so, I am sure I will be expressing the views of the House if I say that we are indebted to the Public Accounts Committee for the very full and careful work with which they have presented us.

The Motion which I am moving falls into two parts, with which I propose to deal separately. The first deals with the report, and the second expresses regret at the failure of the Secretary of State to disclose the full extent of the losses when he first had an opportunity to do so. First, I wish to direct the attention of the House to the conclusions of the Report. Broadly speaking, the fact emerges that the losses could have been reduced had more speedy and energetic steps been taken by the War Office, and had those responsible in Germany been quicker in informing the War Office of what was happening. That is alluded to in the Report. Be it remembered that within this sum of £58 million sterling there is also a loss of dollars. In our present dollar situation that is an extremely serious matter, and I will hazard a guess that within that £58 million sterling there is a greater loss of dollars than the amount of dollars that will be saved by the proposed cuts in newsprint.

During the Committee stage of the Estimates the Secretary of State sought to ride off responsibility by saying that a very large proportion of the loss occurred at the time of the Coalition or "caretaker" Government. It emerges from the report which is now before us that the whole of the German losses occurred during the tenure of office of the present Administration. It is true that some £14 million sterling of loss occurred in Holland between January and October, 1945, part of that period, of course, being covered by the time just preceding and during the General Election. But this should have been a warning of what was likely to happen in Germany; and, indeed, the Committee direct attention to this. I refer the House to page xiii of the Report—to the conclusions—in which the Committee say, Your Committee, however, consider that the War Office should have been warned by what happened in the Netherlands, where sup-pluses accumulated rapidly from January to October, 1945. Of course, these losses occurred when operations were still proceeding. As I say, this lesson was apparently disregarded.

I want now to examine the incidence of the losses in Germany. For that, I would ask the House to look at the Annex on page 30 of the Report, where a table is set out, showing the dates and the amounts of the losses in Germany as they occurred. It will be observed there that the first loss to show itself was in October, 1945—that is, three months after the present Administration had been in office—and the loss then showing was 49,912,000 marks. If hon. Members will recollect that 40 marks to the pound is the correct exchange rate to use in these calculations, they will find that the loss was of the order of £1,250,000. That was not known by the War Office. It was known in Germany in November, but it was not known in the War Office until January, and the Public Accounts Committee report on the length of time it took for the authorities in Germany to make that information available here. As soon as they heard it, the War Office asked for further information, and it became apparent that by February, 1946, the loss had amounted to over £4,500,000 sterling.

It was at that point that the decision was taken to introduce the special voucher scheme. I do not quite know how one pronounces it, but I believe they are known as B.A.F.S.V. But let the House note that, that decision having been taken, it took no less than six months to put it into operation. Just let us see what happened in those six months. The vouchers were not introduced until August—the decision having been taken in February—and during that time the losses rose to a total of £31 million sterling; or in other words, in that period of six months the losses rose by £26 million. With the losses running at this rate of increase, the War Office delayed the introduction of the scheme by one month through rejecting the original design of the vouchers, because it was feared that they might be forged. I presume they must have known the losses were at this rate. They also adhered to their decision that two months' notice must be given to the troops before a change was made. I commented on that on an earlier occasion. There was a written Question put down to the Secretary of State for War in May. Two months' notice was to be given before the voucher scheme was introduced, at a time when the losses were mounting at this staggering rate. We will look to see what the Committee say about that, and I refer the House again to page XIII, in the conclusions in their Report. They say: As regards the delay of one month due to the War Office rejecting the original design of the vouchers, your Committee consider that on balance the risk of forgery might have been taken, even if it had become necessary on that ground to replace the original vouchers at a later date I understand the War Office did, in fact, receive that advice from the Treasury.

With regard to the other point, I should like to read part of paragraph 43 on page XIII: The War Office felt that it was absolutely essential to maintain the morale of the forces and any sudden interference with well established practices might have given rise to great difficulties. Your Committee doubt, however, whether the introduction of a scheme with the object of restricting undesirable practices would in fact have created much difficulty. I think the House will agree with that. We must recollect the staggering rate at which these losses were rising. It is quite clear, I think, that the Administration disregarded the warning from Holland and showed lack of drive in stopping losses which have cost the country large sums of money. Let me refer to something which was said during the hearing of the evidence, and which appears on page 8 in the minutes of evidence. This was an answer by Sir Eric Speed to a question by the hon. Member for Shore-ditch (Mr. Thurtle). The question was: You, told us that you first realised there was a danger of substantial loss in January, 1946. At what date was the matter first brought to the notice of Ministers? The answer was: I cannot produce evidence of it having been brought before Ministers, but I personally discussed this with Ministers continuously from the time when I had that report, which was in February, 1946. I think it is clear that there was delay in this matter that could have been avoided; and, having regard to the time which elapsed after the authorities in Germany first reported the matter to the War Office, to the time when the vouchers were introduced, taking into consideration the delay of one month through the changing of the design of the vouchers, and this insistence upon two months' notice to the troops, I think the Administration have let the country down very badly in this regard.

I want to turn to the last conclusion of the Public Accounts Committee, and I am afraid—I hope the House will forgive me—that, in order to bring out what I want to say, I must read it in full. It says: Your Committee note that there was great difficulty in making British personnel in Germany appreciate the fact that any loss is incurred by paying in cigarettes or other goods for services rendered or for local products. When payment is made in marks for such services or products the cost falls on Germany, but cigarettes and other goods, e.g., food, are provided by the United Kingdom, to a large extent out of the limited dollar resources of this country. I ask the House to notice the last sentence particularly: Your Committee understand that the practice of obtaining services and local products in return for goods and not by payment in marks is still prevalent, and they recommend that the appropriate authorities should take all necessary steps to stop this practice. I do not know if hon. Members saw the other day a poignant letter from a parent in "The Times" in regard to venereal disease. It was published on 16th July. I quote an extract from it: Vice naked and unashamed comes as a great shock to youth, and it is absolutely wrong that young boys should be sent to places where women sell themselves openly it the streets for cigarettes or soap. I now turn to a Question which was asked by my hon. Friend the Member for Devizes (Mr. Hollis) the other day. He asked the Secretary of State for War, whether he is aware that payment for articles is still being made by British troops in occupied territory in goods and cigarettes; and what steps are being taken to bring this practice to an end? The Secretary of State for War answered: Yes, Sir. B.A.O.R. have made such transactions a disciplinary offence, and disciplinary action has been taken in a number of cases. There then followed several supplementary questions. My noble Friend the Member for Horsham asked: In view of the serious scandal that arose in the past from this practice of exchange and barter, is the Minister satisfied that all possible steps are being taken to prevent it? The Secretary of State answered: Yes, Sir, and I think that the Public Accounts Committee which investigated the matter is of the same opinion. That is exactly what the Public Accounts Committee is not. They say that the thing is still prevalent. Yet the Secretary of State for War gives that answer.

The Secretary of State for War (Mr. Bellenger)

Is the suggestion which the hon. Member is making that there is a large scale traffic on the part of our troops in Germany for illicit or immoral purposes, and that that traffic is in cigarettes?

Mr. Grimston

I am dealing here with the last recommendation of the report of the Public Accounts Committee, which said that the practice of getting services and goods by cigarettes and other things is still prevalent. I quote this letter from "The Times" to show some of the temptations to which the troops may be subjected. If that is right, I am now going to show the House that the Secretary of State does not understand this point. My hon. Friend the Member for Devizes then asked the Secretary of State: Is not the right hon. Gentleman aware that the Public Accounts Committee expressed great concern at the practice? The Secretary of State answered: "No, Sir." I have read the Report of the Public Accounts Committee, and that is exactly contrary to what that Committee expressed. They expressed great concern. Yet the right hon. Gentleman says: No, Sir. I have read the Public Accounts Committee's Report … and I think that the introduction of the special currency vouchers has stopped all chances of it continuing."— [OFFICIAL REPORT, 1st July,1947: Vol. 439. c 1126.] This has got nothing to do with the special currency vouchers. This is to do with cigarettes in payment for services or other goods.

Mr. Lipson (Cheltenham)

Will the hon. Gentleman give the date of the Question asked by the hon. Member for Devizes (Mr. Hollis)?

Mr. Grimston

It was 1st July. I think it is pretty obvious that there is little hope of convincing the Army—which is difficult anyway—that it is wrong to use cigarettes or other things in payment for services when the Secretary of State for War can give answers like that in the House to supplementary questions. He has not understood this paragraph in the report. How can we expect to put it over to the troops that it is wrong when the Secretary of State for War obviously has not understood it himself?

I come now to the second part of the Motion, which concerns the personal conduct of the right hon. Gentleman. Let me give the House the background of the matter. On 18th February, 1947, the Secretary of State comes down to the House with a Supplementary Estimate, in which there is a request to the House to provide £20 million for these currency losses. Incidentally, the Supplementary Estimate was introduced by the Financial Secretary to the War Office and no mention was made of this matter. But it was pressed, and we know now from Annex A, to which I have referred, that the German losses alone, in August, 1946, stood at £31 million. That is seven, months before the right hon. Gentleman comes down to the House for a £20 million Supplementary Estimate. I also have here the Army Appropriation Account for 1945–46, and it will be seen from the abstract of that Account that it was signed by Sir Eric Speed, who is now chief accounting officer, on 24th December, 1946—two months before the Debate took place in the House. This was not available, but it was ordered by the House of Commons to be printed, on 21st January, 1947. It was not available in the House until April, though, of course, it was available in the Department.

Bearing this background in mind, I want to refer the House specifically to what passed during the Debate in Committee of Supply on 18th February, 1947. During that Debate, when the Secretary of State for War was explaining this matter, I intervened and said: The right hon. Gentleman will observe that the Explanatory Note with these Estimates says that this loss of £20 million arose during the current year. The right hon. Gentleman has been asked whether that is the total loss He was asked that question, I think, by the hon. Member for Nelson and Colne (Mr. S. Silverman) and by the hon. Member for Oldham (Mr. Hale). I then asked him again whether £20 million was the total loss, and the right hon. Gentleman answered: Yes, Sir, the loss came this year because the marks which have accumulated have to he dealt with in this current year, but the actual speculations occurred right from the start.… The right hon. Gentleman gave a categorical "Yes, Sir" when he was asked on 18th February whether the £20 million was the total loss or not. Of course, we now know that £20 million was nothing like the total loss, which was £58 million sterling.

Mr. James Callaghan (Cardiff, South)

The hon. Member knew it eight days later.

Mr. Rellenger

If the hon. Member will read his question he will see the question he then asked me was in relation to the current year.

Mr. Grimston

Oh, no. The right hon. Gentleman cannot get away with it like that. If the Secretary of State turns to the question put to him by the hon. Member for Nelson and Colne and others, he will see the question put was: "Is the £20 million the total of these losses, or are we to be Laced with some more? At that time the Secretary of State gave a categorical "Yes, Sir."

Sir Peter Macdonald (Isle of Wight)

Would the hon. Member mind reading again the question which he put, because there is no doubt about it?

Mr. Grimston

On 18th February this year I said: The right hon. Gentleman will observe that the Explanatory Note with these Estimates says that this loss of £20 million arose during the current year. The right hon. Gentleman has been asked whether that is the total loss, and that was the question I was trying to put."—[OFFICIAL REPORT, 18th February. 1947; Vol. 433, c. 1065.] Surely, that is clear enough. The right hon. Gentleman then answered: "Yes, Sir." I must leave it to the House to judge. What I want to know, and what I think the House would like to knew is, whether the right hon. Gentleman gave that answer from ignorance.

Before I conclude I must quote another remark made by the Secretary of State during the subsequent Report stage of the Estimates. On 26th February, 1947, during the Report stage of the Supplementary Estimate, when the right hon. Gentleman did disclose the total amount of the loss, he made this remark: I have not attempted to hide anything from the House on the Report stage…"—[OFFICIAL REPORT, 26th February, 5947; Vol. 433, c. 2214.] As I say, the House must be the judge whether or not the Minister has been merely incompetent. Parliament has the right, nay, the duty, to demand a high standard from His Majesty's Ministers, and it seems to me that a standard which prescribes that the House can be misled on one occasion provided the Minister "comes clean" later, is just not good enough. My right hon. Friend the Member for Woodford (Mr. Churchill) has said on another occasion that this Government degrades everything that it touches, and I believe this is yet another example of it.

4.0 p.m.

Mr. Hollis (Devizes)

I beg to second the Motion.

Hon. Members will agree that my hon. Friend for Westbury (Mr. Grimston) has rendered a very great public service in bringing this most important and disturbing matter to the attention of the House and of the public. Its importance can hardly be exaggerated. I speak in the interval which by custom elapses between a Minister's statement and his subsequent apology. We are all anxious to hear the right hon. Gentleman's apology. I will not attempt to anticipate what he may say, or delay hon. Members by going through the whole of the exposè already given in detail by my hon. Friend the Member for Westbury. My own feeling—and it will be interesting to learn whether the right hon. Gentleman can dispel it— is that he has not understood a single word of what has been going on from the beginning to the end of this transaction. I could give many instances of that. As it is, I will give only one. In the Debate on 26th February, my hon. and gallant Friend the Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre), on this very important question of the delay in issuing vouchers, said: 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 would not have to bear this large loss. The right hon. Gentleman interrupted my hon. and gallant Friend at this point to say: That was done, and they were not allowed to transfer more than a certain amount without a certificate from the commanding officer. That is the basic point of the whole transaction, which the right hon. Gentleman in his' own speech of defence has not seen fit to mention one way or the other. It is clear that he can have understood nothing and that he had no idea about what was going on. He was unaware of the important question of whether there was or was not a lapse of two months before the orders were given, because my hon. and gallant Friend, in reply to the right hon. Gentleman's interjection, stated: 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."—[OFFICIAL REPORT, 26th Feb., 5947, Vol. 433, c. 2226.] It will be interesting if the right hon. Gentleman can take up that point again when he speaks. Up to the present, the House has not the least notion whether there was notice or not; nor should we have heard anything about it at all, if there had not been an intervention as a result of the remarks made by a Member.

The first indictment we have against the right hon. Gentleman is the intolerable tardiness and casualness in owning up to the fact that there was a loss of £59; million. It was a matter almost of indifference whether it was £20 million, or £59 million—it merely dropped out in an aside. My next point is whether in fact we have even yet had the confession of the right hon. Gentleman as to what is the full extent of the loss, about which I am very doubtful. If we look at the second Report of the Committee of Public Accounts, we find, in addition to the statement made by the right hon. Gentleman on the £59 million, which in all conscience is considerable enough, an ominous heading "Unrecorded Losses" appearing over paragraph 15. there, we read: in addition to the losses recorded in the accounts, it seems clear that other losses were incurred. It is extremely disturbing that time after time these new things were being thrown up—a few more millions here, a few more millions there—until they do not bother to add up the total sum, which it is perhaps too difficult to do. We find it stated in paragraph 15: As mentioned in paragraph 8, the War Office expected that some part of the pay issued in German currency would be spent on local products, hut, in fact, the profits from illicit transactions enabled members of the Forces to pay for their local expenditure without drawing anything like their full pay. As will be seen from paragraph 20 below, the whole of the currency issued as pay, together with a substantial surplus arising from dealings with the civil population, returned to the Army Paymasters. The use of Allied military marks did not lead to the expected increase of currency in circulation (paragraph 10), and thus no part of the cost of the pay of the Forces was borne by Germany. The United Kingdom has paid in sterling the total cost of pay, and to the extent to which this cost should have been borne by Germany there is a loss, the amount of which cannot be determined. If we turn to paragraph 22, we find that apparently exactly the same thing has been going on in Italy.

My third point, which is the most highly disturbing of all, is that we have not the least reason to imagine that this has stopped. My hon. Friend the Member for Westbury has referred to the question I asked on 1st July. My hon. Friend has taken hon. Members through the whole story, and I need not therefore delay Members too long. The noble Lord, the hon. Member for Horsham (Earl Winter-ton) asked: In view of the serious scandal that arose in the past from this practice of exchange and barter, is the Minister satisfied that all possible steps are being taken to prevent it? Mr. BELLENGER: Yes, Sir, and I think that the Public Accounts Committee which investigated the matter is of the same opinion. Mr. HOLLIS: Is not the right hon. Gentleman aware that the Public Accounts Committee expressed great concern at the practice? Mr. BELLENGER: No, Sir. I have read the Public Accounts Committee's report and the evidence, and I think that the introduction of the special currency vouchers has stopped all chances of it continuing."—[OFFICIAL REPORT. 1St July. 1947; Vol. 439, c. 1126.] The all-important point is that the right hon. Gentleman could not have understood a word of what he was talking about in giving that answer, which, of course, we accept as being made in good faith. He may have read but he could not have learnt and inwardly digested the report of the Public Accounts Committee, or have understood it, when he read it, because it states exactly the contrary. It refers to the special vouchers scheme, which we hope has stopped up certain leaks, but the report never says that the introduction of special currency vouchers has stopped up all leakages; in fact, the report states the direct opposite. The Committee recounts the story of the introduction of this special currency voucher, and admits that these vouchers have stopped part of these evils, but the Committee also says that as long as there is this barter of goods against goods, it is inevitable that the British taxpayer is being defrauded. The Committee concludes its Report by saying: Your Committee understand that the practice of obtaining services and local products in return for goods and not by payment in marks is still prevalent, and they recommend that the appropriate authorities should take all necessary steps to stop this practice. Before we can possibly give any form of acquittal to the right hon. Gentleman, we must have reassurance on that matter. Not only must account be given of these vast sums of money allowed to be lost in the past, but some assurance must be given that money is not being lost to the British taxpayer at the present time. We must be given some indication from the right hon. Gentleman that he understands the working of his own Department, about which we have not the smallest assurance at present.

4.10 p.m.

The Secretary of State for War (Mr. Bellenger)

Before I reply to the Debate, may I draw attention to the Amendment, to leave out all words after "Committee," which stands on the Paper in my name? Perhaps it will suit the convenience of the House if I formally move that Amendment at a later stage. I think it would give a wider scope to the Debate if I did not move that Amendment at this stage.

Mr. Speaker

I think it will be more convenient if the Amendment is not moved now, so that the Debate can be left wide open in consequence. Perhaps when the Under-Secretary winds up the Debate, he will move the Amendment formally, and then the House can divide upon it.

Mr. Bellenger

The speeches of the hon. Member for Westbury (Mr. Grimston) and the hon. Member for Devizes (Mr. Hollis) have put me in something of a quandary. I do not quite know whether the charge against me is a charge in the first degree —as, I believe, occurs in America, in relation to certain crimes—namely, that I wilfully misled the Committee when I or my hon. Friend presented the Supplementary Estimates, by attempting to withhold information from it, or whether the charge is something a little less, namely, as the hon. Member for Devizes so charmingly put it, that I did not understand a word of what I was saying. I want to speak frankly to the House, and I hope that whatever decision is taken at the end of this Debate, the House will at least withdraw the charge that I did not understand what I was saying. I shall make it clear that I understood very much what I was saying, both in Committee of Supply and, later, on the Report stage.

Before I come to the terms of the Motion, I wish to make one point quite clear. On a previous occasion surprise was expressed that my hon. Friend the Under-Secretary, when introducing the Supplementary Estimates, did not mention the matter of £20 million which was included in those Estimates. My hon. Friend acted on my express instruction. I realised only too well that junior Ministers, as a rule, introduce what they have to introduce—the Supplementary Estimates in this case—as briefly as possible, and leave it to the Minister to reply to the Debate and deal, if possible with the difficult part of the Debate. There was not the slightest doubt in my mind that the loss of £20 million in this current year was a serious matter. I recognised that long before then, when the matter was first brought to my attention in the War Office, and when I had to give my assent to certain serious steps being taken to change the currency in which troops—and not only troops, but civilians and others as well—were paid. I, therefore, hope the House will understand that there was no attempt at subterfuge merely because my hon. Friend did not refer to that item specifically in his remarks.

Now let me come to the terms of the Motion. First, I would like to explain a point which was not made clear in a previous Debate—how was it that £20 million was taken in a Supplementary Estimate for 1946–47, to cover losses in that year, whereas nothing was taken for the corresponding, but larger losses, in the previous year, whether by original or Supplementary Estimate? If the House will turn to paragraphs 2, 3 and 31 of the Report of the Public Accounts Committee, they will see that the matter is referred to there. During the war, and up to and including the financial year 1945–46, funds for the Army and for war purposes were supplied by means of Votes of Credit. Those who were Members of this House during the war will know that we had no chance of investigating war expenditure such as we have now. What was done was to introduce a token sum in the Estimates. In other words, the Government were given more or less carte blanche to run the war, and the cost was not subject to the same detailed examination as that which goes on now. That course was approved by the House. For this reason, it would have been contrary to the recognised practice for the amount of the currency loss falling in 1945–46 to have been covered either in the original Estimate—if the loss had been foreseen at all—or in a Supplementary Estimate. The attention of the House was drawn to the matter in a reply to a written Question on loth March, 1946, but the loss was charged to the Vote of Credit, and no specific Parliamentary action was required.

The position in the following financial year, 1946–47, was different, because of the reversion to our peace-time procedure of presenting detailed Estimates. I could not, however, make provision in the original Army Estimates for 1946–47, because, when they were being prepared, these losses had not been brought to the notice of the War Office. Right hon. Gentlemen who have been Ministers themselves will know the procedure of making up Estimates. Generally, it is in January that the final figures are inserted. It was not possible for me, in the original Estimates, to include a sum to meet this specific loss. It was not until later in that year that we had any idea of the magnitude of this loss. It follows, therefore, that the first occasion for making provision for this loss was when I did so in the form of the Supplementary Estimate which was presented to the House in February, 1947.

Now I will deal specifically with the terms of the second part of the Motion. The suggestion is, although there was some difference between the hon. Member for Westbury and the hon. Member for Devizes, that in asking for this Supplementary Estimate for the provision of £20 million for this loss, it was incumbent upon me to give full details of complete losses covering, not merely the financial year current, but preceding periods. I would like to draw the attention of the House to page II of the Supplementary Estimate which states: The Supplementary Estimate provides £20 million to cover such losses as were incurred (luring the current year"— that is 1946–47— prior to the introduction of the special voucher scheme. It seems to be perfectly clear from those words—and I presume that when this Estimate was introduced, Members had taken the opportunity of reading the explanatory remarks, even though they did not pay too much attention to the detailed figures—that the loss for which the supplementary provision was being asked, formed part of larger losses. I can place no other interpretation upon those words; no other meaning can be attached to that sentence, in my opinion. On that ground alone, I strongly repudiate any implication—and I think there was an implication in what both hon. Members opposite said—that I deliberately withheld from the House knowledge that the loss of £20 million was not the whole story.

Moreover, it was well known to me and to my Department that the Army Appropriation Account for the previous year would shortly be presented to Parliament, with the the remarks of the Comptroller and Auditor-General, and would be submitted in the ordinary way for examination to the Public Accounts Committee, and, subsequently, to this House. It is really beyond reason to suggest that, even if that had been my intention, which I suggest it was not, the full measure of the losses would have escaped the scrutiny of this House. I hope and believe that the House will agree that it has always been my desire and practice to furnish to the House all facts and details which may be relevant to the subject which they are discussing. The matter did not end there.

The occasion on which the Motion suggests I should have given more information was the presentation of the Supplementary Estimates, the details of which were set out in the White Paper to which I have referred. I would like the House to pay particular attention to what I am now about to say. The business before the House then was, in fact, the provision of further sums required during the year ending 31st March, 1947, to meet charges to Army Votes which were not provided for in the Estimates of the year. These charges to Army Votes are specified in detail in the White Paper, and the sum with which the House is now concerned was stated separately. I suggest to the House that there was nothing in the requirements of the occasion which would demand, or even permit, that I should mention other expenditure already incurred in another year. Indeed, when, on the Report stage, I gave full details of the whole of the losses, it was as a matter of courtesy, in reply to a question which was, I think, put to me by the hon. Member for Westbury, and not because the method of their disposal was relevant to the business before the House; but I did it. Certain hon. Gentlemen rose, notably the right hon. Member for Horsham (Earl Winterton), and asked whether the matter was in Order. I believe that you, Mr. Speaker, or Mr. Deputy-Speaker, ruled that it was out of Order to discuss any previous losses. To sum up, I cannot admit that I was at fault in the original presentation of the Supplementary Estimates. I repudiate entirely that I was guilty of deliberate misrepresentation. So much for that part of the Motion which seeks to fasten on me blame for what I venture to say to my hon. Friends, and, indeed, to other hon. Members who are well disposed to listen to facts, is something which, if it were true, would need to be disclosed by anybody whether Minister or an hon. Member in coming to this House and presenting the facts.

As to the Report itself, the hon. Member who promoted this Motion made one or two points of detail—and I expect other hon. Members will, too, in the course of the Debate—which will be answered, I hope, by my hon. Friend later on. As the Minister responsible for the Department to which the handling of this matter fell, I accept the broad conclusions of the Committee. Let us take a look at those conclusions. I think that if the House will turn to the conclusions, because I wish to refer to them paragraph by paragraph, they will see better what I am driving at. Paragraph 40 on page XII, which is the first of the conclusions, does not, I think, require much comment from me, except to say that these conclusions point to the fact, which was based on the evidence given by officers to the Public Accounts Committee, that the losses are real losses and not accountancy losses. We have admitted that, and we have placed all the relevant evidence before the Public Accounts Committee on which they base this conclusion. If we turn to paragraph 41 at the top of page XIII—the decision of the Allied authorities to maintain German currency as legal tender, to give it equal status with the Allied military mark, and to establish an exchange rate of 40 marks to the £ sterling—a rate which many of us would think was out of actual relation to the value of the £ sterling—that decision was taken after the decision between the participating governments and there were quite a number of them. It was in the light of that decision, but without being solely responsible for it, that the War Office had to operate.

The Committee referred to the omission of the War Office to take precautionary measures before the losses were incurred, and great play has been made with that part of the Committee's report by the two hon. Gentlemen who have spoken. If hon. Members will turn to Part IV of Appendix 1, pages 28 and 29 of the report, they will see that a great variety of precautionary measures were, indeed, taken by the War Office; and I read this part of their conclusions not as a condemnation of the War Office for taking no measures whatever, but as a criticism for not taking adequate measures. But measures were taken, and hon. Members can see what those measures were.

Mr. Harold Macmillan (Bromley)

I think that the right hon. Gentleman is unconsciously misleading the House, in connection with Part IV, which is part of the Report and not the conclusions.

Mr. Bellenger

The contention of the Public Accounts Committee is that the War Office was lacking entirely in taking steps to prevent this—

Mr. Macmillan

The right hon. Gentleman referred to part of the conclusions. This is part of the Report.

Mr. Bellenger

I certainly have gone through the conclusions in paragraph 41 of the Committee, and I referred the House to this particular Part IV of Appendix 1 to rebut the suggestions made in paragraph 41. It is true that Part IV of Appendix r is evidence submitted to the Committee by the permanent Under-Secretary of the War Office I say that that evidence goes to show that the War Office had taken—how far they were adequate or not the House can draw their own conclusions—but we had taken very potent steps, as we thought, to stop this leakage. I have no doubt that we did, by these methods, depreciate to a certain extent the speculation that was going on; at any rate, we put some difficulties in the way of it, and we certainly did curb this illicit trading.

Mr. Keeling (Twickenham)

As the measures which the War Office took were quite ineffective, does it really make any difference whether they took any measures or none at all?

Mr. Bellenger

I am dealing with the Committee's conclusions, and the conclusions were that we had taken no steps at all. I say that we had taken steps, although admitting that these steps were not adequate. The gravamen of the charge is that experience in the Netherlands should have warned the War Office of the likelihood of corresponding events in Germany. When the non-fraternisation rule was lifted in 1945, it would have been then a wise step to prepare for increasing transactions with the local population. I will not attempt to deny that that suggestion was well-founded. Events have proved it to be so. Although pressure for revocation of the non-fraternisation Order was strong in this country and in this House, it was by no means universal among the occupying troops, and the circumstances of the two countries, Holland and the Netherlands, and those in Germany were not exactly similar.

In Holland there was a spontaneous and immediate atmosphere of friendship between our troops and the native population and one must not forget that those people had been starved of the bare necessities of life for a long time. In those circumstances, it was not entirely for wrong motives that our troops, and not only our troops but others, took the opportunity of engaging in the sale of food and other commodities which they acquired from the canteens. It may interest the House to know that first contacts in Germany between our troops and the people were hostile—[Laughter]. Hon. Members may like to know that these facts have been ascertained from the reports submitted by the authorities at that time, and what I am stating is information I have got from those reports. Hon. Members opposite may treat these remarks of mine with some cynicism, but that was the state of things when our troops first entered Germany. The hostility may not have been entirely between the different sexes, but nevertheless, definite hostility was shown towards our troops. I am not talking of cases where fighting troops were meeting fighting troops. I am talking of where they had met the civilian population who had become by that time very peaceful indeed. [Laughter.] I hope hon. Members will treat this matter with the seriousness with which I am treating it.

There was one other factor. In Holland the troops were billeted, but in Germany they were not, and they are not even today. They are not billeted in Germany generally speaking as they were after the first world war, when I was billeted in a house in Germany and had adequate opportunities for fraternisation, though there were small opportunities this time. I admit the sole responsibility of the War Office, but if they were not prescient, no one else was either. The Committee put that on record by stating very generously in paragraph 44: that it is easy to be wise after the event, as some hon. Members are now.

In the same paragraph of the report there is some criticism of the military authorities on the spot. The hon. Member for Westbury complained this afternoon because the military authorities on the spot did not bring to the notice of the War Office the illicit trading that was going on or the amount of the accumulation of those surpluses in currency which arose out of those trading operations. It is true that the consolidated accounts showing the beginning of these accumulations were first seen at headquarters in Germany about the middle of November, 1945, but, in fairness to the military authorities on the spot, I think I ought to say that the accumulations at that time were not very serious, something of the order of £1 million sterling. That £1 million sterling represented the balance of the accumulation over nine months. If hon. Members will turn to page 30 of the printed document, they will see that the balances actually declined during November. Therefore, I suggest that it was not unreasonable for the military authorities on the spot to assume that the accumulation was merely temporary.

Mr. Grimston

Did I hear the right hon. Gentleman correctly as saying that the balances declined during November?

Mr. Bellenger

Yes, Sir.

Mr. Grimston

That is not according to the figures in Annex A, which show that in November the mark balances totalled 89,096,000, while in December they amounted to 54,822,000 mark balances.

Mr. Bellenger

Perhaps the hon. Gentleman will allow me to explain that. He accuses me of not stating what is correct, but I hope he will understand what I mean. In November, 1945, the surplus mark balances totalled 89,096,000. By December, which would include the November figures, the figure had dropped to 54,822,000 mark balances, and again I say that the military authorities were entitled to assume that these surpluses were only temporary and they were on the wane. I hope the hon. Gentleman will agree with what I am saying. At any rate, what I want to say in this connection is that it could not have been foreseen by the military authorities in Germany that the proportion of these trading balances would rise to the large figures which they eventually did. In the final sentence of this paragraph the Committee remarks that there was an unnecessary delay of two or perhaps three months in applying the voucher scheme in Austria. I am not prepared to dispute the suggestion. The first vouchers were not issued in Austria until April, 1946, two months after action had been taken in connection with the German balances, and I can appreciate the feelings of the executive authorities in these matters. No one had had experience of what would happen by the introduction of this system of canteen money. It was a novelty, and I would seriously suggest to the House that they should consider that the troops did not easily understand the somewhat sudden change of policy which might affect them very considerably.

Mr. Bowles (Nuneaton)

My right hon. Friend has read the last sentence in paragraph 41. May I read to him the penultimate sentence because it seems to excuse the War Office altogether? That sentence reads: Your Committee are glad to note that, as soon as the War Office became aware of the position, action was taken to introduce a special voucher scheme, but it is to be regretted that prompt warning was not given by the authorities in Germany. That suggests that the War Office, as soon as they knew, took action.

Mr. Bellenger

I would not go so far as that, because the Public Accounts Committee report does criticise the War Office to a certain extent and I have already said we accept their report, or, at any rate, we accept their criticism. I submit today the explanation why the B.A.F.S.V. system was not introduced into Austria earlier than it was, and I think the reason is a good one. There is another reason—the actual designing and printing of these notes was a very large operation indeed, and we thought that we should not have sufficient of these notes to deal with Austria as well as Germany. Besides, we wanted to get some experience of the working of this system in Germany. In paragraph 4z the Committee considers: that on balance the risk of forgery might have been taken for the delay of one month would have been avoided. I cannot say I agree with the Committee entirely. It may interest the House to know that forgery did occur in the American canteens, but what the losses due to that forgery were, I cannot say. We were acting on advice from the Bank of England and we had also legal advice. Rightly or wrongly, the War Office thought it better to get a waterproof note and delay it for a little time to get a scheme of that nature run—

Mr. Brendan Bracken (Bournemouth)

A waterproof note?

Mr. Bellenger

A watertight note, or a note that was not subject easily to forgery if that satisfies the right hon. Gentleman.

Mr. Bracken

Was it a watermarked note?

Mr. Bellenger

That was the reason why there was a delay in introducing this new currency in Germany, and the House can judge if we did right or whether we should have taken that risk of forgery and introduced the note earlier. I do not know whether, speaking after the event, it may have been wrong not to take the risk of forgery as the Committee says, but that cannot be held against the War Office too seriously as a very important item in the mark losses for which we have had to ask the House subsequently to pay. I have already made some reference to the generous remarks of the Committee in paragraph 4 of its Report where, having heard the detailed evidence and having sat during a number of meetings, it says that it is very easy to be wise after the event —or, as the right hon. Gentleman would say, it is no good jobbing backwards.

Mr. Scollan (Renfrew, Western)

It is all very well to talk of being wise after the event, hut is it not the case that the Government appointed economic advisers to the Control Commission to fix the rate of exchange between the mark and the pound? Where those men fit for the job?

Mr. Bellenger

The rate of exchange between the mark and the pound was fixed long before an economic adviser Was appointed to the Control Commission, and I would remind my hon. Friend that this was not merely a matter of Britain saying what the rate to the pound should be. I could give the House a very interesting account of the negotiations which went on, and perhaps the right hon. Gentleman and some of his hon. Friends may be aware of the nature of some of these negotiations. On a far higher level than the War Office, the rate of 40 marks to the pound was fixed between all the participating Governments.

I should like now to say something about paragraph 45 to which both hon. Gentlemen attached considerable importance in their speeches, and which relates to the avoidance of future losses. May I say to the House that when the certain accumulation of losses was brought to my attention—I was then Financial Secretary to the War Office, a fact which is mentioned in the chronological account at the back of this Report—I was deeply disturbed at the losses which had occurred, but I thought that it was not my duty to inquire at that time into what had already happened, but to try to stop something that might happen in the future. When, therefore, I was asked to give my approval to the introduction of a new emergency currency, different from the local currency or pounds sterling in which troops had had the right to be paid, I gave it only because I wanted to stop this leakage. I was not so much concerned with the past. Indeed, a good deal of the past had occurred before I became Financial Secretary and, in any event, before 11th March, 1946, the date mentioned. The hon. Gentlemen mentioned the Committee's remarks on future losses. I think they were referring to something other than the losses in currency which the Committee had examined.

The future losses with which the Committee was concerned were losses in goods, because the voucher scheme, as I hope and believe, stopped the currency losses. It is possible that further losses may arise if successful forgeries are produced. The House will remember that 1 mentioned a little while ago that forgeries of American canteen notes had occurred, and I have given instructions for a new set of currency notes to be held in readiness for that emergency should it arise, which I hope it will not. In the last sentence of their Report, the Committee says: … the practice of obtaining service and local products in return for goods and not by payment in marks is still prevalent … I think that is what the hon. Gentleman the Member for Westbury had in mind when he introduced what I thought was an entirely irrelevant consideration, namely, a letter that had appeared in "The Times" which had regretted the prevalence of V.D. among our troops and other personnel in Germany. If it is his suggestion, or if it was the Committee's suggestion, that future losses are likely to occur merely because troops are going to barter cigarettes for immoral purposes, then I think that is a very serious suggestion which needs close examination. I should not myself have been prepared to make that suggestion, with all the facts at my disposal, and I am surprised that it has been thrown into this discussion today, because I do not believe there is any great substance in it. I have always found that if men and women, whether troops or civilians, want to indulge in those practices, it is not always a question of barter. Even if it were so, the charge would not fall on the Army Funds, since there would be no currency loss. The only loss that would occur—and I think this is what the Committee meant when it inserted that sentence or two—would be a loss in goods.

Mr. Grimston

Would the right hon. Gentleman be good enough to read the paragraph again?

Mr. Bellenger

That is my interpretation of it, and if it differs from that of the hon. Gentleman, we must agree to differ. In any case, I give the House the assurance that so far there has been no further currency loss, whatever may be the loss in the particular respect to which the hon. Gentleman referred. In this connection, may I say to hon. Gentlemen and to Members of another place that they should be very careful when they make these light and irresponsible remarks about our young troops in Germany? Parents in this country and the authorities at the War Office are greatly concerned about the opportunities for immorality in Germany, and, since I may be out of Order in enlarging on the point, I would merely say in passing that we ought to have the help of all hon. Gentlemen in all quarters of the House in stopping these practices, and not have them linked up to something which, as I understand the speeches of the two hon. Gentlemen who preceded me, was an attack on the Government, for purposes which they know best.

Mr. Lipson

Surely the Minister is not suggesting that there should he anything in the nature of concealment of the facts, and no doubt he will remember that the letter referred to is written by the father of a young soldier on the evidence of the soldier himself.

Mr. Bellenger

I am also the father of a young soldier who has served in Germany, and I think I know as much as some of these fathers who write to "The Times," or even as much as medical experts, about the opportunities out there. I can assure the House that it is not entirely limited to young soldiers. Other theatres of war besides Germany present equally bad, and probably worse, opportunities, and if the attempt is to stop us from sending young soldiers to Germany, I say that it is ill-timed, because our commitments are such that we have to send them.

I wish to conclude by saying that, in so far as the Public Accounts Committee's criticism is well founded, we are taking every possible step to remedy the situation. We are taking all disciplinary measures that we can think of to do that, and I do not know what other measures hon. Gentlemen would wish us to take. This does not affect the War Office alone, and we are considering, with the other Departments concerned, whether any further measures can be adopted to prevent goods from being available for barter. There is still a large quantity of cigarettes being sent out from this country today to British troops and civilian personnel. In so far as these goods are a drain on our dollar resources or provide an opportunity for illicit trading, we have to cut down the opportunities as much as we can, but there is a certain need of the Forces and the civilian per- sonnel in Germany which we must meet, and below that line I do not think we could go.

Mr. Hollis

The Minister is now saying that the Government are taking all steps to stop barter, but on 1st July he said: … I think that the introduction of the special currency vouchers has stopped all chances of it continuing."—[OFFICIAL REPORT, 1st July, 1947; Vol. 439, c. 1126.] "it" being the practice of exchange and barter. That is just our case against the Government.

Mr. Bellenger

The hon. Gentleman is linking up two things. I reiterate that the new vouchers have stopped currency transactions, which fall upon the Army Vote, but the goods which can still be bought from the canteens with B.A.F.S.V. are still available for those in Germany to do anything they like with—either to smoke the cigarettes themselves, or to part with them to the Germans.

Mr. Hollis

I am aware of what the right hon. Gentleman is saying now, but my point is that it is different from what he said on the previous occasion.

Mr. Bellenger

I have not the time now to look up what I said then, and I will take what the hon. Gentleman says. I will make my position clear. In currency, we have stopped it, unless there may be a forgery. In goods we have not stopped it. What do hon. Gentlemen want me to do? Do they want me to cut off all canteen supplies to the troops, to stop all cigarettes going to the troops? That would be the way to do it, but it would affect the morale of the troops, and I would not be prepared to do it. We are taking honest and legitimate steps by disciplinary measures to prevent this from going on. Any officer or other rank using cigarettes or any other commodity which he gets from the canteen, in order to get what he wants, whether it be moral or otherwise, will find that he will be charged with an offence against the Army Act, and it will be a very serious offence. The consequences will be very serious to the officer or other rank. Any hon. Gentleman or right hon. Gentleman will know the difficulty of controlling all these offences among tens of thousands of troops. Apparently, we cannot stop, the illicit currency transactions taking place on the part of those who go abroad and give cheques. We can only bring them before a court of justice. That is what we do in the Army. We shall attempt to do the same if we find that thing happening, or if we catch those who do it.

Finally, I hope that the House, after the rather long explanation I have given, will acquit me of the charge made by the hon. Member for Devizes that I do not understand what is happening in my own Department. I hope that I can appeal to all quarters of the House when I ask them to reject the implied criticism of those who moved this -Motion that I wilfully attempted to mislead the House.

4.53 p.m.

Major Sir David Maxwell Fyfe (Liverpool, West Derby)

To one sentence of the right hon. Gentleman's speech I shall gladly respond, and that was when he asked us on this side of the House to take this matter seriously. To the next point I shall not respond. In my view, the right hon. Gentleman has completely failed to clear himself on either count of the charges brought against him by this Motion. I should like to examine the attempts which he has made so to do, following his order of the different parts of the Motion.

First, the right hon. Gentleman said that he had told the Financial Secretary not to make any mention of this part of the Supplementary Estimate in his introductory speech. One cannot help wondering, if the intention was that this matter should be brought fully before the Committee, why the right hon. Gentleman did not go on to ask his hon. Friend and fellow-Minister to inform the Committee that the Secretary of State himself, would deal with this very serious matter when we came to that part of the Debate. The next explanation was that the hon. Gentleman who raised the matter had not paid sufficient attention to the note that appears—and to which the right hon. Gentleman referred—on page 11 of the Supplementary Estimate. I gladly acquit the Members of the Committee of the right hon. Gentleman's strictures. I do so out of the mouth of one of his own colleagues, the hon. Member for Nelson and Colne (Mr. S. Silverman). If the right hon. Gentleman will be good enough to look at the report of the Debate, he will find that, towards the end of Column 104.8, the hon. Member for Nelson and Colne said: I observe that in the Explanation on page 11, £20 million is said to be only part of the cost. Then he quotes the sentence which the right hon. Gentleman quoted, and goes on to say, having quoted it and made it perfectly clear that the Estimate was dealing with the matter for a year: £20 million is what it cost us in the current year, and I think we should like to know what has been the total cost. After that, my hon. Friend who opened this Debate asked the very definite question—at the foot of column 1064: The right hon. Gentleman has been asked whether that is the total loss, and that was the question I was trying to put, and the right hon. Gentleman said: Yes, Sir."—[OFICICLAL REPORT, 18th February, 1947; Vol. 433; c. 1048–1065.] It had been made perfectly clear by the hon. Member for Nelson and Colne, and by my hon. Friend the Member for Westbury (Mr. Grimston), that what was in the mind of the Committee was not the estimate for the year, which was clearly stated in the Supplementary Estimate, hut the total cost, and the right hon. Gentleman said, "Yes, Sir." The right hon. Gentleman has not chosen to give any answer respecting that answer that he gave to the Committee on that night. Can he really he surprised, when he fails to give an answer at all, that we, who, after all, are still the guardians of the nation's finances, should put down a Motion regretting that he chose to take that path?

It does not stop there. On 26th February, with much beating of imaginary drums and blowing of his own trumpet, the right hon. Gentleman came to the House and said: "Whatever I did on the Committee stage, I am being frank with the House on the Report stage." That lovely phrase occurs in column 2220, if anybody would like to enshrine it in his commonplace book. Having clone that, the right hon. Gentleman said: This £20 million is part of a larger sum, the greater part of which £38 million, was written off in the Army Account. For once, and purely by mistake, the right hon. Gentleman was right. That was what had happened. Of course, he quickly altered it, in order to make himself wrong again. He said: The total loss amounts to £58 million. I had not the honour of presenting the Estimates last year, but £38 million was written off in last year's Estimates."—[OFFICIAL REPORT, 26th February, 1947. Vol. 433, c. 2212.] Of course, there had not been any Estimates, and the right hon. Gentleman was quite wrong.

Mr. Bellenger

Of course, that was an unfortunate word to use. It was not the Estimates, but the Vote of Credit to which I was referring.

Sir D. Maxwell Fyfe

I quite agree, but it might have been better if the right hon. Gentleman had just paused for a moment. I should like him to follow the effect of his mistake. There was, as the right hon. Gentleman said in his speech, some question of Order in this matter. In column 2228, the Financial Secretary, again I am sure acting on the instructions of his chief, got up and made an objection as a matter of Order, to the fact that some questions were being asked about this matter of £38 million. The Financial Secretary having made this objection, Mr. Speaker said: I am not quite clear where the other £08 million comes in. I think it was in the last Army Estimates, and therefore had been passed by this House and finished With."—[OFFICIAL REPORT, 26th February, 1947; Vol. 433, c. 2228.] After the intervention of the noble Lord the Member for Horsham (Earl Winterton), Mr. Speaker went on: I understand that the £38 million was passed in the last Estimates; the House has had an opportunity of debating the 438 million and the matter is therefore finished. I understand that is what the Secretary of State has now said."—[OFFICIAL REPORT. 26th February. 1947; Vol. 433, c 2229.] On the point of Order raised by the noble Lord, Mr. Speaker said that he understood that the right hon. Gentleman had said that the matter was raised in last year's Estimates. Well, the right hon. Gentleman can have it either way. Either he was in such a muddled state of mind about this that he did not know whether he had presented an Estimate or not, or else he did know that there had not been an Estimate. At any rate, look at the result. A point of Order is raised. Mr. Speaker says, "Well, of course, if this matter has been discussed in last year's Estimates I am not going to have another discussion," and no probing took place. After what I have said took place on the i8th, we have discussion smothered in this way by a point of Order following what the right hon. Gentleman had said about Estimates that did not exist.

Colonel Wigg (Dudley)

In giving his Ruling, Mr. Speaker did not say that the matter had been discussed nor that the matter had been raised. He said that the matter had been passed.

Sir D. Maxwell Fyfe

The hon. and gallant Member is quite wrong. Mr. Speaker said: I understand that the £08 million was passed in the last Estimates; the House has had an opportunity of debating the £38 million and the matter is therefore finished." —[OFRICIAL REPORT. 26th February, 1947: Vol. 433, c. 2229.] That was the point that was made perfectly clear—that the House, according to what the right hon. Gentleman had said, had had the opportunity of debating it, and therefore could not debate it again. That is the position.

I will now examine what has taken place on both dates. I quite agree that today the right hon. Gentleman has given us after careful study an exact account of what took place on the Army Appropriation Account, but the relevant point is that the Army Appropriation Account was signed by Sir Eric Speed on 24th December, 1946, and had been before the right hon. Gentleman since approximately that time. When one finds once that an answer is given in this way which has the result of damping down discussion, it is a difficult matter to let it pass, but when one finds it repeated—I appeal to the right hon. Gentleman; could he understand any Opposition that was doing its duty not asking the House to regret that on the first occasion no explanation is given when it is followed by a second occasion such as I have described? I hope that the right hon. Gentleman, having now seen the full picture, will withdraw his Amendment and join the House in the regret that is expressed in the Motion. I gather that there is not much danger of that. At any rate, some time we may get an explanation which embraces these unanswerable points which rest not on any opinion of mine but on the cold print of the OFFICIAL REPORT of this House.

The explanation of the right hon. Gentleman today reminded me of nothing so much as the remark of a famous Lord Chancellor, Lord Westbury, when he was referring to the words of Bishop Wilberforce. He said: A well lubricated set of words A sentence so oily and saponaceous that no one could grasp it. As to the qualities which were not present in the explanation of the right hon. Gentleman today, every one of my hon. and right hon. Friends will concede him all the qualities which Lord Westbury was prepared to concede to the Bishop of Oxford.

As to the other part of the Motion, I would express our universal agreement with the conclusions of the Committee on Public Accounts. The importance of this is not so much the fact that we have demonstrated that it is not as easy to mislead the House, as the right hon. Gentleman has found it easy to attempt. The importance of this discussion is that the House has demonstrated once again that it is determined to have control and to criticise the finances of this country. It is quite easy to talk, as right hon. Gentlemen opposite have so often talked, about finance as being an accumulation of meaningless symbols. We know that is not the case in regard to the matter before the House. We know that the materials—the tobacco and food which form the subject matter of these things we are considering—have been in the main purchased by dollars which this country could ill spare, and it is in the failure of the right hon. Gentleman's Department to have any early and sufficient inquiries into this matter that they have contributed in no mean way to the difficulties under which we are suffering. As my hon. Friend the Member for Westbury inferred, the amount involved from the point of view of dollars alone in these matters is probably more than twice what will be saved by the restrictions on newsprint for 10 years. I can only suppose that the right hon. Gentleman is very glad that these restrictions are coinciding with the final discussion on this matter.

Let us just consider on what it rests. First of all, the excuse on which the right hon. Gentleman prefers to stand is that it was only after a period that this could be deducted. We have had that, but let us get the facts clear. One of the right hon. Gentleman's more contradictory explanations was that this started in Holland in the days of the Coalition Government. Surely, after it started in Holland somewhere about the end of 1944 he had at any rate a period which one would have thought even his administration at the War Office would have found sufficient to examine this matter? But that was the position. The War Office explained before the Public Accounts Committee that the accumulation of surplus marks first came to their notice about the middle of January, 1946. That was not the December; it was the October or November total. Assume that up to that time the right hon. Gentleman has every excuse and has time on his side, as he has been so anxious to claim. They learned by 1st February that the surplus had trebled itself. Proposals for vouchers were approved by the Financial Secretary to the War Office, then the right hon. Gentleman, on nth March, and it was not until 1st August that they were brought into operation in Germany and, some three months later, in Austria.

Let us see what was said. The sale of postal orders had been limited in November, 1944, and again later, I think in January, 1945, showing that it was known that this was the method of clearing the gains that were made in this way. It was not until March, 1946, 15 months later, that the sale of postal orders was stopped. If it could be stopped as it was in March, 1946, the right hon. Gentleman's red herring about unkindness to the troops drops out of the path. It was stopped then, therefore it could have been stopped earlier; therefore that excuse goes. The War Office agreed in evidence, as is noted in paragraph 24, that the sales of the postal orders might have been stopped at an earlier date, and as I have indicated, after the proposals for vouchers had been approved they were not introduced until 1st August, 1946. Why? Because the right hon. Gentleman thought that there should be two months' notice.

Now the Committee say—and again I gather that on mature reflection the right hon. Gentleman agrees with them—that that idea of two months' notice arose largely from the reluctance to introduce at short notice a scheme which would have rendered valueless much of the currency in the hands of the troops. That is the explanation. That is why two months' notice was given. Why? If a large amount of that currency had not been legally acquired, why two months' notice should have been given in order to dispose of illegal gains and make it easy for their disposal, I frankly cannot fathom. The Committee say, and I gather that the right hon. Gentleman agrees with them, that they doubt whether the introduction of a scheme with the object of restricting undesirable practices would, in fact, have created much difficulty. I think the right hon. Gentleman's present agreement with the view of the Committee could have been anticipated, with great saving to his country and to our finances. Then, after that two months, another three months was given to those who were operating in Austria. Again why? I could not, frankly, find in the explanation of the right hon. Gentleman any real excuse for that action.

On all these points, all of which are mentioned in the report, all of which stand out, there was ample opportunity for earlier action on the part of the right hon. Gentleman in this matter; and we have been quite without excuse today for the failure to take that action. But let me put to the House what in my view is the most important aspect of the matter—

Major Bruce (Portsmouth, North)

Will the right hon. and learned Gentleman permit me—

Sir D. Maxwell Fyfe

I do not think so, thank you very much. I rather want to make this point which is important. If the hon. and gallant Gentleman will look at paragraph 44, he will see the importance of the point. The Committee say: There was no general realisation of the fact that such transactions would result in a loss to the United Kingdom, and no general condemnation of these practices by public opinion in the Army. The points I want to make—and then I will willingly give way to the hon. and gallant Gentleman—are these: I think it is almost incredible, and very difficult to find any explanation for the fact, that there was no general realisation that these transactions would result in a loss to the United Kingdom. That was a problem first for the right hon. Gentleman and then for the War Office to appreciate. When they appreciated it, it was a simple problem of Service public relations such as we are all accustomed to deal with—

Mr. Callaghan

No.

Sir D. Maxwell Fyfe

And in which we have all taken part. The other point is that there was no general condemnation of these practices by public opinion in the Army. That, again, as the right hon. Gentleman knows, is a matter not only of public relations but of organisation and right leadership, and it was for the War Office, realising the problem, to see that that general condemnation should have been created. I agree with the right hon. Gentleman; I am not here for a moment to say that there is a low standard; I am here to say that there is a standard which can be appealed to and made high if the right steps are taken, and it was the absence of taking those steps that we are pointing out today.

Mr. Bowles

May I ask the right hon. and learned Gentleman two questions? First, why is he confining his remarks altogether to the Army? He has said nothing whatever about the Control Commission. Secondly, did he or did he not see any of this going on in Europe when he was there for so many months, and did he report it?

Sir D. Maxwell Fyfe

I will answer that, but would the hon. and gallant Member for North Portsmouth (Major Bruce) first like to put his question?

Major Bruce

indicated dissent

Sir D. Maxwell Fyfe

I am not sure it the hon. Member for Nuneaton (Mr. Bowles) was in when his first point was mentioned?

Mr. Bowles

I have been in the Chamber all through the Debate.

Sir D. Maxwell Fyfe

Then he will remember it. The Army were acting as bankers for the other Services, and they were dealing with the organisation. With regard to the second question, at Nuremberg the total British strength with me was under too, and I certainly did not see any signs of it amongst them. The hon. Gentleman will appreciate that there was a very small British unit in the American zone where I was. I did not see anything.

Mr. Bowles

I am not reflecting on any member of our legal team at all; I was asking the right hon. and learned Gentleman whether he saw any of it going on when he was there.

Sir D. Maxwell Fyfe

Apart from 10 days in Berlin when we were settling the indictment in October, 1945, I was in the American zone with only about too British troops, and I did not see any of it. Can I answer the hon. and gallant Member for North Portsmouth now?

Major Bruce

The right hon. and learned Gentleman has said that in all these matters my right hon. Friend has been negligent, and he specifically raised the question of the surplus postal orders. Would he explain to the House why it took until 19th January, 1945, for it to be brought home to the Government of that day that a surplus of postal orders was likely to arise? There was a Supreme Headquarters memorandum issued in September, 1944, which drew attention to that state of affairs.

Sir D. Maxwell Fyfe

The hon. and gallant Gentleman will find in the Report—I think I have the dates right—that it was noted in November, 1944; action was adopted in January, 1945, and the immediate result from the second limitation was to cut down the amounts sent back; that is, limiting the postal orders to the amount of pay drawn at the pay table resulted in the average monthly sales to the British Forces dropping from 17s. 6d. to 8s. a head. I do not think the hon. and gallant Gentleman was here when my hon. Friend the Member for Westbury dealt with the position that arose in Holland, and that made the matter become clear.

Major Bruce

rose

Sir D. Maxwell Fyfe

I have given way three times and I hope the hon. and gallant Gentleman will allow me to finish my speech. He knows as well as anyone else that the tempo slightly alters if one answers too many questions. I have said, and no hon. Gentleman has taken me up on these two points, that it is a bad thing that there was no general realisation of the fact that these transactions would result in a loss to this country and, secondly, that there was no general condemnation of these practices among public opinion in the Army. We say on these benches that that is a simple example of bad Administration. Every trickle of incompetence which goes on unchecked becomes a torrent of inefficiency, such as we have seen here. It is an example of the general complaint that whenever any- thing that may be tinged with unpopularity arises, this Government never do today what they can put off till tomorrow. Inefficiency the House can accept, procrastination it is getting used to, but tergiversation it will not forgive, and that is what we have seen in this matter.

5.20 p.m.

Colonel Wigg (Dudley)

This problem can be approached from two angles, and it would seem that the Opposition have chosen to attack the Secretary of State for War rather than learn the lessons focused by the loss of this £58 million. It, can be explained in terms of what happened before and after this Government took over. I suggest that there was plenty of warning for the War Office, as to what was likely to happen if we found ourselves with Forces occupying enemy territory. There were considerable losses at the end of the last war. The Secretary of State for War himself in the first Debate on the loss of the £20 million pointed out the losses in the last war and said that there had been losses as late as 1935 in Hong Kong. I remember in Constantinople in 1922 the troops did a considerable amount of useful work from their point of view not only in changing British sterling into Turkish lira and back again, but also into Deniken and Wrangel notes. In the early days of our occupation they even used the labels torn from condensed milk tins.

I think it is most important to realise that the imperfect state of the financial organisation of the War Office was well appreciated after the last war. Sir Charles Harris, as I have mentioned on previous occasions, was constantly pointing out to successive Secretaries of State that the system of accounting in the Army as revealed in the first world war showed that in fact, as it was ordinarily understood, there was no accounting but little more than fidelity checks and assessment of entitlement. When, during the first world war, great industrialists came into the War Office and asked for accounts, there were none. After the end of that war recommendations were made, and a committee was set up by the Secretary of State for War, which resulted in the setting up of the Corps of Military Accountants. It was the effect of the Geddes Axe and the actions of the Conservative Secretary of State for War, Sir John Laming Worthington-Evans, which hamstrung this development. The report before us makes it quite clear that if we want to assign the responsibility we must look at the advice given at the War Office and to Commanders-in-Chief in the Field. True, the political responsibility has to rest with the Secretary of State—but if the House turn to page 5 of the Report the specific question is put, who is responsible? And the answer is given: "The Commander-in-Chief." In Germany the Commander-in-Chief was ordered by a brigadier called the deputy paymaster-in-chief, and he was responsible for a failure to apprehend what was going on in 1945. His immediate departmental chief at the War Office was the chief paymaster holding the rank of general. It would be a waste of time at this date to try to pinpoint responsibility, but I wish to call the attention of the House to the recommendation of the Lawrence Committee in 1924: The present method of obtaining officers for the Royal Army Pay Corps would obviously be unsuitable to the requirements of the new accounting force. It goes on to say: It was laid down as far back as 1919 that future entrants to the Royal Army Pay Corps would be required to give evidence of having reached a standard of efficiency"—

Squadron-Leader Fleming (Manchester, Withington)

What was the date of that Report?

Colonel Wigg

It was 1924. The recommendation was made that financial advisers should have a certain standard of professional efficiency but, in the sacred name of economy, Conservative Administrations preferred to carry on a hand to mouth policy and one can be certain that the chief paymaster at the War Office at the time of these happenings and the deputy paymaster in the field were not men who had been adequately trained in economic and financial affairs.

Squadron-Leader Fleming (Manchester, Withington)

On a point of Order. Has this really anything to do with the Debate?

Mr. Deputy-Speaker (Major Milner)

the hon. and gallant Member for Dudley (Colonel Wigg) is presumably suggesting how matters of this kind could arise, and I hops is coming to the Report.

Colonel Wigg

As I have already said, the members of the Public Accounts Committee asked one specific question in their endeavours to fasten responsibility and I am dealing with that point. It is a fruitless procedure to spend a considerable amount of time lambasting the Secretary of State for War. It is of more importance to find out if an important part of the Army in peace and war is so run that we have the best possible Army. These senior officers, whose responsibility was to give advice to the commander-sin-chief in the field, were utterly and completely incompetent, not from any fault of their own, but because they were square pegs in round holes. I do not wish to detain the House too long, but if one looks at the problem in its setting, one sees first that the War Office failed to learn the lessons of the last war. As I have said they failed to appoint competent officers to the staff of the commander-in-chief or the War Office at home, and when it became clear that things had seriously gone wrong and there had been failure at a high level at the War Office to take the steps which should be taken to put the matter right. I do not think responsibility can fairly be placed on the Government, because the original steps had not been taken, and taken in time, to prevent this loss would have to have been taken certainly by the middle of 1945.

On the question of personal responsibility of the Secretary of State himself, I think it is true that the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) was technically right when he dealt with the question on the discussion of the Estimates. But I believe the case is that the Secretary of State failed to draw a distinction between Estimates and a Vote of Credit. Perhaps in looking at HANSARD after a lapse of four months one can hold him guiltless. I do not think it was by deliberate intention—or the right hon. and learned Gentleman must think that the Minister's powers of pulling fast ones was so great that he hoped to get away with another £38 million when he had disclosed £20 million. Personally, I do not think the Secretary of State is guilty; even if he is, it is a profitless business to push that to far. It seems to be symptomatic of the political schizophrenia from which the party opposite suffer that they ignore the real lessons of these happenings because they are too happy with the lambasting of the Secretary of State for War. I feel that the more informed section of the party opposite will he concerned, as my hon. Friends here are, with drawing the correct lesson from the losses in order to prevent any such happening again, although one hopes that the circumstances will never arise. We should be using this occasion to scrutinise the financial control of the War Office and the control of finance at lower formation levels, in order that we can obtain the best method of organisation possible.

I hope that when the Financial Secretary replies, he will go a little further than the Secretary of State for War has gone, and will indicate that the overall lessons revealed by these losses have, in fact, been realised. I do not ask him to set up committees but I ask that he and his military advisers shall go back and read the Reports, look at some of the statements made after the last war, look at the lessons which were learned then, and see why they were not put into operation. I hope also he will realise that as we have limited sources of manpower, and our equipment is not as great as we would like, it is, therefore, vital that we, as a nation, should make the best possible use of the Armed Forces we have got. One never knows when the time may come along when they will suddenly be charged with the task of meeting an emergency. I will be frank and say, although I hesitate to prophesy, that if that happens, it will reveal serious organisation weaknesses.

I am conscious that I am trying your patience to much, Mr. Deputy-Speaker, and that you think that I am wandering too far from the subject of our Debate. My excuse, however, is that those of us who have served in the lower levels of the Army know only too well that in the days of peace, when interest in the Army was not so great as in war, the tentacles of financial control reach right down, and "Do not" is present all the time. I hope that the Secretary of State will realise that the loss of this 58 million is an expensive lesson, which he and his advisers must learn to the best advantage. I would not be so cynical as to say that if they had learned the lesson, that sum would be well spent. It is a very high price to pay for any lesson, but I am certain that this Debate will not have been without value if the Secretary of State will do as I ask.

5.33 p.m.

Mr. Dodds-Parker (Banbury)

I think the whole House will agree with the hon. and gallant Member for Dudley (Colonel Wigg) that this particular instance of the trouble which we are discussing today arose in the middle of 1945, and that the individual responsible is some high official at the War Office [HON. MEMBERS: "1944."] I think that the hon. and gallant Member said 1945. If he said 1944, the point I wish to make is that throughout the speech of the Secretary of State for War four months ago, and again this afternoon, he adopted the attitude that he was a novice attempting to grapple with this tremendous problem. That was the implication of his statement. I put it to him, with great respect, that a lot of experience had been gained in the previous three or four years. I put to him the question, Why was not proper advantage taken of that experience in order to ensure that this particular instance did not arise? On page 26 of the report, under the heading "Part 2—Background," there appears in the last sentence of Paragraph 5: In North Africa and Italy during the recent war there was speculation, but it was kept in hounds by the restrictions imposed. That, I think, answers the point which the hon. and gallant Member for Dudley has made. As long as the Coalition Government were in office, and the War Office was being administered by them, then control was kept on this speculation and on this form of currency leakage. The noble Lord the Member for Paisley (Viscount Corvedale) will remember the difficulty in connection with this problem which we encountered in 1940–41 when we went to Abyssinia, and later in Libya. There was a difficulty in North Africa and again in Italy, but these problems were tackled and dealt with, and I think that a number of distinguished high officers and officials tendered their resignations over this problem. It has, in fact, been faced up to previously, and by and large, as this Report shows, there was a method used to tackle it. As we had had all that experience in the Mediterranean, North Africa, etc., why was it not used in North-West Europe? Who is responsible? Someone must be. The Secretary of State stood up and answered these charges four months ago. Why did he not use the experience we gained in wartime in order to see that these tremendous losses did not occur again?

It is stated on page 27 of the Report: From 16th July, 1945, each Allied Commander became responsible for his own troops One know that all these things went on long before any individual commander took over. It is stated, on page 29 of the Report in Paragraph 13 (n) that there was some difficulty because American canteens were used. Again, was it worth incurring a loss of £59 million because there was difficulty over American canteens? It seems to me a pretty high price to pay for reverse Lend-lease, or whatever it is called today. It is stated, page 29, Subparagraph (o) that: The novelty of the 'currency' for which H.M. Government was making itself responsible was such that, at the request of the War Office, the Treasury obtained the personal approval of the Chancellor of the Exchequer. When the loss is over £50 million apparently we get the Chancellor of the Exchequer called in. Why was he not called in before? He was not called in by the Board of Trade over the loss we suffered in rubber, but he is called in about the loss of more than £50 million in this particular item. The Secretary of State pointed out that inadequate action was taken, and taken too late. We want to know why use was not made of the wartime experience, why this vast sum of money, even in a Socialist Utopia, was allowed to be spent, and why use was not made of this experience in the Mediterranean and North Africa to stop this particular loss occuring?

5.37 p.m.

Lieut.-Colonel Hamilton (Sudbury)

As a Member of the Public Accounts Committee and an old soldier, I naturally took a good deal of interest in this case. There has been a great tendency to take an entirely unbalanced view of it, and I would try to restore a balanced view. The first element which led to this trouble was certainly one which has often occurred in the years gone by, that is to say, a great difference between the official rate of exchange and the actual rate that could be obtained when dealing in real goods. I do not quite agree, however, with my hon. and gallant Friend the Member for Dudley (Colonel Wigg) when he says that the same thing has occurred before. I do not think that that is really the case, because there are two elements in this case which make it quite different from previous instances. One is the magnitude of the scale on which this speculation took place, and the other is the fact that we were dealing with a country which was absolutely and completely down and out, so that the currency was virtually of no value.

As regards the scale of operations, I need only remind the House that the strength of our Forces was not far short of a million, and that the difference in the rate of exchange was in some cases as much as between £1=40 marks and£1=10,000 marks, so that theoretically a man could turn £1 into £250 or £1 worth cigarettes into £250. Of course it was not often that that actually happened, because there were restrictions which prevented it, but the scope was enormous. Then there is this question of the marks which were accumulated, and which were of no value because there was nothing we could get out of Germany in return for them. Germany was down and out. If there was anything we could buy from Germany such as timber, the credit for that had to go against the large sums which we were spending on feeding Germany—the £80 million that we spent on providing her with all manner of materials.

It has been suggested that this loss might be regarded as a future claim on Germany to be made good in some dim and distant future, but it would have to be such a dim and distant future that I think the authorities were quite right to deciding to write it off. More than that, it would be hardly fair on Germany because this accumulation occurred when we were in control and when the Germans had no control at all. That argument would not apply in the case of the Dutch because they were a sovereign State and were in control. In fact, negotiations began in connection with the £13 million worth of guilder and it was suggested that the Dutch should accept some responsibility; but, as the records show, it was decided to include this with a whole number of other financial negotiations with Holland, and there was a general write-off of £90 million technically owed by them to us, and that included this £13 million.

I would now like to get to the point which I think is fundamental. It is that when mankind is confronted with an en- tirely new situation he learns in time how to deal with it, but he does not know at once. Innumerable examples of that can be quoted. I need only instance the methods of financing the two world wars. Nobody will deny how infinitely better we managed the business this time, compared with last time. The rates of interest on our loans were far lower. As far as I know, we avoided some of those terrible ramps which took place on the first occasion where some of the loans consisted of quite fictitious money created by the banks and handed out to wealthy clients to lend to the Government. We got rid of that kind of thing and we probably saved thousands of millions by doing it. We might turn that round and say that in the first world war, thousands of millions of pounds were lost by not doing that. We do not say that the Chancellors of the Exchequer and other Ministers in the first world war were utterly incompetent and lacking any sense of public duty. We say that they had not had time to learn how to cope with such an entirely new situation. I consider that exactly the same thing took place here.

Mr. Dodds-Parker

Does the hon. and gallant Gentleman not realise that the situation had already arisen in various countries which I named? It was not a new situation as far as Germany and Holland were concerned.

Lieut.-Colonel Hamilton

I thought I had made it clear it was new in two respects: one, in the magnitude of the possibilities of speculation and, the other, in the fact that it was utterly impossible to use this currency. In other cases it was possible. For instance, in Italy the lira was used to pay for goods and services supplied by the Italians. It was not left uselessly on our hands. This was the first occasion on which enormous sums of foreign currency were left in the hands of the British Government who found them utterly useless.

Mr. Dodds-Parker

The money could still be used to pay the Germans.

Lieut.-Colonel Hamilton

The Public Accounts Committee has, quite rightly, pointed out the way in which steps might have been taken earlier to minimise this loss. I think we were quite right to do that because our target must be per- fection, though we know that we will never get perfection. Always there are bound to be lapses of some kind. We must ask ourselves whether reasonable competence was displayed. I consider that in this case it was. I would like to draw attention to the positive side, because, so far, we have hardly had anything but the negative side. Steps were taken to restrict the amount that troops could change when they came back to this country, and the value of postal orders they could withdraw. Though I must admit responsibility for the paragraph which speaks of "omission" in rather a sweeping way, I must agree that I think we were too sweeping in that statement.

When the real trouble began, forthright and novel action was taken. The War Office financial authorities broke out on to what was for them or any Allied country an entirely new line. It had been taken to some extent by the German Government but not by us or any other Allied Government. It was an entirely new experiment. It is easy to say now that it was all perfectly obvious that that was the thing to do and that it would achieve the results required. But it was not at all easy to see then. The Americans, who I do not think are regarded as particularly backward where finance is concerned, took six weeks longer than we did to put any such scheme into operation, and the popular guess is that their losses were something of the order of £150 million. Furthermore, as we have been told, their notes were not good enough to prevent forgery and that meant additional losses for them. The French took longer still before they made a similar change.

I would like to touch on another very important point. The impression has been given that this £59 million is a national loss, a loss to the country. That, of course, is entirely incorrect. Only a comparatively small part of it is a national loss. Most of it is an internal transfer of money. All of us as taxpayers are a little poorer; perhaps hundreds of thousands of soldiers are a bit richer.

Lieut.-Colonel Dower (Penrith and Cockermouth)

Can we ignore the fact that it is quite clearly laid down that the taxpayer lost £59 million? Whether some people got away with that money, has nothing whatever to do with this.

Lieut.-Colonel Hamilton

The hon. and gallant Member has completely confirmed just what I was saying. Evidently he did not appreciate the point I was making. I admit that the taxpayer has lost £59 million, but to whom has he lost it? He has lost the greater part of it to the soldier. It is an internal transfer of money. I admit that some of it is a national loss.

Mr. Beswick (Uxbridge)

Will the hon. and gallant Gentleman agree that it is an exactly similar transfer when a burglar gets away with the property of a citizen?

Lieut.-Colonel Hamilton

If the hon. Member suggests that the citizen is one nation and the burglar another, I say that that is an entirely incorrect simile. If he suggests that they belong to the same nation, then I say that it is the same. Let me come back to my point. Some of it was a national loss in that we lost a certain quantity of tobacco and possibly chocolate and other things, which had to be bought with dollar exchange. But nobody will suggest that anything approaching £59 million worth of tobacco was involved. Of course not. It was very much smaller than that. There is another total loss in the fact that when members of the Forces bought cameras and goods of that kind, they were goods which might have been used by Germany for exports which could have been set off against the large sums spent by us on Germany. That is a very, very small loss compared with the total of £59 million involved.

The war cost us immense sums of money. We can look back on all manner of failures and disasters. It is easy now to show just how all these failures and disasters might have been avoided if so-and-so had had the sense to do this and somebody else had had the sense to do the other. Looking back on our own lives, I dare say that there is not one of us who cannot look back and say, "What a fool I was to do so-and-so at such a time." Generally speaking, we accept these losses and disasters as inevitable accidents of war, and the only point which we have to consider in regard to the matter we are now discussing is whether or not the Government were well served by their administrative officials. Speaking as a member of the Public Accounts Committee, which went into this very thoroughly, I say that, on the whole, they were well served, and that things might have been very much worse had they not been well served.

5.50 p.m.

Mr. Boyd-Carpenter (Kingston upon Thames)

I hope that the hon. and gallant Member for Sudbury (Lieut.-Colonel Hamilton), who has told the House that he was speaking as a member of the Public Accounts Committee, will not think me discourteous if I begin by inviting his attention to the conclusions of his own Committee, to which, as far as I am aware, he indicated no dissent. If he will look at paragraph 40 of this report, he will see that the Committee's conclusion was: Your Committee wish to make it clear that the losses recorded in the Accounts are not.paper losses.

Lieut.-Colonel Hamilton

May I point out that I never said they were? They are all very real losses, but I am only saying that that loss was gained by other citizens.

Mr. Boyd-Carpenter

I quite appreciate the subtlety both of that conclusion and, indeed, of the hon. and gallant Member who made it, but I think that in this matter, if it is to be considered sensibly, and if the Public Accounts Committee is to render a service to this House, if a member of that Committee does not regard the loss of £59 million as a loss, but regards is merely as a redistribution of wealth, it really would have been more suitable if he had recorded a dissenting voice in the Report and had not waited until this stage in order to put that view before the House. The Committee concludes its report with paragraph 45, which says: Your Committee note that there was great difficulty in making British personnel in Germany appreciate the fact that any loss is incurred by paying in cigarettes or other goods for services rendered or for local products. That difficulty is very clearly indicated when it appears to be shared by a member of the Committee which produced the report.

Lieut.-Colonel Hamilton

I think the hon. Member has completely misinterpreted and misquoted me. I never said that there was no loss, or that it was not a sad thing that these losses had occurred. I did not want to see the taxpayers losing money, but I was referring to the point made at the outset, I think by the hon. Member for Westbury (Mr. Grimston), which gave the impression that this was a national loss, which reduced our dollar exchange. I am afraid the hon. Member cannot distinguish between the two cases which I described.

Mr. Boyd-Carpenter

I do not want to go on reading aloud from the Report of the Committee, because the hon. and gallant Gentleman should be aware of it himself, but I must invite his attention to the last words: When payment is made in marks for such services or products the cost falls on Germany, hut cigarettes and other goods, e.g., food, are provided by the United Kingdom, to a large extent out of the limited dollar resources of this country. It is quite clear from that that the effect of these transactions is not, as the hon. and gallant Gentleman has seen fit to suggest, merely to redistribute wealth among British citizens, but, at any rate in part, to transfer charges which otherwise, and quite properly, would fall upon the German people on to the shoulders of the much-tried British taxpayer, and in those circumstances I regret that, as a member of the Public Accounts Committee, the hon. and gallant Member should have seen fit to suggest that there is any mitigation whatsoever of these offences. I do not think there is very much dispute on that side of the matter; at any rate, there should not be, since this report is perfectly clear, and it is, apparently, the Government's intention, if the Amendment on the Order Paper is taken into account, to accept that report. The only matter on which, as I understand it, there is dispute between the two sides of the House is whether the right hon. Gentleman the Secretary of State did or did not mislead the House, and I hope I may be allowed to say that, if the main subject matter of the dispute between the two sides of the House involves, as it does, the personal conduct of the right hon. Gentleman, it does seem a little strange that the right hon. Gentleman is not only not on the Front Bench at the moment, but has been absent from it for nearly an hour.

The Under-Secretary of State for War (Mr. John Freeman)

Perhaps the hon. Member will allow me to interrupt to state that my right hon. Friend left the House at the end of the speech of the hon. Member for Banbury (Mr. Dodds-Parker).

Mr. Boyd-Carpenter

If the Under-Secretary says that, I will accept it from him, and if hon. Members opposite regard as an important distinction the difference between 40 minutes and an hour, I congratulate them upon their fine perception, and I only hope that, as a result of the messages that will, no doubt, be sent to the right hon. Gentleman, he will be able to get here inside the hour. I think we are entitled, when considering the treatment of this House by the right hon. Gentle man, to bear in mind whether or not he has seen fit to be present when his own conduct is under discussion, and that appears to me to be a very material consideration. I also regret very much the tone of the right hon. Gentleman's speech. All hon. Gentlemen, and even right hon. Gentlemen, make mistakes, and if the right hon. Gentleman had come to the House and had said that, in the heat and excitement of the Debate, he had unwittingly misled the House, I am certain that hon. Members on both sides would have understood and been ready to forgive, because no one seeks to set up for a Minister a criterion of infallibility. As I understood the speech of the right hon. Gentleman, he did not apologise or regret it, but merely said that, as the House was discussing Supplementary Estimates, he would have been out of Order in mentioning the £38 million.

That might well be a valid argument for refusing to answer at all the questions addressed to him by the hon. Member for Westbury (Mr. Grimston) as to whether or not the £20 million was the whole total. It would have been perfectly easy to have said, "I cannot answer that question without transgressing the Rules of Order," but, surely, the Rules of Order did not compel him to give a misleading answer? That is an argument for giving no answer, but it is no argument whatever for giving an answer which was wrong according to information which had been in the custody of the right hon. Gentleman's Department for the best part of two months, and which bore absolutely no possible connection with the truth of the matter. It is quite clear—and the right hon. Gentleman himself made no attempt to argue it —that he misled the House. It seems to be extremely regrettable that, in these circumstances, the right hon. Gentleman did not take advantage of the generosity which this House always extends to those who admit they have erred, and say that no was sorry, and that it would not occur again. His failure to do so leaves the doubt in our minds that if he regards a speech of that kind as right—as he appears to do—and if he regards the giving of wrong information as right, we have no guarantee whatsoever that the same thing will not occur again and again so long as he remains in his present office.

6.2 p.m.

Mr. James Callaghan (Cardiff, South)

The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) has been as heavy-footed as usual—[HON. MEMBERS: "Worse."] I will accept that correction; he has been worse than usual, and he is making out of this so-called attempt to mislead the House, something which really will not bear the weight of his heavy feet upon it. Let us examine what actually happened. My hon. Friend the Member for Nelson and Colne (Mr. S. Silverman), during his speech on 18th February, was in no doubt at all that the £20 million did not represent the full amount of the losses. What he said was—and this has been quoted by the right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe): It appears to me that the £20 million is not the whole of the sum which we are called upon to pay in order to subsidise and support this black market; £20 million is what it cost us in the current yearֵ…"—[OFFICIAL REPORT, 18th February, 1947; Vol. 433, C. 1048.]

Mr. Boyd-Carpenter

Will the hon. Gentleman give way for a moment?

Mr. Callaghan

Not at the moment; I will give way in due time, when I have made my point. When one looks at the question that the hon. Member for Westbury (Mr. Grimston) asked my right hon. Friend, it is clear that it was put in the form of an interjection, and my right hon. Friend got up and said, "Yes, Sir." That is the position as recorded. It is quite clear that is so. My right hon. Friend is much more experienced in these matters than I am, and he would probably not feel so confused at the interruption as I should. What I am saying is that when, in response to an interjection in a winding up speech, one makes a comment like that, is it really a sensible thing to hang the whole terms of a censure Motion on it, especially when one remembers that, eight days later, my right hon. Friend came down to this House, without any prompting, and said that he had made a mistake, and that the £20 million represented only the sum in the current year?

Mr. Boyd-Carpenter

The hon. Member has based his justification for suggesting that the House was not misled on the fact that the hon. Member for Nelson and Colne (Mr. S. Silverman) was not. The explanation he has given as to why the right hon. Gentleman said what he did may be a very valid one; it may be a commonsense one, but the hon. Member must remember that his right hon. Friend did not offer that as his excuse this afternoon.

Mr. Callaghan

In view of the terms of the Motion that has been put down, I do not think that my right hon. Friend hit out at the Opposition as much as he should have done. He ought to have been much more on the attack. Had I been in his position, I certainly should not have apologised.

Mr. Bellenger

Perhaps the House will allow me to intervene. The assumption is that in saying, "Yes, Sir," right out of its context, I wilfully misled the House. I knew that the total cost was more than £20 million, but the question put by the hon. Member for Westbury was: The right hon. Gentleman will observe that the explanatory note with these Estimates says that this loss of £20 million arose during the current year. That was in my mind when I replied. It is true that he also said: The right hon. Gentleman has been asked whether this is the total loss, and that was the question I was trying to put."—[OFFICIAL REPORT, 18th February, 1947; Vol. 433, c. 1064.] But, in giving the answer, "Yes, Sir," I meant that the loss for the current year was £20 million. Had I attempted to tell the House that the £20 millions was the total loss, I should have been misleading it. My answer must be read in its context with the question, and the way in which I gave it.

Mr. Callaghan

I certainly accept that explanation, and I think that anybody who did not want to make party capital out of it would do the same. In response to an interjection made during the peroration of his speech, my right hon Friend got up and said "Yes, sir." It was an answer on which alternative interpretations could be placed. I re-emphasise the fact that my right hon. Friend came down on the next stage of these Estimates and said that the amount involved was £58 million. As so much is being hung on the fact by the hon. Member for Banbury (Mr. Dodds-Parker) that we had the experience of Italy, and other countries into which we went, to go on, let me say this to him. Of the £38 million about which we are talking this afternoon, £13 million is in respect of those losses. We are not dealing only with events which occurred in Germany; we are dealing with events which he sought to excuse and which account for one-third of the amount. I do not want to spend a lot of time on that, but I want to bring out three points this afternoon.

The first point is in relation to the so-called losses. Here, I think, the Public Accounts Committee have not been as clear as they might have been. In their report there is a heading entitled "Unrecorded Losses." What is the nature of those losses? It is simply this. When we went into Germany, we printed marks on the American printing presses, and we paid our soldiers those marks instead of sterling. We expected that two things were going to happen, first, that some of those marks would come back to us through our canteens in the shape of payments for tooth-paste, razor blades and chocolate, and, secondly, that the balance of those marks would go into the German economy through transactions with the Germans. What we were doing, in fact—and I am not judging the morality of the thing this afternoon; I have my own views about it—was foisting inflation on the German people to the extent of printing marks outside their country, and intending that they would eventually trickle into the Germany economy. To that extent, the British taxpayer and the British Government were going to be relieved of the responsibility for paying the British soldier his wages—to the extent that the marks found their way into the German economy and were, therefore, not claimed back again by N.A.A.F.I. from the War Office. That is the extent of the loss we have suffered—the extent to which we have not been able to make the German people pay the amount that we thought should have been absorbed into the Germany economy.

In that sense, there is no loss at all. What has happened is that the British taxpayer has had to pay in sterling, the full amount of the British soldier's wages, when, under the arrangement made by the Allied Control Council, we only expected to have to pay a part of it in sterling, and that the rest was going to be paid by the German people. I have my own views on that sort of thing. I believe it was a highly immoral procedure to inflate the German currency in that way, instead of putting in our claim for reparations against the German people in the proper legal way. My view is that that is what should have been done, but instead we have been caught. The basic immorality arose at the first stage when we decided to print marks and to put them into the German currency, without any expectation that they would come from any goods which the German people would have. It is on that point where the hon. Member for Devizes (Mr. Hollis), for whose intellect I have a great respect, went wrong. That is the type and the nature of the loss, and one cannot possibly ever measure it. One obviously cannot measure the extent to which one has got back marks which might have been spent with the Germans and which might have remained in German hands, and it is that first point which I wish to bring out.

I think the War Office have a pretty good record in this connection, which is borne out when one looks at the programme of events and sees that we took the initiative in this matter, that we had to wait for a reply from the Americans, that we had introduced a scheme long before the Americans introduced theirs, and that our losses are only a small proportion of the American losses. I see that Sir Eric Speed in his evidence said that he had seen a report to the effect that the American losses were £250 million as against our £59 million. Let us be clear on this point. Having been caught, it is fairly obvious that we took the proper steps long before the Americans did, and if the purpose of the Opposition this afternoon is to demonstrate that we got on with the job quickly, they certainly are doing that. It has been pointed out that the Chancellor of the Exchequer was not brought in until we had lost something like £50 million. Of course, that is not true. Let us look at the sequence of events. This matter came to light in February. On 5th March a meeting of departments was held at the War Office. The Americans were approached on 9th March. The Financial Secretary approved the scheme on 11th March, and the Chancellor approved it on the 18th March. Why did it take so long to put it into operation? The answer lies in the difficulty of getting the sterling vouchers printed. It took us so long to get those sterling vouchers printed. Had we accepted the inferior copy of the sterling voucher which the Treasury advised the War Office to accept, we could have saved one month, but no more than that.

The sequence of events set out on pages 36 and 37 of the Second Report of the Public Accounts Committee makes it quite clear that there is only one month involved, because of the physical difficulties of producing the sterling vouchers and the plastic tokens which were involved. To that extent, one can say that the War Office should have taken the risk, and should have introduced the inferior voucher, which quite probably would have been forged. Many forgeries were going on, on the Continent in those days; the Americans have suffered badly, as my hon. and gallant Friend the Member for Sudbury (Lieut.-Colonel Hamilton) has said, and we should probably have had to withdraw it. It might have saved one month's losses, but no more.

The Public Accounts Committee have been particularly sanctimonious in their conclusion in paragraph 45, where they say: Your Committee understand that the practice of obtaining services and local products in return for goods and not by payment in marks is still prevalent, and they recommend that the appropriate authorities should take all necessary steps to stop this practice. How does one stop the soldier from giving five cigarettes to his batman when he has done a job for him? That is the loss involved today. How does one stop the soldier from giving a bar of chocolate to a child whom he sees in the street? That is the loss involved. My right hon. Friend can continue giving instructions until the cows come home, but he will still not stop it. If the Public Accounts Committee had really got down to recommend- ing to him what steps he might take in order to stop those transactions, they would have been doing a useful service, but this last recommendation is completely valueless. The situation arises because a willing buyer meets a willing seller. When one man has got chocolate and another man has a camera and they both want to exchange, there is no power on earth which will stop them, and the Opposition know that. There is no need for me to give them a lesson in elementary economics.

The real people we ought to get after are the Allied Control Commission and our own Control Commission in Germany. It is ridiculous to have fixed a rate of 40 marks to the £at a time when the mark was practically valueless. I took the trouble this afternoon to work out a few of the values. In May, a pound of butter was fetching 300 marks which, at our rate of exchange, is £7 10s. A pound of sugar was fetching 75 marks, or £1 17s. 6d. at 40 marks to the £. A pair of man's shoes was fetching 900 marks, or £22 10., and a man's woollen suit was fetching 2,500 marks, or £62 10s. What it amounts to is this. A packet of 20 cigarettes, in terms of marks, was worth to the soldier £4 sterling. How can we possibly prevent this sort of thing from going on when that situation arises? It is the gentlemen in the Control Commission whom we should tackle. I have no doubt about that at all. My right hon. Friend the Secretary of State for War should not be the target for tonight; it should be somebody else. The whole basis of life in Germany at the moment is one of barter. The products of the factories in Germany are being bartered for raw materials. Those products are not being sold; they are going into the black market in exchange for raw materials, and the raw materials are going into the factories. And all the Public Accounts Committee can say amidst an economy conducted in that way, is that the Secretary of State should issue instructions saying that the Brtish soldier must not take part in it.

Mr. Nigel Birch (Flint)

Surely, it is a little unfair to blame the Control Commission for the fact that the mark is valueless. The Control Commission has recommended hundreds of times that it should be given a real value. It has been held up by matters of high policy.

Mr. Callaghan

I am much obliged and I accept that correction. It is not the Allied Control Commission, but the Allied Control Council, which is the responsible body. I am obliged to the hon. Gentleman for interrupting me. It is the Allied Control Council which has kept this absurd rate of exchange. It should be altered and then we would have an opportunity of dealing with the problem. If nothing is done my right hon. Friend will have no more success in the future in dealing with the barter problem—I think he has dealt with the currency problem—than he has had in the past.

6.18 p.m.

Mr. Niall Macpherson (Dumfries)

If I understood the hon. Member for South Cardiff (Mr. Callaghan) correctly, his argument was, first, that there are no real losses to the taxpayers of this country, and, secondly, if there are, they could not have been prevented in a shorter time. He said that the losses were of our own making because we had created currency in Germany. Supposing we had paid all the soldiers in Germany in Reichsmarks, and they had converted back into sterling all that they were paid, still the amount of the loss would not have equalled the loss which we have actually incurred. That is where matters have gone wrong. There has been a perpetual inflation, and trafficking has been going on all the time. I would draw the attention of the House to observations which were made while the Public Accounts Committee was sitting. The following statement was made by a witness in answer to question 1368: The broad picture is that we issued for current pay over this period about £20 million worth of marks and we got back about £60 minion worth of marks The difference represents a very considerable loss to the taxpayer of this country. Now quite apart from the disclosed real loss—and it is a real loss—there has also been a very considerable concealed loss, as is brought out by the same witness in answer to Question 1619. He said: If you assume an average strength during the period 1st March to 1st August, 1946, of 400,000 all ranks, the full pay entitlement worked out very roughly at £26 million for that period—full pay, if they had drawn everything. In point of fact, apart from advances for leave, and so on, they drew in the way of current pay somewhere about £4 million. The balance of £22 million is paid in sterling in this country. In addition, much more has been paid in conversion of Reichsmarks into sterling than the total pay which was due. That is an indication of the losses. So that there is a concealed loss—if we are to accept what the witness said—during the period from 1st March to 1st August, 1946, estimated by him to be £9,000,000. If we take the period from 1st October, 1945, to 1st March, 1946, when there were on average twice as many troops in the country, and one can assume that, therefore, twice as much pay was due, it may well be that the concealed loss in those five months was twice as great, and that there is an additional concealed loss of £27 million that ought to be added on to the loss of £59,000,000 that has actually been revealed in this report.

The second point is a question of time —whether these losses could have been stopped earlier. The hon. and gallant Gentleman the Member for Sudbury (Lieut.-Colonel Hamilton) said this was an entirely new situation. But the Financial Commission were well alive to this problem. It had been discussed before we got into Austria or Germany. What changed the entire situation, quite apart from the losses that had arisen in Holland, was the cancellation of the non-fraternisation order in September, 1945. It was that which left the way wide open for barter. What could have been done? What was the reasonable thing to do? Here we are faced with an entirely new situation. Was the right hon. Gentleman merely to say he should wait to see what happened? That is, in fact, what he did. He waited until all the paymasters' accounts were consolidated and presented in February. In fact, he seems never to have called for accounts at all. They were presented at the War Office. Then it was suddenly realised something was going wrong. The accounts were brought to him, and then, of course, the fat was in the fire. Surely, he should have given an instruction that throughout accounts were to be examined monthly. It can hardly be said that that could not he done, because it was done. As soon as the difficulties came to light, then, within a few days, they got a report showing the losses had very considerably increased, up to 1st February, as compared with the losses up to 1st October previously.

Major Bruce

The hon. Gentleman says they have known of this business for some time. Will he say when 21 Army Group main headquarters or 21 Army Group rear headquarters—who were quartered at St. Paul's—first became aware of these illegal currency and postal order transactions?

Mr. Macpherson

I am advised that this was discussed at St. Paul's, in the days when the currency regulations for Germany and Austria were being proposed.

Major Bruce

Will the hon. Gentleman be more precise? It is a matter of some importance.

Mr. Macpherson

Of course, I cannot give the exact date. I think the House will agree that, whatever we may think about how little time might have been saved—during the second period when the bank notes had to be printed, agreements between the Allies had, apparently, to be obtained—during the first period up to 1st March, 1946, at any rate, the least the Government could have done was to have kept the situation, as they so often say, "constantly under review." There is one other point to which I feel I must refer, and that is the question of the attitude that is alleged to have been taken up throughout the Army. The Committee says: There was no general realisation of the fact that such transactions would result in a loss to the United Kingdom. Surely, the one great advantage that the Army has over all other institutions is that, whether there is realisation or not, it can give an order and can see, what is more, that that order is carried out. What efforts were made to ensure that the orders regarding barter and currency transactions were carried out? I think that one of the most revealing and astonishing admissions was that in which a witness said, in answer to question 1446: I was talking to a senior officer this morning before I came here and he said he was in a port and found that 85 men had been refused exchange of their money and were staging a small not. Well, the authorities gave way. There was a riot, there was a difficult situation. They said, as it were, "Really, we must not be too much troubled in these matters. We must maintain the morale of the troops in Germany. We must avoid these inconvenient disorders." What pitiable weakness this represents.

Lieut.-Colonel Hamilton

Surely, there is no evidence to say how these men were in possession of their marks? They may have been quite legitimately acquired. It does not follow that every one of the men had broken orders.

Mr. Macpherson

Presumably, the Paymaster-General's staff at the base were carrying out instructions, which were to investigate cases where £40 or more in Reichsmarks was offered for conversion. There must have been a prima facie case for investigating these matters. But they did not dare even to investigate.

Lieut.-Colonel Hamilton

Does the hon. Gentleman really think it is a practicable proposition, when there is a large body of men at a port waiting to go to Great Britain, to put everyone through a "third degree" and a long process of investigation?

Mr. Macpherson

The hon. and gallant Gentleman is quite entitled to make that point, but the witness, in the course of his evidence, said: There was great anxiety about the losses. Surely, they should have made some attempt to curtail them by taking disciplinary action sometime. If they had done that, if they had taken disciplinary action, I am sure the losses would never have been anything like what they are. It is idle to say, as was said in course of evidence, that it is an extremely difficult matter, when troops are about to be demobilised, to hold them. Of course it is inconvenient to hold them. It is a lot more inconvenient for the troops to be held for court-martial, if they have infringed some order. If there had been a clear indication by the Army that they would enforce this order—as the hon. Member for Banbury (Mr. Dodds-Parker) said it was enforced in other countries—we should not have had these difficulties.

Mr. Rees-Williams (Croydon, South)

One of the difficulties of dealing with this situation was that, in the American Army, these transactions were done officially, and machinery was laid on to permit the soldiers to send back marks to the United States. It was very difficult to get the ordinary "Tommy" to appreciate that what he did was a crime when the ordinary G.I. could do it.

Mr. Macpherson

Surely, the hon. Gentleman with his great experience knows that there is one thing about an order—and that is that it should either be enforced or withdrawn. If we were in difficulties, surely we could have got into consultation with the Americans, so that we could all agree to a common policy, and then enforce it.

6.30 p.m.

Mr. Beswick (Uxbridge)

I do not think I would be in Order in entering into a discussion on monetary theory with my hon. Friend the Member for South Cardiff (Mr. Callaghan), but I disagree with what he said about the origin of the money which we are discussing this evening. My hon. Friend said that the money which came back into this country was simply the money which had been printed on our own or American printing presses. The fact is that this was money over and above that which had been printed on our own presses. Indeed, in Question 1368 in the Report, it is stated that for one period only £20 million worth of marks had been issued as current pay, whereas in fact the authorities had received back £60 million worth of marks. It is that surplus which was eventually transferred into sterling, and which was used to buy goods here by people who had done nothing to produce those goods. To that extent, of course, it was a loss to the consumers of this country.

However, I do not want to suggest, or appear to support hon. and right hon. Members opposite in their suggestion, that there was deliberate misrepresentation by the Secretary of State for War as to the amount of money involved. I do not think there was any deliberate misrepresentation. On the other hand, it does seem to me that the Secretary of State failed to appreciate the urgency or the implications of what was going on. We have heard a lot of talk during this Debate about a loss of money. I think there was also a much more important loss in Germany as a result of this circulation of easy money. There was a loss of administrative energy; there was a loss of morale, consequent upon the ease with which men out there could buy various goods, both in our own canteens and from the Germans. It was that easy money which led to such a degeneration of morale in certain quarters, and which is probably the most serious loss of all. In the Public Accounts Committee the question was asked why the soldiers who were engag- ing in these transactions were not court-martialled, and the answer is given in reply to question 1402: public opinion in the Army would have been a little shocked if somebody was court-martialled when all ranks, including, very likely, the officers sitting on the court-martial, were doing the same thing.

Mr. Osbert Peake (Leeds, North)

What the hon. Member is reading now is not an answer by the witness but a question by myself.

Mr. Beswick

I am much obliged to the right hon. Gentleman. That is, in fact, a question by him, but the answer is: "That is true." The witness was saying that the question put by the right hon. Gentleman was, in fact, the truth; that the reason why these men were not being court-martialled was apparently because the rot had set in so deeply that even the officers on the court-martial were very likely engaged in these transactions, and they were therefore, reluctant to carry into effect the orders which had been issued. When the rot is so bad in the lower reaches it is only by action from the top that the situation can be repaired.

What happened when the matter was raised in this House? The question was raised in this House and the whole business was referred to by the Secretary of State for War as a "merry game" The charge that I make against the Secretary of State for War is that the levity with which he treated this matter in the first instance encouraged the consequent degeneration of moral atmosphere on the part of a number of people still out in Germany. As the House may remember, the other day I put a Question about the transference of certain property from Germany to this country. A Control Commission official had been charged with transferring property from Germany to this country; he was charged with the illegal export of silver, and he was sentenced to, I believe, a fine of 10s. A remark was then made by a member of the court that these transactions were no more serious than the breaking of the speed limit. Again, my charge is that the attitude which the Secretary of State adopted encourages precisely that kind of loose attitude on the part of officials in Germany at the present time. It is essential that some steps should be taken from the top to tighten the whole business up, in order that further degeneration shall not take place.

Finally, I wish to put one more question. It is widely reported—and I heard the report myself in the United States of America, which indicates that the report has circulated widely—that Criminal Investigation Department officials went to Germany to investigate the transactions that were taking place. It was not simply a question, as one of my hon. Friends has suggested, of packets of cigarettes being given to German people, or a bar of chocolate being given to a child in the street. The suggestion was that articles were being smuggled into Germany for the purpose of changing them into Germany currency, and then being changed back into sterling. And the transactions were on a large scale. The question I have to ask is: Were C.I.D. men sent out to Germany to make investigations on these matters? If they were sent out, was any report made? If any report was made, was that report acted upon? And if, as is alleged, those C.I.D. men were recalled because of the significance of some of the reports they were making, why were they recalled? If the whole story is without foundation, I shall be very grateful if the Secretary of State will deny it.

6.37 p.m.

Mr. Maude (Exeter)

I shall detain the House for five minutes only. I hope to employ the time well, because I believe —and that is why I remained persistently trying to catch your eye, Sir—having heard the Secretary of State for War make his intervention some little time ago in this Debate, to the whole of which I have listened, that the steps taken by my hon. Friends in putting down this Motion were right; that something was wrong, and that the House was either wittingly or unwittingly misled; that it was a grave matter that the House should have been misled, and unless,, when some final speech is made for the Government, something further is done to show that it is recognised that that really was wrong, then one would go away with the firm conviction and fear that such a thing might happen again—and I should hate it to happen, whoever was in power.

The hon. Member for South Cardiff (Mr. Callaghan) quoted from various parts of the OFFICIAL REPORT. I have noticed—and I am sure he has, too—particularly in our legal profession, that there is nothing more dangerous, so far as the tribunal which is trying to ascertain the truth is concerned, than to have in front of it an advocate who reads only part of what is down on the shorthand note. I propose, therefore, to employ my remaining few minutes to developing this argument, and this argument only. On 18th February, 1947, the Secretary of State for War stood at that Box, knowing that this Appropriation Account was prepared, which had in it the grave loss of £39 million odd in addition to the £20 million about which he was then going to speak. He knew, as he stood at that Box, that that account had been signed on 24th December by Sir Eric Speed. But, of course, it was not published. It was not published and available to the public until much later, in April. There he stood, and the hon. Member for Nelson and Colne (Mr. S. Silverman) asked whether the £20 million was the total indebtedness, and agreed that it really did not seem likely. He then said: All we can do about it now, is to pay up; but, at least, we are entitled to know how far it has gone, and I hope the Secretary of State will be able to tell us. When the Secretary of State came to make his speech—I would point out that the HANSARD column reference figures are rather different from those in the Bound Volume—he said: The main point of substance has been the loss of £20 million in relation to what one might call speculation by the troops in Germany and Austria, which resulted in the British Treasury being landed with a considerable number of marks and schillings. The hon. Member for Westbury (Mr. Grimston) rightly picked on that point, as indeed, when the matter came to my attention when I was Financial Secretary it startled me. Although I have had some experience of the agility and as one hon. Gentleman called it, the "slickness" of the British Army in making a deal and making a profit out of that deal, I was not aware of anything like this. The strictures passed by the hon. Member for Westbury on His Majesty's present Government will not all reach the right mark because, it may interest him to know, a very large proportion—I cannot tell him how much—of these speculations occurred during the time of his own Government or of the National Government which preceded the present one. When our troops went into Germany— Mr. GRIMSTON: The right hon. Gentleman will observe that the explanatory note with these Estimates says that this loss of £20 million arose during the current year. The right hon. Gentleman has been asked whether that is the total loss, and that was the question I was trying to put. The answer by the Secretary of State was not "Yes, Sir." It is quite misleading to say that it was. It was a careful and detailed reply, namely: Yes, Sir, the loss came into this year because the marks which have accumulated have to be dealt with in this current year, but the actual speculations occurred right from the start when British troops went into occupied countries."—[OFFICIAL REPORT, 18th February, 1947; Vol. 433, cc. 1049, 1064–5.] I find it impossible, in these circumstances, not to feel that it was reasonable we should have been satisfied—at any rate as far as we could see for the moment—that he had made a disclosure which showed what had happened. It is also fair criticism to say that what he might have said was that there were nearly £40 million more which would have to be spoken about at some time. We could all have taken it perfectly well. It would have been easy to say, "I would like the House to know, in respect of the question asked by the hon. Member for Nelson and Colne, that there are very large sums which are on the way."

I do not believe he intended to mislead, but he did not disclose, and by that particular answer which he gave to the hon. Member for Westbury (Mr. Grimston), it unfortunately did look as though this huge thing was not possible. [An HON. MEMBER: "Read the Supplementary Estimates."] Some hon. Members will remember that on 18th February there was not a soul present who ever dreamt it was conceivably possible that the British taxpayer had been robbed by a section of our own fellow countrymen of a sum of not merely £20 million, but of £60 million. No one knew it except the Secretary of State for War, and, I suppose, his colleague. That being so, if only we could now hear the words "I agree it is unwise." It is a question of losing face. Of course, the right hon. Gentleman will lose face. It is right that where there has been a misconception, not merely in this House but throughout the country, that the right hon. Gentleman and those who stand with him should see to it that in future he does not do things of this kind. The defence put up by the hon. Member for South Cardiff was much too thin. The proper thing is that we should go into the Lobby, unless something happens now, and vote to show that what has happened was wrong.

6.45 p.m.

The Under-Secretary of State for War (Mr. John Freeman)

I should like to draw the attention of the House to the fact that the right hon. and learned Gentleman the Member for West Derby (Sir D. Maxwell Fyfe) has apologised for being unable to remain until the end of the Debate. I am disappointed that he has gone, because naturally I had some comments to make on the speech he made. I have little doubt that any comment I can make on his forensic skill will have no effect on him and so I propose to say exactly what I should have said, had he been here. I was glad to see him come down and take part in an Army Debate, which is not a very usual thing for the right hon. and learned Gentleman. Hon. Members opposite and right hon. Members of the Opposition Front Bench who take part in these Army Debates have become rather well known to us. We have quite affectionate relations with them, and we are glad to see them when they do take part.

We should be glad to see the noble Lord the Member for Horsham (Earl Winterton) with us tonight. I wonder whether the House would like to consider why the noble Lord, who normally leads for the Opposition on these occasions and is a very persuasive speaker on Army affairs, has not thought fit that he should come down and present his case to us. [Interruption.] Hon. Members opposite can put forward any explanations they like, but I wish to draw the attention of the House to one thing which occurs to me as a possible explanation. It is a remark the noble Lord made on 13th March, that is to say, after we had had the previous Debate on the subject of these mark losses. At that stage the noble Lord, who has not put his name to this Motion, said of my right hon. Friend: I think I am speaking for both sides of the House when I say, while one cannot always divorce personal predilections from political differences—and the right hon. Gentleman knows I am not effusive—he is very much the right man in the right place."—[OFFICIAL REPORT. 13th March, 1947: Vol. 434. c. 1527.] That was the view of the noble Lord at a date after the original Debate on these mark losses had taken place. I hear hon. Members saying "Get on." They have introduced this, and I shall debate it as I think fit. We should have been glad to see the noble Lord here. While we recognise the vast military experience acquired by the right hon. and learned Gentleman the Member for West Derby in the Judge Advocate-General's Department, we none the less want—

Squadron-Leader Fleming

On a point of Order. What has this to do with the Motion?

Mr. Speaker

An hon. Member must be allowed to develop his case in his own way.

Mr. Freeman

I do not want to press this point unduly. I have a point here of which I should like the House to take notice. I wonder whether, in fact, we have been asked to debate this Motion in these terms, not because hon. Members think it will have the smallest possible effect on either the past or the future, but because they think, by putting up the right hon. and learned Gentleman the Member for West Derby, with the blood still dripping from his jowl—

Mr. Henry Strauss (Combined English Universities)

On a point of Order. The Under-Secretary has just referred to the military career of my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe) as having been spent in the Judge Advocate-General's Department. Surely he is aware that my right hon. and learned Friend fought with the Scots Guards in the first world war and, in those circumstances, is it in accordance with the traditions of the House, Mr. Speaker, that the hon. Gentleman should make that sort of remark?

Mr. Speaker

I said that the hon. Member must be allowed to develop his case in his own way. Hon. Members may resent it, but in the end the public read these things, and can form their own opinion.

Mr. Godfrey Nicholson (Farnham)

Further to that point of Order. The hon. Gentleman referred to my right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe) as having blood dripping from his jowl. I hardly want to call your attention to such a childish remark, Sir, but is that the way to refer to a Member or right hon. Member of this House?

Mr. Speaker

I did not actually hear what the Under-Secretary did say.

Mr. Nicholson

He used the words I have just repeated, and I say to you, Sir, that those words are offensive to the House of Commons.

Hon. Members

Withdraw.

Mr. Speaker

I think we had better hear whether the Under-Secretary is going to say whether he did utter those words, or wishes to alter them in any way.

Mr. Freeman

If hon. Members will permit me, I was going to say that I did use those words, and that if they are held to be a breach of taste I gladly withdraw them. With regard to the point raised by the hon. and learned Member for the Combined English Universities (Mr. H. Strauss), I am glad to hear of the experience of his right hon. and learned Friend the Member for West Derby (Sir D. Maxwell Fyfe) in the Scots Guards. I did not know it, and I do not dispute it. All I said—and it was not an insult at all—was that he had had experience in the Judge Advocate-General's Department during the recent war. Members opposite have made some harsh remarks about my right hon. Friend during this Debate, and they must listen to something I have to say to them now.

The real reason, I suggest to the House, why the right hon. and learned Gentleman was put up to develop this case against the Government is because Members opposite have followed the advice of their leader, who endorsed—on a date which I will not bother to quote to the House—the practice of "hiring a pert lawyer in order to insult your political opponents." I do not blame Members opposite, but that is what we have had to listen to today, and I hope the House will present a rather sterner front to the right hon. and learned Gentleman the Member for West Derby than the Conservative ladies of Liverpool.

Mr. Nicholson

What does that mean?

Mr. Freeman

This Motion is divided into two parts. First, we are asked to agree with the Public Accounts Committee in their report, and second, we are asked by hon. and right hon. Members opposite to express regret at the course of action which my right hon. Friend took on the Committee stage of this Supplementary Estimate. We have heard a great deal today about the report of the Public Accounts Committee, but I do not know that it has all been very fruitful because, when all is said and done, there is nothing between the two sides in the acceptance of that Report. No doubt in Debate each side will seek to emphasise slightly different points but, in general terms, both sides accept that report. I deprecate the attempts made by one or two Members to read more into the report than is there. For instance, the hon. Member for Westbury (Mr. Grimston), at the beginning of the Debate, put a gloss on paragraph 44 which I do not think is there. The hon. Gentleman said—and I do not pretend that he misled the House, as he did not quote the words—that the losses could have been reduced if more energetic and more imaginative measures had been used. The report does not say that. It says: The losses could have been reduced it earlier measures had been taken. There is, in this case, a distinction between "earlier" and "more energetic" because the whole deliberations of the Public Accounts Committee had been on this factual issue of the dates on which things happened. It is, therefore, a pity that Members opposite should seek to put a gloss on the report which is not there.

In general terms we accept what the Public Accounts Committee have said about this matter, and I would draw the attention of the House to a fact which my right hon. Friend referred to, that they realised that it is easy to be wise after the event. From what I have heard today I have wondered whether the Public Accounts Committee were not over-optimistic in making even that expression of opinion. But they have gone out of their way to point out that there were great inherent difficulties in the situation, and in recording the degree of blame they have recorded that they none the less accept the fact that it is easy to be wise after the event. There is one point in the report of that Committee which I would ask the House to look at, and, possibly, take with a grain of salt. In paragraph 43 the Committee say: Your Committee doubt, however, whether the introduction of a scheme with the object of restricting undesirable prac- tices would, in fact, have created much difficulty. That is a matter of opinion. My right hon. Friend and his advisers thought that such difficulties would be encountered, and that they would be serious. It is possible that they were mistaken in that view, but the Public Accounts Committee in expressing that view, which they were entitled to do, and in which they may be right, none the less did not interrogate any witnesses other than the Principal Accounting Officer at the War Office. If they were going to pass that stricture it might have been advisable, if they had thought fit, to send for a senior officer from Germany, and hear his views as to what the morale of the situation might have been. I have no quarrel with the report, which is an eminently balanced one, but I put that point forward for the consideration of the House.

On the issue of the Public Accounts Committee Report, the hon. Member for Devizes (Mr. Hollis) referred to unrecorded losses. I am sure that he was not guilty of any desire to mislead the House, but I suggest to him that it is conceivable that even he perhaps did not quite understand what was the nature of these unrecorded losses. If he did not understand before he should have understood when he heard my hon. Friend the Member for South Cardiff (Mr. Callaghan), because I think he made the point plain. It is true, as the Public Accounts Committee have said, that there were hidden and unrecorded losses which we can never know and which cannot he defined. But to say, as the hon. Member for Devizes said, that extra losses were incurred, and were not brought out, and which, to use his own words, we did not bother to add up, or could not add up, is such a distortion of the fact that I hope he will agree that he slightly misapprehended the position.

Mr. Hollis

I married the two—paragraphs 15 and 45. Paragraph 15, said that there were unrecorded losses in the past owing to the exchange of goods against goods, and paragraph 45 said that was still going on.

Mr. Freeman

The hon. Member is perfectly entitled to do that, but he is not entitled to suggest, as I think he did—the House can judge for themselves—that there is any concealment here which could possibly have been made public or indeed, that it would be possible to assess these further losses by anything other than pure guess work. The hon. Member added, on that particular point, that these unrecorded losses had also taken place in Italy. Of course, they had. I am making no party point. It remains a fact that these unrecorded losses had taken place in Italy throughout the whole period during which our troops were in Italy. The only reason that we did not have an accumulated surplus balance of lira in Italy was that we had in Italy a method of injecting into the Italian economy the lira we collected; and that is the reason why it is quite unreasonable for hon Members opposite to say, "Why did not you learn from previous experience?" We have heard that about lira and about guilders. The answer is that, while previous experience would have had some relevance to this problem if we had been as wise after the event as before, the situation in Germany was unparalleled and the application of previous experience would not have led us to the right conclusion.

The right hon. and learned Member for West Derby went on at a later stage in his speech to point out that the shortages of goods and dollars in this country at the present moment makes the matter more serious. I hope that the House will look at this and see what is the truth or otherwise of that statement. Of course, it is undesirable that any goods for which we are paying dollars should pass into the hands of German black marketeers. But it is not open to him to suggest that our particular shortages of the moment have been worsened by what happened unless he can also show that the supply of goods to canteens during the relevant period was at an unreasonable and inflated level. That cannot be shown, and in fact it is not true. While I do not seek to defend in any way the course of action taken over these goods, it is a fact that once a soldier bought these goods and had them in his own hands, the shortage of goods and dollars from which we are suffering in this country temporarily at this moment, has not thereby increased.

I want to address myself to paragraph 45 of the report of the Committee of Public Accounts to which the hon. Member for Devizes referred. I think that the hon. Member for Westbury did so as well, and certainly the right hon. and learned Member for West Derby did. The Public Accounts Committee in paragraph 45 note that this barter is still going on, and they trust that we shall take all possible steps to put it right. There is really nothing on this point which I can add to what the hon. Member for South Cardiff (Air. Callaghan) has said about it. There is the problem. It is perfectly true that any commodity which is passed to a German in return for services rendered, represents an infinitisimally small loss to the British Exchequer. If any hon. Member of this House who was previously in Germany played a round of golf and gave five cigarettes to his caddy at the end of it, he was responsible for a very small loss to the Exchequer. The Public Accounts Committee say rather unctuously, as my right hon. Friend said, that we must take all possible steps to stop that. I ask the House in all human reasonableness what can we do to stop it? We will certainly do everything that we can to bring to book people who are found guilty of disregarding the regulations which we published on the subject. That is the same method which the Treasury are using in regard to currency black marketing on the Riviera.

We have referred to the authorities in Germany the recommendation of the Public Accounts Committee on this point, in order that they may give us their formal assurance on a situation of which we are already well aware, that they have published all the necessary regulations to make this practice illegal. They have done all that, and it is out of all human reason for hon. Members to suggest that it is open to my right hon. Friend, in any way, to take any action which will conclusively prevent barter in Germany at the present moment. Therefore, while one accepts with the Public Accounts Committee the desirability of limiting this barter as much as possible, it is quite impossible to give any effective guarantee that it can be brought to a stop. With regard to the currency leakages, I think that it is possible to guarantee that, except for the danger residing in the possibility of forgery, currency losses have been stopped, and if forgery should arise, as my right hon. Friend pointed out, we have plans laid to meet it.

I want to turn to the second part of the Motion on the Order Paper and to the Amendment which I shall formally move before I sit down. It is suggested that my right hon. Friend failed to give the Committee the information which in fact he should have given. Really the case which has been made against my right hon. Friend of misleading the Committee is so utterly flimsy that I feel quite certain that not only is it received with contempt on this side of the House, but it is really not believed by the majority of hon Members opposite. When I first saw the Motion on the Order Paper, I went through the proceedings of the Committee in the light of the subsequent Report of the Public Accounts Committee to find out whether any misleading could have taken place. While it is perfectly true, as hon. Members opposite have pointed out, that there were two ill-considered answers to interruptions in the middle of a speech, which could be interpretated to be slightly misleading, when they are looked at against the Supplementary Estimate itself with the Memorandum attached to it, which was in the hands of the House and which hon. Members opposite ought to have read, and looked at also in the light of the Vote on the Army Appropriation Account for the year in question which was just about to come before the House—

Mr. Peake (Leeds, North)

indicated dissent.

Mr. Freeman

The right hon. Gentleman shakes his head. It was to come up six weeks later. The point is as hon. Members have not been slow to point out that, prior to the date of this Debate, the accounting officer of the War Office, with the knowledge of my right hon. Friend, had actually signed that account. That argument cuts both ways. It is used by hon. Members opposite to suggest that my right hon. Friend was seeking to conceal. Is it conceivable when that step had been taken and we at the War Office knew that account was being passed and we were shortly going to publish the accounts—is it conceivably possible that it was intended to deceive the House? In fact I do not believe that he did really deceive the House. We have had a great deal of play made over this interruption of the hon. Member for Westbury. Again and again reference has been made to an answer given by my right hon. Friend to a question by the hon. Gentleman the Member for Westbury and one of the counsel for the prosecution read it out last. My right hon. Friend's answer was: "Yes, Sir." in regard to the question of whether the loss came into this year. He said on that occasion, The loss came into this year because the marks which have accumulated have to be dealt with in the current year…"—[OFFICIAL REPORT, 18th February, 1947: Vol. 433, c. 1061.] I would ask the House to note that the reference is to marks "which have accumulated" not marks which had previously in the past accumulated and already had been written off in a previous account. It seems to me to be perfectly reasonable to say in answer to that, that this was in relation to the matter which we were considering, this particular £20 million. I would ask the House to look at it against the background that it was printed in the Supplementary Estimate the House was asked to consider, that there were previous losses in other years; and therefore, the suggestion against my right hon. Friend is too absurd for serious consideration.

I want to refer to the serious suggestion which was made by the right hon. and learned Gentleman the Member for West Derby in relation to a point of Order in connection with which I and the noble Lord the Member for Horsham intervened, and finally you, Mr. Speaker, gave a Ruling. This was due, as the right hon. and learned Gentleman pointed out, to the fact that my right hon. Friend had by a slip of the tongue referred to the passing of the Army Estimates instead of the Army Accounts. I do not think the right hon. and learned Gentleman suggests that it was ever more than a slip of the tongue, and indeed, I think he told the House so. The point of Order that was raised with you, Mr. Speaker, was whether it would be in Order to debate on a Supplementary Estimate what had, in fact, occurred previously and had already been written off in a previous Army Account. You gave your Ruling to the effect that a Debate on such a matter would not be out of Order and you said at that time: 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."— [OFFICIAL REPORT, 26th February, 1947; Vol. 433, col. 2222.] It might be that the Secretary of State, by a slip of the tongue, if I may use the phrase, put those words almost into your mouth. I suggest to you with the greatest possible respect that, in fact, you had no possible option but to rule any discussion on that account out of Order, because whatever else was true of it, it certainly did not arise out of the Supplementary Estimate we were considering. If am right in that submission to you—and I feel confident that I am—then what we are being asked to do in this Motion is not to pass judgment one way or the other as to whether or not my right hon. Friend may or may not have misled the House—that is the point which was brought in this afternoon—but what we are being asked to do is to say, as set out on the Order Paper: That this House … expresses its regret that the Secretary of State for War did not disclose in Committee of Supply on 18th February the full extent of the losses incurred by the Exchequer. In other words, we are being asked to express regret because on 18th February the Secretary of State did not do what quite clearly it was not in Order to do and what he could not have done in any case without being ruled out of Order.

Mr. Pickthorn (Cambridge University)

Since so much weight is put on this argument, may I now put it to you, Sir, as a point of Order? Would it be in Order on a Supplementary Estimate of that sort, for the Minister to refer to the fact that there was an earlier similar figure which had not before appeared in the Estimate, because at that period the Estimate system was in abeyance? Would such a reference have been in Order or would it not?

Mr. Freeman

Further to that point of Order. I submit before you reply to that Mr. Speaker, you should bear in mind that that statement was already printed in the memorandum to the Estimate.

Mr. Speaker

What statement?

Mr. Freeman

The statement that the £20 million which we were at that time considering was only that part of the loss which fell within that current year.

Mr. Speaker

I think my Ruling was the correct one in the first instance. After all, what was in a former Estimate could not be discussed in the present year but whether it should have been mentioned or not is rather a matter of opinion.

Mr. Freeman

We will ponder that Ruling and each of us will derive what comfort he can from it. I must draw your attention to the fact that if this is to be an authoritative Ruling, with great respect, the money in question had not been passed in the previous Estimate because of our previous accountancy system. The point of substance was that this was not relevant to the Supplementary Estimate we were considering, and, therefore, surely it was out of Order to discuss it.

Mr. Speaker

That surely was my Ruling, that as this came under a previous Estimate, it, therefore, was finished and done with. The other point was whether or not it should have been mentioned. Had it been mentioned, I could not have stopped that, but it could not have been discussed anyhow.

Mr. Callaghan

Further to that point of Order. May I remind you, Mr. Speaker, that on that day I counted 59 Rulings given from the Chair as to what was in Order and what was not in Order. The discussion was clearly extremely limited and everyone who spoke did so with caution.

Mr. Speaker

If on one particular day I gave 59 Rulings, I was exceeding my average.

Mr. Freeman

There is no doubt that in full consciousness of that my right hon. Friend exercised extreme caution on that occasion.

I beg to move in line 2, to leave out from "Committee," to the end of the Question.

There is little more I want to say except that I would ask the House to accept the Report of the Public Accounts Committee, bearing in mind the arguments which have been adduced by both sides this afternoon. I should like to say and no doubt the hon. Member for Westbury and the right hon. and learned Gentleman the Member for West Derby will agree with me that this document is complicated and it really does not lie in the mouths of hon. Gentlemen opposite who have not taken the trouble to read it, to pass stringent criticism on my right hon. Friend who has.

Lieut.-Colonel Sir Walter Smiles (Down)

rose

Mr. Freeman

I will not give way, for am winding up. In regard to the latter part of the Motion, in respect of which I have moved the Amendment, I would ask the House to have no hesitation in deleting it. I expect that not only will there be a great majority for our Amendment, but I would not be altogether surprised if perhaps one or two hon. Members opposite were prepared, if not to vote against the Motion, at any rate to abstain from voting, because I do not believe for one moment that a number of hon. and gallant Members opposite who are interested in the well-being of the Army and who have assisted us in this Parliament to the greatest possible extent to run the Army, approve of what has been done this afternoon. This is a matter which twice before we have debated, and the Public Accounts Committee have now issued a full Report. It is perfectly within the

rights of hon. Members opposite to rake it up again but they must forgive us if when they do so we come to the conclusion that it is done to get cheap political publicity in their own Press tomorrow morning rather than to help or further the well being of the Army.

Captain Crookshank (Gainsborough)

Before the hon. Gentleman sits down may I ask him if he intends to explain how it is that this Amendment appears in the name of the Secretary of State for War and himself, and not in the name of the Prime Minister or one of the more senior Members of the Government as is usual when the conduct of a Minister is being criticised? Is the explanation that no one is prepared to whitewash them, so that they have to whitewash themselves?

Question put, "That the words pro posed to be left out stand part of the Question."

The House divided: Ayes, 114; Noes, 239.

Division No. 317.	AYES	[7.21 p.m.
Agnew, Cmdr P. G.	Hollis, M. C.	Ponsonby, Col. C. E.
Amory, D. Heathcoal	Hope, Lord J.	Prescott, Stanley
Assheton, Rt. Hon. R	Hurd, A.	Prior-Palmer, Brig, O
Baldwin, A. E.	Hutchison, Col. J. R. (Glasgow, C.)	Ramsay, Maj. S.
Birch, Nigel	Jeffreys, General Sir G.	Reed, Sir S. (Aylesbury)
Boles, Lt.-Col O. C. (Wells)	Keeling, E. H.	Reid, Rt. Hon. J. S. C. (Hillhead)
Bossom, A. C.	Lambert, Hon. G.	Roberts, Emrys (Merioneth)
Bowen, R	Lancaster, Col. C. G.	Roberts, W. (Cumberland, N.)
Bower, N.	Law, Rt. Hon. R. K.	Robinson, Wing-Comdr. Roland
Boyd-Carpenter, J. A.	Legge-Bourke, Maj. E. A. H.	Ropner, Col. L.
Bracken, Rt. Hon. Brendan	Lipson, D. L	Ross, Sir R. D. (Londonderry)
Bromley-Davenport, Lt.-Col W	Low, Brig A R. W	Sanderson, Sir F.
Buchan-Hepburn, P G T	Lucas, Major Sir J	Savory, Prof. D. L.
Butcher, H. W	Lucas-Tooth, Sir H	Shephard, S (Newark)
Byers, Frank	Maodonald, Sir P. (I of Wight)	Shepherd, W. S. (Bucklow)
Challen, C.	Mackeson, Brig. H. R.	Smiles, Lt.-Col. Sir W
Clarke, Col R. S.	Macmillan, Rt. Hon. Harold (Bromley)	Smith, E. P. (Ashford)
Crookshank, Capt. Rt. Hon. H. F. C.	Macpherson, N. (Dumfries)	Snadden, W. M.
Crowder, Capt. John E.	Maitland, Comdr. J. W.	Spearman, A. C. M
Davies, Clement (Montgomery)	Manningham-Butler, R. E.	Stanley, Rt. Hon. O.
Dodds-Parker, A. D.	Marlowe, A. A. H.	Stoddart-Scott, Col. M.
Dower, E. L. G. (Caithness)	Marples, A. E.	Strauss, H. G (English Universities)
Elliot Rt. Hon Waller	Marshall, D. (Bodmin)	Sutcliffe, H
Erroll, F. J.	Marshall, S. H. (Sutton)	Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
Fleming, Sqn.-Ldr. E L	Maude, J. C	Teeling, William
Fletcher, W. (Bury)	Mellor, Sir J.	Thomas, J. P. L (Hereford)
Fraser, H. C. P. (Stone)	Molson, A. H. E.	Thorneycroft, G. E. P. (Monmouth)
Fyfe, Rt. Hon. Sir D. P. M	Morris, Hopkin (Carmarthen)	Thornton-Kemsley, C. N.
Gage, C.	Morrison, Maj. J. G. (Salisbury)	Thorp, Lt.-Col R. A. F
Galbraith, Cmdr. T. D	Morrison, Rt. Hon. W. S. (Cirencesier)	Touche, G. C.
Gammans, L. D	Mott-Radclyffe, Maj. C. E.	Wadsworth, G.
Gridley, Sir A.	Neven-Spence, Sir B	Wakefield, Sir W. W
Grimston, R. V	Nicholson, G	Walker-Smith, D.
Hannon, Sir P. (Moseley)	Nutting, Anthony	Wheatley, Colonel M. J.
Hare, Hon J. H. (Woodbridge)	Orr-Ewing, I. L.	White, J. B. (Canterbury)
Harvey, Air-Comdre. A. V.	Peake, Rt. Hon. O.	Williams, C. (Torquay)
Head, Brig. A, H	Peto, Brig. C. H. M
Henderson, John (Cathcart)	Pickthorn, K.	TELLERS FOR THE AYES:
Hogg, Hon. Q	Pitman, I J	Mr. Studholme and
		Major Conant.
NOES
Adams, Richard (Balham)	Alpass, J. H.	Austin, H. Lewis
Adams, W. T. (Hammersmith, South)	Anderson, A. (Motherwell)	Awbery, S. S.
Allen, A. C. (Bosworth)	Attewell, H C	Ayles, W. H.
Ayrton Gould, Mrs. B	Hamilton, Lieut. -Col. R	Porter E. (Warrington)
Balfour A	Harrison, J	Porter, G. (Leeds)
Barnes, Rt. Hon A J	Hastings, Dr Somerville	Proctor, W. T.
Barstow, P G	Henderson, A (Kingswinford)	Randall, H. E
Battley, J. R.	Herbison, Miss M.	Ranger, J
Bechervaise, A. E.	Hewitson, Capt. M	Rees-Williams, D R
Belcher, J W.	Hobson, C. R.	Reeves, J.
Bellenger, Rt. Hon F. [...]	Holman, P.	Reid, T. (Swindon)
Benson, G.	Holmes, H. E. (Hemsworth)	Ridealgh, Mrs. M
Beswick, F.	House, G.	Robens, A.
Bevan, Rt Hon A. (Ebbw Vale)	Hudson, J. H. (Ealing, W.)	Rogers, G. H. R.
Bing, G. H C	Hughes, Hector (Aberdeen, N.)	Ross, William (Kilmarnock)
Binns, J.	Hynd, H. (Hackney, C.)	Royle, C.
Blackburn, A. R	Hynd, J. B. (Attercliffe)	Sargood, R.
Blenkinsop, A.	Isaacs, Rt. Hon. G A	Scollan, T.
Blyton, W. R.	Janner, B	Scott-Elliot, W
Bowles, F. G. (Nuneaton)	Jay, D. P. T	Segal, Dr. S.
Braddock, T. (Mitcham)	Jeger, G. (Winchester)	Shackleton, E. A. A
Bramall, E. A.	Jones, D. T. (Hartlepools)	Sharp, Granville
Brook, D. (Halifax)	Jones, P. Asterley (Hitchin)	Shawcross, C. N (Widnes)
Brooks, T. J. (Rothwell)	Keenan, W.	Shinwell, Rt. Hon. E
Brown, George (Belper)	King, E. M	Shurmer, P.
Brown, T. J. (Ince)	Kinley, J.	Silverman, S. S. (Nelson)
Bruce, Maj. D. W. T.	Kirby, B. V	Simmons, C. J.
Burden, T. W.	Lavers, S.	Skeffington, A. M
Callaghan, James	Lee, Miss J. (Cannock)	Skinnard, F. W.
Carmichael, James	Leonard, W.	Smith, H. N. (Nottingham, S.)
Castle, Mrs. B. A.	Leslie, J. R.	Smith, S. H. (Hull, S.W.)
Chamberlain, R. A	Levy, B. W.	Snow, Capt. J. W.
Champion, A. J	Lewis, A. W. J. (Upton)	Sorensen, R. W
Chater, D.	Lipton, Lt.-Col. M	Soskice, Maj Sir [...]
Chetwynd, G. R	Longden, F.	Sparks, J. A
Cluse, W. S	Lyne, A. W	Stamford, W
Cobb, F. A.	McAdam, W	Steele, T.
Cocks, F S.	McEntee, V. La T	Stewart, Michael (Fulham, E.)
Coldrick, W.	McGhee, H. G.	Stubbs, A. E
Collins, V. J.	Mack, J. D	Symonds, A. L.
Comyns, Dr. L.	McKay, J. (Wallsend)	Taylor, H. B. (Mansfield)
Corvedale, Viscount	Mackay, R. W. G. (Hull, N.W.)	Taylor, R. J. (Morpeth)
Cove, W. G.	McLeavy, F.	Thomas, D. E. (Aberdare)
Crossman, R. H S	Macpherson, T. (Romford)	Thomas, Ivor (Keighley)
Daggar, G.	Mainwaring, W. H.	Thomas, I. O. (Wrekin)
Daines, P.	Mallalieu, J. P. W.	Thorneycroft, Harry (Clayton)
Davies, Ernest (Enfield)	Manning, Mrs. L. (Epping)	Thurtle, Ernest
Deer, G.	Marshall, F. (Brightside)	Titterington, M. F.
Diamond, J	Mathers, G.	Tolley, L.
Dobbie, W	Mayhew, C P	Tomlinson, Rt. Hon. G
Dodds, N N	Medland, H M	Turner-Samuels, M.
Donovan, T.	Mellish, R. J.	Ungoed-Thomas, L
Driberg, T E. N.	Messer, F.	Usborne, Henry
Dugdale, J (W. Bromwich)	Middleton, Mrs. L	Vernon, Maj W F
Dumpleton, C. W.	Mikardo, Ian	Viant, S P
Durbin, E F. M.	Millington, Wing-Comdr. E. R	Walkden, E.
Dye, S.	Mitchison, G. R	Walker, G. H.
Ede, Rt. Hon. J. C.	Monslow, W.	Wallace, G. D. (Chislehurst)
Edwards, A. (Middlesbrough, E.)	Moody, A. S.	Wallace, H. W (Walthamstow, E.)
Edwards, N. (Caerphilly)	Morgan, Dr. H. B	Weitzman, D
Edwards, W. J. (Whitechapel)	Morley, R.	Wells, P. L. (Faversham)
Evans, E. (Lowestoft)	Morris, P. (Swansea, W.)	Wells, W. T. (Walsall)
Evans, John (Ogmore)	Moyle, A.	White, H. (Derbyshire, N.E.)
Fletcher, E. G M. (Islington, E.)	Naylor, T. E.	Whiteley, Rt. Hon. W
Follick, M.	Neal, H. (Claycross)	Wigg, Col G. E
Foot, M. M	Nichol, Mrs M. E. (Bradford, N.)	Wilkins, W. A
Fraser, T. (Hamilton)	Noel-Baker, Capt. F E (Brentford)	Willey, F. T. (Sunderland)
Freeman, Maj. J. (Watford)	Noel-Buxton, Lady	Williams, J. L. (Kelvingrove)
Ganley, Mrs C S	O'Brien, T.	Williams, W R. (Heston)
Gilz[...], A	Oliver, G. H	Willis, E.
Glanv[...]te, J. E. (Consett)	Orbach, M.	Wills, Mrs. E A
Greenwood, Rt. Hon. A. (Wakefield)	Paget, R. T.	Woodburn, A.
Greenwood, A W J. (Heywood)	Paling, Will T. (Dewsbury)	Woods, G. S
Grey, C. F.	Palmer, A. M. F.	Wyatt, W.
Grietson, E	P[...]rker, J.	Yates, V F.
Griffiths, D. (Rother Valley)	Paton, J. (Norwich)	Young, Sir R. (Newton)
Griffiths, Rt. Hon J (Llanelly)	Pearson, A.	Younger, Hon. Kenneth
G[...]ter, R. J	Peart, T. F
G[...] W. H.	Platte-Mills, J. F. F.	TELLERS FOR THE NOES:
Hale, Leslie	Poole, Major Cecil (Lichfield)	Mr. Joseph Henderson and
Hall, W. G	Popplewell, E	Mr. Hannan.

Question put, and agreed to.

Resolved:

"That this House doth agree with the Second Report of the Committee of Public Accounts."