HC Deb 02 February 1948 vol 446 cc1580-98

9.55 p.m.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

I beg to move: That an humble Address be presented to His Majesty, praying that the Order, dated 13th January, 1948, entitled the Exchange Control (Payments) (Union of Soviet Socialist Republics) Order, 1948 (S.I., 1948, No. 17), a copy of which was presented on 20th January, be annulled. With your permission, Mr. Speaker, I will make two things clear before I come to what I wish to say. The first is that there is nothing political in the moving of this Motion, and that whether it had been the Union of Soviet Socialist Republics, the United States, the Argentine, or any other country, my hon. Friends and I would have moved this Motion. Secondly, it is no intention of ours to raise any question about the trade portions of the Agreement against the financial arrangements of which we are now praying, but we think that it is essential, if this House is to understand the order, that some reference should be made to what has gone before in the financial arrangements between ourselves and Soviet Russia.

In 1941, in the heat of the war, we had an Agreement whereby 40 per cent. of the money that they borrowed from us should be repayable in gold and dollars and 60 per cent. in sterling lent by ourselves. For some reason—it is not ours to argue it tonight—that Agreement broke down and it was found necessary in the latter part of last year to form a new agreement. Articles 3 and 5 of that new Agreement govern the order we are discussing tonight.

It would be as well for the House to realise from the start the sacrifices we have made under these Clauses. In the first place, we were told by the Economic Secretary to the Treasury that he could not disclose what sums we had waived, but from an answer given by his master it was quite apparent that we had surrendered at least £60 million and wiped that off, that a further £160 million had been funded at some ½ per cent. and equally that we had waived £27 million under Lend-Lease. What we are asked to agree to now is a new arrangement which, despite the sacrifices that we have made, imposes still further liabilities upon us. If hon. Members will look at paragraphs 2 and 3 of the present order, they will see that it is perfectly possible for any sterling surplus received by the Russians to be used for payments within the Third and Fourth Schedules of the main Exchange Control Order, whereas if they will refer to paragraph 3 of the present order they will see that while sterling owned by Russia to ourselves may be paid in sterling, any such sterling required by Russia has to be made available by ourselves.

I ask the House to consider for a moment just what that lands us into. In the first case, it is quite apparent that during the next 12 months we shall have a credit balance with Russia. They are delivering a large number of goods to us and we shall have to pay for them. The money which they receive under Article 2 of this Agreement is made payable within al countries in the Third and Fourth Schedules to the main Control Exchange Order, and that can only mean that these sums can be used by Russia to secure goods from such countries as the Argentine Republic, Brazil, Egypt and Iran, to take four examples, from all of which countries we have the greatest difficulty in getting the goods we ourselves need. It must equally mean that in so far as this credit surplus is used by Russia to this end, so must our own power to use sterling in those areas be diminished.

Let us take one example. Suppose, for the purpose of argument, the Argentine are willing to hold £10 million of sterling; and suppose the Russians use their temporary surplus credit to the extent of £2 million in order to buy goods from the Argentine, and to use Article 2 for payment of that sum, that can only mean that our credit in the Argentine is reduced from £10 million to £8 million and that we shall be the immediate sufferers. In fact, if one were to pursue it one stage further, and take the case of Egypt which is also included in the Schedule, I would ask the Financial Secretary this direct question: in so far as the Russians may use that temporary surplus of sterling within Egypt, how far do we not have to make sterling available from blocked sterling balances in order to meet that deficit? I believe that if the Financial Secretary will look into this, he will find that by every single penny we make available to the Russians under this Agreement, we shall have to fund that to the advantage of the Egyptians from No. 2 account to No. 1.

Coming to Article 3 of this Agreement, it is obvious that within, say, two years the Russians will owe us a lot of money. It may be said that just as the Russians are able to sell their sterling within Schedules 3 and 4 of the main Exchange Control Order, so will they now buy it back and, therefore, there is reciprocity; but the Economic Secretary knows that is wrong, because there is only one authority in Soviet Russia which is allowed to own foreign exchange, and that is the government, and when this order talks about sterling from an account of a person resident in Russia, that is some parrot phrase for the government itself, and should the government not wish to have sterling available, or not wish to purchase sterling, then under Article 5 of the Trade Agreement we have to provide the sterling from the Bank of England and pay it into the Soviet account in order that they may pay us.

In this House I have often challenged the Government about unrequited exports, but no more perfect example of unrequited exports could be found than this, that we solemnly, in a payments agreement, say that we will provide sterling to another country in order that they may pay us for their goods, and not only provide the sterling, but provide it, leave it there for four years, and then accept repayment of the capital over 10 further years charging only ½ per cent. interest. If that is not financial lunacy, I cannot imagine what is. I recall to the Government what was suggested the other day by my right hon. Friend the Member for Aldershot (Mr. Lyttelton), if I may remind the President of the Board of Trade of it: I beg the new President of the Board of Trade, also in no carping spirit, not to get negotiator's fever, it he has not already con- tracted the disease. No one on this side of the House will give any credit to anyone for coming to an agreement about anything."—[OFFICIAL REPORT, 29th January. 1948; Vol. 446, c. 1240.] This Agreement shows what can happen when negotiator's fever takes the place of common sense. I would say further that if any hon. Member will read the Anglo-Russian Trade Agreement, and will then read what is set down in this order, he must come to the conclusion that His Majesty's Government have been absolutely dishonest in what they have put in the White Paper because, while they have stated in that White Paper, first, that it was a triumph for bilateral agreement, and, secondly, that there was no cost incurred to this country, the fact is that whatever money Soviet Russia may earn from that Agreement is transferable to a great number of hard currency countries, and that any deficit has to be paid by this country in order to enable the Russians to pay us. Therefore, I say either that the White Paper, and particularly Clause 5, is dishonest or, alternatively, that secret agreements were reached by His Majesty's Government which have not been disclosed to this House.

The President of the Board of Trade (Mr. Harold Wilson)

I am sure the hon. and gallant Member will not mind me interrupting. I would like to make clear once again that there were no secret agreements at any stage. Everything was published, and if the hon. and gallant Member finds it incomprehensible, the fault lies with him.

Colonel Crosthwaite-Eyre

Of course, I accept the assurance of the President of the Board of Trade that there is not any secret, but in that case I leave it to the House to decide. The White Paper, in Article 5, states the reason for the order this evening. I quoted the article correctly, and perhaps the President of the Board of Trade, having interrupted me, will now interrupt me again and say whether this order can be related to what the White Paper said because—[Interruption.] He palms it off on to someone else. The President of the Board of Trade challenged me, and I gave way, and I have asked him a question but he prefers someone else to answer.

Hon. Members opposite and on this side of the House have continually stated that if we are to pursue our present policy, and if we are to try to balance our trade, then exports must not be unrequited, and wherever we make an agreement we must regain some service for it. If my interpretation is correct, this order denies both those principles. I suggest to the House that if hon. Members have been sincere in the many economic Debates held in this House one thing they cannot do is to allow this order to stand now.

10.7 p.m.

Sir John Mellor (Sutton Coldfield)

I beg to second the Motion.

My hon. and gallant Friend the Member for Christchurch (Colonel Crosthwaite Eyre) has performed a service in the readiness he has shown to challenge any arrangement which appeared to involve unrequited exports from this country. It was a misfortune that, shortly before Christmas, when we raised a similar matter, we were prevented from hearing a reply from the Financial Secretary to the Treasury as the House was counted out. This afternoon the right hon. Gentleman received many bouquets for the lucidity with which he introduced the Second Reading of the Industrial Assurance and Friendly Societies Bill. We hope very much to hear similar lucidity from him tonight. I see he indicates that his hon. Friend the Economic Secretary to the Treasury is to reply.

Many of us have thought that the financial provisions of the Trade and Payments Agreement by which the provisions of the 1941 agreement were modified were too generous to Russia; but the point with which my hon. and gallant Friend has mainly concerned himself tonight, and the only point on which I shall touch, is the aspect of current transactions. It seems to us that in the earlier stages there will arise a surplus of sterling in favour of Soviet Russia. As my hon. and gallant Friend has argued, Soviet Russia will be free to spend that sterling in any of those countries named in the Fourth Schedule to the Payments Order. We assume that later the balance of trade will change in favour of the United Kingdom. When that happens the Soviet will have to produce sterling, but if she has spent the sterling surplus which arose in favour of Soviet Russia during the earlier stages, she will only be able to get fresh sterling by borrowing more sterling from us.

That is a most unfortunate prospect from the point of view of the United Kingdom. Already we have agreed to modify the terms of repayment and the rate of interest on the sterling already owed to the United Kingdom under the 1941 Agreement. Soviet Russia still has to make repayment of that, spread over a long period of time, but in reduced amounts and carrying much reduced rates of interest. But that has got to be found. She will also presumably still be importing goods from the United Kingdom, but if she has spent her sterling surplus which arises from the earlier transactions, where is Soviet Russia to Obtain the sterling required to provide for the service of the funded debt, and also to provide for the purchase of fresh goods from this country? There is only one way in which that sterling can be found by Soviet Russia—it is by further borrowing from this country.

That is the burden of our contention tonight. If the hon. Gentleman who is to reply proves it to be wrong, no one will be better pleased than my hon. and gallant Friend and myself. That appears to us to be the position, and it does not seem to us that we are getting value from this Agreement or from the way in which this order proposes to implement the terms of the Agreement. This country is, I feel, being bled white by transactions involving unrequited exports. It seems to me that the transaction involved in this Agreement, and furthered by this Order, is a transaction which, unless we receive assurances from the hon. Gentleman that our calculations are incorrect, we ought to ask the House to annul tonight.

10.14 p.m.

Mr. Mott-Radclyffe (Windsor)

I wish to ask the President of the Board of Trade to explain one point about this Trade Agreement, about which I am not at all clear. He will no doubt recollect the original announcement on the subject of the Anglo-Soviet trade talks made in the House by his predecessor. The then President of the Board of Trade, the present Chancellor of the Exchequer, explained to the House that the original negotiations broke down over the terms of the repayment of the 1941 credit. He said: —we could not go the whole way the Soviet Government demanded as a condition of an agreement. He went on to say: The concessions we were prepared to make involved us in a heavy loss in the next three or four years, and in view of our serious overseas financial position, we could not meet what the Soviet Government, after moving some way to meet us, stated were their minimum terms."—[OFFICIAL REPORT, 28th July, 1947; Vol. 441, c. 37.] When the right hon. Gentleman made his last announcement to the House, on his return from what was described as a successful conclusion of the negotiations, he said: Agreement was reached in principle also on the terms of repayment of the credit advanced under the Civil Supplies Agreement of 1941 and on other financial questions."—[OFFICIAL REPORT, 11th December, 1947; Vol. 445, c. 1208.] If, in July, 1947, our overseas financial position was such that it was considered impossible to make any further concessions towards the Soviet minimum demands, in what way was this position altered by last December? Had our overseas financial position improved so much that we felt able to abandon the position we had taken up?

Mr. Speaker

I think that goes beyond the scope of this order. After all, this order deals with facts which are part of the Agreement, and the Agreement itself cannot be discussed. These are methods of payment—financial methods—and to discuss the whole Agreement in relation to Russia is quite outside this order.

Mr. Mott-Radcyffe

I apologise if I am out of Order. I thought the methods of payment we are discussing tonight hung to some extent on the original arrangements under the 1941 Agreement.

Mr. Speaker

The mover of the Motion merely gave it as a background. We cannot discuss the background now that we have arrived at the foreground.

Mr. Mott-Radclyffe

I apologise for digressing. It was unintentional, merely wanted to ask the right hon. Gentleman to assure the House that he had, in fact, not made concessions too great in respect of this Agreement, and that what was called the successful conclusion was not wholly successful on one side and wholly unsuccessful on the other.

10.17 p.m.

Mr. Drayton (Skipton)

I dislike this Order as much as many others which have been introduced by this Government, but as it is connected with a trade agreement which provides for this country three-quarters of a million tons of course grain, which the farmers in my constituency are most anxious to receive, I am awaiting the Minister's reply with great interest. If the supply of this grain is contingent upon this order being approved, it may well be that there are some merits in it. It is difficult to assess precisely what the merits are, as we have not yet had the opportunity of discussing fully the terms of the trade agreement under which it arises. It appears to me that we are going to receive in this country feedingstuffs to the value of approximately—

Mr. Speaker

It does not deal with feedingstuffs; it deals with a monetary arrangement and payment.

Mr. Drayson

I will confine myself to the actual sum of money which I consider, according to my rough calculations, is involved in this order. I have estimated that it will amount to something between £25 million and £30 million. Those credits are to be built up by the Soviet Union as a result of their supplying certain commodities to this country. What we are discussing is how the position will be dealt with when those credits have been accumulated. We understand that certain capital goods are to be supplied by this country at a future date. It may be that the total sum involved does not equal the value of the goods to be supplied. Therefore, the Soviet Government—perhaps not having confidence in this country being able to supply them with goods from our current production—sought for permission to be able to expend this sterling throughout the sterling area. This order adds the U.S.S.R. to the various Schedules dealing with sterling in the Exchange Control Act of 1947.

I welcome any move which tends to make sterling into a more desirable currency, and to give it greater flexibility amongst those who acquire it. I suggest that the Soviet Government, in requiring this provision in the trade Agreement, have called the bluff of His Majesty's Government to see exactly what sterling will buy in the sterling areas throughout the world. When he was Chancellor of the Exchequer the right hon. Member for Bishop Auckland (Mr. Dalton) was unfortunate when he agreed to the convertibility of sterling balances into dollars. Let us see what will happen to this sterling which we are allowing the Soviet Government to place on their transferable account. Let us see what they will get for it.

I would like to think that this new Order opens up a vast field of expanding trade with the Soviet Union. If we could get together on the basis of trade and not of politics, it would be far better for the peace of the world. I am glad that the President of the Board of Trade has succeeded with that country where the Foreign Secretary has utterly failed during the last two years. It would be interesting to hear what complaints, if any, have been received from other members of the sterling area or from the countries involved in the Schedules mentioned in the order. I would like to know whether any of the countries concerned have objected to this Agreement with the Soviet Union. On the question of unrequited sterling balances, the House and the country are well aware that there are a large number of things that are unrequited. The possible merits of the Agreement are that we will get into this country certain articles which are desirable; but I shall believe that they are coming when I see them.

10.25 p.m.

The Economic Secretary to the Treasury (Mr. Douglas Jay)

The hon. Member for Skipton (Mr. Drayson) asked me whether the supply of 750,000 tons of feedingstuffs to this country was contingent on the making of this order. The answer is, "Yes," and I can add that it was just because we made this order that the first shipment of that grain actually left Russian ports for this country on Thursday of last week. The hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) who initiated this Debate, accused the Government, if I understood him right, of being dishonest, because the order made did not proceed from the White Paper on the Russian Trade Agreement which was recently laid before the House. Really, there is no dishonesty about it, because, if the hon. and gallant Member will look at pages 8 and 9 of the White Paper, which set out the payments agreement between the two Governments, he will find that the order not merely flows automatically from that but is merely the necessary machinery for carrying that Agreement into effect.

Colonel Crosthwaite-Eyre

Does the mean, minister in his last statement, that, instead of reading "Agreement signed by the two Governments," one should read, "Exchange of letters"?

Mr. Jay

It is part of the general Agreement—

Colonel Crosthwaite-Eyre

Absolute nonsense.

Mr. Jay

If the hon. and gallant Member will allow me, what he will read on page 8 of the White Paper is, "Payments Agreement between His Majesty's Government in the United Kingdom and Northern Ireland and the Government of the Union of Soviet Socialist Republics," which is the same thing as an Agreement between the two Governments. There is nothing dishonest about it, and nothing to get heated about at all.

Colonel Crosthwaite-Eyre

I would ask the hon. Gentleman whether this exchange of letters, which constitutes an Appendix to the White Paper, has the same value as Article 5, which was signed officially by the Government?

Mr. Jay

They are both of equal value and validity. The point which the hon. and gallant Member does not appreciate is that the order we are discussing tonight has nothing whatever to do with Article 5, which relates only to the civil supplies agreement of 1941, as it proceeds entirely on the payments arrangements to be found on pages 8 and 9 of the White Paper.

The hon. and gallant Member also asked me, if I understood him correctly, whether it was true that, under the Agreement, Great Britain is involved, for instance, in making available to Russia, for the purpose of buying goods in Egypt, Egyptian blocked sterling. The specific answer is "No." It is only sterling in transferable accounts, and not blocked sterling, which is available for that purpose. What we are really discussing tonight is a method of payment between the two countries in respect of goods we are getting from Russia and manufactured goods we are sending to Russia, and it seems to me that the two most important facts in the background of the Financial Agreement have not been mentioned at all.

The first essential fact, surely, is that the negotiations between this country and Russia were conducted on the assumption that we should have to pay in convertible sterling—gold or dollars—for any grain we might get. In December, however, the Russians agreed to sell very large quantities of feedingstuffs for non-convertible sterling. That was a very fine concession, and that is the answer to the hon. Member for Windsor (Mr. MottRadclyffe), who asked what the difference was. The other most important fact about the financial background is that, by this Agreement, we shall, in the early stages, that is, in the coming months, obtain a much larger supply of goods from Russia in value than we shall be sending to Russia. That means that unrequited exports will be the other way round. Russia will be sending unrequited exports to us, and Russia will, in fact, as she is doing at present, be tending to increase her holdings of sterling. That means that, to that extent, Russia is making a short-term credit to us and is incidentally showing her confidence in sterling, which I am sure will be gratifying to all parties in the House.

The hon. Member for Sutton Goldfield (Sir J. Mellor) asked how Russia, if she had expended all her sterling, which she may have done, will he able in future to buy additional goods. Obviously her ability to buy them will depend on whether she can sell us more goods. As negotiations are to be resumed later in the year it may be that is how the matter will turn out.

Perhaps I may say a word briefly on the specific purposes of this order. The purpose of this order is to include Russia in what is called the "transferable account" group of countries. I may perhaps add that if the House were to annul this order tonight, the Government would still have all the powers to do the things they want to do under this order. Hon. Members may well ask why it is we need to have the order at all. The answer to that is that the order enables us to do these things in a much more rapid, expeditious and efficient way. It enables the necessary measures to be taken without so many of those bureaucratic interferences and delays and' expenditure of manpower and paper, and so on, that hon. Members opposite so much dislike. I cannot really believe the Opposition would want to press this Prayer tonight since the effect of annulling the order would be not merely to increase the tightness of our exchange control generally, which I remember the hon. Member for the City of London (Mr. Assheton) deprecating when we were discussing the Exchange Control Bill, but greatly to increase the administrative work necessary to carry out this very valuable trade agreement.

The crux of the order is in paragraph 2, which very briefly places Russia in what I have called the "transferable account" group of countries. I would like to explain what that group involves, and here, perhaps, I might refer the hon. and gallant Member for Christchurch to an article in the "Economist" of 24th January, because he might pay more respect to the words of the "Economist" than to mine. In effect, it expressed the hope that that group of "transferable account" countries might be expanded and that, of course, is exactly what we are doing by admitting Russia to membership by this order.

The essence of the "transferable account" system is this: it enables a resident in any country in the group to pay in sterling for goods from any member of the sterling area or any other member of the "transferable accounts" group, and enables him to accept payment in sterling for exports to any member of the group or of the sterling area. That is to say, in effect, that it encourages trade within the group and between the group and the sterling area and, incidentally, encourages the holding of sterling by member countries which is beneficial to us and enhances confidence in sterling generally. I remember the right hon. Member for Aldershot (Mr. Lyttelton) last week advising the Government to take steps to increase confidence in sterling, and this is another object to which this order contributes.

Perhaps I may also mention two things which membership of the "transferable account" group does not permit. It does not permit a member to take capital transfers to other countries in the group: it merely permits transfers on current account. It does not enable the country concerned to extract any gold or dollars from Great Britain. Therefore, there is nothing in this order which will cost Great Britain any gold or dollars.

I would like to emphasise finally that there have been two very good reasons for making the financial arrangements included in this Agreement and making them in such a way as to facilitate Russian trade. The first point, surely, is that there is the Civil Supplies Agreement, but that is an old debt, and ordinary commercial considerations cannot be applied to it; that was the reason for making some of the concessions here. Secondly, this is merely an Agreement by which Russia accepts payment for grains in non-convertible sterling, and that is more favourable to us, and less favourable to the Russians than the scheme discussed last summer. I submit that nothing useful whatever would be achieved by annulling an order such as this, the purpose of which is simply to bring Russia into the transferable account group of countries. Furthermore, I would also point out that it provides financial machinery for a general Agreement of value to Great Britain, and to British agriculture above all.

10.36 p.m.

Mr. Assheton (City of London)

would like to intervene now because, at this stage, I have an opportunity to say that I am glad that the hon. Member for North Battersea (Mr. Jay) has had the chance to make his maiden speech as a junior Minister on this occasion. I worked with the hon. Member during the war and I know of the intelligence and industry which he brought to bear on his work in those days, and which, I am sure he employs in his new appointment. But I am sorry that on this particular occasion he does not take the same view of this matter as I and my hon. colleagues sitting behind me. This is, admittedly, a rather difficult order to understand, but I observe that most hon. Members opposite—and some, probably, on this side—seem able to discuss this complex matter without having a copy of the order to hand. Some of its technicalities are quite considerable, and I must congratulate my hon. and gallant Friend the Member for New Forest and Christchurch (Colonel CrosthwaiteEyre) on the clear way in which he puts his case.

I do not know whether the House feels that the case made out was a good one, but in answer to the Economic Secretary I would say he tried, so it seemed to me, to convince the House that the sterling which the Russians would have available as a result of the particular agreement under this order itself, would not have a deleterious effect on our gold and dollar reserves. I agree that, in a limited technical sense, that is true, but, at the same time, I suggest that in the broader sense it is certainly not so. I say that because what will happen under the payments agreement is that the Russians will have a certain amount of sterling which they will be able to use in those countries such as Egypt, the Argentine, Brazil, and Iran which are those that have been mentioned, and that will have exactly the same effect. The Government clearly think that the whole transaction is all very fine for this country, but I find it very difficult to take that view.

The price paid for this agreement is a very heavy one. I fully realise the difficulties which confronted the President of the Board of Trade when he started his negotiations, and I have every sympathy for him, but now that he has come home, we cannot allow that sympathy to delude us into thinking that he has made a good bargain. Mr. Speaker has made it clear to us that we cannot go into the whole agreement, and I am in some difficulty in answering the question I have put myself. Broadly, I think—and this is as far as I shall be permitted to go—we have got less than we have given. So far as this purely financial order is concerned, the point made by my hon. and gallant Friend is, I think, that we have put the Russians into the position of getting an advantage which, over the period of, say, two or three years, will be very much to our detriment. I agree that if the Russians send over shiploads of coarse grain in the next month or so, and we have sent nothing to them in return, that would not, in itself, make the case of unrequited exports which he has made. But take it for a longer period—for six months or a year ahead—and then the thing is reversed.

What we are sending to the Russians, without any doubt, is something equivalent to the hardest possible currency. We are sending them machinery which may he sold for hard currency in a great many countries which are paying in really hard currency. So that when my hon. Friend speaks of unrequited exports he is right over a period of months, and certainly over a period of years. The hon. Member for Sutton Coldfield (Sir J. Mellor) when he talked of our being bled white by transactions involving unrequited exports, was quite right. It is difficult to form an opinion on such a technical matter as this order. I see the difficulty in which hon. Members must be when they try to cope with it. Those of us who have spent considerable time studying these things find that we have difficulty. The Economic Secretary to the Treasury, with all his experience of economic affairs, has not had a great deal of experience yet with the technicalities of this Exchange Control business. I think we must support the view of my hon. and gallant Friend the Member for New Forest and Christchurch that this is definitely a disadvantageous order from the point of view of sterling. Hon. Members opposite talk about Russia coming into the sterling area. But that is not the position at all. The Russians have said they are not going to demand non-convertible sterling, but in fact they are going to sell for sterling which can be converted into currencies which are very scarce. I feel bound to support the point of view put forward by my hon. and gallant Friend the Member for New Forest and Christchurch.

10.43 p.m.

Mr. Erroll (Altrincham and Sale)

The Prime Minister is paying an unconscious tribute to the Opposition in being present while this Prayer is being moved tonight. H graced the House with his presence when another order was discussed only a few days ago, and we are glad that he is here to-night to listen to a Debate on a matter of even greater importance. Immediately after the conclusion of the Trade Agreement, the President of the Board of Trade came to my constituency and discussed the matter with a meeting of my constituents. In joining in the protest against this order I do not want the President of the Board of Trade to think that I am wholly against the purport of this Agreement. However, there is a number of points relating to the speech of the Economic Secretary to the Treasury about which I have some doubts.

The first shipment of grain from Russia, he said, took place last Thursday. It is a pity that he did not say whether it was in British or Russian ships. It is true, as he said, that the negotiations which were successfully concluded in November and December represented an improvement on the summer negotiations; but they nevertheless represent an extremely hard bargain. It is true that we no longer have to pay in convertible currency, but to suggest that we were likely to accumulate a large credit during the summer due to the Russian shipments of grain to this country is only half the case; because an important point is that unless successful contracts are made by Russian company agents in this country, the Russians reserve the right to withhold a large part of the grain during the current shipping period. That is clearly stated in Subsection C of Article 3 and I would like to draw the attention of the Economic Secretary to the Treasury to that very point. It is not, therefore, the good bargain which the Economic Secretary to the Treasury suggested it was. It is a hard bargain and with a bit of luck we shall be able to keep to it. But it must be remembered that the machinery which the Russians hope to obtain—a certain proportion of it will come from engineering firms in my constituency—might well be sent to hard currency countries.

Mr. Speaker

The hon. Member is going right outside this order. I think that one must be very careful of that.

Mr. Erroll

I quite agree, Mr. Speaker, how careful one must be, particularly as transferable currency may be involved as a result of the bargain just concluded. As we are sending machinery to Russia as a result of this agreement, and we have to consider the matter of hard currency, whether it be roubles, francs or dollars, you will appreciate how difficult it is.

Mr. Speaker

I appreciate that, but I do not think that one can use a monetary or financial arrangement as a peg on which to hang a discussion on the Trade Agreement itself. I do not think that one can put the hen before the egg or the egg before the hen in that way.

Mr. Erroll

We are likely to export machinery before we get satisfaction, Mr. Speaker, and it is on that that we feel considerable concern on this side of the House. As regards the details of the order, we appreciate that it represents an ad vance on the summer arrangement that it should be a transferable account in con[...]vertible currency. We have witnessed in the last few years considerable and serious leakage in one kind of account and another, and it is by no means certain that transactions on transferable account, within the transferable club, as it has been called, as has been suggested by the Economic Secretary to the Treasury, will in fact prevent a certain amount of leakage into other types of accounts. We are very disappointed on this side of the House that there have been no assurances given that transferable account will be utterly watertight, or utterly currency tight, or that there will be no leakages. It was rightly pointed out by the Secretary to the Treasury that the Government have all the powers, and that they need not bother with this order, except as a matter of administrative convenience. It may be that is the case, but members of the Opposition, and the country in general, are not reassured by statements of that kind. There is very great need for fuller information on the whole complex question of this type of currency transaction and if this Prayer yields nothing else, it will help, I hope, all of us and the country to see the complexity of our present difficulties.

10.54 p.m.

Colonel Crosthwaite—Eyre

The Economic Secretary to the Treasury, in his reply, touched on a number of issues, and the first one was that the sacrifices made by this country were well worth while in achieving a broader sphere of exchange of trade. That seems to me to come very curiously from the Government which have brushed aside the fact that we have given up £187 million and agreed to receive one-sixth of the interest on the balance, and yet, at the same time, are unwilling to press with any of the other countries mentioned in the schedule to achieve any reduction in the debt that we owe to them. It seems to be just a one-way bargain. If one looks at this one will find the Government's answer, is that unrequited exports are not incurred, but as the Economic Secretary to the Treasury said, in the first 12 months, the Russians are going to have a surplus of currency. He went on to say that the unrequited exports would be in our favour and not in theirs, but that is just what does not happen under the order, because the Russians are wholly entitled to use their actual sterling surplus for purchases in the 16 countries mentioned in the Third and Fourth Schedules to the main Exchange Control Order, and there is nothing to stop the Russians using whatever sterling they may thus have from competing against us in such countries as Brazil, the Argentine and Egypt for goods which we ourselves badly need.

I would suggest to the House—and my contention has not been answered—that any of these countries is willing only to hold a certain amount of sterling and by that amount which the Russians place in these markets, by so much will our own imports be reduced. Under this order too, we grant the Russians unrestricted credits from this country in order to pay for that which they buy from us.

Mr. Jay

Does not the hon. and gallant Member realise that this order puts Russia into exactly the same position as any other country in the transferable accounts group. If he has no political bias in the matter, why does he object to Russia being a member and not all the other countries?

Colonel Crosthwaite-Eyre

I have no political bias. My objection is that Russia is granted credits in order to pay for our exports. This part of my argument is not addressed to transferability. I would call the attention of the Economic Secretary to Article 5 of the financial arrangements of the Anglo-Soviet Trade Agreement. There he will read under subsection B: Any debit balance shall be discharged in sterling to he paid to the account by the Government of the U.K by way of advances to the Government of the U.S.S.R."— That can only mean one thing—that if at any stage the Russians owe us money, we then put money into the account in order to balance it. If there is any other interpretation I should be glad to hear it: certainly none has been advanced tonight.

My last point is that the Economic Secretary says we are not to suffer from the loss of gold and dollars. He has forgotten one thing. Of these countries in the "transfer club"—a most unpleasant club, because every member uses the opportunity of hitting every other member over the head with the longest possible club—every member has taken precautions with regard to sterling. They say, "No more hardships for us, let us take advantage of the weakness of sterling." If we allow unrequited sterling to come into the "club" so we will increase our difficulties and ensure that, in the case, for example, of the Argentine, more dollars and more gold will have to be spent by us in order to cover the surplus sterling. Equally in the case of Egypt this unrequited sterling will mean that more has to be transferred from the No. 2 Accounts to the No. 1 Accounts in order to guarantee the amount of convertibility that the Egyptians want. The Economic Secretary was very smooth and suave in his attitude. He is the ideal club secretary who insures that the members remain members as long as possible even if they pay only half their entrance fee. What we ask the Government to do is to take back this agreement as it stands, for it means unrequited exports to us and a further burden on sterling and our gold reserve. Let them consider it anew, because under it we in this country instead of using our best endeavours to restore a fundamental disequilibrium are simply signing our names to a document to secure a political victory for His Majesty's Government.

Question put, That an humble Address he presented to His Majesty, praying that the Order, dated 13th January, 1948, entitled the Exchange Control (Payments) (Union of Soviet Socialist Republics) Order, 1948 (S.I., 1948, No. 17), a copy of which was presented on 10th January, be annulled.

The House divided: Ayes, 30; Noes, 170.