HC Deb 04 March 1957 vol 566 cc33-9
Mr. H. Wilson (by Private Notice)

asked the Chancellor of the Exchequer whether he will make a statement on the Agreement concluded with the German Federal Government about the defence support costs, and other economic questions.

The Chancellor of the Exchequer (Mr. Peter Thomeycroft)

As a result of the discussions concluded in Bonn on Saturday, 2nd March, the Anglo-German Economic Committee agreed to recommend the following proposals to their Governments.

It is proposed that a sum of £50 million should be made available by the Federal Government as a contribution towards the defence effort of the United Kingdom during the period begining 1st April, 1957. It was also decided to make two other main recommendations: the Bank Deutscher Laender will deposit £75 million with the Bank of England, to meet future German obligations; and a further £10 million will be added to the existing Arms Purchase Account as an advance against purchases to be made in the coming year.

These discussions, which have been held in the spirit of Article 3 of the North Atlantic Treaty, have been co-operative and friendly. The recommendations are subject to final acceptance by Governments, and there are some matters of detail to clear up. I can, however, indicate that Her Majesty's Government regard them as fair and reasonable and are prepared to accept them.

Mr. Wilson

The House will be glad to see the improvement, such as it is, on the miserably inadequate support costs contribution made last year. But will the Chancellor of the Exchequer answer this? With regard to this quite abnormal placing of the £75 million in the Bank of England, is not this, in effect, in the nature of a loan which will anticipate the earnings that we might have had at some future time? In other words, is not it a continuation of the pawnshop finance which the previous Chancellor of the Exchequer introduced in December? Secondly, will the Chancellor answer this? Since the party opposite made so much, two or three years after the war, about the need of the country to have Marshall Aid, are we to be told now that eleven or twelve years after the war, under this Government, we now need Adenauer aid?

Mr. Thorneycroft

The £75 million which the Germans are depositing over here is to enable them to make certain debt payments which are paid at an annual rate of £7½ million, and it is convenient for them to hold it in sterling in this country.

Mr. Bevan

Will the right hon. Gentleman elucidate the statement he made about future claims by Britain on Germany? In respect of what period are we being mortgaged, because this £75 million is related to a very vague description? Can the right hon. Gentleman express it in terms of years? Will he take into account the fact that as Japan also lost the war he might take his hat to Tokyo?

Mr. Thorneycroft

I will certainly give the right hon. Gentleman the figures he asks for. The total outstanding debt is £120 million sterling and to meet this annual instalments of £7½ million are being paid by Germany. This £7½ million annual instalment will be paid out of the £75 million now being paid across the exchanges.

Mr. Shinwell

What additional expenditure will be borne on our Defence Estimates as a result of this Agreement?

Mr. Thorneycroft

I do not think that I can go further on the Defence Estimates than is already stated in the Estimates.

Mr. Shinwell

Since this has a very profound bearing on our Defence Estimates, are the British taxpayers to be burdened still heavier as a result of this arrangement?

Mr. Thorneycroft

They will be burdened £50 million less by this arrangement, but it is true to say that the £50 million will not cover the total cost of our forces in Germany?

Mr. Nicholson

Does my right hon. Friend recognise that, by and large, this Agreement will be welcomed? May I offer the congratulations of the House to those responsible for it?

Mr. E. Fletcher

Will the Chancellor confirm that this German contribution which has been agreed upon is irrespective of any reduction we may hereafter make in the size of the British forces in Germany?

Mr. Thorneycroft

The size of the British forces in Germany is a matter which is being discussed at N.A.T.O. and through the Western European Union. I do not want to be drawn into that. I think that questions on that should be addressed to the Minister of Defence or to the Foreign Secretary.

Mr. H. Wilson

With regard to this quite unusual interest-free loan or increased sterling balance, or whatever the right hon. Gentleman likes to call it, will he say what the financial mechanism is to be? Will the finances be cleared through the European Payments Union so that we get, in one way or another, three-quarters of the balance in gold, or will it be through further transactions with the Bank of England and will the gold or dollar consequences of this transaction be shown monthly in the gold and dollar reserves?

Mr. Thorneycroft

That is one of the questions being discussed between the central banks to which I referred.

Captain Waterhouse

Is there any provision for this £75 million to be left in London, or can the Germans withdraw it at any time at their own will? If so, have they to give specific notice before withdrawing it?

Mr. Thorneycroft

I am not sure about the question of notice. [HON. MEMBERS: "Oh!"] Their intention is to deposit it here and to use it for the purpose of repaying their debt at £7½ million a year.

Mr. Gaitskell

Surely this is part of the Agreement which has just been announced by the right hon. Gentleman. Can he tell us whether there is any provision under which the Germans may, in certain circumstances, withdraw the money?

Mr. Thorneycroft

I think not, I think that it is deposited here for that particular purpose, but I will verify that point. I do not want to mislead the House.

Mr. Healey

Further to the question of my hon. Friend the Member for Islington, East (Mr. E. Fletcher), can the Chancellor of the Exchequer say whether the payment is conditional upon the maintenance of British forces at their present level?

Mr. Thorneycroft

No, not at their present level. It is not conditional upon that. As the hon. Gentleman knows, discussions are now going on with our other friends in Europe on the question of what level the British forces should be at, but I do not wish to make a statement on that.

Mr. Bevan

Was it not undesirable that any statement at all should be made until the right hon. Gentleman was sure about his facts? I understand that this was made public on Saturday and now we are being told that he does not know the basis upon which the arrangement is made?

Mr. Thorneycroft

I was only giving the House the information for which the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) asked. I think that he was quite entitled to ask the Question.

Mr. H. Wilson

To suggest that this is being dragged out of the Chancellor before he had time to brief himself about a Private Notice Question—is not that a falsification of the position when the whole of the world's Press had this information for more than 24 hours?

Mr. Thorneycroft

I am not making any objection whatever to the right hon. Gentleman's Private Notice Question. If I did so, that would be a reflection on Mr. Speaker, who allowed it. It was a perfectly proper Question. The reason I am giving this information is that the Question was asked.

Mr. Gaitskell

With further reference to the Question raised by my hon. Friend the Member for Leeds, East (Mr. Healey) and my hon. Friend the Member for Islington, East (Mr. E. Fletcher), could the Chancellor tell us this? Supposing that these negotiations about the size of our forces in Germany were to result in a reduction of those forces, would it make any difference to the financial Agreement which he has just announced?

Mr. Thorneycroft

May I, first, answer the question to which I did not give the full information to the House just now? I was asked about the German right to withdrawal of the £75 million. The Germans have stated that they do not claim the right to withdrawal although the point is not, in fact, included in the text of the Agreement. I think that the hon. Gentleman opposite asked that, and that it is right for me to answer it.

Secondly, the level of the forces is being separately discussed. There is nothing about the level of the forces in the terms of the Agreement itself. At the same time, there is an Article in the Agreement under which the Federal Government may call for discussions at any time after 1st December, 1957, with a view to the amendment of the figures in the Article—I will not refer to the Articles; they relate to the £50 million and other matters—in the light of any changes in the situation which may be held to have appropriateness to the level of the contributions now agreed. That is to say—I am trying to give the House the full information—that it would be open to the Germans, if they thought there was a changed situation, to call for discussions.

Mr. Healey

On a point of order, Mr. Speaker. Has not the Chancellor an obligation to this House to read the terms of an Agreement before reporting it to the House?

Mr. Speaker

That is not a point of order.

Mr. Bevan

Is it not now quite clear that the figure of £50 million is attached to a certain level of troops in Germany; that this is a clear understanding with the German Government and that what the right hon. Gentleman is now reading out is that this will continue for this year and, if there is any alteration, the Germans, after December, can claim to renegotiate the £50 million?

Mr. Thorneycroft

I would emphasise that it is not tied to a particular level of forces in Germany. I think that right hon. Gentlemen are entitled to put the question, but the answer is clear; it is not so tied.

Mr. Bevan

Then what is the meaning of the last statement made by the right hon. Gentleman? I submit that it is most unfortunate that we should have these replies dragged out of the right hon. Gentleman as if he has only just learned them for the first time and is unable to estimate their significance to the House. What he said, as I understood, was that the Germains claimed the right, in the light of any decisions we make about the level of our forces, to rediscuss the £50 million after December.

Mr. Thorneyeroft

What I said was—I read out the article of the Agreement; I am anxious to give the House all the information I can—that if the Agreement was tied to a specific level of forces in Germany that would be plainly stated in the terms of the Agreement.

Mr. Strachey

Will the Chancellor confirm that, while the Agreement is not tied to a specific size of the forces in Germany, if we do make a reduction of our forces in Germany this whole financial Agreement is then to be reopened from the German side?

Mr. Dugdale

Although the Chancellor says that it is not tied to a particular figure, may I ask whether it is tied to such a figure as the Germans themselves may agree—not a particular figure, but a figure that they may agree?

Mr. Thorneycroft

No figure whatever is mentioned about the level of forces in Germany.

Mr. Bevan

I am quite certain that we do not want to return to this subject on another day, if we can clear it up now. Will the right hon. Gentleman read out the article which he was good enough to read just now?

Mr. Thorneycroft

This is the Article: The Federal Government may call for discussions at any time after 1st September, 1957, with a view to the amendment of the figures in paragraphs 1 (a) and 1 (b) in the light of any changes in the situation which may be held to have a bearing on the appropriate level of contributions.

Mr. Bevan

Is it not reasonable for us to interpret that as meaning that if we reduce the level of our forces in Germany obviously it would have a bearing on the figure?

Mr. Thorneycroft

I am anxious to satisfy the right hon. Gentleman. I think that one has to consider the German point of view in this as well. Suppose they signed the Agreement and we removed all our forces in Germany—let us take the extreme case. It would not then be wholly unreasonable that they should have some opportunity of rediscussing the figure of £50 million.

Mr. H. Morrison

Does the right hon. Gentleman recognise that we are not necessarily quarrelling with the German interpretation, or with the need for the Germans to protect their rights? Does not he realise that what we are quarrelling about is the British Chancellor of the Exchequer not being frank with the House of Commons? Is he not aware that if there are other conditions, he should have stated them in the first instance and not later? Will he now say whether there are any other conditions which could be of interest to the British taxpayer and the British House of Commons?

Mr. Thorneycroft

The right hon. Gentleman will have an opportunity to read this Agreement as soon as it has been agreed.