RHODESIA

HC Deb 14 December 1965 vol 722 cc1151-208

6.20 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond)

I beg to move, That the Reserve Bank of Rhodesia Order, 1965, dated 3rd December, 1965, made by Her Majesty in Council under the Southern Rhodesia Act, 1965, a copy of which was laid before this House on 3rd December, be approved. I understand, Mr. Speaker, that it might be to the convenience of the House, if you thought fit, that this Order should be discussed together with the following Order: That the Southern Rhodesia (Bank Assets) Order, 1965, dated 3rd December, 1965, made by Her Majesty in Council under the Southern Rhodesia Act, 1965, a copy of which was laid before this House on 6th December, be approved.

Mr. Speaker

If the House has no objection, so be it.

Mr. Diamond

As the Prime Minister explained to the House as recently as last Friday, … we seek no conclusion in Rhodesia except an honourable return to constitutional rule. On this we must insist."—[OFFICIAL REPORT, 10th December, 1965; Vol. 722. c. 771.] The economic and financial measures which we have taken are designed to this end, and among the most important of these is the present Order which secures control of Rhodesia's Central Bank. Perhaps it would be convenient to the House if I were to describe, first, the background to this Order, then the steps taken under it and finally their effect. Then I would propose to deal with the second Order which you, Mr. Speaker, have been good enough to say might be discussed at the same time.

The operations of the Reserve Bank of Rhodesia fall broadly into two classes—those relating to its internal affairs, such as the issue of Bank notes in Rhodesia, and those relating to external affairs. As to the former, the chief cashier and other officers of the Bank, whose tenure of office has not been affected by the Government's action, will continue to conduct the day-to-day internal affairs of the Bank from Salisbury.

By "external affairs" is meant in effect control over the assets of the Bank held outside Rhodesia, whether in the United Kingdom or elsewhere. It is clearly our responsibility to ensure, as far as we are able to do so, that these assets are safeguarded in the interests of the people of Rhodesia and to prevent their being used for the purposes of the illegal régime. This is a state of affairs which must depend on having at the head of the Bank a Board consisting of men of complete integrity, of great knowledge in the field of banking, and above all of complete loyalty to our constitutional processes.

The Government have been able to achieve this dual purpose as a result of the Order which we are discussing. The previous Board has been suspended and a new Board appointed consisting of six men of the necessary qualities and distinctions. The Chairman is Sir Sydney Caine, the Director of the London School of Economics and for many years a senior official in the Colonial Office and the Treasury. Three of the directors, Lord Harcourt, Lord Poole and Mr. Warburg, are bankers of great experience. Many of us will remember Lord Poole as a Member of this House before he undertook high office in the Conservative Party. The remaining members are Sir Norman Kipping, former Director General of the Federation of British Industries, and Sir Gordon Munro, who has served both as Chairman of the Southern Rhodesia Currency Board and as High Commissioner for Southern Rhodesia in London. We are indeed fortunate that such a distinguished body of men was prepared to take on this arduous task in the national interest and we are deeply grateful to them.

The Board is already hard at work and has sufficiently established its authority. No central bank has refused recognition. Certain countries have recognised it either publicly or tacitly. In other cases the need to consult legal opinion has led to the funds of the Rhodesian Reserve Bank in those countries being frozen in the meantime, which is an equally satisfactory way of denying the use of these funds to the illegal régime.

As was to be expected, the effectiveness of this action was mirrored in a violent response by Mr. Smith. But from what I have said it will be clear how totally unfounded are the references to "confiscation". The assets of the Rhodesia Bank have not been transferred to the United Kingdom Government. They can still be used on the instructions of the new Board for making such payments as are permitted under our exchange control arrangements. What they cannot be used for is bolstering up the illegal régime, for this Order serves the dual purpose of safeguarding the people of Rhodesia and hastening the return to constitutional government in the most effective way.

Moreover, to make sure that the Board is seen to be fully supported by the Government and at the same time to enable us to develop our policy in the most effective way, by obtaining, for example, any necessary information as to the location of any reserve assets abroad, the Order provides for the Secretary of State to give directions as to the conduct by the Board of the business of the Bank.

The Southern Rhodesia (Bank Assets) Order, to which the first Order is closely related, is the second Order before the House. Information about the amount of bank assets is of obvious relevance to the formulation of our policy of securing the return to constitutional government. This Order enables the Treasury to obtain that information.

The exchange control measures introduced on 11th November brought all Rhodesian accounts under Treasury control. This meant that the Treasury was able to obtain information about transfers into and out of those accounts. This Order enables the Treasury to obtain information about the net balances held by banks in the United Kingdom on behalf of Rhodesian banks. That information is not obtainable under exchange control powers, or under any other powers normally available.

In normal times information about the balances of customers, whether at the Bank of England or at other British banks, is completely confidential and not available to the Treasury. In the very special circumstances which now prevail in relation to Rhodesia, the Government find it necessary to have this information. In order to get it, we approach our task in a proper, open and legal way by making use of the special powers available under the Southern Rhodesia Act, and we bring the Order before the House for approval as required under that Act.

The Order will also protect the legal position in relation to their customers of banks which are required under the Order to supply information to the Treasury. One account in which we are interested is that of the Reserve Bank of Rhodesia held at the Bank of England. But the Order covers also assets held not only at the Bank of England hut with other banks in the United Kingdom. For example, it would apply to assets which a commercial bank in the United Kingdom might be holding on behalf of the Reserve Bank of Rhodesia. Furthermore, the Order applies not only to the assets of the Reserve Bank of Rhodesia but also to the assets of any Rhodesian office of any bank. This information, too, may be relevant to the formulation of our policy.

I must emphasise that the Order applies only to bank assets. It does not enable the Treasury to obtain information about the accounts of Rhodesian residents other than banks, for example, private individuals in Southern Rhodesia. The Treasury will use the powers conferred by this Order with proper circumspection. Any information which the Treasury may obtain under the powers conferred by the Order will be treated as strictly secret.

I am very conscious that I have not attempted to deal with the detailed provisions of the various sections or to explain the legal niceties. I do not imagine that this is what the House wishes to know. Rather, I believe it my duty to make clear, as I have attempted to do, that these Orders are an important element in the Government's policy of securing both the real interests of the Rhodesian people and the earliest possible return to constitutional government. Nor is there any inconsistency between these two objectives. In my view we cannot secure the first without the second, and I ask for the full support of the British House of Commons in achieving both.

6.30 p.m.

Mr. William Clark (Nottingham, South)

In all parts of the House we regretted Mr. Smith's U.D.I. on 11th November, and today we are discussing an Order dated 3rd December. My first question is: why was there a delay of 22 days? This delay meant that there was tacit agreement that the Rhodesian Government, if I may so call it, in Salisbury were able to carry on their banking business. The British Government had warning of what has been going on since the U.D.I. In the Financial Times of 18th November there was a closely reasoned article which told us that the Reserve Bank of Rhodesia was buying all the gold it could. This was in the sort of twilight period.

Following that, on 23rd November, the British Government allowed the Rhodesian Government to use their balances in London in order to settle part of their external debt. In fact, during the twilight period of 22 days, the British Government allowed Rhodesia to operate its banking system as though nothing had happened.

These are relevant points when we are considering this Order. If it is right to introduce the Order now, it was far more right to introduce it 22, days ago. Why the delay? On 10th December, the New Statesmen, which does not usually support this side of the House, had an article saying: There are formidable consequences. If the controls had been imposed on the day of U.D.I. they might have toppled Smith immediately. Now he has had time to build banking contacts elsewhere, and perhaps transfer some funds out of London; some inter-company transfers may also have been made, and then it adds a comment about what may happen "if he survives". This delay of 22 days must be explained away, and I hope that whoever is to reply for the Government will address himself to my question.

The Government's action now is extra proof to the electors that the present Socialist Government are governing only from day to day, never looking to the future to see what the effect of their policy would be.

I come now to two minor points on the Reserve Bank of Rhodesia Order, S.I.No.2049. Paragraph 2 suspends the Salisbury board. But what about the Reserve Bank of Rhodesia Act, 1964, under which the directors were appointed for five years and the chairman for seven? They have been suspended, but are salaries still being paid? Is there any question of compensation for loss of office? These are minor points, but the right hon. Gentleman did not deal with any of them.

We now have the new board appointed, and, presumably, this board will be able to take over whatever reserves there are in this country. For the record, perhaps I may give the figures which I have been able to obtain of Southern Rhodesia's reserves. In London, approximately £9 million; in South Africa and Switzerland approximately £9½ million. I say that because in the Financial Times of 8th December there was an article saying that the Rhodesian Government, or the Smith Government, to put it in that way, had instructed their overseas journalists to pay their bills in either Swiss francs or South African rands. I wonder what the present position is as regards the £9½ million. Who can say? The right hon. Gentleman may have the break-up. Perhaps £6 million is in South Africa and £3½ million is in Switzerland. We know from the latest figures that there was £3½ million worth of gold actually in Rhodesia itself. It will be found that these figures add up to the £22 million reserves.

The position must have changed because Mr. Smith said recently that there was only £12 million overseas, not £18½ million as shown in the last official figures. Possibly there is £10 million in Rhodesia? Who knows?

I appreciate that the second Order deals only with United Kingdom banks, and the new London board is trying to find out where these accounts are either in Switzerland or elsewhere. But money is held abroad by many people and not necessarily in the name of the parcular Government. It can be in a numbered account or in a personal account. Therefore, it is possible that Mr. Smith's allegation that he has only £12 million abroad may be right.

Is the Order merely a device to take over the overseas reserves of the Bank of Rhodesia? I remind the Chief Secretary that Her Majesty's Government have not got powers of expropriation. Is the Order another external sanction against Rhodesia? The Chief Secretary said that the cashier of the Bank and others in Rhodesia would carry on their currency function. Is there any intention to interfere with that at all? Just taking the assets which are immediately available in this country is not enough.

The most important and the most explosive paragraph of the Reserve Bank Order is paragraph 3(e). What will be the position of the British taxpayer under it? The new board of directors has been set up under the Order, and paragraph 3(e) plainly removes the usual duty of a director to hold his powers in trust for the benefit of the company. I am delighted to see the two Law Officers present. Perhaps they will address their minds to this question. May not this provision of the Order have the effect of making the London board the agent of the Secretary of State and, therefore, attract to the Government liability for acts of that board? How will this affect the British taxpayer?

The Government say that the Smith régime is illegal. What about interest on the external debt of the Bank of Rhodesia? This arises under paragraph 3(e). The prospectus of one of the stocks issued, the 4½ per cent. 1987–92, says that the revenues of the Colony of Southern Rhodesia alone are liable in respect of the stock and it goes on to say that the Consolidated Fund in this country shall not be affected at all. But, as I understand it, the United Kingdom Government are now the Government of Rhodesia. If this Government are the effective Government of Southern Rhodesia, then, according to that prospectus, they are the Government of Rhodesia responsible for the interest.

The total public internal debt of Southern Rhodesia is £113 million. Rhodesian Government stock is £67 million. The World Bank liability, which, incidentally, the United Kingdom Government have guaranteed, is about £25 million. There is then about £16 million advanced through C.D. and W. and by the British Government. This is a total of £221 million and the debt repayment is about £8 million per year.

I would like now to come to the so-called "twilight period" between U.D.I. and the date of the order.

Mr. Paget

The hon. Gentleman has given us the figure of the debt repayment. Has he also got the interest figure?

Mr. Clark

The figure is £3¼ million.

During the twilight period between 11th November and 3rd December, the Smith régime, on 21st November, paid the interest on the 6 per cent. 1976–79 stock on Rhodesia. This was before the takeover of the Bank by the British Government. What happened to the interest on the 4 per cent. 1972–74 stock which was due on 6th December? The Bank of England refused to pay this although I understand that all the warrants had been made out. I quote what the City Editor of The Times had to say. I think that he put his finger on the point. He said: It is, however, an unhappy precedent (as are so many others) as it looks like being the first time ever that there has, been a default on any British or Commonwealth stock. This is the first default in our history on any Commonwealth stock. The payment that should have been made on 6th December totalled about £90,000 gross, before the deduction of Income Tax. It is interesting to see who owns the stock. There are about 1,500 shareholders comprising charities, investment trusts, trade unions and insurance companies, which invest on behalf of the small investor. They are not large capitalists. In addition to them, there are the small investors who also hold this stock as individuals. The City Editor of the Sunday Express said on 5th December that many of them held under £100 of stock.

I know the interest of the Chief Secretary of the Treasury in small savings and it is an interesting situation that, with the encouragement offered by successive Governments of both parties to savings and, indeed, to investment in the Commonwealth, here for the first time ever there has been a default on a Commonwealth stock. Some people who invested in this stock may be suffering hardship because they cannot get their interest.

We warmly welcome the Government's somersault on pensions, but it is no use saying that, in this case, no money has come from Salisbury because if Her Majesty's Government are right in saying that a Salisbury Government do not exist, they could not in any case take money from Salisbury because its acceptance would constitute at least de facto recognition that there is a Government there, even though we say that they are illegal.

It is no good saying that the Rhodesian directors have not sent any money, for Her Majesty's Government have suspended them and presumably they are no longer active. The London Board has about £9 million at its disposal. There is no payment of interest on these stocks. At the moment they are considered to be trustee security stocks. What is the position now when they do not bear any interest, the interest payment having gone by default? Are they still trustee security stocks? Does it mean that a person holding these stocks under a trust—depending on the constitution of the trust—must sell the stocks because they are no longer trustee security stocks? If that happens there will be a flood of these stocks on the market and the price will be depressed even more. Indeed, the stocks have been depressed so much that one of them now yields £11 12s. 6d. per cent. What will happen if these trustee stocks have lost their trustee status? It is an important point.

What are the implications for us as sterling bankers? Unless the debts are serviced, the Government will have proved that we have used our external banking position in order to prosecute a private quarrel. Will that be good for us as sterling bankers? We are in an extremely precarious position unless the Secretary of State instructs the Bank to pay the interest. Failure to pay could have far-reaching effects on our position as sterling bankers. It could be detrimental to our economy.

This is an extremely unhappy situation, but it is even more so for the United Kingdom banks in Rhodesia. The right hon. Gentleman said nothing about Barclays D.C.O. and the Standard Bank. They are entitled to some guidance from the Government. What is the position if London banks in Rhodesia obey the London directive and disobey the Salisbury directive? What recompense will they get from home? Do the Government intend to compensate?

All that the second Order refers to is assets. But what about the contingent liabilities? It is quite possible to have £10,000 in the bank but a contingent liability of £8,000 or so, with the result that one's net worth is £2,000. Why is there, in the second Order, only a reference to assets? We should know something about the liabilities, contingent or otherwise.

The right hon. Gentleman said that any information given under the second Order would be confidential. We are delighted to hear it. But I cannot think why some such note could not have been put in the Order. It seemed on reading the Order that the information would not be secret.

The Government have had this problem before them for many months and my greatest criticism is that these measures were not thought out from the start. Why do the Government always give the impression of governing from day to day? We have seen this so often. The Government lurch from crisis to crisis. It is not good for any Government to govern from day to day. They should look to the future.

It would be out of order for me to deal with other sanctions that have been imposed—our insurance business is being badly damaged, for example. But we must have answers to the questions I have posed. The whole position depends on what instructions are given by Her Majesty's Government to the London Board. Because of Britain's unique and important position as world bankers, we must be sure that the Government, even at this late stage, realise the issues involved. I am not sure that they do. Have they really thought this out to finality? I am not sure that they have done so and consequently I am not sure that they will not give instructions to the Bank which will in no way jeopardise either our domestic economy or our international economy.

6.50 p.m.

Mr. R. T. Paget (Northampton)

This seems to be a case which illustrates the impotence of our position in this quarrel in which we have landed ourselves. When the hon. Member for Nottingham, South (Mr. William Clark) asks why we had not planned this in advance, the answer is simply that it was not part of our intention in advance. This was not one of the things which we intended to do. It has been something which we have been kicked into doing in order to give an impression of activity, of doing a lot, in face of pressure from the African nations. I hope that we do not have to submit any more to that pressure. I understand, according to their resolution, that the African nations are to withdraw recognition of us on Wednesday. I hope that we shall accept that as having played themselves out of this game. One cannot bluff, have one's position called, and then resume.

Let us examine for a moment what this action, set up and thought of as the only thing we could find to do, does to us and what it does to the de facto régime in Salisbury. Recognising that this is the best thing which we could find to do, it illustrates just how weak our position is. What does it do? First, we gravely injure our banking position as a reserve banker. That does not worry me very much. I would very much like to see us ceasing to be a reserve banker, and I have always held that view, but if we are to be a reserve banker, we must play that game by its rules and we cannot use our reserve banking position in order to play our politics.

If on Day I we had said, "We are now the Government of Rhodesia and the Reserve Bank is our bank and the liabilities of Rhodesia are our liabilities", that would have been a perfectly tenable position in our rôle as the reserve banker. What is not tenable within thatrôle is to allow the de facto régime to proceed within our banking system for 21 days to operate that bank as its bank, the bank of an illegal but none the less operating and de facto régime—for surely there are many régimes which after revolutions and the like are de facto for a period. If, after recognising and allowing operations of a de facto régime, we are suddenly and for political purposes to withdraw its banking facilities and to make a switch, we undermine the system of confidence necessary for an international banker. The business just cannot be run that way. Thus, the first thing we do, in terms of our credit and the management of our business, is to do ourselves a serious injury, and we do that whatever we do about the liabilities of Rhodesia.

The next consideration is our position with regard to the liabilities of Rhodesia. Do we assume them, or do we not? From the point of view of the de facto régime in Salisbury, that matters little because, whatever else we have done, we have effectively released that régime from its liabilities. When we seize Mr. Smith's reserves and his bank, nobody blames him for not paying debts which we say are not his debts because he is not Rhodesia. On that view, he is released from those debts.

It may be that my right hon. Friend the Chief Secretary and I are somehow at cross purposes, but I cannot see how the repayment of debts and interest on an indebtedness of well over £220 million can possibly be only £11 million a year. The figure which I have been given is £26 million a year, which is the liability from which by this manoeuvre Mr. Smith is released. Perhaps I can be given some figure.

In passing may I say that that is probably about double the injury expected to be done to him by the tobacco embargo. In other words, over the year for which the tobacco embargo operates, we shall release him from payments about double the tobacco receipts of which we shall deprive him. Assuming that we get that part of the reserves which are held abroad as well as those held in this country—and about £12 million to £14 million is the probable figure—for a catch of f12 million to £14 million Mr. Smith will get a return of £26 million a year, which is just about the most remarkable paying investment which any government has ever been offered. This illustrates how difficult our position is.

The best we can do, the "hot shot" sanctions which are to bring Mr. Smith down, turn out to be an injury to our credit and sterling position, because if we are to support sterling and Commonwealth loans at all, we have to pay these costs of——

Mr. William Shepherd (Cheadle)

I am very anxious not to misunderstand the hon. and learned Member. Would he be good enough to tell me how sterling prestige, both in terms of currency value and banking, has suffered since this announcement was made? I should like to get clear what he has in mind.

Mr. Paget

I thought that that was what I had dealt with earlier in my speech. If the hon. Member did not follow it, perhaps some of his colleagues will be explaining it to him again during the debate. I was saying that using one's position as a central banker for political purposes after having recognised a banking position——

Mr. Shepherd

Can I press the hon. and learned Gentleman? Has this been reflected in the level of sterling or the level of foreign funds deposited in London? Will he answer the question?

Mr. Paget

I am not saying that that immediate effect has happened. This is a long-term effect which is remembered when there is trouble somewhere else. The hon. Member will hear from people in the banking world who know more about this than I do, and he will certainly learn in the process the kind of injury which this sort of manoeuvre causes to confidence within that business. There is no run on sterling at the moment or anything like that.

The other point is that if we do not support the Rhodesian loans, after claiming to be Rhodesia, and deprive the de facto Government of the means of paying, then certainly sterling colonial stocks will cease to be trustee stocks and will cease to hold their value. I am simply assuming that this is the position which we have to take over, and that we have to pay this liability. For the purpose of putting a short-term squeeze on Rhodesia it is costing us, in terms of our banking position, something immeasurable, and in terms of sterling stock something measurable, as I understand it, at about £26 million a year. This is the best we can do, and it seems to illustrate just how weak is our position in this silly quarrel into which we have got ourselves. I shudder a bit at the thought of what the next stage will be. During the next week I should have thought that nothing in the world was more important than that our representatives should be in a position to say "I must refer back to my Government"——

Mr. Speaker

Order. The hon. and learned Gentleman, with difficulty, has kept in order. He is now in order but he must not tempt himself out of order.

Mr. Paget

I will not go further than that. Within the next few days I am keeping my fingers crossed as to what further steps we may be involved in——

Mr. Speaker

Order. The hon. and learned Gentleman must concern himself with the subject with which we are involved in this Order.

Mr. Paget

I see how injurious and costly this is to us and what a small injury it has been to Rhodesia. I must not go further on that.

7.4 p.m.

Mr. Jeremy Thorpe (Devon, North)

The hon. and learned Gentleman will not be surprised if I do not find myself in agreement with most of his conclusions. I do find myself in agreement with most of the remarks of the hon. Gentleman the Member for Nottingham, South (Mr. Willian Clark), although I must say that I was surprised to find the Opposition Front Bench complaining that the sanctions had not been sufficiently swift. No doubt the next stage will be for them to say that they are not sufficiently stringent, and then we shall really be in "Alice in the Looking Glass". I agree with him when he suggested that the Government could have introduced these measures long before they did. The Government's slogan could well be, in regard to Rhodesia, and particularly with regard to these Orders, "For every crisis an immediate compromise providing it maintains national unity," which interpreted means not losing the Labour Party any votes in the country.

I am pleased to see that the hon. Gentleman is taking what I must call the "Chippenham line", bearing in mind the criticisms made by my right hon. Friend the Member for Orkney and Shetland (Mr. Grimond) over the weekend, of the Government's handling of this crisis. I want first of all to ask the Government what powers are these directors to be given? Both the Orders in Council refer to the power to request information, the power to suspend the existing Board, the power of appointing a new Board and the functioning of it, but there is no reference to the actual powers which may be exercised by these directors. I speak subject to correction on this. I assume that in so far as they now constitute the legal Reserve Bank of Rhodesia they may be deemed to exercise all those powers granted by the Southern Rhodesia legislature in the Reserve Bank of Rhodesia Act, 1964, passed by the Southern Rhodesia Legislature.

I am not certain how many hon. Members have seen this, particularly because I understand that I have the only copy at the moment available from the Library. There are very extensive powers given to that Bank, and I think that it would be helpful if the Government can tell us which of those powers they think they are going to exercise.

But may I ask first of all whether we can have a little more information about the extent of the disclosures which have already been made? The Financial Secretary said that so far no country and the banks of no country had refused to disclose information and refused to recognise that the Reserve Bank was now vested in the board which the Government have set up. But he said that there were those who were reserving their position pending the taking of legal advice. Could we know what success the Government have so far had in obtaining disclosures as to the whereabouts of assets with particular reference to the banks of Switzerland, South Africa and Portugal?

I entirely agree with the hon. and learned Gentleman, that if we are going to take over the assets of a country then we must obviously shoulder the liabilities as well. The last people who should be made to suffer for the illegal declaration of independence should be small investors in this country, or any other country. We would like to know a little more about the extent to which the liabilities will be shouldered.

I now turn to one or two of the powers granted to the original bank under the 1964 Act. Under Section 11 of the Reserve Bank of Rhodesia Act, the only people who have the right to make or cause to be made and to issue bank notes in Southern Rhodesia is the Reserve Bank itself. I take it that this Bank, now constituted in London could, technically speaking, make a new issue. It could call in all existing currency in Rhodesia or it could, to use the words of the Act, "demonetise" it. It has, therefore, very great powers. It could render illegal, at any rate as far as foreign exchange is concerned, or not recognise, all existing currency in Southern Rhodesia. If I am right that is a power which could now be exercised by the new Board.

Under Section 18 of the Act the Governor of Rhodesia, who I take in law to be either the Governor or alternatively the Secretary of State exercising that power as a result of the 1965 Act which we have passed, shall determine the value, under subsection (1) … of the unit of currency which is legal tender id Southern Rhodesia in relation to both gold and sterling or to other gold or sterling.

Sir Kenneth Pickthorn (Carlton)

Either.

Mr. Thorpe

"Or to either gold or sterling". I am grateful to the right hon. Gentleman the Member for Carlton, whose correction I am sure the House will regard as valuable assistance, and I am in his debt.

Subsection (3) of Clause 18 provides that: The Bank may determine the rates at which persons who are lawfully entitled to deal in foreign exchange may buy and sell sterling and other currencies. Does not it come to this, that this Bank may fix the price at which the existing Rhodesian currency may be exchanged in the foreign market? It is, therefore, possible for this Bank effectively to devalue the currency of Rhodesia if it thought fit. Is it not also correct that, shortly after U.D.I., the value of the Rhodesian £ sunk to about 5s. compared with the £ sterling and that it was only after the Bank of England, for some strange reason, said that it would support the Rhodesian £ that the Rhodesian £ crept back to 20s. and reached parity with the sterling of this country? Therefore, is it not right to say that this Bank will have the power, not only to render all currency in Rhodesia illegal if it thought fit and to issue fresh currency, but also to devalue it in foreign markets?

I do not make complaint of that, but I should like to know whether it is right that this is a power which exists and whether the Government have any intention of operating it. I should have thought that if we wanted sharp, effective and bloodless sanctions there were very few things which could be done which could have brought about the desired objective with greater speed.

I would, therefore, particularly press two points: first, to what extent will the new Board of the Bank accept liabilities; and, secondly, with what powers is it to be clothed, and which of those powers is it likely to use?

7.12 p.m.

Sir Knox Cunningham (Antrim, South)

There are two points to which I should like the Chief Secretary to reply. One deals with the Southern Rhodesia (Bank Assets) Order, 1965, which provides in the first paragraph: Any bank shall give to the Treasury such information as the Treasury may require concerning the assets held on or after 11th November 1965 at any United Kingdom office of that bank on behalf of any Southern Rhodesian office of any bank. This is confined to the United Kingdom offices of these banks. Do I take it that these include foreign banks and that any bank with a United Kingdom office will be compelled to give this information? This is an important point, and I should like it clarified.

Am I to take it that the Reserve Bank of Rhodesia Order, 1965, which the Chief Secretary explained, creates a new board of directors and suspends the old but, in the words of the Chief Secretary, that the issue of notes and the day-to-day affairs will go on in Salisbury as before? From whom do the officers of the bank in Salisbury take their orders—from the board of directors in London, or from the de facto people in Salisbury? This is important, because here one is splitting up this bank. If this unhappy situation goes on for a year or more, what happens? This Order breaks down the financial structure. What happens in the end? What do we do, and where are we going with this form of sanctions?

Lastly, would the Chief Secretary say whether this is recognised internationally? Certain revenue matters are recognised only in the domestic courts of the country which passes the law. I agree that this is not quite on all fours with that position. But will this change in law be recognised by foreign countries, and how will the Orders which we are passing tonight be recognised in international law?

7.15 p.m.

Mr. Julian Amery (Preston, North)

Like my hon. Friend, I feel that we are embarking on a very dubious proceeding. I am rather reinforced in that view by the opening remarks of the Chief Secretary. He said that a number of countries were examining the legal implications of the Government's decision and whether in international law they should recognise our action. He went on to say that, meanwhile, the Rhodesian assets overseas were frozen and that from his point of view this was just as good as if our action had been accepted as correct in international law. That was the implication of what he said.

I do not think that it is a very happy position for the British Government, for the central banker of the sterling area, to be quite happy if the validity of what we are doing is in doubt under international law and if we succeed in freezing Rhodesian assets abroad only because there is some uncertainty about whether the course which we have embarked on is valid in international law. I do not think that this is a very sound position for this country to get into.

This is not politically a very wise position for us either. What we are doing is not confiscating, I agree, but taking hold of money earned by the people of Rhodesia, European and African, and freezing it so as to inflict hardship upon them. The Chief Secretary will remember that the row with the American Colonies in the 18th century was all about money in the first instance. I can think of no way of making the British connection seem more odious to the people in Rhodesia than to impound their hard-won earnings for the purpose of inflicting hardship upon them.

I wonder, too, like the hon. and learned Member for Northampton (Mr. Paget), whether this course is really very healthy for the central banker of the sterling area. No doubt the Government have the right in domestic law to act as they have acted. I cannot judge the international law position; I do not know enough about it, although I understand that there are serious doubts on this in many quarters. But were the Government wise to act as they have acted? The essence of the sterling area is trust—trust that Britain will not take advantage of the small print or of legal niceties.

I am rather jealous, and I hope that the whole House is, of our good name. I remember very well when Colonel Nasser seized the Suez Canal Company's assets in 1956. I went with some of my hon. Friends to talk to the Chancellor of the Exchequer and to urge him to freeze the Egyptian balances—which were substantial—in London at the time. I came away from that talk convinced that the reputation of sterling required that even in a situation in which we were very near to war, and in which we were presently involved in military operations, it would have been wrong to have taken advantage of our position and acted against the Egyptian balances.

This case is not on all fours with the Egyptian case. In some ways, the Government have greater authority in this matter, but in other ways they must recognise that the moral provocation is, in many ways at least, considerably less. I am not sure that we have acted very wisely.

Then there is the question which the hon. and learned Member for Northampton raised: will this be effective? Will the Government secure the assets? As my hon. Friend the Member for Nottingham, South (Mr. William Clark) said, this seems doubtful, particularly after the dilatory way in which the Government have acted. I make no complaint of the dilatoriness, but it makes their action considerably less effective.

Turning to the question of the liabilities, I do not think that it is possible—this seems to be the view shared on both sides of the House—to take over assets without taking over liabilities. But if we take over liabilities, are we really imposing a sanction? I shall be delighted if I thought that when we came back to power, somebody would take over this country's liabilities. It would be quite a nice start for a new Government.

I am beginning to think that whatever view we may hold of the Government's policy towards Rhodesia, the Prime Minister's adventure looks like being rather costly. If we are to have to pay either £11 million or £26 million a year to meet the Rhodesian liabilities, and if we are to have to pay what looks like being between £20 million and £35 million a year on dollars for American tobacco, the bill will be quite a big one. I hope that in the reply to this debate we can be told the precise estimate of the liabilities.

Mr. Michael Foot (Ebbw Vale)

Why does the right hon. Gentleman call it the Prime Minister's "adventure" when he himself has agreed to all the measures that the Government have proposed?

Mr. Amery

It is very nice to have the hon. Member defending his Prime Minister for a change.

Mr. J. J. Mendelson (Penistone)

Answer the question.

Mr. Amery

These Orders are the centrepiece of the second list of sanctions which the Prime Minister brought to the House last week and which together, including these two Orders, cover some- thing like 95 per cent. of the economic relations between this country and Rhodesia. The Prime Minister put particular weight on the financial measures, of which these Orders are the key.

What is the purpose of these Orders? What is the political end which the Prime Minister seeks to achieve and for which these Orders are brought before the House tonight? The right hon. Gentleman made it clear in his statement to the House last Friday that what he is calling for is the unconditional surrender of the Rhodesia Front Government and Parliament.

Will these Orders and the supporting measures which go with them achieve that result? Not only have I the gravest doubts, but authorities like Sir Roy Welensky and Sir Edgar Whitehead, in articles which appeared in the British Press during the weekend, came out clearly with the view that there would be no "short, sharp result" either from these Orders or from the supporting measures which go with them.

I believe that these Orders are part of a policy which will prove ineffective. They will take months before they begin to bite at all, and I judge that they will never bite hard enough to achieve the unconditional surrender which the Prime Minister seeks.

Mr. Speaker

Order. The right hon. Gentleman is broadening the debate a little more than he should. We are discussing this particular sanction, not the others.

Mr. Amery

I accept your Ruling, of course, Mr. Speaker, and I shall try to keep my remaining few remarks as narrow as I can.

We have to look a little bit at the purpose of these two Orders. They are two of many, but their purpose as I see it is to fulfil the terms for a settlement of the Rhodesian problem which the Prime Minister put to the House last Friday. I recognise that the Government are in great difficulty and, therefore, this is not, perhaps, the moment to oppose these Orders tonight. I recognise that the Government are in great difficulties with the African States with whom they have to negotiate, both here in London and, it may be, at the Security Council. Perhaps this is not an issue on which to divide. But the fact that we let the Orders go through—certainly as far as I am concerned—must not be taken to mean that we in any way support what might be called the war aims which the Prime Minister laid down in his statement on Friday.

I see no objection to the Government arming themselves with powers and putting themselves in a strong bargaining position, although I question whether these Orders are really helpful for that purpose.

But the time has come when the Government should follow the policy advocated by my right hon. Friend the Member for Kinross and West Perthshire (Sir Alec Douglas-Home) and seek to negotiate now with Salisbury. [An HON. MEMBER: "With whom?"] Sir Roy Welensky's answer is that there is no alternative to Mr. Smith. And I can think of no more suitable basis on which to negotiate than the terms put forward by my right hon. Friend in his speech at Glasgow yesterday.

7.15 p.m.

Mr. Colin Jackson (Brighouse and Spenborough)

I had not intended to intervene but, having listened to the right hon. Member for Preston, North (Mr. J. Amery), I could not help feeling that the whole purpose of this discussion was being missed. Surely we are debating whether these financial measures should be given to Her Majesty's Government with a view to restricting the financial power of the Smith régime. I had assumed that we had already decided that the Smith régime was illegal and one with which we would in no circumstances discuss or negotiate. The question is whether these measures are likely to be effective. It is a question not of legal niceties but of basic principles.

I agree with the hon. Member for Devon, North (Mr. Thorpe) that if we are to have sanctions, those dealt with in the Orders seem to be most likely to be speedily effective in dealing with the Salisbury régime.

I should like to know whether, in relation to the financial measures, we have had co-operation from the banks in Switzerland, because a considerable amount of the funds of the illegal régime must be residing there. I should also like an indication of what, after discussion of the legal niceties, is likely to be the attitude of Governments generally throughout the world to the power of our Government to take over the Reserve Bank.

I hope that all our discussions of this matter will be related to the general welfare of Britain and I should like to mention the remarks of the noble Lord, Lord Fisher of Lambeth, concerning certain of the comments of the Opposition, in which, in a letter to The Times yesterday, he said: Knowing well, as I do, the extreme spiritual dangers of judging others, I have to ask whether Her Majesty's Opposition in Parliament recognise the harm they do, or may do, to the authority of Her Majesty's Government in Parliament.

Mr. Speaker

Order. We are not discussing Her Majesty's Opposition. We are discussing two specific Orders. The hon. Member must relate his remarks to the Orders.

Mr. Jackson

I was merely commenting, Mr. Speaker, on the remarks of the right hon. Member for Preston, North concerning the legality of the Smith régime and his comments with regard to that régime.

7.28 p.m.

Mr. John Farr (Harborough)

My right hon. Friend the Member for Preston, North (Mr. J. Amery) said that most hon. Members in this House were jealous for the good name of our country, and I think that we all are. I remind him, however, that some of us have different ways in which the good name of this country of ours can be preserved. There are a good many of us who think that probably the energetic implementation of this succession of Orders presented by the Government on different days is the best way of preserving the fair name of our country abroad.

Before I go further, I believe that it is customary in these debates to declare an interest. I should mention that I have an interest in a farm in Rhodesia near the Kariba Dam. I should like to continue by posing to the Chief Secretary two questions concerning tonight's Orders. Is it the intention of the Government to apply these Orders energetically or are they merely producing them tonight in line with other Orders already produced which are really nothing more than a public gesture and are designed simply to make an impression?

The Chief Secretary told us that the Board had been sufficiently established. He went on to say also that most countries—and he named one or two—recognised the new Board. But how are these Orders being physically applied? Are the members of the new Board in this country actively tracing the assets believed to be held by Rhodesia in South Africa and Switzerland to which my hon. Friend the Member for Nottingham, South (Mr. William Clark) referred, and has the new Board initiated legislation at least to control the use of these funds when they are traced in South Africa, Switzerland or anywhere else? If it has not yet initiated action in the courts of those countries, is it intended that it should energetically pursue the matter and really put a stopper on those funds being utilised by the illegal régime in Rhodesia?

Could I ask the right hon. Gentleman the Chief Secretary what the old Board is doing now? Has it vacated its offices in Salisbury and, if these Orders are going to be applied energetically, is it intended to take legal action in Rhodesia to obtain possession through the Rhodesian courts of the Reserve Bank offices in Salisbury?

Sir Douglas Glover (Ormskirk)

Send out Lord Poole.

Mr. Farr

I find it difficult to believe that a court in Rhodesia or anywhere else could deny the justification of a case presented on behalf of the legal Board in a court in Salisbury or anywhere else bearing in mind that the Reserve Bank was set up by the Southern Rhodesia Act, 1964, and a million pounds' worth of capital is held by the Government.

In Paragraph 3(a) of Order No. 2049 it is said that the Board may exercise the functions of its offices either in Rhodesia or elsewhere. Earlier on, the Chief Secretary was good enough to give us a list of names of the people who comprised the Board, together with the name of the new Governor, but how are they actually exercising their funtions now? It is all very well to trot out to the House a list of impressive sounding names, most of whom we understand are those of men of considerable experience in the financial world. But what are they doing about their position and what energetic steps are they taking to take over the reins from the old Board, presumably still in Rhodesia?

I should like also to ask the Chief Secretary a little more about the old Board. Is it still functioning in Salisbury? Can he say if it is still in receipt of a salary and, if so, from whom the salary comes? Furthermore, who is paying the salaries of the directors of the new Board?

I want to apologise to the Chief Secretary for asking him these detailed questions but I believe that it is no use trotting out a succession of Orders to the House and thinking that we have made a gesture which may keep them quiet in the United Nations. It is no use presenting these Orders liberally bathed in eyewash. If the Orders are approved tonight I look to the Government to see that they are energetically and properly pursued to a conclusion.

7.34 p.m.

Sir Kenneth Pickthorn (Carlton)

Mr. Speaker, this is a sad occasion, perhaps rather sadder than the last occasion on which we discussed such Statutory Instruments. I should like, if I might, to have the attention of the Chief Secretary. I do not want to be more contentious than I must be, but with him I must, of course, be particularly contentious.

He told us when he spoke about the special circumstances which now prevail", as if they were weather which had happened. He told us that he had not attempted to explain the details, and one of his hon. Friends behind him who got up just now to help him told us that really we need not bother to go into the legal niceties.

I think that that is not only a mistake but that it is worse than a mistake: it is a misunderstanding of what all this is about. The legal niceties are highly relevant, but still more decisive are what I would call without, I hope, being too pedantic the supra-legal niceties.

Here we are, embarked with all-party agreement on sanctions which have received the general support of the House. I have never had any doubt that the illegal declaration of independence involved sanctions automatically, and there they have got to be. Very few of us, if any, want to go back upon that now. But we are under obligation to recognise the disadvantages of sanctions.

Hon. and right hon. Gentlemen who have either used weapons or had weapons used against them will know that it is wise before combat begins to consider what are the potentialities for evil, either to their users or to their opponents, that the weapons have. The possibilities vary from weapon to weapon.

What are the disadvantages of sanctions? One of them is that they hit not only the chap that one is trying to hit but oneself, and a lot of third parties. I think that that has been generally admitted though perhaps not sufficiently considered in the House and hardly referred to at all, if ever, from the Treasury Bench.

There is another disadvantage in sanctions, and it is that if one is going to use sanctions in order to compel people to return to law and order, one is under stricter obligations than ever would-be litigants were who wished to get into the Court of Chancery. One must come with one's hands whiter than the driven snow.

To use sanctions of which one is doubtful, whether they are legally doubtful, whether they are constitutionally doubtful, even whether they are consonant with the Law of Nations or the Law of Nature, in order to compel a return to law and order, without being certain about that, and if one is a Parliamentary person to use such sanctions without that previous certainty and without feeling a duty to indoctrinate those whose votes one is going to ask for, seems to me to be a great betrayal of both the practice and the theory of Parliament.

I do not want to return to previous debate too long because it might be out of order, but I think it is in order to remind the House that the other day when we had arguments about the earlier Statutory Instruments, the main complaint of the critics was not really the Statutory Instruments themselves; it was that the Treasury Bench had not evidently and plainly done enough to make itself clear about the meanings and implications, and had certainly done little or nothing to make us clear. I think that it was widely felt that that complaint was not wholly unjustified.

I am sorry that the Attorney-General, who graced the Chief Secretary's performance today with his, I am sure, admiring and grateful presence—

Mr. Speaker

Order. I think that the right hon. Gentleman is a little too wide now.

Sir K. Pickthorn

Surely it cannot be too wide to say that I am sorry that the Attorney-General, although he was here for the first speech of the debate, left at once. I had thought perhaps to go on to regret that the Solicitor-General had not left, but I quite see that there might be some objection to that.

"A detailed examination of the legal and constitutional points is absolutely vital." That is what the Prime Minister said: he told us that it was vital to us, not to the Rhodesians or to the United Nations. He told us that it was vital to us that these legal, and what I ventured to indicate by using the phrase supra-legal, questions should be understood by the Treasury Bench and explained to us by the Treasury Bench. As the Chief Secretary himself remarked in his speech today, he did not attempt to do that, and nobody so far has attempted to do it.

I do not want to go over again, but I must refer again to, the remarks which have been made by my hon. Friends and others about our position as sterling bankers, or as reserve bankers, as someone else put it. We have had no explanation of what are felt to be the risks inherent in the potentiality of these two Statutory Instruments, to our position as bankers, to our State's position as banker, to the position of the Bank of England as sterling bankers, and to the position of other British banks, insurance companies, and so on.

Is this piece of delegated legislation, as many financial experts believe it to be, in effect something new in the history of the relationship between British authority and British credit? Is there anything new about it? To me it seems that there may be, but I do not pretend to understand such things thoroughly. If there is the least temptation or excuse for thinking that it is, it is a matter which should be fully expounded and closely justified by Ministers.

I am surprised at the frivolity with which this question has been treated, involved, as heaven knows, in a great and tragic issue. I hope it will be felt that, both financially and legally, and because of the general question of the international and traditional morality of behaviour in these things, however right these orders may be, and however indispensable they may be, I hope it will he felt that the House ought not to be asked to swallow them without having had a much fuller and clearer justification than has yet been offered.

7.43 p.m.

Mr. Leslie Hale (Oldham, West)

I want to try to deal with one or two points only, or to submit my own humble views about one or two points. The hon. Member for Nottingham, South (Mr. William Clark), who spoke from the Opposition Front Bench, made a singularly able and temperate statement in which he called attention to a considerable number of problems which arise in connection with Rhodesia. Who is responsible for paying the interest on Rhodesian loan? I thought that when he came to trustee stocks, and so on, he appeared to attribute rather more importance to trustee stocks than the Tory Government did to the 3½ per cent. War Loan, or 2½ per cent. Consols, which dropped by about half during their 13 years. This was a problem which I had to face. On the advice of my bankers I advised people to buy 3½ per cent. War Loan, and they still want to know what has happened to half their money.

Many of the people who paid National Insurance still want to know why the Fund was worth 100 million quid less at the end of the Tory Government than now, 100 million quid less than the amount put in. If Charles Clore had had it, it would have been worth about £1,000 million more, so do not let us get too sentimental about trustee stocks, although I have always been a little sentimental about them because, as a solicitor, I used to have to give advice about investment, which I was incompetent to give, but I passed it to the local bankers and I did not always think that they were much better.

The hon. Member for Nottingham, South said that this was rather a bad bargain He said that we may have to pay this. We are guarantors for the World Bank loan. If the Rhodesian Government do not pay it, we have to. Listening to him, and listening with great respect and thinking that in the in-fighting he was making a point which might be damaging to Her Majesty's Government, it seemed that there was an underlying fallacy in everything that he said. The underlying fallacy is that these consequences do not flow from these Instruments. Apart from the hon. Gentleman's point about lack of respect for reserve banks, and so on, with which I am incompetent to deal, the consequences do not flow.

Of course we would have to pay the interest on the Rhodesian loan in the end if there were no settlement. Of course in the end it will probably be part of any settlement. Of course when there is a Government in Rhodesia, whether it be white or black or piebald, they will have to reassume their obligations, and for the moment we are responsible on our own thesis. In all her history Britain has been apt to be a little pompous about these things. I remember Britain lecturing the Bolshevik Government as they then called it. I think that there was a Press campaign about "Red Petrol" as a result because they did not assume the financial responsibilities for the Czarist Government which locked them up and transported them to Siberia for so long that they became a little dissatisfied. It goes back also to the Confederated States of America, defeated by what were then known as the Yankees, when we were a little pompous too about the payment of alleged international liabilities.

I am not talking about whether it is necessary to pay them immediately or not, but there is little advantage in bringing it down to the widow's mite. The hon. Gentleman said that a lot of people owned 100 quids' worth of shares and that these people might be terribly hard up, but for the moment they are not jeopardised except for the immediate payment of £5 or £6 and saving a couple of quid Income Tax on it. It is not in that case going to be a terrible hardship to leave these matters to be sensibly and properly adjusted when the moment for sensible and proper adjustment arises.

I say again that the hon. Member for Nottingham, South put his case temperately and without any unnecessary controversy. He raised a series of important points which one would wish to clear up as soon as possible. He raised the question of the position of British bankers in Salisbury, and so on, but the decision not to recognise U.D.I. was an all party decision which we inherited from the party opposite. There has never been much controversy about that except on what used to be called the lunatic fringe of both sides. I have always been a member of the "lunatic fringe" on this side and I cannot use those words in any sort of general reproach. I have always been referred to as being on the lunatic fringe particularly when I agree with my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot).

This was an all-party decision, and when the Prime Minister was called on to implement it, it is more than probable that he more than anyone else realised the many difficulties which would confront the Government in implementing it. He went out to Rhodesia uninvited, and took a courageous decision which I think is unprecedent in any political history. I can recall no precedent for a Prime Minister of a great country like Britain going out there, risking failure, risking being received with contempt, and negotiating as he did in a desperate effort to find a last-minute way out of a problem which we all now know is not an easy one. All of us now know that this involves taking decisions which could well occupy international courts for years. If ever an international court were called upon to apply itself to the law of States in relation to de facto Governments and de jure Governments we might have litigation for years.

I do not envisage this. This problem will be solved quite automatically and not with very great difficulty when Rhodesia is prepared to revert to the 1961 Constitution and is prepared to produce a Government which can negotiate. The rather hypothetical problems which have been referred to will cease at that moment.

Let us at least give credit to the Prime Minister—for whom, at the moment, I feel increasing respect and rather less affection—for taking a tremendously difficult decision, knowing the facts. The evils to which the hon. Member has referred flow from the inevitable decision forced upon him by the almost unanimous will of the House, and if he saw a little further than some of us did at that time it is a little unfair to complain now about consequential actions. I would have thought that this Measure was consequential; the hon. Member slightly destroyed his argument by putting the old alternative plea—which is respectable in the courts in some cases but not terribly respectable here—that "if 'twere well done 'twere better it were done 21 days ago, or 21 days, two hours ago".

It is apparent that great effort was needed to get the bankers to participate in this singularly unhappy exercise, and it is great credit to the Prime Minister that they have done it. No one can say that anyone who accepts the task of administering this affair does so other than out of a sense of duty, and it is not an easy or pleasant duty to perform. We could hardly expect that this could be arranged on the telephone, at five minutes' notice.

The House is justified in thinking that in this Measure, which has its difficulties, we are merely taking a necessary and inevitable step in implementing an all-party decision, arrived at before this Government took office, and inevitably precipitated by Mr. Smith's declaration of independence.

7.53 p.m.

Mr. Norman Buchan (Renfrew, West)

One of the fortunate things about being on this side of the House is that one does not often have to follow my hon. Friend the Member for Oldham, West (Mr. Hale). Now, however, owing to the peculiar circumstances, I find myself in this almost impossible situation. One of the difficulties is that when one listens to my hon. Friend's arguments one tends to forget one's own point of view.

My hon. Friend was correct in saying that every speech made from the benches opposite has attributed the events that have been made necessary to the action of the Government. We are told that the legality of some of these steps is doubtful—indeed, that the supra-legality of some of them is doubtful. When the right hon. Member for Carlton (Sir K. Pickthorn) raised the question of supra-legality I thought that we were at last getting to the kernel of the matter—to what really ought to be of concern to us—and to the question of the morality of the thing. But we were merely told that we cannot apply these sanctions unless our hands are whiter than white, the suggestion being that the pale hands of the Rhodesians we love are whiter than white in this situation. The action that we are taking stems entirely from the illegal action of Mr. Smith and his fellow rebels.

I regret not merely the fallacy which my hon. Friend has pointed out in the argument of the hon. Member for Nottingham, South (Mr. William Clark); I regret even more the fact that from first to last he said not a word in recognition of the necessity for these steps. There was not one word suggesting that the party opposite backed up, even in general terms, the action forced upon us by illegality. On the contrary, every word he used was a word of criticism, designed to make more difficult the operation of these matters, purely in financial terms. We were told about the cost to us, and about the 22 days' delay. Was the hon. Member really concerned about the 22 days' delay—he wanted more effective action at that time—or was he more concerned to play his own game of party politics on this issue? He raised this question in the form of a criticism, but he said on a previous occasion that he wants more effective action. That did not emerge from the rest of his speech. Does he really want stronger and quicker action? We are not given an answer. We thought that the Tory Party was split on this issue, but it is slowly being united on it, largely on the terms put forward by the right hon. Member for Preston, North (Mr. J. Amery).

Sir Godfrey Nicholson (Farnham)

On a point of order. When Mr. Speaker was in the Chair he kept the debate within narrow limits. I know that many hon. Members would have liked to widen those limits if they had not been kept within them. Is it to be understood that the debate may now range very widely?

Mr. Deputy Speaker (Mr. Roderic Bowden)

I am watching the hon. Member for Renfrew, West (Mr. Buchan) very carefully. He has now neared the border.

Mr. Buchan

My hon. Friends are pointing out that I come from very far north of the Border. The question of legality has been raised. The important point to remember is that we are the legal Government. The question of legality does not arise in connection with our actions. That is being forgotten. Somebody suggested that we were the effective Government, but that is a different point.

The whole purpose of these Measures is to put us in the position of becoming the effective Government. I very much regret that in this extremely grave situation hon. Members opposite, on both the Front Bench and the back benches, have not seen clearly and plainly where their national duty lay, which was to recognise the supra-legality of measures such as this, and to participate in the full backing of the people of this country for the attempt to deal with this situation quickly and effectively. This one would have expected; this we have not got this evening.

7.58 p.m.

Mr. William Shepherd (Cheadle)

I will not detain the House for long as I have picked up a considerable cold. I support these Orders and urge upon the Government what my right hon. Friend the Member for Harborough (Mr. Farr) said with such effectiveness, namely, that they should be discharged with the utmost rigour. I say this because I have just come back, together with some of my hon. Friends and some hon. Members opposite, from a very friendly countryLibya—where I was much impressed by the feelings of that nation, which is disposed towards us in the most friendly way. Any vigorous action which we take will make it much easier for us to preserve relations both of friendship and trade with neutral countries like Libya.

I agree that these Orders create difficulties. In them we have some of the shadow and some of the substance, and it is always difficult when this condition obtains. But the difficulties which have been adumbrated by the hon. and learned Member for Northampton (Mr. Paget) and my right hon. Friend the Member for Preston, North (Mr. J. Amery) are not very real. I asked the hon. and learned Gentleman, in order that he can enlighten me—because I was not able to follow him too well—to show how the Orders, in their 11 days' existence, have affected the strength of sterling and the level of foreign deposits in the United Kingdom. This was not a foolish or unreasonable question. Of course, if Orders of this kind are to have any effect, the effect would be immediate—[An HON. MEMBER: "Why?"] Because financial effects always are, and they flow back after a period. The hon. and learned Gentleman, with some lack of courage, referred me to some of my hon. Friends for the answer. I hope that when he makes further statements to the House he will at least attempt to make them on the basis of some solid information which he is prepared to give.

The other criticism both of the hon. and learned Member for Northampton and of my right hon. Friend the Member for Preston, North was that this action would cause a loss of prestige for Britain among the nations of the world. I should like to ask the House to consider the reaction to the Orders. I understand that they have been received with some caution in South Africa, and I believe that Portugal is a little concerned about them. However, I know of no other nation which is in serious doubts about their legality or desirability. I have no doubt that the Swiss Government, in pursuit of a financial policy which is not entirely commendable, but which brings Switzerland a great deal of revenue and is therefore economically justifiable, I suppose, will have second thoughts about their reaction to the new board.

I reiterate that no sound, solid, worthwhile financial Power in the world has criticised either the legality or the desirability of the Order. Therefore, one can dispose in relatively few words of the objections raised by the hon. and learned Member for Northampton and my right hon. Friend the Member for Preston, North.

I want to deal with the question of whether this action is justified, particularly in the sense of whether it will hurt us more than those whom we seek to influence. This will do damage to us. We cannot proceed along the line to which both parties are dedicated in this respect without imposing some harm on our own economy. But if we take the view that, in the pursuit of what we believe to be right, we should never make any sacrifice, we shall achieve no result.

Any doubts which are cast upon the validity of the Orders or of any other measures which we have taken increases resistance in Southern Rhodesia and doubts about our policy in the Commonwealth. Those who, for one moment, question the intention of the Order are prolonging the agony in Rhodesia. If there is behind the Orders a firm and resolute determination to see that this does not happen, this will be in the best interests not only of this country but of Rhodesia.

8.4 p.m.

Mr. Stephen Hastings (Mid-Bedfordshire)

These Orders are a grave matter, and the House has a right to know their practical effect on our economy and what objectives it is claimed they will achieve. I hope, on both these counts, that the questions raised will be satisfactorily answered when the right hon. Gentleman winds up. I do not want to labour the financial side—I am no expert—but I should like to know what will be the cost to this country of the liabilities which we are taking over. There is the servicing of the World Bank loan and the dividends on the Rhodesian loan stock: figures of £11 million and £26 million have been mentioned, and there is a vast discrepancy between the two. It seems that this on top of the costs of the other sanctions which we have already carried out amounts to something of which the general public and this House should be aware.

My main point is about the effects which those Orders are designed to achieve and whether they will achieve them. It appears from the Prime Minister's statement last Friday that the Government are aiming at something approaching unconditional surrender. I hope that this is not so: I say frankly to the Secretary of State that it would be a very foolish aim. But, whatever end is envisaged, we are told that the Orders are necessary in order to bring about a sharp effect in the shortest possible time. They crown the other sanctions, which presumably means that they are intended to cause Mr. Smith to give in in the shortest possible time. Now, I am disturbed by two questions: how sharp an effect is necessary and how short is a short time? We should have some idea—the Government should have some idea—about these things.

We are told—it is suggested in the newspapers by columnists who have studied the matter deeply—that the maximum bite will be imposed in the new year and that Rhodesia should be in grave economic trouble by about March. This may be so, but does it follow that the Rhodesians will give in? Suppose that Mr. Smith's régime is still struggling along in June or July. These Measures represent virtually the financial maximum. What if they fail? What will be done next?

It seems to me that the policy of which these measures are the crowning feature, and ought to be the most effective aspect, are based on two assumptions. The first is that, as soon as they experience physical discomfort or financial difficulty, the majority of the white Rhodesians will desert Mr. Smith. But what persuades the Government that this will he so? From the information which is arriving and which has been available to all of us since U.D.I., one must recognise, whether we like it or not, that this is a true national movement. There is nothing in the British or Dutch Rhodesians to suggest that they give in easily. On the contrary, there is much in their history to suggest that they do not.

They live a harder physical existence, by and large, than we do, and they are convinced, rightly or wrongly, that the very survival of their country is at stake. They will fight on, just as we would if we were convinced, in different circumstances, that this was so. I believe that it is folly to imagine that the white Rhodesians will give up because of financial stringency alone, which is the intention behind the Orders.

The second assumption is that there exists a significant number of white Rhodesians who approve of the Orders and of this policy and who are presumably abetting it and who will be ready to co-operate with Her Majesty's Government in the direct rule of Rhodesia from Whitehall as soon as the Smith régime gives in. But who are they? The names of Sir Roy Welensky, Mr. Evan Campbell and Mr. Winston Field have been mentioned. They are all eminent Rhodesians and opponents of Mr. Smith, in varying degree, but none of them shows the least inclination to take up this position and none of them would entertain the idea of direct rule from Whitehall—the first time this would have happened in Rhodesia's entire history, incidentally—in any circumstances.

I believe that these assumptions are in danger of being completely false. If they are, I can see very little point in the Orders before us tonight.

Mr. Thorpe

Am I not right in saying that hitherto the hon. Gentleman has seen fit to vote for all the measures which the Government have brought before the House, whatever reservations he might have had? Can we take it from his remarks that we are not to have the benefit of his support tonight on these Orders? If, however, he is going to support them, why will he do so in view of the remarks he is making?

Mr. Hastings

If the hon. Gentleman will be patient and wait for just a minute or two he will find that before concluding my speech I will give him the benefit of such advice as I have to offer on this subject.

It was, as I saw it, the duty of hon. Members to support the general measure in the first place because to oppose it would have been to condone illegality. It is no part of the duty of any hon. Member of this House to do that, whatever his reservations or views. But equally, it is necessary as time goes on in this tragic affair, as it develops and changes from day to day, to examine everything that is brought before us by the Government. That is what I am endeavouring to do.

I believe that the only sane course is to initiate discussions now, before the situation slips totally out of control. With every day this may become more difficult, but I believe that a settlement could now be reached. Mr. Smith has said that he is ready to talk. There must be give and take on both sides——

Mr. Deputy Speaker (Mr. Bowen)

Order. The hon. Gentleman is getting rather wide of the Orders we are discussing.

Mr. Hastings

Only one sentence of my speech remains. I am sure that no one who understands the gravity of the situation which is facing us in Rhodesia would think less of the Prime Minister if he took the initiative. I beseech him to consider this.

8.13 p.m.

Mr. Michael Foot (Ebbw Vale)

No one can quarrel with the proposition included in the speech of the hon. Member for Mid-Bedfordshire (Mr. Hastings) that the House of Commons has the right, indeed the duty, to examine these Orders in detail and to discover exactly what will be their consequences and effect on the economy of this country and on the situation in Rhodesia. We have every right to make that examination and hon. Gentleman opposite, cannot fail to reach would be improper for us to let these Measures go through without examining them and inquiring into their exact purpose. I am glad, therefore, that the Government have provided proper time for that examination to take place and I hope that all the future Measures which will come forward to deal with this subject will be examined in the same way.

Having said that I do not complain about that, I must say that anyone who has listened to the debate and has read of the events happening outside the House—in Rhodesia, Africa, the United Nations and elsewhere—and who contrasts what is being said and demanded there and in the House by some hon. Gentleman opposite, cannot fail to reach the conclusion that the House of Commons as a whole is not living up to its reputation in this matter.

Let us first consider the question of certain hon. Gentlemen opposite who, as the House and the whole country know, are opposed to the Government's measures but who have never taken the step of actually opposing them in the Lobbies. That applies with even greater force to these measures than to the previous ones. Not a word was said by the hon. Member for Mid-Bedfordshire in support of these Measures. Not a word was said by his right hon. Friend the Member for Preston, North (Mr. J. Amery) in support of them. I do not think that the same can be said of the spokesmen on the Opposition Front Bench, and there are one or two other hon. Gentlemen opposite who have spoken in support of the Orders.

The whole sense of the speech of the right hon. Member for Preston, North was that in his view these measures are wrong and that they will not assist the position in Southern Rhodesia. The hon. Member for Mid-Bedfordshire indicated that in his view they would interfere with the possibility of getting negotiations started on the terms desired. If that is what they think about the Orders they should vote against them, for it would be better for the health of the country and the health of the policy which the majority of the House wishes to carry through if they expressed their position in the Lobbies. Then everybody in Britain and in Africa would be able to attach to their statements exactly the significance they deserve.

The kind of debate we are having on these Orders, as on previous Orders, can cause—indeed, has caused—considerable damage in Africa. If a Government are putting forward Orders of this nature and there is a debate in which a large number of hon. Members say, in effect, that they are opposed to them, that they do not believe that they will accomplish anything, that they hope that they will not do so or that in spirit they are opposed to them, then at any rate part of the purpose of the Orders is removed. I say that because instead of the House of Commons making it clear to the people of Africa, whether in Southern Rhodesia or in the neighbouring countries, that it is determined in its policies, the whole position is blurred, and I have no doubt that that is the intention of the right hon. Member for Preston, North. He wants the will of the House of Commons to be blurred in Africa so that the people there will not know whether or not Her Majesty's Government are determined to carry through their policy of bringing down the Smith régime.

That is why I intervened when the right hon. Gentleman was speaking and when he referred all the time to the prime Minister's "adventure in Southern Rhodesia". The right hon. Gentleman knows that he used that phrase in a pejorative manner. That is what is being said by some people in Rhodesia, as reported by the noble Lord the Member for Berwick-upon-Tweed (Viscount Lambton) in the Evening Standard the other day. He reported that Mr. Smith always refers to the policy as "Mr. Wilson's policy" when it is not Mr. Wilson's policy but the policy of Her Majesty's Government and the House of Commons. It is the policy which the right hon. Member for Preston, North has supported.

The right hon. Member for Preston, North cannot carry on this game any further. He must make up his mind whether he is prepared to vote for the policies which he advocates. That is the only honourable course open to him. He should vote in the Lobbies according to the views he holds on this matter. He regards the subject as of great importance and I am sure that he speaks with sincerity——

Mr. Deputy Speaker

Order. I would be grateful if the hon. Gentleman would Ret closer to the Orders under discussion.

Mr. Foot

I did not think that I could be any closer to them in discussing how the right hon. Member for Preston, North will vote on them. If I have strayed in earlier parts of my speech, I certainly thought that at the moment I was hitting the nail on the head.

Hon. Gentlemen opposite who are fundamentally opposed to the Orders and the whole policy of the Government would perform a service to their reputation as well as to the country if they carried their views into the Lobbies. Then we would all know how much support there is in the House for their alternative policies.

The procedure of blurring the issue and not permitting the people of Africa an opportunity to know whether or not the policy of Her Majesty's Government is the policy of the country is extremely dangerous, not only because of the effects in Southern Rhodesia but, even more, because of the effects on the neighbouring countries, in particular on the country which undoubtedly in my view must bear the heaviest burden of all in this tragic affair, the Government of Zambia. That Government and President Kaunda must deal with a most difficult and complicated situation in which——

Mr. Deputy Speaker

Order. The hon. Gentleman must try a little harder to get closer to the Orders under discussion.

Mr. Foot

I am grateful that you give me credit for trying, Mr. Deputy Speaker, and I will certainly continue along that course.

I submit that it is perfectly relevant for me to argue that the best course for this House to take is to show as plainly as we can how determined we are to support this Order. One reason why we should do so is that we want to make our will as apparent as possible in Africa and, in particular, amongst those countries which have to bear the consequences of our actions I was indicating that the Government of Zambia——

Sir G. Nicholson

On a point of order, Mr. Deputy Speaker. The present position is surely too extraordinary for words. In the earlier part of the debate our noses were kept to the grindstone, and we were confined most strictly, without an instance of tolerance, to talk about the Order—nothing to do with Zambia or with the conscience of the right hon. Member for Preston, North (Mr. J. Amery), or anything else. I hope that you will now keep the foot to the grindstone.

Mr. Deputy Speaker

The hon. Member for Ebbw Vale (Mr. Michael Foot) has heard that intervention on a point of order. I must now ask him to come closer to these Orders.

Mr. Foot

If anyone is responsible for widening this debate, Mr. Deputy Speaker, it is not I. Indeed, I was replying, I hope directly, to statements made by hon. Members opposite who have recently spoken. The hon. Member for Mid-Bedfordshire spoke of what he considered to be a proper condition for securing negotiations on Southern Rhodesia—something that I thought very wide of the Order. If I had been a pedantic kind of person I might have asked for your assistance in calling the hon. Gentleman to order, but I did not. And the right hon. Member for Preston, North concluded his speech by saying that he wanted to see measures taken by the Government—and I gather that this Order was not amongst those measures—that would assist the process of negotiation with Southern Rhodesia.

It is to that part of those speeches that I seek to reply, as I should have thought I had every right to do. Both the right hon. and the hon. Gentleman referred to the Prime Minister's statement of last Friday, and both said they hoped that the statement did not involve a demand for unconditional surrender from the Southern Rhodesian Government. That seems very strange terminology. When the train robbers carried out their adventure——

Mr. Deputy Speaker

Order. I have shown the hon. Gentleman a considerable degree of tolerance. Now, I am afraid, he is straining my tolerance to breaking point.

Mr. Foot

I was using the train robbers as an illustration, Mr. Deputy Speaker, and I apologise if I have gone further than I should—although, sincerely, I did not imagine that I was going further, because these matters were raised in the rest of the debate. I believe that it is strictly relevant to the decision that this House now has to take of whether to approve this Order, in the sense that one of the reasons for passing the Order is that we wish to make—we on this side certainly do, as, I believe, do many hon. Members opposite—the determination of the Government as apparent as possible.

Not merely should we pass this Order but, in my opinion, many future measures will have to be brought before the House. As I said when we previously discussed this issue, the situation is very much more serious than many people imagine. This country is involved in a dispute the ramifications of which are enormous. I believe that the whole future of our relationship with African and Asian countries is involved in what is happening.

I come back to that part of my speech which, at any rate, was held to be in order, because I was not pulled up. As I said at the beginning, the contrast between what is said in this House and what is said outside it is something of which we should take notice, because this debate shows that this House of Commons as a whole has not yet understood how grave is the crisis facing the country, how speedy must be the action of the Government, and how determined they must be to follow one measure by another if we are to convince our friends in Africa of our will to carry out the policy.

This Order is one further measure in our plan to destroy the Smith régime in Southern Rhodesia. We think that it is impossible to maintain a situation in which Britain is a member of the Com- monwealth whilst the Smith régime remains there. As has been said by the hon. Member for Mid-Bedfordshire, the Smith régime was set up and is supported by people who, he says, believe that they are a people, a nation, fighting for their survival. That is how the hon. Gentleman spoke.

I do not seek to dissent from his view of what many white people in Southern Rhodesia feel about the problem. Many of them think that the survival of their way of life is involved, but there are other nations surrounding Southern Rhodesia which also feel that their survival is involved—very much more populous nations. And most of the Rhodesians believe that their survival is involved in the overthrow of the Smith régime. So it is no good the hon. Gentleman——

Mr. Deputy Speaker

Order. The hon. Gentleman is now discussing the general position of the sanctions. He is not in order to do that and, if he persists, I must ask him to sit down.

Mr. Foot

I shall not proceed in that case, Mr. Deputy Speaker. It would be most indelicate of me to proceed in such circumstances, and I have no intention of doing so. But I suggest—if it is not in order, as I gather it is not, for us to discuss the full implications of this Order—that the best course for the Government would be to seek a genuine debate in the House in which we could have a genuine Division, in which people decided that if they voted for the policy they voted for its consequences as well and, if they did not like it, voted against it. But let them not blur the issue in this House, or blur the issue in Africa, and thereby injure the possibility of carrying the whole policy through to a successful end.

8.27 p.m.

Sir Charles Taylor (Eastbourne)

I in no way condone the illegal action of Mr. Smith but I am definitely opposed to these two Orders, and I shall try to show why. We have to realise that the ultimate sanction must be force. If we introduce sanctions of this nature against Rhodesia, eventually, if they do not succeed, we have to resort to force. I understand that that is a point of view with which I could never agree. I understand the point of view that some people might take, that it will eventually be necessary to resort to force. In his interview with the Daily Mirror the Prime Minister said that he had no intention of using force against Rhodesia.

I happened to see a friend of mine today who has three sons. This is quite a human story. Two of them are twins and the third is a younger son. One is serving in Zambia——

Mr. Thorpe

On a point of order. Can we know what the relevance of these twins is to this debate?

Sir C. Taylor

Perhaps the hon. Gentleman would wait until the story develops and then perhaps he will see the relevance. One son is serving in Zambia, one in Rhodesia and the other is with the British Army in Aden. [An HON. MEMBER: "Three twins."] No. One is with the British Army in Aden. The one who is serving with the British Army in Aden is under call to go to Zambia. It does not need me to go on very much more with this story to show the human tragedy that is facing this family.

Mr. Deputy Speaker

The hon. Gentleman must get a little closer to the Reserve Bank of Rhodesia.

Sir C. Taylor

If I may come back to the Order, I should like to ask one or two questions about the Reserve Bank. First, I want to know what the liabilities of the Reserve Bank are and in which countries there are liabilities. Secondly, I want to know what the funds of the Reserve Bank are in total, what funds are in Rhodesia, what funds are in this country, what funds are in Switzerland and what funds are in other countries. I strongly suggest that it might be appropriate for the Government to produce a White Paper giving us a few details about the Reserve Bank so that we might know a little more about it.

My hon. Friend the Member for Mid-Bedfordshire (Mr. Hastings) asked what the old Board of the Bank was now doing. I can tell my hon. Friend that the old Board, the former Board, which has been sacked, is in close conversation with the gnomes of Zurich, the Swiss bankers. The Swiss bankers are advising what is called the old Board. What is the new Board doing? I understand that it is still looking for offices. What is more, it has very little information about the Bank or its affairs.

Mr. Diamond

I should be grateful if the hon. Gentleman would tell me where he gets his information from.

Sir C. Taylor

Afterwards. The hon. Member for Ebbw Vale (Mr. Michael Foot) asked whether we would vote in the Lobbies tonight. I shall not vote in the Lobbies tonight, because I do not want to give comfort to Mr. Smith. That is the only reason. I do not believe in sanctions. The only reason why I shall not vote in the Lobby tonight is that I do not want to give comfort to Mr. Smith's illegal Government.

The Government should withdraw these Orders. We should reopen negotiations at the earliest possible time with the Smith régime and try to find some peaceful solution.

Mr. Thorpe

It has been tried.

Sir C. Taylor

Let us try again. "Jaw jaw, not war war", as Sir Winston Churchill once said. That is what we ought to do. We should reopen negotiations with the utmost urgency, otherwise we shall find ourselves drifting into a state of war with the Rhodesian people and we shall completely ruin both the white and the native population Rhodesia in doing so.

8.33 p.m.

Rear-Admiral Morgan Giles (Winchester)

The hon. Member for Ebbw Vale (Mr. Michael Foot) spoke widely about the Order and the way in which it furthers the Government's policy. He defined the Government's policy as bringing down the Smith régime. He also defined it as destroying the Smith régime. This may be the policy which the hon. Gentleman and his friends would like to pursue. I should like to ask whether this is in fact the Government's policy. If it is not so, will whoever winds up for the Government tonight say quite clearly that it is not so and thus deny the sinister wing of their party?

8.34 p.m.

Mr. Peter Kirk (Saffron Walden)

I shall detain the House for a very short time only. I wish to make it clear from the start that I fully support the Order. I have a curious rather old-fashioned feeling that one intends the natural consequences of one's acts and those who have supported the Government up to now must support this sort of Order. It seems to me to be a very simple proposition which I hope the House will accept.

I want to raise one point which I have raised in correspondence with the Chief Secretary. The right hon. Gentleman may not remember this, but perhaps he can deal with it. There are people living in this country who up to now have been paid pensions and dividends through the Reserve Bank of Rhodesia but who presumably, because certain funds of the Reserve Bank of Rhodesia are now held in Salisbury, cannot now be paid from that source. Is it the Government's intention that these people can be paid out of United Kingdom sources? In one case about which I have written to the right hon. Gentleman, the entire income of the person involved—a constituent of mine—depends upon this source. I should have thought that there was a fairly strong case for making up their income from United Kingdom sources because, after all, we do not want to inflict too many sacrifices upon people who have no other source of income.

8.35 p.m.

Mr. Iain Macleod (Enfield, West)

We have had a fairly calm debate. In a short speech, I should like to keep it that way. Perhaps I can concentrate on one matter which has gone to and fro in a number of speeches—the question of the powers of direction that can be given by the Secretary of State to this new Board. These two new Orders, which I am sure we shall pass tonight, are no doubt largely technical, but it is also true that they have implications which affect our good faith as a country and I hope that the Chief Secretary will give us some assurance on this matter.

I should like to make one thing absolutely clear, and I am sure that everyone who has spoken will agree with me. We have heard no criticism tonight of this new Board, neither of Sir Sydney Caine nor of the members. They are people of the highest reputation and—this should be said—what criticisms there are are criticisms of Her Majesty's Government. I am sure that Her Majesty's Government equally would prefer it that way.

I am not sure that I agree with the hon. Member for Oldham, West (Mr. Hale), who said that what we are discussing today is consequential on earlier decisions, because, for one particular reason, this is a major change of policy The policy of Her Majesty's Government at the beginning, immediately after U.D.I., which is universally condemned in the House, was to leave as many as possible of the internal props there. I am not arguing whether this was wise, but the police, the Civil Service, the banks and so on were left. Therefore, this Order is clearly a change of policy and, whatever we think of it, we cannot refer to it as consequential on earlier acts. It should be justified on its own merits.

One main charge we should make. If I can take the words of the hon. Member for Devon, North (Mr. Thorpe), paraphrasing him slightly, he said that if we took over the assets of a concern we should also take over the liabilities. This country has to be specially careful about this. The hon. and learned Member for Northampton (Mr. Paget) was quite right when he talked about our central position as bankers. There was some dispute between him and my hon. Friend the Member for Cheadle (Mr. Shepherd). It is perfectly true, as my hon. Friend said, that there has been no immediate effect of sterling traceable to these events, but I think that he takes rather too lightly the fact that this is the first time that there has been a default on British, Commonwealth or Colonial stock. I do not take this as a light matter, and I am certain that the Chief Secretary does not. The Chief Secretary may feel, for reasons which he may advance, that he has to justify it, but that is quite a different matter. He must be very worried at the Government's position.

What is the Government's position in this? We have it clearly and it will be in Hansard tomorrow—from a Written Answer today by the Secretary of State for Commonwealth Relations to my right hon. Friend the Member for Flint, West (Mr. Birch), who asked, in effect, why although the right hon. Gentleman has powers he has permitted default. The right hon. Gentleman replied—and I leave out the opening words—that the Government of the United Kingdom has not assumed the government of that country"— that is, Southern Rhodesia— and has not in any way succeeded either to the assets or the liabilities of the Government of Southern Rhodesia. It is not for the British Government to intervene in a situation where interest payments of Rhodesian public debt in this country have been stopped as a result of the illegal actions of Mr. Smith and his colleagues on 11th November. I am bound to say to the right hon. Gentleman that that Answer is simply not true. I believe that the hon. Member for Renfrew, West (Mr. Buchan) was right—though I do not agree with some other things that he said—when he said that we are the legal Government. He is right. We are. But if we say that the Smith régime is illegal, as, of course, it is, we cannot go on to say, "But it is illegal only for certain purposes", when it happens to suit us.

The Secretary of State must accept responsibility here. Whatever the de facto position may be in Rhodesia, the de jure position—there can be no doubt about this—is that Her Majesty's Government have in any case, or have assumed where they had not got it, power of direction in relation to Southern Rhodesia. The Secretary of State will know that Article 4(1,a) of the Southern Rhodesia Constitution Order, 1952, provides that executive authority of Southern Rhodesia may be exercised on Her Majesty's behalf by a Secretary of State.

My hon. Friend the Member for Nottingham, South (Mr. William Clark) quoted the words of a prospectus this afternoon and asked whether a direction had been given. It is quite clear that it is the responsibility of the Government of Southern Rhodesia to make these payments. In my view, it is equally clear beyond doubt that we—when I say "we" I mean the British Government and Parliament—have this responsibility and it is not one which we can avoid. My hon. Friend quoted The Times. Perhaps I can give this quotation from last week's Economist which puts the matter accurately and exactly in perspective: Technically, the responsibility belongs not to Sir Sydney Caine's Reserve Bank—the agent for these loans in the past has usually been a commercial bank rather than the Rhodesian Reserve Bank. Formally, therefore, it is held that any London decision to pay up on Rhodesian loans was for the Treasury rather than Sir Sydney Caine. These rather meaningless technicalities aside, the interest should surely have been paid: either London is responsible for Rhodesia or it is not. I am sure that that is right, and I am sure the matter of the Government's good faith is involved here. The sum involved on the default on 6th December was £87,000 for about 1,500 people. There is a further payment due tomorrow, and I imagine that the Chief Secretary will once more confirm that there will be this default. It seems to us to be a matter of principle of great importance.

Apart from the general points I make, I ask the Chief Secretary for a specific undertaking that the Government will meet the interest payments on Rhodesian loan stock. But I think it important, particularly in view of some of the observations which have been made, that the House should be in no doubt of our feelings on this matter. If we are given such an assurance, well and good. I did not agree with the doctrine of opposition advanced, with, I thought, less than his usual logic, by the hon. Member for Ebbw Vale (Mr. Michael Foot). Criticism, of course—that should always be part of the essential functions of the House of Commons. But if, as in this case, we feel strongly, as we do, on one particular issue, there may yet be reasons, as I believe there are, why it would be quite wrong to pursue those objections into the Division Lobby. This was put very clearly by my hon. Friend the Member for Eastbourne (Sir C. Taylor).

I am quite sure—here I agree with my hon. Friend the Member for Cheadle—that in the countries involved, or at least in most of them, there has generally been no particular criticism of this measure. It would, therefore, be quite wrong to divide the House on this issue tonight because of one's anxiety about a matter of good faith, and I hope very much that there will be no Division. I go further. I hope that we shall get through the whole of this Rhodesian crisis without a Division in the House. But that is a matter for the future, and we must never feel inhibited as an Opposition from putting properly constructive comments and criticism by the sort of speech which we have had directed against us by the hon. Member for Ebbw Vale.

On this particular point, we think that the Government are making a misjudgment similar in nature, if different in magnitude, to the mistake which they made over pensions payments, which the whole House was delighted to hear the Chancellor of the Exchequer put right this afternoon. That was warmly welcomed. There were no recriminations, for the House is always generous in these circumstances. We took the Government's change of heart at once and were delighted.

Equally, if the Chief Secretary to the Treasury wants to come to the penitent's stool on this issue, we shall be happy to receive him in a similarly grateful way. But I am not hopeful. However, for the reasons I have given, I believe that it would be wrong for the House to divide tonight. Equally, on the general case, we accept that the Government wish to see a solution by conciliation and negotiation. It may be difficult now to see how that is to happen or when it will be achieved, but both sides of this House wish to see such a solution.

But, as my right hon. Friend the Leader of the Opposition made clear on Friday, we do not believe in policies which may be read, even if they are not intended, as demands for unconditional surrender. I am sure that we will be returning perhaps many times to these wider issues after Christmas, but in the meantime I think it would be wrong, whatever the answer may be tonight, for the House to divide tonight. I hope that we will have no division. I hope that the Chief Secretary will feel able to give me either the whole or part of the undertaking for which I have asked.

8.46 p.m.

Mr. Diamond

I should first like to echo what the right hon. Member for Enfield, West (Mr. Iain Macleod) has said—that it would be our hope that we should get through the whole of this crisis without a Division in the House. Perhaps I can go even further and say that the Government have not the slightest doubt that, if we do get through without a Division, we shall get through all the quicker because there is no question but that the views expressed in this House, particularly in the Division Lobbies, are of extreme relevance to the attitudes in Rhodesia that we are seeking to influence.

It would be wrong for me, and wholly inappropriate by virtue of the responsibilities which I carry, to attempt to do more than answer some of the technical questions that I have been asked and which I will deal with as fully as I can, recognising, as the right hon. Gentleman wisely said, that we are bound to come back to these matters on many occasions. It would be straining your patience, Mr. Deputy Speaker, and the limits of order if I tried to place these two Orders against the full background and in the full perspective of the situation and of what is in the minds of many hon. Members in the speeches they make. I hope, therefore, that it will be thought appropriate if I merely concentrate on details of the two Orders and the important questions which have been asked.

First, I deal with the responsibility of the Government for what they have done, because this seemed to be underlying a good number of the criticisms that have been made and these have been based on a complete misunderstanding of the action taken and of the purpose and scope of the two Orders.

In the first Order, the Secretary of State has power to give the board directions. But that does not make the Bank the Secretary of State's agent so as to attract to him the liabilities of the Bank. Nothing like it. It is a very common case for statutory bodies to be made subject to directions from the Government but that does not make them agents of the Government and certainly does not make the Government responsible for their liabilities. There is no question of such an assumption of liabilities having taken place here, or of possibly being deemed to have taken place, as a result of the Government taking the power to give directions through the Secretary of State.

It is not a breach of the directors' duty if they comply with the Secretary of State's direction any more than if they comply with any other obligation laid upon them by Statute. So I hope that we can clear up that aspect. I recognise that the point put to me by the right hon. Gentleman just now was on an entirely different footing—on the question of responsibility, honour and other matters of that kind.

Mr. Thorpe

Can the right hon. Gentleman take this a little further? Are we to assume that the Secretary of State is to give directions that these liabilities are not to be shouldered by the Bank, or are we to take it that the new board inherits all the legal liabilities of those whom it has replaced?

Mr. Diamond

The Secretary of State cannot give directions to a bank that it should not shoulder responsibilities which it has. If a bank has responsibilities, it has responsibilities.

Mr. Thorpe

He could order the Bank not to pay out.

Mr. Diamond

The hon. Gentleman says that he could order the Bank not to pay out, but that is not the question he asked me. A good deal of confusion has arisen by thinking of the Bank as some being other than it is. The Bank is there; it exists. Nothing has altered about the property of the Bank, its assets, its liabilities and so on. What has happened is that the names of the directors have changed. Secondly, the Secretary of State now has power to give directions to the Board.

Mr. Paget

Is it not the position that the liabilities for Rhodesian debts are the responsibility of either the Bank or the Rhodesian Government? If we take over the Bank and are the Rhodesian Government it does not seem to matter much.

Mr. Diamond

All we are doing is limited to ascertaining all facts about the Bank under the second Order and, under the first Order, taking power, which has been exercised, to suspend existing and appoint new directors. I can only repeat—and it is unusual that there is ever a noccasion when I have to repeat anything to my hon. and learned Friend the Member for Northampton (Mr. Paget)—that the appointment of directors is not and bears no resemblance to taking over liabilities. This is a situation which happens in other companies every day and must be well within the experience of my hon. and learned Friend.

Mr. Iain Macleod

The right hon. Gentleman would not deny that it is within the competence of the Secretary of State to give a direction to Sir Sydney Caine to meet this payment. If he accepts that, does he say that there is no responsibility upon Her Majesty's Government to do so?

Mr. Diamond

I do not know whether the right hon. Gentleman is now asking me what kind of directions may be issued in future, or what kind of directions have been issued in the past. That is an entirely different matter. I want to get clear on the ground floor first, that there is no question whatever of these Orders meaning that the Secretary of State, Her Majesty's Government, or anybody like that, has taken over any liabilities with which he has not previously encumbered.

Mr. R. H. Turton (Thirsk and Malton)

Surely the making of the Order from 3rd December and the consequent action of the Bank of England prevented the payment of interest on 6th December. As a result of that, there must he an obligation on Her Majesty's Government to bond holders to see that the interest is paid.

Mr. Diamond

That is not even a correct statement of facts. Nothing the Bank of England did prevented the payment of interest to bondholders, and so the whole basis of the right hon. Gentleman's question goes.

I wonder whether it would be more convenient for me to deal separately with the major questions which the right hon. Gentleman asked about the payment of interest on a particular stock which, I gather, is of special interest to a number of right hon. and hon. Gentlemen and to deal with that in a moment. What I want to do for a moment is to get away from that, which is a quite separate issue, and first to deal with the effect of the Order rather than with any problems which may arise in giving instructions under the Order. I will certainly come back to that matter. [HON. MEMBERS: "Oh."] As there seems to be so much interest in it, it might be preferable to deal with it at once, having established, as I hope I have, that the mere fact of the Order does not encumber the Government or the Secretary of State with liabilities which did not previously belong there.

What the right hon. Gentleman is now asking is what instructions the Secretary of State may give in the future with regard to the carrying out of its duty by the Board. The first point is that this does not strictly arise on the present Order, because, so far as the payment of interest on the stocks is concerned, the Reserve Bank of Rhodesia is purely an agent. The stocks are not the stocks of the Reserve Bank. The Reserve Bank is not liable to pay interest on them from its own funds. The position is that the board of the Reserve Bank has not received instructions from any of its customers to make these payments. The Order which we are now discussing, and for which I am seeking the support of the House, does not alter that situation in the slightest.

I hope that I have made the position absolutely dear. It is that the board of the Reserve Bank has not received instructions from any of its customers to make these payments. I am sure that hon. and right hon. Gentlemen will remember the dates and the point of time on which a statement was made in Rhodesia about the non-payment of this interest.

Mr. John Biggs-Davison (Chigwell)

I am trying to follow the right hon. Gentleman. He said that the Reserve Bank was merely an agent. Could he say very clearly of whom is the Reserve Bank an agent?

Mr. Diamond

Of course. The Reserve Bank is the agent of its customers, like every bank is. No bank proceeds to dispose of the money which it holds without the request of its customers. If the hon. Gentleman was fortunate enough to have £200 in the bank and he went along tomorrow and presented a cheque and said, "I want to withdraw all of this" and it said to him, "We have paid out, we have paid out your rent because we thought you would like us to do it", the hon. Gentleman would have a word to say to the bank. The function of the bank is to act on behalf of its customers, and when the customer gives the bank instructions that is the time for it to think about them.

Mr. Biggs-Davison

Is the Reserve Bank not in a somewhat different position from a commercial bank? Is it not an agent of the Government?

Mr. Diamond

I do not know what question the hon. Gentleman is asking me now. Of course the Reserve Bank is different from an ordinary bank because its customers are, by and large, different from the customers of an ordinary com- mercial bank. They are not Mr. Jones and Mr. Robinson—I had better not say Mr. Smith, it would create confusion. They are not the tradesmen who are the customers of the ordinary bank. The customers of the Reserve Bank are very often the Government and other bankers. That is the difference, but essentially a banker carries on the banking business of holding funds belonging to his customers and seeking instructions from the customers as to the disposal of those funds. If a customer does not give him instructions as to the disposal of the funds, the bank's duty is to hang on to them. That is the simple situation.

I hope that I have made that perfectly clear. [Laughter.] I never thought that it would fall to my lot to attempt to explain the elementary principles of banking to so distinguished a Member. I will proceed to deal with the effects of the Order on the Boards, both the new Board, as it has been called, and the old Board. I was asked what powers the new Board would have conferred upon it as the result of the 1964 Rhodesia Act. The answer is that the new Board will have all of the powers conferred by that Act. Whether it will make use of those powers is a premature question, as it is also to say to what extent the Board will think it right to do so.

I was asked whether the new Board is being active or whether it is a gesture. This gives me the opportunity to say that the new Board is very active. This is not done as a gesture; this is done for serious business. The new Board is very active and is getting on with all its tasks—any single task that any hon. Member has mentioned—and it is getting on with them with energy. It is no part of my duty—I am sorry to say this; I hope that the House will understand it—to disclose banking information. I am sure that that will be accepted in full.

I was asked by the hon. Member for Nottinghamshire, South (Mr. William Clark) what is the position of the old Board. The members of the old Board have been suspended from office, and their suspension is effective so long as this Order is in operation. During that time they are not entitled to any salary, nor is there any provision under which they are entitled to compensation. I am merely saying what the present position is. No doubt these matters can be dealt with when constitutional Government is restored and the Order is revoked or lapses.

Sir K. Pickthorn

Would the right hon. Gentleman permit me to ask a supplementary question? Are they relieved from any disqualification for other jobs which may have been involved in being directors of the Bank when they were so effectively?

Mr. Diamond

I shall be only too glad to answer that question if the right hon. Gentleman will be good enough to write to me. I do not think that it would be right to attempt to consider off the cuff what the effect of this might be on all sorts of obligations which they might have and of which Her Majesty's Government have no knowledge. All I can say is that the effect of this Order is that they have been suspended, and whatever flows from suspension generally would flow from suspension in their case.

I have been asked whether action under these Orders will harm the position of the United Kingdom as bankers for the sterling area. There is no question of the United Kingdom having acted in any way improperly as bankers for the sterling area. We have gone to very considerable lengths to avoid doing that, and we have been completely successful, as I think the hon. Member for Cheadle (Mr. Shepherd) pointed out. The effect of these Orders has not been damaging in the slightest degree. It is only right for me to say that we act on the best possible advice from all sources available to the Treasury and to Her Majesty's Government.

One hon. Gentleman made the suggestion that the Bank of England had supported the Rhodesian £. That does not arise strictly in this debate, but the House will forgive me if I deal with it and say that the suggestion is absolutely absurd and that that did not happen. It may have been reported somewhere, but that does not affect the facts of the situation.

I have been asked why these Orders are delayed for 22 days. I was glad of the implication behind the question in the sense that officially the Opposition are anxious that we should get on with the job. We are very grateful for that kind of support. However, I am bound to reply that there are many measures which can be taken, some of which have been taken, and some of which have not been taken yet. We do not propose to be put off by the knowledge that when we take a further measure in future hon. Members will ask why we did not take it 42 or even 82 days before, depending on the case. This is a moving situation, and we have to take whatever measures seem appropriate as the situation develops. It seemed appropriate to us that a number of measures should be taken on 3rd December, and that was the occasion for this one.

I think that I have dealt with most of the points put to me.

Sir Knox Cunningham

Before the right hon. Gentleman sits down, would he deal with the question of how Order No. 2049 will be considered under international law?

Mr. Diamond

With pleasure. I have carefully checked this. There is no respect in which international law arises. International law deals with the relationship between one state and another, I am informed, which is not at issue here. This concerns purely the domestic law affecting individuals and the capacity to search and receive information.

One hon. Member asked me about a pension payable from a Rhodesian company to a resident in this country. There is nothing, in the circumstances which he described, by which we are preventing that pension from being paid. It may be that there are other circumstances in Rhodesia which would prevent the payment being paid, but there is nothing in what we have done heretofore, or in these Orders more particularly, which affects payment of pension.

Mr. Kirk

I understand that it is a pension payable by the Rhodesian Government through the Reserve Bank which is not now being paid. I have sent the right hon. Gentleman details.

Mr. Diamond

I will look further into them. I can only repeat that from the information given to me during the debate there is nothing on our side to prevent that payment being made.

Mr. Paget

We are the Government of Rhodesia. As a result of these Orders we have in our hands the reserves of the Government of Rhodesia. Are we proposing to pay the debts of the Government of Rhodesia?

Mr. Diamond

My hon. and learned Friend makes these statements with clarity, but that does not affect their accuracy. It is absolutely inaccurate—I hope that my hon. and learned Friend will not mind my being quite clear in my reply—that we, the British Government, own the assets or funds of the Reserve Bank of Rhodesia. The assets and funds of the Reserve Bank of Rhodesia belong today exactly where they belonged before the Order was introduced. It has not affected that position one iota.

My hon. and learned Friend is giving unfortunate support to an allegation from Salisbury that we have confiscated these funds. That allegation was wholly wrong. What my hon. and learned Friend has said as the basis of his question was equally wholly wrong.

Sir C. Taylor

Presumably, the funds in the Reserve Bank belong to the depositors who have deposited funds with the Bank. Did those people have any say in the choosing of the new directors?

Mr. Diamond

I hope that I have made it clear that the new directors were appointed by my right hon. Friend the Secretary of State, who, as far as I know, is not a customer of the Reserve Bank of Rhodesia: he does not have an account with the Bank. It would follow from that that the customers of the Reserve Bank of Rhodesia were not so consulted. The appointment was made, as I said from the outset, by the Secretary of State.

We are now getting the kind of question which indicates that the more important questions have been answered. I hope that I have dealt as fully as would have been wished with the main questions that were put to me. I hope that I have explained the functions of the Orders. I can only repeat what the right hon. Gentleman has said and hope that the House will be good enough now to give us the two Orders.

Rear-Admiral Morgan Giles

Before the Chief Secretary sits down, will he please clear up the point—

Mr. Deputy Speaker

The Chief Secretary has sat down. The Question is——

Mr. Paget

I desire, Mr. Deputy Speaker, to ask the Chief Secretary who is the customer of the Reserve Bank of Rhodesia. Is that customer the Governor of Rhodesia? Are we the Government of Rhodesia?

Question put and agreed to.

Resolved, That the Reserve Bank of Rhodesia Order, 1965, dated 3rd December, 1965, made by Her Majesty in Council under the Southern Rhodesia Act, 1965, a copy of which was laid before this House on 3rd December, be approved.

Southern Rhodesia (Bank Assets) Order, 1965, dated 3rd December, 1965, made by Her Majesty in Council under the Southern Rhodesia Act, 1965, [copy laid before the House 6th December], approved.—[Mr. Diamond.]