Lords Sitting of 14 November 1912

CRIMINAL LAW AMENDMENT BILL.
Brought from the Commons.

NORFOLK FISHERIES PROVISIONAL ORDER BILL. (No. 165.)
LOCAL GOVERNMENT PROVISIONAL ORDERS (No. 15) BILL. (No. 166.)
MARRIAGES PROVISIONAL ORDER BILL. (No. 167.)
Brought from the Commons; read 1a; to be printed; and referred to the Examiners.

NATIONAL INSURANCE ACT, 1911.
Regulations, dated 11th November, 1912, made by the Insurance Commissioners, the Irish Insurance Commissioners, and the Welsh Insurance Commissioners, entitled the National Health Insurance (Naval and Military Forces) (Time Limits) Regulations, 1912: Laid before the House (pursuant to Act), and to be printed. (No. 168.)
LAND DRAINAGE (BRAITHWAITE MOSS) PROVISIONAL ORDER BILL. [H.L.]
Read 3a (according to Order), and passed, and sent to the Commons.
PROTECTION OF ANIMALS ACT (1911) AMENDMENT BILL.
House in Committee (according to Order): Bill reported without amendment, and to be read 3a on Wednesday the 27 th instant.

TERRITORIAL RECRUITING AREAS.
THE EARL OF DARTMOUTH*THE EARL OF DARTMOUTH rose to move to resolve, "That in the opinion of this House the recruiting areas originally allotted to the various counties for the raising of the Territorial Force should not be affected by any extension of county boundaries not contemplated at the inception of the scheme, in view of the fact that on those areas the proportion of the Force to be raised by each county was calculated, and that in those areas the respective counties have up till now been recruiting."
The noble Earl said: My Lords, this matter arises out of the Act which was passed last year extending the boundaries of Birmingham. That Act has had a considerable effect on the recruiting areas of three counties—Warwickshire, Worcestershire, and
Staffordshire. Handsworth, which was in Staffordshire and now goes to Warwickshire, is a very important district, and in that area we raise four units representing three different kinds of arms—one Infantry, two Army Service Corps, and a Field Ambulance. I would remind your Lordships that under the original scheme the country was divided into six principal commands, and within those six commands were ten grouped regimental districts in which various counties were placed. Each of these grouped regimental districts had its full proportion of the various arms—Infantry, Cavalry, Artillery of various sorts, Engineers, Army Service Corps, and so on. To each county, of course, was allotted the proportion of the Force it was supposed to be able to raise; but the passing of the Extension of Birmingham Act and the transfer of Handsworth to Warwickshire has, as I say, considerably affected Staffordshire.
One point to which I should like to call particular attention is the fact that it was from a letter written by Colonel Brade from the War Office on August 21, 1912, we received the first intimation that the various County Associations were to deal with this matter themselves. I think I have reason to complain, because the Royal Assent was given to the Birmingham Act as long ago as June 2, 1911, and realising to the full that we in Staffordshire would be considerably prejudiced by the passing of that Extension Act I went myself to the War Office nearly two years before the Act came into force to call their attention to the fact and to beg them to take some steps to prevent any possible friction between the counties in consequence. In his letter Colonel Brade refers to the fact that a strict adherence to regulations would require the transfer of the administration of the units to the Warwickshire County Association, and in order to avoid unnecessary disturbance he suggested that we should make arrangements with the Warwickshire Association. That was, as I say, the first intimation we received that we would have to deal with the matter.
I would like to ask the representative of the War Office what would have happened supposing there had been strict adherence to the regulations and supposing we, as we would have been perfectly justified in doing, had declined the responsibility of raising four units in another county. Why, our action would have dislocated the whole of this scheme. Because if you look at the position you will find that Staffordshire is in the sixth grouped regimental district. It marches on the west with Salop and Cheshire, which are in the fourth grouped regimental district, and on the south with Warwickshire and Worcestershire, which are in the seventh. Therefore if we had declined the responsibility there would have been four units, representing three separate arms, transferred from Staffordshire to Warwickshire, which means that the sixth grouped regimental district would have been representatives of three arms short, while in the seventh grouped regimental district these arms would have been duplicated, which would have entirely destroyed the original scheme, and, I gather, would have made it impossible to carry on. I may say that, as far as Warwickshire, Worcestershire, and Staffordshire are concerned, we have arranged our difficulties, but it has given us a considerable amount of labour, and what I wish to avoid in the future is that it should be left to the respective counties, with all the possibilities of friction, to adjust these matters. I ask in my resolution that the War Office should take upon themselves now to say that no future extension of boundaries shall affect the recruiting areas.
I have had a correspondence with the Secretary of State for War, and there are one or two points in the right hon. gentleman's letter on which I would like to dwell. The Secretary of State says that as the boundaries of Warwickshire have been changed by the Act to which I have referred the sphere of the Warwickshire County Association would, if we took no action, be correspondingly increased. That is exactly what I complain of. It is owing to the inaction of the War Office that the Warwickshire area has been increased and that we proportionately suffer. They left action to us. I suggest to your Lordships that it is not our business to re-arrange recruiting areas. Staffordshire and Worcestershire are very much in the position of the children of Israel in the land of Egypt. In
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the first instance the genial Pharaoh, who now graces the Woolsack, came down to us and said, "Here is your tale of bricks which you have to complete; the straw will be provided for you to complete your tale." We completed our tale; and then the War Office come down and say, "That, is all very well, but you must keep up your tale of bricks, but we will not provide the straw." That is, I submit, putting us in an unfair position.
The Secretary of State referred to the fact that it would not be fair to Warwickshire to issue orders that they were not to recruit in what was strictly their own area "until we have heard their views." With regard to hearing their views, I suggest that the time to consult the various localities is when the areas are first allotted. There would have been no unfairness to Warwickshire in this instance if that had been done, for Warwickshire and Staffordshire were the first two counties in the whole of the country to complete their establishment. I suggest that the unfairness is not to the county which acquires extra recruiting ground, but to the county which loses it. Another point which was made by the War Office was that they were often attacked for issuing orders without consulting the wishes of the local authorities. There, again, the same argument applies. The time to consult the local authorities was when the original scheme was first introduced.
I urge the noble Lord who represents the War Office to meet me in this matter. I would point out the great tendency there is for the extension of large centres of population. It is happening all over the country, and it is very possible that before long in Staffordshire there will be another question of the extension of an area which may affect the county boundaries, and very possibly it may occur in a locality where there is no room for two Associations. But if the War Office will undertake to do what I suggest there will be no feeling of injury to any one. The trouble comes when you have two neighbouring counties competing for an area where there is not room for both to recruit. This is easily avoidable if a settlement is made before the difficulty arises. We accepted certain responsibilities under certain conditions, and it is not fair to ask us to carry out those responsibilities when the conditions are entirely changed. I beg to make the Motion standing in my name on the Paper.
LORD HERSCHELL: My Lords, in the first place I should like to express regret that the noble Earl who has just spoken should feel himself aggrieved in this matter, and I should like to say, on behalf of the Secretary of State, that nothing could possibly be further either from the desires or from the intentions of the War Office than to cause any grievance to one who has worked so whole-heartedly and in so disinterested a way for the furtherance of the interests of the Territorial Army. I hope, therefore, that if there may appear to have been a disagreement the noble Earl will not think that the services he has rendered have been in any way lost sight of. Before dealing with the specific questions which are before the House, I may also say that it is the earnest desire of the War Office to avoid causing any unnecessary friction between County Associations. That is an object which they would always have in view.
On the general question, as the noble Earl has stated, the legal position is quite clear, and is as follows. Under the Territorial and Reserve Forces Act an Association may be formed for any county, and a county for territorial purposes coincides with the administrative county; and by an Order in Council of March 19, 1908, Section 59 of the Local Government Act of 1888 was applied to the Territorial Force, thus providing that any changes in county boundaries authorised in pursuance of that Act would be recognised for Territorial Force purposes. Accordingly the area within which an Association is appointed to exercise its powers legally alters with any alteration of the county boundaries, and the reasons for this are not far to seek. The whole basis of the territorial organisation being by counties, and Associations being appointed to represent county interests, it is quite obvious that any wide divergence between the areas of County Associations and the areas of administrative counties would tend to confusion and overlapping, not only between neighbouring Associations, but also between the Associations and the civil county authorities. But while legally the County Association area follows the civil boundary of the county, it is at the same time open to the War Office to direct, on administrative grounds, that particular functions of the Association should be exercised over an area which does not coincide with the county boundaries. In particular
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the War Office may issue directions as to the areas in which Associations should be allowed to recruit, but these directions are matters of administrative convenience and do not affect the legal position.
The recruiting areas allotted to Associations being co-extensive with counties, when a change of county boundaries takes place it is then for the Army Council to decide how the units and detachments of units in the affected areas are to be raised—that is to say, whether they shall remain under the administration of the Association out of whose area they have passed or whether they shall be transferred to the Association into whose area they have passed. It is the view of the War Office that each case where there is a disturbance of county boundaries the case must be considered on its merits, for while, on the one hand, it is obviously necessary to preserve as far as possible a county basis of organisation, at the same time it is inexpedient to disturb existing conditions where such disturbance can be avoided. Such cases as these involve an infinity of local considerations of convenience, of prestige, of local sympathies. Therefore before giving a decision in such matters the War Office hold that it is absolutely essential that the views and wishes of the Associations concerned should be ascertained. They do not consider that it would be possible to lay down in advance a general rule for all future cases of change of county boundaries. That is to say, a general rule which would give no consideration to changes of population or of local conditions.
With regard to the particular case of the Birmingham area, in 1910 the Local Government Board made a Provisional Order for the enlargement of the boundaries of the borough of Birmingham, and as that borough is reckoned within the county of Warwick the effect was to transfer certain districts from Staffordshire and from Worcestershire to Warwickshire. The Bill was passed in June of last year, and the first communication, I believe, that was received direct from an Association by the War Office was in the middle of December of last year. A considerable delay then occurred owing to certain difficulties in collecting the necessary facts, and also the War Office were of opinion that, while it

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was obviously necessary that a decision should be come to in due course, it was not specially necessary for hurried intervention so long as no difficulties arose between the Associations. But having collected these facts it became evident that the general principle hitherto followed, that Associations should administer all the operations of units within their own county areas, was contravened in several instances, and that such contravention was likely to lead to confusion in administration generally and particularly in recruiting. Difficulties were also foreseen to be possible through the overlapping of civil representatives of Associations on the question of police jurisdiction, nursing committees, National Reserve registration, and other points, all of which points, in the opinion of the War Office, would be much more obvious to those actually concerned in the local administration than they would be to the War Office. Therefore, before deciding whether any transfer of units should or should not be made, a letter was sent to the three Associations concerned pointing out the position under the Act, and asking them to confer and to recommend a solution which would be mutually satisfactory. This solution, I understand, has actually been arrived at in the present case. But as regards the whole position of the matter the point of view of the War Office is that in these questions the local conditions can only really be properly ascertained by obtaining the views of the various Associations concerned, and it is, therefore, essential that the Associations concerned should in the first instance consider and discuss the matter to see whether any arrangement could not be come to. Obviously if no arrangement could be come to then the War Office must take such measures as appear necessary, but at the same time they would assist in every way the County Associations in arriving at some conclusion.
With regard to the actual Motion on the Paper, the War Office feel that they cannot tie their hands for the future, but must preserve the right to decide a matter of administration in accordance with the merits of each case. While it is only logical to preserve as far as possible a close co-relation between the county areas and the recruiting areas, as the whole organisation of the Territorial Force is based on counties, at the same time practical considerations of administration
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may make it undesirable in special cases to interfere with pre-existing recruiting arrangements. I fear that the Government are unable to accept the Motion of the noble Earl as it stands on the Paper, and I venture to think that possibly your Lordships may hesitate in accepting the Motion in view of the fact that you would thereby be binding yourselves to retain indefinitely the same recruiting areas as were instituted, in the original Act. I do not know whether j the noble Earl might think it worth while to alter his Resolution and with the object of placing on record the protest which he has made. If it would meet his views to alter it by omitting all the words after "scheme," and inserting the words "without consultation with the County Associations concerned," then the Government would be quite prepared to accept that amended Resolution. But as it stands the Government would have to resist the Motion.
THE EARL OF DARTMOUTH: I hope my noble friend will allow me to thank him for the full and clear explanation he has given, and I hope he does not think that I merely raised this question on personal grounds. I raised it because it is a matter which affects the Territorial Force generally. I own that the announcement which the noble Lord has made that the Territorial Force Act was put under the Local Government Act, 1888, does alter the circumstances, and I do not know that I should have raised the question at all if I had been aware of that. I endeavoured as far as I could to find out what Acts did affect the Territorial Force, and that is one which was overlooked. Therefore I am quite willing to adopt the noble Lord's suggestion and omit all the words after the word "scheme" and accept the words which he proposes in their place. I make the Motion in that form.
Moved to resolve, That in the opinion of this House the recruiting areas originally allotted to the various counties for the raising of the Territorial Force should not be affected by any extension of county boundaries not contemplated at the inception of the scheme without consultation with the County Associations concerned.—(The Earl of Dartmouth.)
On Question, Motion agreed to.

THE PURCHASE OF SILVER FOR INDIA.
LORD INCHCAPE*LORD INCHCAPE rose to call attention to recent purchases of silver on behalf of the Government of India, and to inquire whether any decision has been reached regarding the coinage of gold in India; and to move for Papers.
The noble Lord said: My Lords, it is within your Lordships' knowledge that some discussion has recently taken place in regard to a new departure made by the India Office in their system of purchasing silver required for silver coinage in India. As your Lordships are aware, after the Mints in India were closed to the free coinage of silver some nineteen years ago when Lord Lansdowne was Viceroy, the Government undertook to provide until further notice the silver currency required by the public at the price of 1s. 4d. per rupee, or 15 rupees to the pound sterling. To meet the demand for rupee coinage, which cannot conveniently at times be given out of the Currency Note Reserve, the Government are obliged to purchase silver and to coin this silver into rupees precisely as His Majesty's Government in this country do in regard to the silver coinage here. To some small extent it has been possible to buy silver in India, but practically the whole of the silver required for currency in India has had to be purchased on the London market. Up to a few months ago the India Office employed the Bank of England to buy their silver, but recently the purchases appear to have been made through a firm of bullion brokers in the City, and the change of purchasing agent has led to some criticism. I am convinced that the change was only introduced because it was believed that it would be to the advantage of the Indian taxpayer, but I think it would be convenient if the noble Marquess the Secretary of State for India were to explain to your Lordships the circumstances which led him to sanction the change.
To move from silver to gold when the Mints in India were closed to the free coinage of silver the sovereign was made legal tender at the ratio of 15 rupees to the £1 and sonic years ago—in 1901—when Lord Curzon was Viceroy and when Lord George Hamilton was Secretary of State for India, a proposal went from Whitehall to the Government of India, with the approval of the Lords of the
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Treasury, for the coinage of sovereigns in that country, so that the gold produced in India might be coined there instead of having to be sent home. If my memory does not betray me, the arrangements would have gone through, but the Government of India at that time ascertained that the Indian mining companies preferred, for reasons known to themselves, to send the gold home, and the Government of India were of opinion that there was, therefore, nothing to be gained by establishing a branch of the Royal Mint in Bombay. Looking to the fact that the gold standard had been established in India and that sovereigns and half-sovereigns were legal tender and were beginning to circulate freely throughout the country, I think it was unfortunate that the suggestion made by the Secretary of State in 1901 was not then accepted. It was true, no doubt, that the Indian gold mining companies at the time found it convenient to ship their gold home and that only a small amount of gold at the outside might have been offered for coinage; but seeing that the standard of value had been changed from silver to gold I think it would have been better if facilities had been offered for the free coinage of gold in India. The question of opening the Mints to the coinage of gold has lately been raised again, and I venture to ask the noble Marquess whether there is any likelihood of his being disposed to urge once more on the Government of India, as Lord George Hamilton did, the desirability of giving facilities for the coinage of gold in India. I beg to move.
Moved, for Papers relating to recent purchases of silver on behalf of the Government of India.—(Lord Inchcape.)
LORD SWAYTHLING: My Lords, I think it would be in the interests of the House if I intervened for a moment in this discussion, and in doing so I venture to ask your Lordships to extend to me that kind indulgence which you always extend to Members who address you for the first time. I am sorry that, after a history of business of over sixty years, it is necessary for me to defend my firm against attacks which have been made in the public Press and in the other House of Parliament. Those attacks have been made under various heads. The first and most important is

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a charge made in several newspapers that my firm has conspired corruptly with my brother, the Under-Secretary for India, to obtain a large order for the purchase of silver for the Indian Government. I would like to state to the House that from first to last my firm has had no correspondence or communication whatsoever with my brother, the Under-Secretary. From the commencement to the end all the orders were conveyed to us from the Secretary of State for India in Council, on which body, I am informed, my brother has no seat, and in connection with whose proceedings he has no vote and is not allowed to speak. The purchases and orders were regulated by the Finance Committee through their Chairman, and I am informed that my brother was never present at a single meeting at which the question of the purchase of silver was discussed, although I believe that technically he has a right to attend. I wish also to state to the House that I have never had a conversation with my brother on Indian finance since he has been Under-Secretary for India except on one occasion when, after the comparative failure of the last Indian Loan, I said to him that I thought it was the duty of the country, when it desired to borrow, to consult the lenders—in other words, that it should go into the market and discover whether long-dated bonds were required by the market and then issue long-dated bonds, or whether the market required short-dated bonds, in which case short-dated bonds should be issued. With this single exception I have never discussed Indian finance with my brother, nor has any member of my firm to my knowledge, and I understand that he has nothing to do, in the way the Office is arranged, with Indian finance of any kind.
THE MARQUESS OF CREWE: Hear, hear.
LORD SWAYTHLING: I need not refer, I think, to the reasons why the order of the India Council was given to my firm. Anything that can be said on that matter the noble Marquess the Leader of the House will be able to say better than I can. But I think I may say this one thing, that it is common knowledge that a ring was formed some time ago in India for the purpose of "rigging" the market against the Indian Government.
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There are only four firms who deal largely in silver in London, and three of these had acted and were acting at the time for this ring. That left one firm, our firm, which was the only one not connected with this speculative ring. I would also like to say that when in the instructions to us secrecy was made one of the chief objects, the reason will be evident to the House. When you have a large purchase of silver to make it is desirable that it should be kept secret in order to avoid the probable or the certain rise that would occur in the market if that information leaked out. We were verbally informed that after the reasons for secrecy were over the India Council would probably go back to their old channels for purchasing. We acted absolutely under the daily instructions of the Finance Committee who gave us orders for half a million and a quarter of a million at a time, sometimes telling us to abstain from and sometimes telling us to resume purchase—at one time telling us to abstain quite for a long time because of the uncertainty of the monsoon, under which circumstances, if this proved unfavourable, they might not have required to purchase as much silver or perhaps no more.
Practically no inkling of the purchase crept out until the first shipments of silver had arrived in India and were sent to the Mint. We were complimented by the Indian banks, whose business it was to find such a fact out, on the way in which the secret of the India Council was kept, and we had a letter of thanks from the India Council for the way we had carried out their instructions. Your Lordships can therefore imagine the surprise and disappointment we experienced when we read the attacks upon us in the public Press, chiefly through lack of information. One newspaper—and the statement was copied into a great many others—actually published a statement that the Under-Secretary was a member of my firm. I do not think it is necessary for me to say that he has never had, and has not now, any connection whatsoever with our firm, beyond the fact that he has a few hundred pounds which were deposited with us at interest when he was a boy and which still remains with us. That is the only connection in any way between my brother and the firm, and I wish to contradict any question of his having any further connection with our firm. I can only imagine

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that some of the attacks on our firm and on the Indian Government have been instigated by the speculators in India who, having carried their silver holdings for several months, losing interest thereon, were balked of the huge profits, not confined to the £99,000 mentioned in the House of Commons, but of a far larger sum which they had expected to make from the India Council.
The third subject with which I must trouble your Lordships is a reference in the public Press to the statement that on tenders to the India Council there was an intimation that firms having a partner in the House of Commons must not tender. This may be so, but I have never seen such a clause, nor till now have I heard of such a clause. We never made any tender to the Indian Government, and no such clause appears in any of the instructions sent to us nor in our sale notes to them. It never occurred to me nor to any of my partners that such a rule would apply any more in this case than with regard to transactions with Canada or any other part of the Empire.
The fourth subject, and the last, to which I would like to refer is the attack that has been made upon us because of the large loans that we have had from the India Council during the past year. We have done business of this kind with the India Council for over twenty-seven years, as other firms have done, and I would like to mention that these sums that have been lent to us have frequently been of large amounts. During last year the largest amount it ever reached was £1,050,000. I have in my hand some figures which I have had looked up, and I find that in May, 1909, before my brother was Under-Secretary, the figures reached £850,000, and in February, 1905, when there was no Liberal Government in power, the amount was exactly the same. The reason that it has increased to £1,050,000 is this. When the India Council are large and anxious lenders in the market their loans are governed by three considerations: first, the willingness of the borrowers to take the money from the India Council; secondly, the trustworthiness of the approved borrowers; and, thirdly, whether those firms approved have sufficient of the particular securities
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which the India Council requires when it makes loans to approved borrowers. As far as the question of the willingness of borrowers to take these loans is concerned, that depends on the market value of money. At the time of these large loans from the India Council the rate was 2½ per cent. during a short period, as mentioned in the Press, but the rate varies, and at the present moment the rate charged by the India Council is 4¼ per cent., so that the statement that they borrow at 3½ per cent. and lend at 2½, per cent. certainly does not apply at the present moment as they are making a profit. But I do not wish to enter into that question at the moment.
As to the third point, which is the most important—the question of the sufficiency of securities of the particular kind required from the approved borrowers—it is well known that so large were the amounts during this year that were at one time lent out by the India Council that there was a scarcity of these particular securities among the approved borrowers, and for that reason the India Council lent large sums to the clearing banks generally at lower rates than they could have lent to the approved borrowers if the approved borrowers had more of the securities upon which they could borrow from the India Council; and I can only believe that it was because my firm happened to be the holders of a large amount of "short-dated floaters," as these securities are called, that the amount reached this large figure, although it is only £200,000 more than the loans to us under previous Governments.
I have to thank your Lordships for the kind manner in which you have listened to what I have had to say. If there is any further information upon these transactions which, after the noble Marquess has answered the noble Lord who initiated this discussion, the House would like me to give and it is in my power to give it, I am perfectly willing to do so. I have waited under attacks against my personal honour and the honour of my firm until this opportunity has occurred for me to address you, and I am very grateful to the noble Lord that the Question he has put on the Paper has enabled me so to address you.
LORD FABER: My Lords, I was greatly interested in the remarks of the noble Lord who brought tins subject to our notice to-day, and I listened very sympathetically to what fell from the noble Lord who has just sat down. Personally I do not look at this matter of the Gold Reserves from the political point of view. In fact, so far as that goes I think the India Council have been right in the majority of the actions they have taken. I look at the matter from the business point of view, because business circles are greatly interested in the position of the Gold Reserves held in India and here for the India rupees. More interest has been excited lately than would otherwise have been the case by reason of three or four very good articles that have appeared in The Times, evidently written by an expert. When the Indian Government came to the conclusion that a sovereign was to represent 15 rupees they put India practically on a gold basis. In the meanwhile the India Council bought a great amount of silver bullion because of the great demand for rupees and coined the bullion into rupees, which were worth a great deal more than the bullion. The result of that transaction over a series of years is that we have now £20,000,000 in the Gold Reserve of India, which is invested partly in gold, but the greater part in securities. That opens a very interesting question. I am told that the Gold Reserve is to be increased by £5,000,000, which is wise and right. I cannot think it was good finance on the part of the Council when they took part of the reserves which they had accumulated from the coinage and used it for other purposes, such as constructing railways, and so on. The amount of profit made out of the coinage should have been kept wholly and solely for the purpose of redeeming silver in gold if tendered. The balances in London appear to have been too large lately, but I am told there is good reason for that. It is that short-time bonds are maturing in large amount, and the money is held to pay the bonds as they fall due. That is the proper course to pursue.
Now we come to the difficulties. First of all, should the Gold Reserve that we have be kept in India? To that I answer, Yes; and for this reason. The promissory note in the shape of the rupee will be
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presented in India, and the gold ought to be there to pay it. The next question is whether the £15,000,000 or £18,000,000 which is the greater part of the Gold Reserve, should be kept in gold or in securities. Academically speaking, it should be kept in gold, but that is a very costly proceeding, entailing a loss of interest of £600,000 or £700,000 a year. Is there any danger of so sudden a rush for gold in India in exchange for the rupee that the India Council would not have time to telegraph to England to sell securities and remit gold to India? It is not easy to get £10,000,000 of gold in a short space of time, but with all the reserve we have in London and the well-known credit the Indian Government enjoys I would have thought that there was no fear of a sudden rush for gold. Writers in the Press take the view that all the reserve ought to be kept in gold. My commercial mind does not like the idea of throwing away £600,000 or £700,000 interest if it can be helped, and I do not think the necessity is great enough to justify us in keeping all the reserve in gold. I may be a heretic in this matter. I allow that gold is the bedrock of credit, but I think our experience must count for something, and if we kept the whole of the reserve in gold it would be an expensive luxury indeed. I hope that the noble Marquess will give some indication of what is in his mind, because this is an important business point.
THE LORD PRIVY SEAL AND SECRETARY OF STATE FOR INDIA (THE MARQUESS OF CREWE): My Lords, the subject of Indian currency and finance, I am afraid, cannot be regarded as one of universal, or even general, public interest, and it is, as we all know, one of great complexity; but at the same time I am grateful to my noble friend Lord Inchcape for having raised this question to-day, partly on account of the personal matter upon which my noble friend Lord Swaythling spoke in a manner upon which I am sure the House would wish to congratulate him, both for the way in which he performed his task and also for the substance of what he was able to say.
It is, indeed, true that for a considerable time past a series of attacks have been made in different quarters both upon the India Office as a whole and upon various individuals in and out of that Office.

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So far as the general system of assault upon the financial methods of the India Office is concerned, that is no new story. There always have been a number of people who have taken distinct exception to our methods and proceedings, and very often from quite different points of view. Some of the criticisms which have been made from Indian sources in India represent, generally speaking, a kind of national Indian amour propre, which resents the fact that so large a part of Indian financial business should be conducted here in London and not in the Peninsula itself. That, like all questions of amour propre, is a sentiment with which it is not always easy to argue. But there has also been a more definite line of attack from those same natives of India and also from a great many Anglo-Indians engaged in business in India, who have regarded with suspicion the kind of deference which they say that we at the India Office show to the opinion of the City of London, thereby sacrificing the commercial interests of those engaged in business in India—they are not for the moment speaking of the Indian taxpayer and revenue-producer, but those engaged in business—in favour of those engaged in business in London.
As the noble Lord who has just sat down reminded us, there has been lately a series of articles in The Times, written, as that newspaper was careful to point out, from a distinct and somewhat biased standpoint, but representing, no doubt, a certain volume of opinion in India. Those articles covered practically the whole ground of Indian finance in all its aspects. I do not propose to touch at any length upon a great many of those points, but to confine myself so far as possible to the two questions raised by my noble friend Lord Inchcape in his Question. But it is important that the House should realise what the character of some of the other attacks made upon us has been, and for that purpose I will read an extract, from an article in an evening newspaper of, I suppose, large circulation and at any rate a great reputation in the past—I mean the Pall Mall Gazette. The Pall Mall Gazette of October 31 said—
"It is quite evident now that the scandals of India Office finance are going to be brought into the light of day. Only an Edmund Burke could do full justice to their magnitude. The venality of the Nabobs of an earlier era, the evils of Tammany Hall, the revelations of Radical rapacity in other directions in recent years, all become insignificant
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when compared with the vast and impudent perversities which have been organised in Whitehall M the last six or seven years. The ramifications of the affair are very serious. Some names hitherto honoured are about to be called in question. The abuses are of varying forms, and have escaped attention chiefly by reason of their incredible size and their astonishing effrontery. Sometimes institutions and corporations have derived benefit, while the individuals really concerned are in the background; at other times the 'benefits' have been more directly individual. It is only when we get down to the way Indian Loans have been floated in the London Money Market that we begin to realise the practices going on unchecked, while Secretaries of State, present and past, have been persistently fooled and hoodwinked. We repeat that this is going to be a very nasty business."
We are passing generally through a phase of violent and unqualified statement in many places and on many subjects, a phase which has lasted for some time, but which I hope will not last for ever. If, for instance, we were now to read in an article that one controversialist had said of another that his proper fate ought to be that he should be publicly impaled in Trafalgar Square and that his disembowelled carcase should be exposed on a gibbet on the Horse Guards Parade, we should feel entitled to infer that the two gentlemen concerned perhaps did not, as the phrase is, see altogether eye to eye on some question affecting the elementary education of youth, or perhaps the importation of manufactured goods from abroad. But even after making all allowance for the habits of to-day, one would not be surprised if on reading an article such as that which I have just quoted people outside ventured to surmise that something was slightly wrong. Therefore it is desirable that an authoritative statement should be made in relation to these purchases of silver about which my noble friend has asked.
In making that statement I can testify to the complete accuracy of everything which HI from my noble friend Lord Swaythling in relation to the part played by his firm. As is well known, the Government of India is always prepared to give rupees in India—silver coins—in exchange for gold. Rupees in India are an unlimited tender, just as 5 franc pieces are in France and silver dollars are in the United States. Of course that fact does not mean that either France or the United States or India has adopted a bi-metallic system, because that would involve the opening of the mints in these respective countries to the free coinage of silver for anybody who chose to tender that, metal

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There is, in fact, a single standard of exchange—that is to say, gold—although there is a double standard of value in the country itself in the case of all those three nations. The result has been that since the recommendations of the Fowler Committee were accepted the rupee has remained stable at the value of 1s. 4d.—the fifteenth of a £1. It is important to note that the number of rupees issued does not rest on any act of the Government, but is the act of the public in India. The number of rupees required depends on the amount of gold which the Indian public chooses to tender desiring to receive rupees in exchange. The Government of India holds its rupees in large quantities, partly in the Paper Currency Reserve in India and to a smaller extent in the silver branch of the Gold Standard Reserve.
The usual custom for many years past in India has been that somewhere about the 1st of October, at which time the busy trade season in India begins and rupees are likely to be in great demand, the Government of India should at that time hold in rupees something like sixteen millions sterling, or, in the rupee term, 24 crores of rupees. During the trade season that stock diminishes as rupees are asked for in the course of business, and in the following spring, before the slack season begins, the Government of India has to make up its mind whether in the following October, in order to be in the position of strength signified by the sum which I have mentioned, it will have to engage in smile purchase of silver and coin it into rupees. That is not always an entirely simple matter to decide. A great deal depends upon the character of the monsoon, upon which, as your Lordships know, the prosperity of India and Indian trade so largely depend. If there is a very bad monsoon and trade is consequently slack the demand for rupees may become very much less, and the Government reserve may therefore not be diminished to the extent anticipated. It is therefore by no means an automatic process to purchase silver, particularly in any given quantity, at the beginning of any one year. In the spring of this year it became quite evident, as the stock of rupees was getting low, that purchases would have to be made. As a matter of fact that proved to be the case to a very large extent indeed. As a matter of fact, purchases of silver to the extent of some-
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thing like six millions sterling were proved to be necessary from the early part of this year.
It is important to note one or two facts in relation to silver. One is that the fluctuations in the price of silver are both marked and sometimes rapid. The change in the price of silver moves sometimes between two figures involving no small difference where large sums are concerned. In the ten years between 1902 and 1911 inclusive, silver was at one time quoted at 211/1⅙d. to the standard ounce, and the highest rate reached during that period was 331/1⅙d. I will show in a moment what the bearing of that fact might be expected to be upon the transactions in which we were engaged. Then, as my noble friend behind me has pointed out, there was no doubt whatever that speculators in India, acting perfectly within their rights, as speculators may and do act, and foreseeing the probability that large purchases of silver would have to be made on behalf of the Government, made up their minds that there was a chance of driving up the price and thereby making a profit, which might be very large indeed.
If your Lordships will forgive my quoting again I would quote from a well-known Indian newspaper, the Pioneer. In its mail edition of December 11 last year it stated—
"The silver position has of late caused a good deal of anxiety to those interested in the welfare of the metal, the turn of the wheel having once more put the key of the situation into the hands of the Bombay group of speculators, whose operations have for long been watched with keen interest, and who have held on to their venture with such pluck and tenacity through good and evil report … The recent movement has shown very clearly to what a large extent the Bombay group of speculators are able to control the market, and how readily they rise to the occasion."
And then on January 29 it said—
"To these men [the speculators] the question of the hour is, What will be the policy of the Indian Government in respect of their currency requirements? Will they have to come on the market very soon and buy largely for coinage purposes, or will they be able to hold off as they have done over the last years? The latest returns show a gradually diminishing stock of rupees. … It is a long time now since the Bombay Syndicate embarked on their venture, and more than once Las shipwreck appeared imminent. … Heavy buying by the Indian Government would certainly assist to this end—
that is, to the success of their venture—
"and it is for that that they have been waiting."

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Those statements, I think, confirm what Lord Swaythling said of the general opinion as to the existence of an Indian ring determined to push up the price of silver.
Then, as my noble friend stated, the position as regards the purchase of silver is complicated and obviously made more difficult by the fact that there are only four firms in the City of London who act as bullion brokers. Our usual custom in the past has been to employ the Bank of England to arrange these purchases for us. They have employed two particular firms of brokers, firms of high standing and repute, and they intimated that when purchases were made through the Bank of England again they would feel bound to still employ those same firms. That left only two firms if the business was to be done in a manner which would not excite the suspicion of the silver speculators, and oblige us, therefore, to go to much greater expense in making our large purchase; and of those two firms—both I need not say, of high standing—the Finance Committee at the India Office chose my noble friend's firm, the firm of Samuel Montagu and Co., because their dealings were considerably the largest, and it was supposed, I believe rightly, that the particular transactions could in practice be carried out by them and by them only. It is right, in view of the character of the attacks that have been made, to state who the Finance Committee of the India Office are by whose agency these transactions took place. The chairman of my Finance Committee at the India Office is Sir Felix Schuster, very well known in the City and especially as the chairman of the Union of London and Smith's Bank. The other financial member of the Council is a gentleman connected with an equally well-known bank—Mr. Lawrence Currie, of the firm of Glyn, Mills and Currie. The other members of the Finance Committee are Sir Charles Egerton, who is well known as a distinguished officer of long and varied Indian experience; Sir Krishna Gupta, whose Indian experience is also well known, he having been for a long time a valued public servant in India; and Sir Theodore Morison, the character of whose service in India is also well known to your Lordships. And I ought to add that during the whole carrying out of these transactions the advice and concurrence was obtained throughout of a gentleman whose pre-
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mature loss we all deeply regret both on public and private grounds—I mean my friend Sir Richmond Ritchie, the late Permanent Under-Secretary at the India Office. Those are the men, with myself at their head, about whom language is used in the public Press of a character of which I have given a specimen to the House. Abuse of that kind, of course, does not hurt any of those gentlemen individually, but I suppose a certain amount of mud sometimes sticks when it is thrown, and it is therefore desirable, even at this length, to explain quite fully all the circumstances and the reasons for the action which the Council of India took.
The effect of the employment of Messrs. Samuel Montagu and Co. for this purpose was entirely successful. It is, I think, an undoubted fact that it was not known to those who were interested in increasing the price of silver that the purchases of Messrs. Montagu, carefully made, as I believe, in a great number of different quarters, were made on behalf of the Government of India, and consequently the market movements were not such as to oblige us to pay more than a moderate price for the silver which we bought. I am informed that the commission actually earned by Messrs. Montagu and Co. on the entire transaction amounted to £7,513. That, no doubt, is a considerable sum of money, but it is not a very large sum for us all to agree to sell our souls for in the manner that we have been accused of doing by these critics. Now as regards the saving which was effected to India, I stated just now the figures for the highest and the lowest prices of silver within the last ten years. The difference of a purchase, at the highest of those prices and the lowest, of £6,000,000 worth of silver would have been £3,150,000–52 per cent., that is to say, being the range of prices during that period. Of course, I do not pretend for a moment that by taking the course we did we saved a sum of that magnitude or anything approaching it, but I do say with the utmost confidence that by, employing the firm of Montagu to buy silver in this particular way and thus defeat the operations of the Market a saving of many hundreds of thousands of pounds was made to the revenues of India; and I venture to state, therefore, that the course which we took in employing that firm

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for this purpose was absolutely justified by the result.
There is, of course, the further point to which my noble friend behind me alluded—the fact that his brother, Mr. E. S. Montagu is Parliamentary Under-Secretary of State at the India Office, and that fact has been made the groundwork of a charge against Mr. Montagu, against the firm, and against ourselves. I have endeavoured to show, I am afraid at rather excessive length, exactly why the Finance Committee, authorised by the Council to do so, employed Messrs. Montagu for the purpose of this purchase, and the question we have to ask is, Was the purely nominal connection between that firm and the Parliamentary Under-Secretary a bar to a transaction which was of such real moment in saving the money of India? In our view—and it is a view which I still maintain—the circumstances were so special and of such a critical character that we should have been unwise and wrong on the bare fact of the relationship between Mr. Montagu and my noble friend to sacrifice that great advantage to the Government of India. It must be remembered that as a matter of fact Mr. Montagu has no more to do with the finance of India at the India Office than he has to do with the finance of the Panama Canal, and he has no more connection with the firm of Samuel Montagu and Co. than he has with the firm of Marshall and Snelgrove. Thus, the facts being as they are, I cannot think that we should have been right, in obedience to a possible prejudice against the blood relationship of the Under-Secretary and the head of the firm, to have sacrificed this great benefit, although I entirely agree that in such matters appearances are important and cannot be altogether ignored.
Some of your Lordships may remember a debate which took place at the close of the year 1900, raised by my noble friend Lord Rosebery, who is not now in the House, with reference to the appointment of Lord Hardwicke to the same post as that which Mr. Montagu now fills. The late Lord Hardwicke was a valued friend of many of your Lordships, and I have pleasure in thinking that he left behind him at the India Office a tradition not merely of particular popularity but
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also of efficiency as an Under-Secretary which certainly none of his successors has ever surpassed. As a matter of fact, when he was appointed he was a partner in a firm of stockbrokers in the City—work which he undertook in circumstances which did him all the credit in the world—and he explained, in accepting from Lord Salisbury the position of Under-Secretary for India, that although he could not cease to be a partner in the firm, because he had to think of his future, yet he would not take any active part in its business while holding office and would altogether relinquish an active share in the conduct of the firm. I thought at the time, and still think, that Lord Hardwicke made out a good case. But in connection with this particular charge against our present Under-Secretary it is fair, I think, to remind the House that Lord Hardwicke did remain a partner of a firm of stockbrokers, which at any rate involves, I think, a closer connection with the City of London than the fact of the relationship between my noble friend and Mr. Montagu which has given rise to such embittered attacks upon both. I hope I have disposed of that part of my noble friend's Question relating to the purchase of silver.
As regards the coinage of gold, as Lord Faber reminded us, in 1899 the Fowler Committee recommended that the sovereign should become legal tender at the value of 15 rupees. That was enacted the same year and has been the law ever since. A long time ago—before 1835—there used to be a real double standard in India. The gold mohur was a gold coin of the value of 15 rupees, and although it was not often seen or greatly used in actual currency it was one of the legal Indian coins. But since that time, although I dare say many of your Lordships have seen gold mohurs; they are as a matter of fact gold medals worth their weight in gold but have no established position as coins now that the sovereign and half-sovereign are the gold coins of India. As the noble Lord said, the Fowler Committee also recommended that sovereigns should be coined in India, that there should be a Mint for gold coinage there, and a long correspondence took place between the India Office and the Government of India at that time on the subject of instituting such a Mint. One difficulty,

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which perpetually exists in connection with this subject, is that if you start a Mint in India for coining sovereigns and half-sovereigns it must be a branch of the Royal Mint, and therefore, so far as it coins those particular coins, under Treasury control, and that has always been regarded as a difficulty, though possibly not an insuperable difficulty, in starting a Mint of that kind in India. Then Lord Faber pointed out that in 1902 the Government of India found that the gold of the Indian mines was being sent, I imagine under some kind of contract, to England, and was therefore not available for the purposes of coinage in India, and that being so they thought it better to drop the question altogether. Lord George Hamilton, who was at that time Secretary of State, agreed that that was the wisest course to take, and from that day until quite lately there have been no communications between the Government of India and the India Office on the subject.
But last year and the year before the question of an Indian Mint was raised in some detail on the Imperial Legislative Council, and the idea was certainly not unsympathetically received by those who spoke on behalf of the Government. So far as the foundation of a Mint for British coinage is concerned, the objections and difficulties which existed to having a branch of the Royal Mint in India of course are still there. But there is another claim for which much, I think, may be said, and I may tell the House frankly that if the Government of India favour the adoption of such a plan, as it is quite possible they may, I personally should give my assent to it, and that is for the institution of a gold coinage in India of Indian coin. The denomination of the coin which I think would probably be the most convenient would be a ten rupee piece—that is to say, a gold coin of the value of 13 s. 4d. It is too early yet to say whether a plan of that kind will be seriously contemplated by the Government of India, and still more whether or not it will be soon set on foot; but so far as I am able to form an opinion I think that the foundation of such a Mint would, at any rate to some extent, satisfy Indian opinion on the subject, and would get rid of such difficulties as exist in connection with a branch of the Royal Mint in that country.
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It is, of course, impossible to say how far gold coins, whether sovereigns or ten rupee pieces, will be now or will be in the future generally used in India. I think there are signs, however, that the almost instinctive habit of hoarding gold which at one time was so marked in India, is being to a considerable extent broken through. The fear of an investment as distinct from a stocking, which was present to the mind of so many Indians of all grades from the highest to the lowest in the past, is, I should venture to hope, greatly diminishing. For instance, there have been hopeful signs in the direction of investment in such a fact that the great iron works lately started in Bengal by Messrs. Tata Brothers, with a very large capital, hundreds of thousands of pounds, represent, with the exception of an almost ridiculously small fraction, Indian money and Indian money only. That is a satisfactory and hopeful fact, possessing a certain bearing on this question of currency, and therefore I should think that we may venture to look forward with some confidence to an increased use of a gold currency in India among the people, although it may be a long and indefinite time before it becomes the habitual or favourite coin of the country at large.
There are one or two other matters which are not covered by the question of my noble friend and with which, therefore, I will not deal at any length, but as they were raised by the noble Lord opposite and one of them was touched on by my noble friend Lord Swaythling I will speak of them very briefly. One is the question of the loans to approved firms made by the Secretary of State for India in Council from our home balances. Lord Swaythling explained very clearly the circumstances in which those loans are made, and it is not necessary for me to repeat anything that he said. I will only say this, that it is quite possible to exaggerate the favour which is done by the Council of India to such firms as those who take these loans. Bearing in mind the standing of the firms and the security which they have to offer, I appeal to the noble Lord opposite, who as a partner in a very distinguished bank is thoroughly cognisant of these subjects, whether it is not the fact that these particular gentlemen to whom we lend money could, if they wanted it, get it anywhere else.
LORD FABER: Hear, hear.
THE MARQUESS OF CREWE: That being so, it is rather ridiculous to attempt to pick out the names of particular institutions and firms as being favoured by us in some astonishing manner, as though they were going begging all over the world to raise money and we from our hoards produced money which they could not find elsewhere. Then the noble Lord said a word on the subject of the Gold Standard Reserve, and I was certainly glad, especially in view of the showers of abuse which we have been receiving from so many different quarters, to find that he was good enough to express some general approval of the manner in which we invest a considerable part of that reserve in first-class securities over here. It is true also, as he added, that we are about to keep £5,000,000 in gold in this country. That is an addition to our securities in a form which I have been for some time anxious to bring about, and so far as I am personally concerned I should not at all mind if the amount were somewhat increased. But if it were to be increased to a very large extent the consideration which the noble Lord pointed out with such force conies into mind—that if we lock up an enormous sum of gold in a reserve without absolute necessity for doing it, we are sacrificing the interest of the Indian taxpayer and the revenues of India to an extent which might, and I think would, lay us open to reasonable criticism.
I have heard it suggested by Indian gentlemen of standing that it would be a grand thing if we had an Indian Gold Reserve here in bullion of £100,000,000 sterling, that it would place India in a splendid position, and I have also heard it added that this would add very much to the strength of our own position, of the British position in the world's markets, because it would be known—although I think if these arguments were mentioned in India it might to some extent destroy the attractiveness of the idea—that, after all, this £100,000,000 would be at our disposal if ever we wanted it. I think India would be entitled to say that if Great Britain wants to keep a Gold Reserve of £100,000,000 it is possible for her to do it, but she ought to do it herself, and that to ask India to sacrifice £3,000,000 or £4,000,000 of revenue for that purpose is scarcely a fair demand. The noble Lord expressed the view that the bullion of the Gold Standard Reserve ought, at any rate in fairness, to be kept in India rather than in England. I know that that view is held
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by some people in India as well as here. I do not think myself it is a point of very great importance, but it is fair in this connection to point out that there is a great deal of gold in India. The Paper Currency Reserve at this moment has got 18,000,000 sovereigns in gold, which, although it is the Paper Currency Reserve, is, of course, available in the last resort for the maintenance of the standard.
EARL CURZON OF KEDLESTON: Is that in India?
THE MARQUESS OF CREWE: Yes; and that being so, although I am prepared to keep an open mind on the point, I do not feel sure that there is anything substantial to be gained from the Indian point of view by not keeping the Gold Standard Reserve here, where in one sense, I think the noble Lord will agree, it is closer to the demand than it would be in India itself. I think, my Lords, those are all the points on which I have to touch. I must apologise for having detained the House at such length, but the personal aspect of the case obliged me to enter into it in a great deal of detail, and I hope that noble Lords opposite will think that I have dealt fairly and satisfactorily with the various charges which have been brought against us in connection with these different matters.
EARL CURZON OF KEDLESTON: My Lords, I should be very sorry if the importance of this subject were to be measured by the size of the audience which has assembled to listen to our discussion this afternoon. As a matter of fact, it is scarcely possible to imagine a subject more worthy of detailed scrutiny by either House of Parliament at the present moment than Indian finance, and I hope that our discussion this afternoon, which has ranged over only a small portion of the field, may be the prelude to another debate on another day in a fuller House, when with greater advantage we may be able to deal with the branches of the question not discussed to-day. With the concluding remarks of the Secretary of State I am sure we shall all agree. There is not one of us who does not think that the noble Marquess was entirely justified in taking this opportunity of making a statement, irrespective of our views about the strength of the case that he has put forward. He was not only justified, in my view, in taking, but was bound to take, an early opportunity of

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giving his views to Parliament, because of the undoubted feeling of uneasiness that has existed for some time both in India and in England as to the present management of Indian finance.
Several expressions of that feeling of uneasiness have been alluded to this afternoon. We have had references made to the articles in The Times, to Questions that have been asked in the Legislative Councils in India, and, I might add, to Questions that are being asked from day to day in the House of Commons. As regards the articles in The Times, the authorship of which is quite unknown to me, although the writer is evidently a man cognisant with his subject, I should like to say that there is a good deal in those articles with which I am not in personal sympathy, and there are several charges made by the writer to which I think a good answer can be made. Still less am I in sympathy with the sort of language which the Secretary of State quoted this afternoon. It was language which by its own violence defeats itself, and which I am sure I may pass by without another word. But I do not think the Secretary of State can complain that this feeling of insecurity and apprehension prevails, to which the Questions in the other House of Parliament are so eloquent a witness. It is almost the inevitable corollary of the system of secrecy, I might almost say mystery—though, perhaps, secrecy is sometimes inevitable—that attends the manipulation—I use the word in no invidious sense—of Indian finance in this country. Therefore I welcome any occasion when the Secretary of State comes forward and gives us an explanation of his policy.
We are really bound to treat our Indian constituents in this matter with the fullest amount of confidence and candour possible. The finances of India which yon administer are not like the revenues which come from the taxpayers of this country who have Members of Parliament to protect them and look after their interests. They come from the taxpayers of a remote part of the Empire who have no official representatives here except the Secretary of State himself, who is not merely the official guardian but almost the only guardian of the interests of the Indian taxpayer in this country. A further consideration which always seems to me to place special responsibility on the Secretary of State in this country is the
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peculiar system of dual government by which we administer India—partly the Secretary of State in Council here and partly the Government of India in India. In all points of finance it is the English partner, the Secretary of State in Council, who is almost, I think I might say quite, omnipotent. He can over-rule, and does I over-rule, the Government of India on important matters of finance. Indeed, the India Office is not only a financial arbiter, but almost a financial autocrat; and if that be so—and it certainly was my own experience—all the greater is the necessity for treating with absolute sincerity and candour those whose interests are so completely in your hands, who are so helpless in your grasp.
The discussion to-night has related mainly to three questions, and perhaps I may be allowed to say a brief word about each. Firstly, there was the matter of the dealings of the India Office with the firm of Messrs. Samuel Montagu and Co. I am sure there is no one in this House who will not have listened with sympathetic respect to the remarks which fell from Lord Swaythling. He made a spirited defence of the honour and of the action of the firm with which he is connected. May I say, as regards his brother, the Under-Secretary, that no one acquainted with that gentleman could for a moment believe him guilty of any conduct unworthy of the highest standard of British political life. We know, from what we have heard to-night, that he is not even a member of the firm for which his brother has spoken, and I can state from my own experience of the India Office—I was Under-Secretary there myself—that the Under-Secretary has nothing to do, or next to nothing to do, with the Finance Committee. And so I can well believe that Mr. Montagu was quite ignorant of the whole transaction. On the point of prudence, raised by the Secretary of State, I am not certain that I wholly agree with him. The Secretary of State said that while appearances have to be considered, at the same time they were making so good a bargain for the Government of India, they were saving them so many hundreds of thousands of pounds, that they had to risk possible misapprehension of their relations with this firm. I am not certain that His Majesty's Government were altogether justified in taking that risk. We are very sensitive, wisely sensitive, in English public

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life, about the business connections and the honour of our public men, and I think it might have occurred to the Secretary of State when undertaking these transactions that when at a later date they would be divulged a good deal of not altogether unreasonable suspicion might be aroused by the connection of their Under-Secretary with the firm in question.
Then there comes the question, with which the noble Lord opposite dealt, of the relations of the India Office with his firm in the purchase of silver. I think the noble Lord made his own position clear upon that point, and I doubt not that his firm was chosen because of their peculiar qualifications for this particular undertaking and because they were not members of the ring to which he has referred. But there was another matter which has scarcely been touched upon, and that is the employment of his firm, not merely for the purchase of silver to be coined into rupees in India, but as the recipients of large sums of money lent out at a small rate of interest from the cash balances of the Government of India in the hands of the Secretary of State in London. I cannot enter into that question to-night, because it raises a large question of policy. I am not discussing the question of right or wrong conduct at the moment. But it does raise a big question of policy—whether you are justified in keeping huge cash balances in London, as you have been doing recently, and in lending millions of money at a very low rate of interest—I think only about 2½ per cent.—to large bankers and business men in London. I am not certain that that is sound policy, and I am certain that it excites a great deal of suspicion in India. In Indian newspapers you constantly see the statement that you are taking the money away from a poor country, India, in order to give an advantage to the richest country in the world, England; that you are using Indian money and Indian credit in order to put money into the pockets of big London bankers and dealers, and so on. The charge may be exaggerated; it may even be unfounded; but it is undesirable that it should be made. I think I am right in saying that in the past when I was responsible for the Government of India we never had cash balances in the hands of the Secretary of State at all approaching the present figure. I believe that in the spring of this year you had £18,000,000 of cash balances.
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That, I know, was an exceptional and inflated sum, which has now fallen to £8,000,000 or £9,000,000. I do not believe that in the time I am speaking of we ever had £9,000,000 of cash balances here. I do not think we ever had more than £4,000,000 or £5,000,000. I do not see why these large balances should be kept here, and I say, in passing, that one of the reasons against the policy seems to me to be the misapprehension to which it may expose you in India.
The next question was the gold coinage. This is a matter on which I may, perhaps, be allowed to say a word, because I happened to be in India when the Fowler Committee reported, and was largely responsible for the steps we took to carry its recommendations into effect. It is quite true, as the Secretary of State has said, that we accepted and did our best to put into practical effect the recommendations of the Fowler Committee, both as regards the institution of a gold standard and of a gold currency. I remember particularly interesting myself in this matter somewhat against the views of Sir Edward Law, my Finance Minister, who was more concerned in building up the Gold Reserve and securing the stability of the currency policy than he was in encouraging the use of gold in India. I argued that it was good policy to familiarise the people with the sight and touch of gold, and I urged that by the use of our currency offices and of the treasuries in the great cities, as well as in the Post Offices and banks we should do everything we could to familiarise the people with gold. We were ready to coin gold. We were quite prepared that the Bombay Mint should be made a branch of the Royal Mint in London. The reasons, which have not been fully stated to-night, for which we were anxious to have a Gold Mint in India—and it is important that this should be known—were these. In the first place, there was the view, perhaps rather a sentimental view, that India ought to coin her own money. Secondly, there were the £2,000,000 of gold coming from the Kolar Goldfields in Mysore. My recollection does not quite agree with that of Lord Inchcape in that respect. It is true that by the time we set to work the firms exporting this gold had made other arrangements, but I do not think there would have been any difficulty in intercepting that gold at Bombay and making arrangements to coin it there. Thirdly, we felt that a Gold Mint at Bombay

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would do a great deal to popularise the gold currency; and, fourthly, we felt that India ought to have one open Mint. Her Mints for the coinage of silver being closed, we thought she ought to have one Mint for the unrestricted coinage of gold.
Our arrangements broke down because of the obstruction that was offered us here at home, not by the India Office, but by authorities outside the India Office. Every sort of difficulty, technical and legal, was raised, and after struggling for two years I remember throwing up my hands in despair. I gather that some of those difficulties still exist—I mean the difficulty about having a branch of the Royal Mint of England in Bombay; and the Secretary of State, I gather, proposes to deal with the matter by allowing the coinage of small gold coins in India—I think he said a ten rupee piece. That is a matter that I have no doubt he will look carefully into. I remember we discussed very closely whether it would be desirable in India to have a gold Indian coinage of a smaller value than a sovereign. We discussed a ten rupee piece and a five rupee piece, and there was a great deal of difference of opinion on the matter. A great many people said that the Indian peasant and even the Indian merchant was quite satisfied with a currency partly in silver and partly in paper, and that these smaller coins Would not be wanted and that the experiment would be a costly one. There was a good deal of difference of opinion about that. But one thing did rather surprise me in what the Secretary of State said. I gather from him that the present Government of India do not express a strong view in favour of a Mint for gold coinage in India. I was under the impression that when the questions were put in the Legislative Council to which the noble Marquess referred the present Finance Minister in India did express himself strongly in its favour. I may be wrong. If there is a strong feeling in India in favour of the experiment, I think on the whole I would like to see it made, if in no other shape, then in the somewhat attenuated form suggested by the Secretary of State, although I myself should like something larger.
There is one other point, raised by Lord Faber, on which I wish to say a word. It was not included in the subject brought before us by Lord Inchcape, but as the Secretary of State referred to it perhaps
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I may be allowed to say a word upon it. I speak of the Gold Reserve Fund. In the existence and in the use of that reserve I take great interest, because it is the result of a proposal made by the Government of India at the time when I was at its head. I think, on the whole, my general sentiments are those of Lord Faber. We did deliberately propose at that time that the bulk of this Gold Reserve should be invested, and we did so for two reasons. Firstly, because we wanted to put it in securities in this country which were easily saleable; and secondly, because we wanted to have the advantage of the interest. At that time we did not contemplate that the reserve would touch the enormous figures it has since reached. We thought that if we got a Gold Reserve up to about £10,000,000 it would, in addition to the £10,000,000 or £11,000,000 of the Paper Currency Reserve, give us £20,000,000, which would be sufficient to guarantee the success of our currency policy and give us steadiness of exchange. Matters have gone much further since those days, and I gather from what I read in the newspapers that you now have about £20,000,000 in the Gold Reserve.
There are one or two changes that have been made of which I venture to disapprove. There was the change made on the recommendation of Lord Inchcape's Committee, under which a certain portion of this reserve—I think £1,000,000—was taken for railway expenditure. I do not say that Lord Inchcape's Committee directly recommended that, but they recommended that part of the profits of coinage set aside for this reserve should be used for railway extension, and £1,000,000 was taken. We have had a strong warning to-day against the use of violent language, and therefore I will not use the word "misappropriation," but I suggest that this was not altogether a wise or sound appropriation of that portion of the Gold Reserve. Of this £20,000,000 I understand that nearly £3,000,000, according to a recent answer given in the House of Commons, is held in rupees. That rather puzzles me. I cannot understand why any portion of the Gold Reserve should be held in silver. The rest is held in securities in this country. The Secretary of State told us that he is contemplating some sort of change, that in future he contemplates holding £5,000,000, I think he said, in gold.
THE MARQUESS OF CREWE: Yes, £5,000,000. That is decided upon.
EARL CURZON OF KEDLESTON: £5,000,000 in gold in this country, and the noble Marquess seemed to be doubtful about the policy of holding any portion of it in gold in India because of the enormous gold accumulation in the Paper Currency Reserve. But the Paper Currency Reserve exists for a different purpose. It exists in order to sustain your rupee notes in that country; and I should like, in addition to the £5,000,000 he proposes to hold in gold in this country, that he should hold a certain amount of the Gold Standard Reserve in gold in India. These are the observations that have been suggested to me by the discussion that has taken place to-night, and I hope that at a later date we may have another occasion when, on a larger field, we may raise other issues of Indian finance at least as important as those we have been examining this evening.
THE EARL OF CROMER: My Lords, I will not detain your Lordships for more than a moment, but as an ex-Financial Member of the Council of India I should like to say a few words. I generally agree with my noble friend Lord Curzon as to the great undesirability of secrecy in all these transactions, but I must confess that in this particular instance I do not see how secrecy was to be avoided. If the Secretary of State had a ring to deal with it was absolutely necessary to break it down, and if it had been known that he was going to employ Messrs. Samuel Montagu and Co. to buy silver the price would have been raised and the operation would have been unsuccessful. It was, no doubt, unfortunate that all sorts of suspicions should be excited, but it was only natural that these suspicions should have been excited. I think that on the whole the action taken by the India Office was perfectly justifiable. As to the question of cash balances, I hope that matter will receive attention. It may interest the noble Marquess to know that when I was appointed a Financial Member
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of Council in 1880 I remember having a long conversation with Mr. Gladstone on Indian affairs, and the point he chiefly directed my attention to was the question of Indian cash balances. He urged me to reduce them, and spoke of the unwisdom of having unnecessarily large cash balances. When I went out to India I found that Mr. Gladstone had not been well informed as to the Indian cash balances. But it has struck me that the cash balances here are rather excessive, and therefore I trust that the matter will receive the consideration which it certainly deserves at the hands of the Secretary of State.
THE MARQUESS OF CREWE: Perhaps I may state, by way of explanation with reference to the matter mentioned by the noble Earl who has just sat down, that it seemed to me wiser, in view of the scope and complexity of the whole question of Indian currency, not to attempt to cover the whole field in what I said to-day; but if, as was indicated by the noble Earl opposite, it is desired to have some further discussion, particularly in relation to the question of cash balances, I shall, of course, be happy to deal with the matter as best I can, and with any other points connected with Indian finance or currency on which noble Lords may desire information.

CRIMINAL LAW AMENDMENT BILL.
Read 1a; to be printed; and to be read 2a on Wednesday the 27 th instant. (No. 169.)

BUSINESS OF THE HOUSE.
THE MARQUESS OF CREWE: I beg to move that the House do adjourn, except for Judicial business, until Monday, the 25th instant.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at a quarter before Seven o'clock, till To-morrow, half-past Ten o'clock.