HL Deb 23 June 1915 vol 19 cc96-115

My Lords, I rise to ask whether His Majesty's Government have received from time to time since the commencement of hostilities direct offers of large quantities of munitions from Canadian individual firms and also a combination of firms; whether direct negotiations with reference to these offers had been declined, and, if so, on what grounds; whether there is any agreement by which the Imperial Government is prevented from dealing direct with British firms or manufacturers in any of the Dominions of the Crown.

When the Munitions Bill was under discussion in this House about ten days ago I took the opportunity of asking whether under its provisions the new Minister of Munitions would be able to release himself from certain conditions which had hitherto prevented His Majesty's Government from dealing with direct offers from Canada. I quoted a case to which I will refer again in a moment. The noble Earl who then replied on behalf of the Government was good enough to say that he would inquire into the matter and communicate further with me with regard to the point I had raised. The point was this. I definitely said that it was within my knowledge that a group of manufacturers in Canada had attempted, through their representatives in this country, to establish business relations direct with His Majesty's Government, but that the agreement between the Government and Messrs. J. P. Morgan, of New York, stood in the way. Lord Curzon, in the communication he subsequently sent to me, stated that the Morgan agreement had application to the United States only and even in that area did not constitute a monopoly, but that it had no application whatever to Canada. That compels me to present cases to show that Canadian firms which have attempted to open direct business relations with the Government here have been referred to Messrs. J. P. Morgan, of New York; and I shall incidentally show at the same time that direct offers from other Canadian firms of great eminence, where those firms have not been told that they must pass their business through New York, have not been entertained at all by the Government.

First of all I will take the case to which I referred the other day. I do not wish it to be assumed by any one that I am giving hearsay information. Everything that I state here to-day I shall be able to verify and prove. In order that this particular case may be easily identified I will state that a solicitor of great eminence in this city whom many of us know quite well, Sir Frank Crisp, has had communications with the Government with regard to this offer and the rejection of the offer; and by my mentioning that name the noble Earl, Lord Curzon, will be easily able to follow the correspondence that has taken place between this group and the War Office. In fact, I know that there has been correspondence between Sir Frank Crisp and the Prime Minister and also between Sir Frank Crisp and the new Minister of Munitions. This group three months ago approached the War Office with an offer to supply 2,000,000 shells, guaranteeing within 60 or 90 days from the signing of the contract to be in a position to deliver at the rate of 30,000 shells weekly. This firm was told to place its business through Messrs. J. P. Morgan, of New York, or, alternatively, through the Shells Committee in Canada. This particular group would do neither. They absolutely declined to transact business through Messrs. J. P. Morgan, very properly claiming that as Canadians they were British subjects and ought to have free access to the Home Government.

Writing to the Prime Minister, under date May 17 last, Sir Frank Crisp said— Dear Mr. ASQUITH.—Every morning when I pick up The Times and read of the 'need for shells,' and so on, I marvel at the fact that people should be ready to supply 2,000,000 shells and the Government will not take them, through what in such a serious matter seems to us on this side of the table a mere question of punctilio—that is, whether the order is to go through an American firm or should be taken direct. The result of that refusal is quite obvious. Had the offer been accepted we might be receiving every week from that quarter alone 30,000 of the high explosive shells which are said to be so badly needed. I think I have stated enough to establish the fact that this particular Canadian group was referred to Messrs. J. P. Morgan, of New York. Therefore I am sorry to have to traverse the statement of the noble Earl that the Morgan agreement did not apply to Canada at all.

In another case a group of manufacturers in Toronto, represented by Mr. Pringle—I mention that name for the purpose of identification, because all this correspondence is to be found in the War Office—made offers in April to supply 3 in. high explosive shells at the rate of 10,000 per day, delivery to begin two months after the order. Mr. Pringle tells me that this was the sort of reception he got. He was told at the War Office, first, that at the moment they did not require any shells, and, secondly, that, if and when they did, the business could only be transacted through Messrs. J. P. Morgan, of New York, or, alternatively, through the Shells Committee in Canada. April, of course, represented a period when a good many people in high authority held the belief—the erroneous belief—that there was no shortage of munitions. We all have in mind the Prime Minister's statement at Newcastle. What is apposite at this moment is to refer to the fact that the Prime Minister, in explanation, mentioned that he did not make the statement in any haphazard way and that the information he received came from the very highest quarter. That establishes the fact, for what it is worth, that at that particular time it was assumed that we had plenty of shells.

I am quite alive to the fact that it may be said—I am not suggesting that the noble Earl will say it—that the capacity, status, and standing of this particular Toronto group were inquired into and were not found satisfactory. Therefore I mention this fact, that at all events the status of the group has been found satisfactory in some quarters, because orders for 100,000 18-pound shells have been placed with them by the Shells Committee in Canada, and those orders are now being executed. I mention that to prevent the possibility of its being surmised or suggested that the status of this particular group was not as it should be. Here again I make the same point as I made in connection with the first case which I cited. Had the Government taken advantage of this direct offer we would now be receiving 70,000 shells per week from this particular quarter. In May the representative of this group—a well-known man in Canada—made a further attempt to open up business relations with the Government, but he made it quite clear in his offer that if it had to go through Messrs. J. P. Morgan no business would result, as he would not treat on those terms. He was invited by the War Office to submit his offer in writing, and also to put in writing his rooted objection to having any transaction through Messrs. J. P. Morgan, of New York. He did so, and received the following most extraordinary reply from the War Office— I beg to thank you for your letter of the 22nd, addressed to the Secretary, offering yourselves as alternative agents to Messrs. J. P. Morgan for the purchase of shells in the United States of America. The Director of Artillery does not wish to take advantage of your offer. That answer was a non sequitur; it was entirely irrelevant. This was a Canadian group endeavouring to enter into direct relations with the Government and absolutely making shells for the Government through the Shells Committee in Canada. Their first offer was not entertained; they repeated their offer, and were told to put it in writing so that there should be no mistake about it; they were also told to put in writing their objection to trading with Messrs. Morgan; this they did, and they received the curious answer which I have read.

I come to another and far more important case which is entirely divested of any reference to Messrs. J. P. Morgan, of New York; it is a purely- Canadian case. The company to which I refer is the Canadian Car and Foundry Company, of Montreal; and if the noble Earl will glance at this document which I hand to him he will see the character of the eight great concerns which this company possesses, the productive capacity of which is enormous. There is no noble Lord who has been to Canada who has not heard of this company. It is one of the most brilliant institutions that the Dominion possesses, and it claims—I think with great justice—that it is the largest industrial concern in the Dominion. There are eight separate plants in different parts of the country, some of them quite near to where the raw material is, fully equipped with machinery capable of producing any quantity of shells. Mr. Butler, the vice-president of this great concern, a man as well known as the president of the Canadian Pacific, has related to me his experiences of attempts to get business direct from the War Office here at home. He visited the War Office for the first time in January, and was told that he was a little too late as all the Government commitments were made. He was rather curious to know what "a little too late" meant. He inquired whether it applied to the present only or for the duration of the war, and he was informed that the commitments were made for a very long time ahead, practically for the duration of the war. That is a statement which I should very much hesitate to make unless I had ample confirmation of it, and the confirmation is here. He wrote a letter on the 15th of this month to the War Office, from which I will quote two paragraphs— About the 10th of last January I was told in your War Department that I was on the ground a little late to secure orders for material that we were and are prepared to furnish, and that the Department had made all its commitments. I was particular to inquire whether this applied to the duration of the war, and the answer was, Yes. He was asked to leave a list of the things he could produce so that if by chance there might be any requirement for any of them he could be communicated with. Indeed, I think he was promised to be placed on the War Oilier list, whatever that may be. But no communication has reached him. No request for quotations has been made to this gigantic concern, who were willing and anxious to give us the service of all their splendid productive plant. It seems to me an astounding thing that a concern with such a capacity should be so disregarded.

Finding there was no possible chance of doing business here, Mr. Butler made his way to Petrograd. There he saw the Russian Government, and almost instantly secured an order from them for 5,000,000 shells for their field guns, half of shrapnel, I believe, and half of the high-explosive kind, and they are now being delivered. Mr. Butler has returned and recently visited the new Ministry of Munitions and made another offer to supply 2,000,000 3 in. shells at the rate of 400,000 monthly, delivery to take place within 90 days of the signing of the contract. I have very great hopes that different methods will be adopted by the new Department towards these direct offers; and it is with the object of eliciting front the Government some idea of what their policy is to be in relation to such direct offers that I have brought the matter before your Lordships to-day.

There is one other case that I desire to mention, that of another great concern, the Canadian General Electric Company of Toronto, which is second only to the concern to which I have just referred. Mr. Frederick Nicholls, the president of this company, has cabled to me as follows— The Canadian General Electric Company communicated with the War Office on November 7 last offering to invest necessary capital in special machinery for manufacturing shells should we receive a firm offer for 1,000,000 shells, but a letter from the War Office declined to consider our proposal and stated that as there was not likely to be any immediate demand it would probably not be desirable for me to undertake a journey to London at present. If the offer had been accepted we could have long before this been shipping from 15,000 to 20,000 shells daily, but all the orders we have received was one from the Canadian Shell Committee for 15,000 and another for 25,000, all of which have been shipped. At this late date production is much delayed until the delivery of special machinery. Many millions of dollars of orders have gone to the United States, but a company like ours, with ample capital and reserves, was not authorized to use its capital and energy in producing munitions at a time of such vital importance to the British Empire. At the time the War Office declined to consider our proposal we could easily have secured delivery of necessary special machinery which it is now almost impossible to obtain. The Bank of Montreal can advise you of the standing of this company, which has assets of four minion pounds sterling. Everybody who knows Canada intimately knows perfectly well that this is a firm of great repute and standing. And here again I make the same point, that they have been entrusted with small orders from the Shells Committee, which at all events shows their Competency. It is an undoubted fact that Canada has great facilities for turning out large quantities of munitions; and seeing What Canada has done for us in the way of sending such splendid replays of troops to fight our battles on the Continent of Europe, I submit that she should receive consideration in this matter. I do not suggest that she should be given a preference, but if there was a question of giving a preference undoubtedly Canada should be favourably considered. We are pouring great quantities of orders into the United States, while Canadians are not having the consideration to which they are entitled. I dare say many noble Lords noticed a statement which appeared a few days ago in The Times from Colonel Bertram, the chairman of the Canadian Shells Committee, to the effect that Canada could manufacture ten times more than the quantity of war munitions which are being made in that country at the present moment, and he blamed the British authorities for lack of orders.

Sir Robert Borden, the Premier, has been obliged, I suppose by the force of public opinion, to make a statement in explanation of why it is that Canada is being so scantily patronised by the British Government in regard to the output of munitions. In reply to persistent complaints in regard to this matter Sir Robert Borden issued a statement to the Press—this was on June 15—pointing out that by an arrangement made at the beginning of the war Great Britain undertook to purchase all field-guns and ammunition. Sir Robert Borden added— Under the above arrangement the British Government has undertaken full responsibility for ordering all field-guns and ammunition. That Government has been made thoroughly acquainted with the resources of Canada in that regard, and is entirely responsible for the amount of the supply ordered. So that this fact emerges, that Canada is capable of producing ten times—I should think twenty times, but it has been asserted in official quarters that she is capable of turning out ten times—the amount of munitions that she has been entrusted with, and it would be interesting to hear what explanation is to be given for our kith and kin in Canada who are part and parcel of the British Empire not receiving full consideration in this matter. Orders are pouring into the United States. I submit, and I hope I shall find response in all quarters of your Lordships' House, that Canada at all events ought to be filled up with orders to her full capacity.

I referred at the commencement of my remarks to the Morgan agreement. As the noble Earl told me, that agreement is not an absolute monopoly in the United States—that is to say, there are exceptions. The British Government has reserved to itself the right of transacting business direct with certain American firms. It would be hard to justify making an exception in America and not making a corresponding exception in Canada. I can assure the noble Earl that I have not the faintest desire to attack the Morgan agreement. I know enough of affairs to realise that some agreement of the kind was absolutely necessary in the conduct of these huge operations in the United States of America. Finance and all sorts of arrangements have to be considered and adjusted. But if the noble Earl, in the goodness of his heart, would give us a little information about this Morgan agreement it would be of great interest. At all events I invite him, since he has told me that it does not constitute a monopoly, to explain its limitation. As regards American manufacturers, there are many who have absolutely declined to put their business through the Morgan agency. I have had in the last few clays a rather heavy correspondence with the United States on this point, and knowing human nature as we do we have to take it as we find it; arid if we want to get these munitions and if there are capable and competent people in the United States who say they will not transact their business through Messrs. J.P. Morgan, the Government ought to consider what elasticity should be given to that agreement so that they can avail themselves of all offers that are worth consideration.

My object in putting this Question on the Paper has simply been to give the Government an opportunity of making clear what their policy is, and I hope they will tell us that the Minister of Munitions and his Department are determined not to be hampered with restrictive arrangements that are hurtful to the common object we have in view, which is to get an adequate and complete supply of munitions of war. We cannot afford to reject offers from competent and capable firms. We want all the help we can get. Mr. Lloyd George, in an eloquent passage in the speech he made at Manchester, acquainted us in the most graphic way with the consequences of lack of supplies. He pointed out that the temporary failure of Russia had arisen from lack of munitions. He admitted that we were suffering from the same defect, of course in a lesser degree, and that had we had all that was necessary we should have driven the enemy out of Belgium and France, have penetrated Germany, and have brought the end of this terrible war in sight. In view of those circumstances I think I am not guilty of any unpatriotic action in raising this question at this moment, in order that the Government may convey to us their determination in relation to tearing aside any impediments or handicaps that stand in the way of their getting copious supplies of ammunition from all quarters.


My Lords, I will endeavour to the best of my ability to answer several, at any rate, of the questions which the noble Lord has addressed to me. Nobody who knows him can possibly suspect him of any unpatriotic action either at this or any other time, and I am not for one moment complaining that the many questions which he has rained upon me he was not entirely at liberty to ask and probably justified in the public interest in asking. I will only say, speaking for myself, that I cannot help rather regretting that he did not give me some intimation in advance of the scope of the speech that he was going to make or of the principal subjects that he intended to raise. The Munitions Department has only been in existence for a few days, and my own connection with that Department is somewhat ill-defined. The bulk of the noble Lord's observations related to the conduct of the War Office at a time many months before the Munitions Department came into existence; and had he desired, as no doubt he did, that I should give your Lordships a full reply to many of the specific cases he has mentioned, I think the noble Lord might at any rate have told me what some of those eases were beforehand, so as to enable me to get the information from the War Office in advance and to give a more full reply than I am now able to do. Subject to those limitations, I will do my best to answer such points as I am cognisant of or familiar with. We have in your Lordships' House a very peculiar practice. A noble Lord puts a Question on the Paper, very likely of a brief and innocent description, which presupposes, not a speech, still less a debate, but a request for information which the Minister is asked to give, and which in nine cases out of ten he is only too happy to give. And the noble Lord will forgive me for saying that his Question as it appeared upon the Paper would have been susceptible of reply in a few sentences. Indeed that reply was furnished to me by the Department, and I will give it to the noble Lord in order that he may realise how much of my information is directly apposite to the Question on the Paper, and how much he will have succeeded in extracting from me by subsequent cross-examination.

To the Question on the Paper the official reply, which is very brief, is as follows:—"Offers have been received from time to time since the commencement of hostilities from Canadian firms, and they have been referred to the Canadian Government. Direct negotiations have not taken place with individual firms. There is no agreement by which the Imperial Government is prevented from dealing with firms or manufacturers in any of the Dominions of the Crown, but it has been arranged in Canada that the Canadian Government shall deal with the matter on behalf of the British Government." That is a direct answer to the Question on the Paper. But the noble Lord wants very much more than that, and to the best of my ability I will give it to him. He gave us in succession statements about four firms or companies who had made applications to the War Office in England with reference to the supply of munitions for the war, in each of which cases he led us to think that the reply that bad been received was chill, unsatisfactory, and, in the public interest, inexpedient. The first case was that of a firm, or of a group, as he described it, whose name he did not even give, but of whom he told me the spokesman or representative in the negotiations which had taken place was an eminent man, Sir Frank Crisp. I am not able to deal with the particular case.


He was the solicitor to the parties interested.


I am unable to deal with that specific case because, owing to the omission of the noble Lord to supply me with any information in advance, this is the first I have heard of it. The second case was the Toronto case, of which the spokesman was a Mr. Pringle. This is the first I have heard of that case. The third case was that of the Canadian Car and Foundry Company, represented by Mr. Butler, who in their inability to secure a contract here went to Russia where they succeeded in obtaining a contract for a large number of shells, which the noble Lord said—and I am delighted to hear it—have now been delivered. That is the best news for the Russian Government that I have heard for some time. The last case cited by the noble Lord was that of the Canadian General Electric Company, who have received certain orders from the Government for shells but desire more. With that case, again, I am not familiar. But I should like to make this observation about the whole of those cases—premising that I am only too glad to look into any of them and give the noble Lord any information that he desires—that it is not the case that any firm went to the War Office in London desirous of obtaining a contract for the supply of munitions in Canada and was told that such negotiation was impossible because of the agreement with Messrs. J. P. Morgan in America. It is obvious, on the face of it, that no agreement with Messrs. Morgan in the United States can have anything to do with Canada; and on the one occasion on which a representative of one of these firms seems to have derived the impression that he was debarred in Canada by something which had been already agreed upon in America, that impression was at once removed. If, as in this case, any manufacturer has been led to believe that an agreement made during the war in America prevents him getting a contract in Canada, he can take it from me that there is not an atom of foundation for it.


I was asked to state as a fact that such information had been conveyed by the War Office to these Canadian representatives.


On one occasion I heard that a Canadian representative had carried away that impression, and it was at a subsequent interview conveyed to him that a mistake had been made, either by him or by the gentleman who had been talking to him, and the matter was cleared up. The noble Lord may say, "So far so good; but what about your Canadian policy?" and this really is the matter to which he directed the greater part of his speech. After all that he said about the patriotism of Canada, the part she has played in this great war, our desire to give every possible opening to her industries, it is not to be believed for a moment that with sources of supply placed at its disposal the Government would stint them, still less that it would stint them in the case of a Dominion which has rendered such splendid and patriotic service. But what is the reason for our policy with regard to the supply of munitions from Canada?

I think, however, that before I pass to that I ought to endeavour to answer the question put by the noble Lord about Messrs. Morgan. He asked me whether I could tell him something about the Morgan contract. I will endeavour to do so. When the war broke out and the War Office began to buy munitions from America they commenced by placing their orders with companies and firms—the very system which the noble Lord now desires us to introduce into Canada. The result was that very high prices had to be paid, the deliveries were almost invariably late, and the system had to be abandoned as unbusinesslike and bad. It was in consequence of this that the agreement with Messrs. J. P. Morgan was concluded. It was done, if I may sum it up in a sentence, in order to get the advantage of competition amongst the various firms concerned. Messrs. Morgan were, as I told the noble Lord in a letter the other day, not given a complete monopoly—that is to say, the Secretary of State is at liberty to deal with other persons or firms if he informs Messrs. Morgan of the facts; but, broadly speaking, all orders except those which had been concluded with firms in the earlier period to which I referred, now pass through Messrs. Morgan. The com- mission they are paid is 2 per cent. [†] and all expenses; and the experience of the Government has been that, in consequence of this arrangement as regards American supplies, not only do we get the things at a much cheaper price than before but we also have much earlier deliveries. That will answer the question with regard to Messrs. Morgan.

Now perhaps I may revert to the subject of Canada, from which I diverged for a moment. In Canada the system adopted by the War Office has been this. They have made their orders from an early date through the Canadian Government, treating the Canadian Government, in fact, as their agents for the supply of munitions of war. Any requirements from the War Office here are communicated by letter or telegram to the Canadian Government, or, rather, to the Minister of Militia there. This officer constituted quite early in the day the Shells Committee to which the noble Lord referred. That is a body presided over by a gentleman whose name he mentioned, a General Bertram, and upon it are representatives of the various manufacturing interests in the Dominion, and the function of the Committee is to advise the Minister as to the contracts which, on behalf of the Imperial Government, he shall conclude. All applications are made to him. They go before the Committee, who examine and adjudicate between the claims or the capacities of the different parties; then the contract is concluded over there, and finally the Canadian Government assume the responsibility of inspecting the munitions for us when they have been produced. I think your Lordships will see at once the obvious advantages of such a method as that. In the first place, the statements and claims of the various business applicants can be tested on the spot by those who know and deal with all the firms concerned. In the second place, in Canada they have naturally a very much wider knowledge as to the resources of the country in respect of raw material, labour, and so on, than anybody could possibly have in the Offices in London. In the third place, firms can be brought into competition with each other, the price lowered, and a chance given to all. This may be a good or a bad system. The Government have hitherto acted upon the belief that in the circumstances it is the best system; and whether the noble Lord agrees with that, or whether he prefers the system of dealing with independent agents coming to London, he will I think realise that as long as the old system exists you cannot go behind the back of the Dominion Government in Canada and make separate arrangements with gentlemen, however reputable, coming to this country. I think that in one respect the noble Lord was a little mistaken. He spoke in one part of his speech as if some one in Canada enjoyed a monopoly comparable with that of Messrs. Morgan in America.


I did not suggest that.


I beg the noble Lord's pardon if I misunderstood him. The Shells Committee is a business body which places its orders in the manner it thinks best. Let us take the rival case pat before us by the noble Lord. He seems to think that a much better plan would be, when the chairman, agent, or representative of a firm conies over here and tells the War Office what he can do, that the War Office should at once jump at the chance and make an arrangement with him. But it is obvious that in such a case it is quite out of our power to accept the statements made by the gentleman, of whatever character or position he may be. We must satisfy ourselves as to the capacity of his firm for production and as to the speed with which he will deliver the articles we may order from him, and we cannot be sure that we may not get a better article elsewhere. The noble Lord seemed to speak as if the firm in question, by being refused here, would exhaust its chance of participating in the war contracts. That is far from being the case. There is nothing to prevent its tendering in Canada and having its tender accepted. Indeed, I think he admitted in two cases to which he referred that the firms in question bad already received and were turning out considerable orders for munitions for the British Government.

Let me state another point. The system which the noble Lord, I understand, advocates has been tried in Canada in respect of the purchase of other articles required for the war—articles, I mean, other than munitions; articles such as forage, food, saddlery, and the like. In the first months of the war those articles were purchased partly from agents in Canada and partly from gentlemen coming to this country. The result was found to be so unfortunate, so lacking in system or regularity, that it had to be replaced by an arrangement by which the War Office purchased those articles through the Canadian Pacific Railway, which has a great purchasing organisation most useful for the purpose. On the question of policy it is, of course, open to the noble Lord, or, indeed, to any one, to argue that the War Office ought to have taken earlier in the war a wider view as to the necessities with regard to munitions and to shells. Probably most of us hold that view. That, however, relates to a matter connected with the Government before the Government was reconstituted. I am not bound to stand here as the champion of the War Office. I stand here, I suppose, as the representative of the Munitions Department; and I am not concerned, indeed I have not the knowledge or the authority to enable me, to defend the policy of the War Office in its wider aspect. What I have been concerned to expound to the House is the method it adopted, which is still in operation.

But I would like to point out one or two things to the noble Lord when he assumes that the offer of a firm to produce so many shells within a given space of time practically means that addition to the fighting strength of our forces. That is far from being the case. It is not a question of the shell alone. The shell by itself is useless. The shell is ineffective for its purpose unless it has a cartridge behind it, unless it has a fuse at its point, unless it has a propellant to discharge it into the air. With the exception of the propellant, Canada does not make these. Canada does not make the fuses or the cartridge cases; and as a matter of fact when orders are given to Canada she has to go to America for these component parts of shells. The delay thus caused has these effects. In the first place I am informed it causes delay in the delivery of shells; and, in the second place, it causes great interference in America with the contracts which we have already entered into with manufacturers in that part of the world.

The noble Lord, as I have remarked, assumes throughout that the drawing up of a contract, the promise to deliver so many shells at a given moment, is equivalent to their possession by us when that moment arrives. Alas! if he had seen the information I have seen relating to firms, not Canadian or American only, but firms in all parts of this country, if he had seen the figures I have seen as to promises and delivery he would have entertained no such sanguine opinion. And I am bound to tell him as regards Canada, to which he specially directed his remarks, that the delivery of shells from Canada under such orders as have been placed there has been unsatisfactory, and does not encourage orders being given on an extended scale to individual firms. If orders were placed wholesale in Canada without the check of the Shells Committee and the Canadian Government we might find ourselves, if the war came to an early termination—which many of us think unlikely—with enormous stocks of shells on hand which we had not received in time to use.

My observations have not, perhaps, satisfied the noble Lord, but they are the best I can offer in the rather peculiar circumstances in which I have been placed. The Government, of course, admit that the case as regards munitions everywhere, including Canada, is one of enormous magnitude, but it is also one of great difficulty and complexity; and your Lordships will have seen in the newspapers with some satisfaction that Mr. Lloyd George has prevailed upon a well-known ex-Member of Parliament, Mr. D. A. Thomas, to go out to America and Canada with a view to seeing whether any changes or improvements in organisation can be effected. When Mr. Thomas comes back and reports to the Government, I hope I shall be able to make a statement to your Lordships more complete than that which I have offered this afternoon.


My Lords, I have listened to the speech of the noble Earl with great interest, and I sympathise with him in having to reply to a speech with so many details and so many hard facts proved up to the hilt without the necessary information with which to do it. I confess that he has made an admirable reply from his point of view. But there is one fact with which, I think, he has not sufficiently dealt. He said that the Canadian Government practically acted as agents for the supply of shells; but we have Sir Robert Borden making a statement that the shells were entirely ordered by the British Government, and that the British Government alone were responsible for them. I come to the conclusion, therefore, that the British Government have not ordered sufficient shells from Canada, and that had Canada been given an opportunity of making more shells she could have supplied a very much larger quantity than she has done. I think we all agree, if there is any claim at all as between America and Canada, that Canada, being part of the British Empire and having sent so many splendid troops to our assistance in this terrible fight, certainly ought to have the preference.

I think that my noble friend has done great service in bring this question forward. Throughout the whole of the country there is great anxiety on this matter of munitions. It is felt that we are and have been at a great disadvantage for want of shells, that we have lost thousands of lives that might have been saved had we been in the same position as the enemy in regard to the supply of shells. Surely after ten months the War Office—I do not know who is responsible in the War Office, probably the Contract Department—surely they cannot say that they have justified their action when we are left with such a short supply. I think that any ordinary business concern would have gone into this question sooner. Even if we had a few million shells left over and above what we required, what is the expense of that in comparison with the value of the lives which are at stake? Who can say that the system which has been adopted by the War Office has been a success? It must have been well known to the people who had to order the shells that for some time there was a deficiency. I judge a system by the results, and- I submit that there has been failure. When the German Government want timber, or shells, or iron, or steel, they get six of the very best experts in that country to advise them and deal with the question of purchase. Had the War Office done that at the early part of this war we should not be in the position we are in to-day. It is not necessary for me to say what that position is. We all feel it too keenly. Who it is that is responsible I cannot tell, but that the War Office has failed in its duty so far as shells—aye, and rifles—are concerned, I have not the slightest doubt. I trust that Mr. Lloyd George, with that energy, skill, and ability which he possesses, will remove this reproach, and that in the future conduct of the war, at all events, we shall not want for an ample supply of shells.


My Lords, the question which has come up is, I think, somewhat mystifying, because it is not understood why a banker should be employed by a Government to do work which is not in his line. No one in business, of course, would think of employing a banker to buy shells or to do anything out of his line. This whole question is a financial operation. The Morgan contract unquestionably would not have been entered into unless it was in connection with exchange. Everything that is bought has to be paid for; as every one knows the question of exchange comes in, and in the last sixty days it has gone down to the lowest point it has been at for sixty years. That, in my opinion, is the crux of the contract with Messrs. Morgan. I am intimately connected with America and the contracting parties in the United States in metals and shells, and I am convinced that the Government would not have had to pay two per cent., which is a double commission, had it not been for the financial operation in which Messrs. Morgan were employed for the purpose of controlling exchange. They are undoubtedly the best firm that could have been employed for the purpose; unquestionably so in the time of Mr. J. P. Morgan. Every one knew the United States Government controlled the exchange and the rate of interest a good deal through Mr. Morgan's intense concentrated knowledge of how to handle it, and there is no one else to-day who can handle it except the German financiers in New York. This contract with Morgan's is not a contract for supplies only, but both for buying and paying for them. The Canadian Government is almost in the same position. They had to have, and did have, arrangements with Morgan's for large exchange operations. That, again, was a question that had to be controlled; the buyer and paymaster had to be in one hand; therefore a large commission was paid, and contracts in consideration from Canada would have necessarily passed through Morgan's hands with the question of how they were to be paid. There was the question whether they were to be paid direct from London, or through New York. If they were paid through New York, the exchange balances that were arranged for in Canada were drawn on. It is well understood in business why Messrs. Morgan were employed. Unfortunately it has got turned round in the shape of refusing contracts for Canada. It is probably through the curt replies which the Government give to those to whom they do not want to give a direct answer that some of this misunderstanding has arisen. It is the experience of all who have been brought into contact with Government Departments that their replies are curt and not couched in business language. I mention this because it is as clear as anything why the contract with Messrs. Morgan was made. But it is unfortunate, because I do not think the Government know how to buy raw material—pig iron, and so on; they have to employ others, probably inferior men, to do this work for them, whereas those at the head of businesses, the most practical and successful men, would be the ones to deal with it. I mention this because it has been made rather a mystery of.


My Lords, it seems to me that the noble Earl has not got the matter clear with regard to Canada. As he pointed out, it is not his special duty or business to defend the War Office. Nevertheless he said all that could be said in favour of it in view of the very damaging and serious remarks which fell from the noble Lord behind him (Lord Devonport). But I venture to say that the noble Earl made rather a serious aspersion upon Canada. He said, I think, that the deliveries from Canada were more unsatisfactory than those coming from any other part.


I did not put it as high as that.


May I ask whether the deliveries are defective in respect of orders given by the War Office to Canada, because from the speech of Lord Devonport it seems that very few orders have been given by the War Office to Canada. Small orders have been given through the Shells Committee, and that Committee presumably made inquiries and thought they were dealing with responsible people who would deliver the orders they contracted to deliver. Therefore it looks as if the Canadian manufacturers were condemned in advance by the War Office. The noble Lord said that in one case the War Office were approached in January, and the offer which was then made was rejected promptly on the ground that shells were not wanted. I do not understand from the speech of the noble Earl that the War Office have ever complained of shortage of deliveries or of deliveries not up to time. I do not think their refusal to give orders was based on that ground. I think what the noble Earl has said will have a very wide effect and may do serious damage to Canadian industries. The Canadian manufacturers are now coming into the market and offering to deliver shells, not only in London, but in Paris and Petrograd, and if it goes forth on the authority of my noble friend that their deliveries are not to be relied upon, business with Canada will, I am afraid, be very seriously interfered with. It is so serious a charge against Canada that it ought to be thoroughly investigated, because if Canadian manufacturers have not delivered shells up to contract they ought to have been informed of the fact by the War Office. I did not gather from the noble Earl whether the orders the deliveries of which were unsatisfactory were given through the Government or the Shells Committee. Is the Canadian Government responsible? Has the War Office appointed the Canadian Government to act as its agent, as it has done in the case of Messrs. Morgan, of New York? The matter seems to be in some confusion, and it is essential that it should be cleared up. Again, the noble Earl said that in view of these unsatisfactory deliveries the War Office would naturally hesitate to give orders. But the War Office might do in regard to the Canadian manufacturers exactly what the French and Russian Governments have done—what I believe our own Government has done in many cases—namely, exact guarantees, which means that a deposit is put up by the manufacturer which is forfeited if the deliveries are not up to date. I agree with Lord Devonport—everybody would agree—that the need for shells was so great that those offers put forward by responsible people in Canada with every probability that they would be carried out, ought to have been accepted by the War Office.