Lords Sitting of 23 April 1929

Preamble
The House met at a quarter past four of the clock, The LORD CHANCELLOR on the Woolsack.
The Earl of Harrington—Sat first in Parliament after the death of his father.

CHATHAM AND SHEERNESS STIPENDIARY MAGISTRATE BILL. [H.L.]
THE LORD CHANCELLOR (LORD HAILSHAM): My Lords, I beg leave to introduce a Bill to prevent difficulties arising in the event of the office of Stipendary Magistrate for Chatham and Sheerness not being filled; and to move that it be read a first time.
Moved, That the Bill be now read 1a.—(The Lord Chancellor.)
On Question, Bill read 1a, and to be printed.

PHARMACY BILL. [H.L.]
VISCOUNT GAGE: My Lords, I beg leave to introduce a Bill to enable the Council of the Pharmaceutical Society of Great Britain to make by-laws providing for the registration, without examination, of persons registered as pharmaceutical chemists in Northern Ireland; and to move that it be read a first time.
Moved, That the Bill be now read 1a.—(Viscount Gage).
On Question, Bill read 1a, and to be printed.

AGRICULTURAL RATES BILL.
Brought from the Commons; read 1a, and to be printed.
METROPOLITAN WATER BOARD BILL.
Read 2a.
WINCHESTER WATER AND GAS BILL.
Read 2a.
GAS LIGHT AND COKE COMPANY BILL.
Read 2a.
LONDON AND NORTH EASTERN RAILWAY BILL.
Read 3a, with the Amendment, and passed, and returned to the Commons.
BIRKENHEAD CORPORATION BILL
Read 3a, with the Amendments, and passed, and returned to the Commons.
BLACKBURN CORPORATION BILL.
Read 3a, with the Amendments, and passed, and returned to the Commons.
IVEAGH BEQUEST (KENWOOD) BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.

LOCAL GOVERNMENT (SCOTLAND) BILL.
THE LORD PRIVY SEAL (THE MARQUESS OF SALISBURY): My Lords, in pursuance of the Notice which I gave last week I beg to move the Motion which stands in my name—namely, that leave be given to advance the Motion for the Third Reading of the Local Government (Scotland) Bill from Thursday next to Wednesday next. I have already stated to your Lordships how sorry I am that the mistake should have been made, but I was not aware of the difficulty in another place when I originally put the Third Reading down for Thursday. I beg to move.
Moved accordingly, and, on Question, Motion agreed to, and ordered accordingly.

ARMY AND AIR FORCE (ANNUAL) BILL.
House in Committee (according to Order): Bill reported without amendment.

SAVINGS BANKS BILL.
Order of the Day for the Second Reading read.
LORD TEMPLEMORE: My Lords, the Bill to which I ask your Lordships to give a Second Reading this afternoon is a Bill to facilitate the further expansion of trustee savings banks, and to simplify the administration of those banks. I wish that my noble friend the Chancellor of the Duchy of Lancaster could have been here this afternoon, as he would, with his Treasury experience, have explained this Bill far better than I can hope to do. However, with your Lordships' permission I will do my best to explain as briefly as possible the clauses of the Bill.
Many of your Lordships may be aware that these trustee savings banks are some of the oldest saving institutions in the country. Some of them have been in existence, I am informed, for considerably over 100 years. They were first brought under Government control in 1817. Since that date many Acts have been passed regulating the administration of these banks and the investment of the funds deposited. Throughout all that time the popularity of the banks has been secured by the maintenance of the principle of local management and control by bodies of unpaid trustees. It is to this principle, which has been maintained throughout, that the great popularity and usefulness of these banks are due. These trustee savings banks are for the most part divided into two departments. There is, firstly, the ordinary department, the funds of which are invested with the National Debt Commissioners who guarantee a fixed rate of interest to the trustees, and secondly, in the case of banks which have deposits of £200,000 or more, there is a special investment department in which depositors who have £50 or more in the ordinary department may deposit. It is interesting to note that on November 20 last there were 119 of these banks with 450 branches. The total amount due to ordinary depositors was over £81,000,000. In fifty-seven of the banks there were special investment departments with deposits of over £38,000,000 making a total of rather over £120,000,000. These facts will show, I think, the usefulness and popularity of these banks and the very important place they have in the life of the country.
Coming to the clauses of the Bill, they may, I think, be dealt with under

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three headings—firstly, simplification; secondly, development; and thirdly, miscellaneous. Under the first heading may be mentioned Clause 1 which will enable the banks to take security from their officers in the form of a general bond of a guarantee society covering all officers in accordance with modern practice. Clause 16 simplifies the dealings of the banks in property by vesting all property in four custodian trustees instead of requiring all documents to be executed by every member of a numerous body of trustees. Clause 18 empowers the National Debt Commissioners to prescribe what persons are to sign the numerous documents and returns prepared by the banks. Under the second of the headings that I have mentioned, development, there is an important clause, Clause 2, which prevents the closing of any trustee savings bank until it has been found absolutely impossible to obtain suitable persons to carry it on. This clause is important because at present the trustees can close a bank whenever they please, provided, of course, that they give the required notice and pay out their depositors. I am informed that in many cases these banks have been closed when they could have gone on and done useful work for the community. Clause 6 will permit the opening of special investment departments in exceptional circumstances where a trustee bank has not in its ordinary department deposits amounting to £200,000, and it widens the scope of the securities in which deposits in these departments may be invested.
Under the third heading, miscellaneous, we find Clause 3, an important clause, enabling the National Debt Commissioners to invest the savings bank funds in any security guaranteed by the Government, instead of as at present, when half the trustee savings bank funds must be invested in direct Government obligations. Clause 9 empowers the banks to undertake certain ancillary business to help thrift, such as the safe custody of depositors' valuables and matters of that kind. This clause will only be put into force very sparingly and the duties which it permits will only be undertaken subject to the consent of the National Debt Commissioners given after consultation with the Inspection Committee and the Trustee Savings
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Banks Association. Then there is Clause 10 which removes most of the existing restrictions under which depositors may not have more than one account in a savings bank. At the present moment, for instance, a person may not have an account in the Post Office Savings Bank and in a trustee savings bank, and he may only have one account in whichever bank he chooses to put his money into. This clause will enable depositors to open, for instance, separate accounts for holidays, education and such like matters. In the future, a depositor will be able to have an account in the Post Office Savings Bank and a trustee bank. The only restriction will be that he cannot have an account in more than one trustee savings bank.
The last clause that I think I need describe to your Lordships is Clause 12, which is also an important one. At present pre-War stocks can only be bought through the trustee banks or the Post Office Savings Bank by existing depositors or by an individual opening a savings bank account specially; whereas Government securities issued during and since the War can be bought by the public in general through the Post Office Savings Bank and the trustee banks. There seems to be no reason whatever for maintaining this difference between pre-War stock and other stock. It is an inconvenience to the public and causes extra work for the banks. It is proposed, therefore, to put all these stocks on the Post Office Register, which will mean that in future any one will be able to buy all Government stocks through the Post Office and trustee savings banks. This will bring within the ambit of these banks such stocks as local loans and other securities which are not directly charged on the Consolidated Fund.
I have said enough, I think, to show that this is a useful measure which will simplify procedure and will generally bring the conduct of these banks up to date. The noble Lord opposite, who I believe is going to address your Lordships, said last week that this Government never did anything that he wanted them to do. I believe that that is not an uncommon complaint for an Opposition to make about a Government, but it would be a great satisfaction to me if, on the first occasion that I have intro

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duced a Bill from this Table, I could obtain even a qualified approval from the noble Lord when he comes to reply. However that may be His Majesty's Government believe that no Party will challenge the principle of this Bill. They look on this measure, the provisions of which have been discussed at length with the representatives of the banks concerned, as advantageous to those banks and one which will assist that person whom they specially desire to assist—namely, the small investor. As such I commend it to your Lordships for Second Reading.
Moved, That the Bill be now read 2a.—(Lord Templemore.)
LORD ARNOLD: My Lords, I do not think, if I may say so, that your Lordships have suffered at all in regard to this Bill through the absence of a noble Lord, Lord Cushendun, because the noble Lord opposite has, I think it will be generally agreed, put forward the case for the Bill with brevity and lucidity, both of them qualities much to be desired. I am sorry I cannot go further in saying entirely pleasant things to him. He was good enough to refer to an observation I made last week when I said that this Government never do quite what I want them to do. That still remains true despite this Bill. It is the case that the Bill, broadly speaking, is non-controversial. I will give the noble Lord that satisfaction if it is any pleasure to him. Whatever pleasure that may bring to him he may enjoy to the full, but my complaint about the Bill is not so much with what is in it but as regards what is not in it. It does not go far enough; it is too restricted. I propose to confine myself to one point, and one point only, of omission from this Bill.
This is a Bill, as the noble Lord has explained, to amend the savings banks procedure, and he says that those banks have great popularity and usefulness. I think it would probably be more true to say that they have had great popularity and usefulness; I believe that under existing conditions their popularity and usefulness are likely steadily to diminish and, indeed, are diminishing in a sense. The reason is that these banks are still only allowed to give the depositors a rate of interest not exceeding 2½ per cent. That is too low in these days and
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I think I can prove that quite apart from the general statement, which carries its own truth with it. Complaint is made, and is made justly, that these banks do not offer the inducements which are given by other institutions, and given with absolute safety. Take the Birmingham Municipal Bank. The Birmingham Municipal Bank, which was formed in 1919, pays 3½ per cent. It is a very prosperous bank and it is growing rapidly; in fact its history is a romance. The authorities are paying 3½ per cent. and are allowed to pay that by their Act, and they pay it to all the depositors I believe. If the Birmingham Municipal Bank can do that, I think it is clear that more than 2½ per cent. should be paid by others, and I am very sorry the opportunity has not been taken in this Bill to raise the permissive rate of interest at least to 3 per cent. That is what was urged in another place, but the Government would not yield on the point.
The chief purpose of these banks is to encourage thrift. That is what they are for; their name implies that; and, therefore, they ought to give the best inducement which it is reasonably possible for them to give for thrift; and they are not doing that. Look at the position to-day. The Bank Rate is now 5½ per cent. The utmost which a depositor in these savings banks can get is 2½ per cent. Even if the Bank Rate fell 1 per cent., or 1½ per cent., of which there seems to be no prospect, at any rate at present—1½ per cent. is probably the most by which it will fall for a considerable time to come—even then I think the savings bank could afford to pay 3 per cent. But even if the Bank Rate fell to such a figure that there was a small loss, there is nothing new about that. The main defence of the Government in regard to this matter in another place, as I understood it, was this. There used to be a loss in those days, now so far in the past that it scarcely seems possible to recall them, when Government securities only yielded 2½ per cent. Still, 2½ per cent. was then paid by those savings banks, and there was a loss. The Government say: "That is quite true; the position now is reversed; it is true that now there is a profit." The Financial Secretary admitted there is a profit made out of depositors which is going to the

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relief of taxation. In effect he said: "Well, there it is; there used to be a loss but now there is a profit, and so, on the whole, justice is done." But justice is not done. It is not the same people to a very large extent that you are dealing with. You are dealing with a new class of depositors and they are entitled to have more than 2½ per cent. having regard to present monetary conditions.
I am only asking that this should be a permissive power. It would not be obligatory to pay 3 per cent.; it would be permissive. It is no answer to say that a lot of these depositors are very small people and they cannot expect very much. But those are just the people you want to encourage. Small depositors may grow into large depositors, and they do in many cases. I point out what the pre-War position was, compared with the present position, and I say the contention of the Government is one which cannot really be sustained. What was said in another place in addition to what I have already told your Lordships was this. It was said there was a Committee—the Montagu Committee—that went into this matter in the middle of the War (when money was much the same as it is to-day) and the Committee said you had better not change it because experience has shown in the past that 2½ per cent. is as much as can be paid over a long period of time. That may have been so in the twenty or thirty years previous to the War, but it is no use to quote the Montagu Committee as one whose findings apply to the present day. The Montagu Committee thought, as practically everybody else did at that time, that after the War monetary conditions would become again pretty much what they were in pre-War days, but that has not happened. The Montagu Committee's Report was based upon past experience and did not take into account the conditions as they exist to-day. Therefore I maintain that to put that forward as a reply is something which, as a matter of fact, is not a sound thing to do, and something which it is very easy to refute by simply looking at the position as it is now.
That is all I am going to say. I do not suppose the Government will give way on the point. I suggest to noble Lords that the Bill does not go far
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enough. It is typical of so many Bills of this Government. They seem to think they ought to do as little as possible; in fact, from the hopeless and dreary speeches of the Prime Minister, I gather that their political philosophy is that if they go on doing nothing, in the long run everything will come right. That is not our view. We have a very different view, and we think, in a modest Bill like this, something might have been done which would have made for its greater usefulness. If I thought there was any use in putting down an Amendment on this point I would do so, but having now some experience of your Lordships' House I will not do that, but will simply leave it as it is.
THE MARQUESS OF READING: My Lords, I have no desire to take part in a discussion on the merits of this Bill which has been so carefully and well explained to us by the noble Lord in his speech. I confess, however, that I think it is difficult to bring forward an argument against that which was just now advanced by my noble friend Lord Arnold. I have always wondered why it is now-a-days, when money brings in so much higher a rate of interest, that we should still adhere as a Government to this percentage of 2½, which is founded on past conditions which certainly do not apply at present. The object of these banks and of course of the Government is always to encourage thrift, but it is a poor encouragement to tell a man that if he deposits money in these banks or the Post Office he will only get such a small interest as 2½ per cent. when he can get more elsewhere. Most of the people who deposit their money in these banks have no notion that they can get more elsewhere, or they do not know how to set about depositing their money with another bank or putting it in some other institution where it would be perfectly secure.
I have wondered why it is that the Government have not gone further, and this particular Bill supplies an opportunity, as my noble friend Lord Arnold has stated, of questioning the policy of the Government. He is not asking that you should make this a statutory rate of interest of 3 per cent. All that is requested is that there should be a permissive three per cent. It is quite right that there should be that distinction, be-

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cause no doubt once you have a clause giving a statutory rate of interest in an Act of Parliament, notwithstanding that money might fall in its yield, it would be very difficult indeed to change the rate of interest which you have agreed to give to persons who have deposited money. I suppose that one of these days—not in the lifetime, I am afraid, of some of us who are here—we may have money again at the rate it was before the War, but I cannot see why there should not be a clause introduced for the purpose of enabling the banks to pay this rate of 3 per cent.
I suggest it is worth the inquiry of the Government. I must assume, and indeed I am perfectly certain, that the object is to get people to deposit money in these banks who otherwise would not deposit their money anywhere, and to get absolute security which is, of course, very much to be desired. I do not want to enter into a controversial discussion with regard to it, but I do suggest that it is worth thought and examination, and it is difficult to see why we should not have a permissive clause in the Bill which would enable a rate of interest not exceeding 3 per cent. to be paid instead of the 2½ per cent. now permitted. I hope some attention may be given to it.
LORD HUNSDON OF HUNSDON: My Lords, I would like to raise a smaller point than that raised by my noble friend opposite. It is with regard to Clause 9. It is really a Committee point, but I dare say your Lordships will allow me to bring it forward this afternoon so that my noble friend may consider it between now and the Committee stage. When I read Clause 9, which, as my noble friend explained, gives power to the trustees of trustee savings banks "to undertake any business which is, in the opinion of the Commissioners, of a nature ancillary to the purposes of the bank," I was rather alarmed, because it is obviously an exceedingly vague expression, and I thought it was intended to enable trustee savings banks to undertake important operations. But when I heard what the Minister in charge of the Bill said I realised that it is a very trivial matter indeed. All they wish to do by the clause is to give trustee savings banks power to take the custody of any securities or wills or documents just as other banks do, and also—a point which my noble friend
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left out—to enable clerks in the savings banks to go round and collect members for trustee schemes from neighbouring factories.
It is nothing at all; it seems a trivial matter. But really the language is almost portentous. I will read the clause to your Lordships. The clause says:—
"It shall be lawful for the trustees of a trustee savings bank, with the consent of the Commissioners given after consultation with the Inspection Committee and the Association and subject to such conditions as the Commissioners after such consultation as aforesaid may impose either generally or in the case of any particular bank, to undertake any business which is, in the opinion of the Commissioners, of a nature ancillary to the purposes of the bank…"
I do not know whether that last expression conveys anything to your Lordships. It conveys nothing whatever to me. I have heard banks described as the handmaids of commerce, but who are the handmaids of the handmaids I really do not know. The clause goes on—
"and calculated to encourage thrift "—
that is quite right—
"and within the financial capacity of the bank."
That is to say, a few shillings paid for overtime to a clerk to tout for members is not to endanger the position of the savings bank. Really the Bill makes extraordinarily heavy weather of almost nothing at all. I very much hope that my noble friend will consider the matter, because I suggest it is inadvisable in an Act of Parliament to suggest that a bank, of all institutions, should have vague powers when it has not got them at all.
LORD OLIVIER: My Lords, I feel so strongly about the inadequacy of the Bill in view of the considerations that have been put forward by noble Lords who have spoken to-day that I wish we could get from the noble Lord in charge of it some indication of the principle on which the restrictions are based. Clause 10 carries on the old Post Office restriction as to the amount which a person may deposit and the number of accounts he may have. What is the reason for saying that a man may not have more than one deposit account in a savings bank or in the Post Office Savings Bank? If you want to encourage thrift why should he not have as many accounts as he likes in

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these very safe institutions? Do you wish to discourage him from making deposits? The history of all these limitations is that, when the Government went into the Post Office Savings Bank business, so far as the Government were concerned there was no money in it, as I think has been pointed out, and they did not want to get saddled with liabilities for large or multiple accounts, and moreover they did not want to compete with what was called the legitimate business of the regular banks. That is the principle in deference to which all these restrictions upon the legitimate use of these very useful institutions (so long as they are run on sound lines) were set up. Do these reasons, in the opinion of the Government, still exist to-day? If they do not exist, why should not the Government make a little more profit and why should they not compete with the so-called legitimate interests of the larger banks which are supposed to cater for any one with more than £100? I should like an explanation of the restrictions to which noble Lords have called attention.
LORD JESSEL: My Lords, before the noble Lord who speaks on behalf of the Government replies I should like to say that some of us who have listened to this debate have been very much impressed by the able speeches of noble Lords opposite. I am sorry that the noble Lord, Lord Arnold, has again made an attack on the Government. It is habitual with him, and he never sees any good in the Government. I can only hope that when he is pressing for the rate of interest to be raised he is not looking forward to the time when possibly a Labour Government may come in and the Bank Rate instead of being 5½ per cent. may be in the neighbourhood of 10 or 15 per cent. in consequence of the damage to the national credit.
LORD ARNOLD: National credit improved under the last Labour Government.
LORD PARMOOR: Very considerably.
LORD JESSEL: They were not in power at the time and I very much doubt if such a contingency happened whether the event I have foretold would not occur. Be that as it may, noble Lords have made a very interesting suggestion. The Montagu Committee sat some time
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ago, and I should like to ask the Government if they cannot see their way clear to make an Amendment now which would not jeopardise the fate of the Bill, or whether they could not set up another Committee or Commission to enquire into the whole question of the rate of interest. It does seem to me to be exceedingly small and that you are defeating the very object you want to achieve—to induce people of small means to deposit their money in these valuable institutions. I merely throw out that suggestion because I think that a great many of us who have not studied the question as closely as we might are anxious to know the reason why the figure is fixed at 2½ per cent., and whether the time has not come to adopt the suggestion so usefully put forward both by Lord Reading and Lord Arnold. As I have said, I know the danger of jeopardising the Bill at this moment, but I hope that the noble Lord will be able to say that the Government will set up another Committee on this important subject to see whether anything can be done in the future in the direction that has been so strongly urged on the opposite side of the House of a proposal which, I am sure, hail the sympathy of many upon this side.
LORD DANESFORT: My Lords, I confess to feeling a certain degree of sympathy with the point raised by the noble Lord, Lord Arnold, and so strongly reinforced by the noble and learned Marquess opposite. There can be no doubt that the rate of interest was fixed at 2½ per cent. when the conditions in the money market were entirely different from what they are now. It is not suggested that there should be a statutory minimum rate of interest, but that there should be a permissive rate of interest. May I suggest that, if the noble Lord who is in charge of the Bill cannot give a decisive answer at the moment, as I think is extremely likely, he should consult with his colleagues and see if they will be prepared to accept an Amendment somewhat in that direction? This is not a very large question, but it is of great importance both to the savings banks themselves and also to the depositors. If we want to encourage investment in savings banks, as I understand the noble Lord, Lord Templemore, desires, and to add to their usefulness, I

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venture to think that this object would be attained to a certain extent by making the suggested alteration.
THE FIRST COMMISSIONER OF WORKS (THE MARQUESS OF LONDONDERRY): My Lords, in view of the speeches that noble Lords have made in regard to this Bill, perhaps I am in a position to throw some light upon the questions which have been raised by the noble Lord, Lord Arnold, and by the noble and learned Marquess. I am given to understand that in respect of Post Office savings the rate of interest is 2½ per cent., but I would venture to point out to noble Lords that there are other methods of saving on which the interest is at a higher figure and that the general public, when saving is in view, is not confined to investments in the Post Office Savings Bank. Another argument which I think noble Lords will appreciate is that, if the rate of interest were to be raised, this would not have the effect of attracting much new money, but that, while only a small amount of new money would, it is estimated, be attracted by a higher rate of interest, the Government would at the same time have to pay that higher rate of interest on other deposits. Those are, I think, arguments which noble Lords have not considered in their full bearing, and I am bound to say that I have not done so either. I would venture to suggest that the further points that have been raised by my noble friends could be brought forward when the Motion is moved that the House go into Committee, and I am sure that my noble friend who has introduced the Bill so admirably will then be in a position fully to answer the questions which noble Lords have put.
LORD PARMOOR: My Lords, I should like to say a few words in answer to the noble Marquess. I think his last suggestion is a good one. If the Second Reading is agreed to now, I understand that the points will be raised and discussed at a later stage. That would fully answer the purpose of my noble friend Lord Arnold, and, I hope, of the noble and learned Marquess as well. But there was one point in the argument which certainly did not appeal to me, perhaps because I did not understand it. The noble Marquess tells us that you could
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get more than 2½ per cent.—I presume up to 3 per cent.—from alternative investments of an equally safe character so far as the small investor is concerned. He referred no doubt to the savings certificates. I thought that this fact was rather an argument in favour of the permissive 3 per cent. I do not want to argue the point further. It may properly be raised, and I hope it will be fully discussed, at a later stage, and I think that when it is reconsidered it may be seen that this is an argument, not in favour of the statutory limit of 2½ per cent., but of a permissive limit up to 3 per cent.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

CEYLON.
LORD PARMOOR LORD PARMOOR rose to call attention to the Report of the Special Commission on the government of Ceylon, and to ask His Majesty's Government whether they are taking any steps to carry out the recommendations. The noble and learned Lord said: My Lords, my Question refers not only to actual and immediate steps, in the sense of suggested legislation or anything of that kind, but asks whether the Government are taking steps to provide that the recommendations of the Donoughmore Committee may be applied in Ceylon. I think this matter is of very great importance from two points of view. I remember spending a few weeks in Ceylon at the beginning of 1925, and hearing on every side the statement that it would be more possible to solve what are called inter-racial differences in Ceylon than in the larger and more complicated atmosphere that surrounds these questions in India. I recollect particularly that Dr. Fraser, who was the extremely well-known head of the Kandy Missionary College, had attributed to him the statement that a further step should be taken in order to bring about understanding and a peaceful spirit between the various races in Ceylon and that in his view—and nobody knew better the conditions in that country—this would be a right method of procedure.
If I may give one more illustration of what I mean and of what one ascertained at that time, there was a very

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well-known internationalist, interested in education in India, who stated that the complexities there are so great and the area so vast, if you wanted to take one view of the whole question, that it would be eminently desirable that steps should be taken in Ceylon in order to place the solution there on the best possible basis and in that way to give an example of the proper treatment of constitutional questions as between East and West and to provide a real lesson of great educational value. One need hardly say that these constitutional questions, such as are dealt with in the Report of the Donoughmore Committee, are of more vital interest to us than to any other country, and that other countries are looking to us to show the way towards that reconciliation among the new principles of just liberty and government that is necessary if civilisation in its larger sense is to be preserved.
I am glad to say that this is a matter about which there is no political dispute or Party difference. It is eminently a matter of constitutional revision which is suitable for discussion in this House, and the Report of the Commission itself of course would dispel any illusion—I do not suppose it exists in this House, but it sometimes comes to the front at Election times—that the Party to which I belong are not equally anxious, with the other two Parties in the State, to do all that is possible to produce understanding and good feeling among the races of our Empire, so that there shall be as little friction in the future as possible. As a matter of fact, on this Commission, the Party to which I belong was represented by Dr. T. Drummond Shiels, whom everyone knows is a careful student of this class of question. I do not want to say more in the presence of Lord Donoughmore, but I believe that Dr. Shiels did his full share in supporting and suggesting the recommendations which we find embodied in the Report of the Commission.
I do not want unduly to praise the Commission, although I feel very strongly what excellent work it has done, but I would like to quote, as a convenient way of summarising my views, a statement on the Report which I read the other day in a very well-known American Review, which deals specially with matters of this kind and especially
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with America's own difficulties or questions as regards these inter-racial matters. This is the quotation, which I think the noble Earl will agree with me is a very excellent way of summarising our views in rather distinct language. The writer of the article says the Report shows:—
"the profound knowledge of the structure and purposes of administrative machinery, and is crammed with political understanding."
I think that is a very forcible way of stating what we find in the Report, and it is sufficient for me to say on this occasion that I entirely agree with it. I think the Report does show profound knowledge—perhaps one might expect it to do so from our experience of the chief of the Commission—of the structure and purposes of administrative machinery, and it is crammed (a forcible expression on a point of this kind) with political understanding.
First of all, I think, we must start from this foundation. The Report finds, without any reservation, that the present Constitution of Ceylon is not working satisfactorily. I do not think any one who studied the question at all can possibly disagree with that finding. Then it goes on to state, what historically we know to be true, but still it has to be stated, as part of the case for the constructive portions of the Commission's Report, which are endorsed unanimously by the members of the Commission, that this Constitution, which is said to be working unsatisfactorily, was framed to meet the requirements of a transitional stage—in its present form it only came into operation nine or ten years ago—and was not intended to be a complete and finished structure. In other words, it left over the problem of what a fair and just Constitution should be. That was the problem which the Commission presided over by Lord Donoughmore approached, and to which their Report is applied. The effect of the present Constitution is summarised in these two ways. I am reading now from the Report itself. Its effect was said to be to divorce power from responsibility—it gave to the electoral representatives on the Legislative Council large powers without responsibility, almost necessarily leading to friction and trouble—and to interfere with administrative efficiency, which is perhaps more important.
Apart from administrative efficiency, you cannot hope in such a country as Ceylon to have a satisfactory Government. No one will call that statement in question for a moment, and although it is unnecessary to refer to it at any length, the Commission does show, on inquiries made and evidence collected, that there was substantial interference with legislative efficiency and that a certain pessimism was induced in officials owing to interference with them in petty and small ways. Perhaps I might add that the Commission summed up the present position in the sentence in which they state that the present Constitution is "an unqualified failure." We are used so much now-a-days to guarded language that one rejoices to find in this Report an outspoken method which brings to one's mind immediately the impression intended. The Commission had to decide as a first principle whether it was right to go forward in the direction of a Parliamentary system or to return to the Crown Colony system. It was not suggested that you could have complete freedom of Parliamentary methods in a place like Ceylon, but the question did arise whether we should try to make a Constitution leading in the direction of complete Parliamentary methods or whether we should go back to the Crown Colony system.
I think the answer given by the Commission is conclusive. They say this, that to go back to the Crown Colony system would mean the suppression of liberties already granted to the people of Ceylon. On that ground, and I think quite rightly, the alternative of going back to Crown Colony government was dismissed by the Commission, and it is stated, and I think it is a very sound argument, that a proposition of that kind would not be just towards the Ceylonese, unless and until it were shown by providing a Constitution suitable to their wants, that they were not capable of managing their own affairs. The Commission, I think, were fully justified when they said that it was only right and proper that the advantage should be given of the trial of a method of free government by granting a constitution which enabled the Ceylonese to show whether they were capable of advancing in that direction or not.
That being the position, I want to say a few words on the constructive side of the Report of the Commission. When we come to constructive suggestions naturally the matter becomes more difficult, but I must say I think the Commission has pointed out entirely the right direction. The general suggestions are really twofold—(1), the methods of government; and, (2), the principles of the franchise. I propose to say a few words, first of all, on the methods of government. The principle which the Commission suggest is to give responsibility to the non-official members of the State Council, and to give that responsibility by making them responsible for administrative as well as for legislative work. That is useful for two reasons. First, it gives an educational advantage in government matters, and secondly, it brings about a day-to-day experience of what is really wanted in order that you may have government success in the sense of official efficiency. The machinery is exceedingly simple. As regards the elective or non-official members of the State Council you are to have a division into seven Committees. Each of those Committees is to have a Chairman who has the status of a Minister responsible for the work with which the Committee deals, and that Committee is to have a dual organisation. It is to be of use for legislative purposes and also for purposes of administration. That principle was carried all through, not only as regards the Committees, but as regards the State Council. On the administrative side each Committee was to have the full advantage of the assistance of permanent officials. That seems to me to be a suggestion of great importance, looking forward to what, I think, we all desire—the real progress of our Dependencies and Dominions within the Empire.
The principle advocated by the Commission has been partly applied in Porto Rico and the Swiss Constitution. I have no particular knowledge except from reading in regard to those two countries, but it seems to have operated well and efficiently in both cases. Rut there is an illustration with which I am more familiar. The procedure I have indicated is closely analogous to the procedure adopted at Geneva, which has operated most efficiently. When the Assembly meets it has a huge quantity of ad-

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ministrative and legislative questions to deal with. The first step it takes is to appoint a number of Committees to consider questions of administration or legislation. Subsequently these questions are brought back to the Assembly, either for decision or for further inquiry. I want to say this very positively from my experience of what goes on at Geneva: unless you have a system of that kind the Assembly would never carry through successfully the work placed upon it. In that way it gets experience, it gets knowledge of the nature of the work, and these Committees give full time in order to workout the problems placed before them. Of course, every system of that kind may have its weak points, though I do not know what they are as regards Geneva. But in substance the business of Geneva has been admirably done, and done by that method.
In the same way as the business of Geneva is directed by the Secretariat so, in such a case as this, it will be directed through the agency of the administrative authority and the Government. In fact, as far as I can follow it, there is no interference whatever with the authority of the Government. On the contrary, its authority in certain respects is increased in order to meet any possible risk from the greater powers and duties which are placed upon the non-official members of what in future will be called the State Council. There are three members of the State Council whose authority is derived directly from the Governor, and who are not appointed by, or responsible to, the State Council—namely, the Treasurer, the Attorney-General and the Colonial Secretary, who will thus be able to exercise control and authority, such as is necessary, I think, in order that a system of this kind may be safely carried through.
The second question of most importance is that of the franchise. This really took up more time than the question of the method of government. At the present time there is a franchise dependent on certain property qualifications and what is called literacy. The practical result is that the electors are only about 4 per cent. or 4½ per cent. of the population. So that, though in form you have representative government, in substance the representative principle, as we know it, is hardly present at all,
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or only to a very small extent. In addition to that, they have what is known as communal representation, that is representation based either on race or creed. That system of communal representation no doubt in the first instance was introduced in order to promote harmony and a common feeling among the various races of Ceylon. There are Sinhalese and Tamils, there are coolie Indians, Malays and Moslems, the Burghers and the English—a very large admixture of racial interests. I am not astonished that the Commission found as the result of inquiry that so far from the communal representation being an advantage to the promotion of national unity, it had had the contrary effect. Their view is that there should no longer be communal representation, but representation of a wide character, on which I will say a word in a moment, in order that you may get national unity by experience and by constituting a body which is less amenable to corrupt or sectional ideas.
This question of the franchise is a very important one, and I think that the whole scheme of the Report depends upon the realisation of what is found on the franchise question. The Commission say very truly that in their view the franchise so nearly affects the life of every man that it is a more important consideration than any which is founded on property distinctions. Therefore, their suggestion is that there should be manhood suffrage, provided of course, the voter is a British subject, and that so far as the coolie Indians are concerned—I think it is a perfectly right suggestion—there must be a five years residential qualification. The result would be, according to their estimates, that there would be an electorate of about 200,000 so far as the coolie Indians are concerned. Of the general electorate, of course, the low country Sinhalese, who are a majority of the population, and the Tamils together, would be a very much larger proportion indeed. In addition, it is proposed to give women the franchise when they have reached the age of thirty years. I am not prepared to offer any opinion upon a point of that kind in an Eastern country because, naturally, one knows very little about it; but I certainly welcome the suggestion. Undoubtedly, there are in the East as in the West a

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large number of matters on which women are specially qualified to give assistance both to the progress and the processes of government.
There is one other matter regarding the franchise to which I will call attention, and I am sure that the noble Earl will appreciate the importance of it. It is that the condition of literacy should not be maintained. The reasons given on wide grounds by the Commission are certainly very strong. To begin with, less than 50 per cent. (it is given as 45 per cent.) of the children are educated at all. Secondly, as regards the test of literacy, it does not seem to be determined by the ordinary officials but on the ipse dixit of the various headmen, and it seems to be applied in a very loose manner. Thirdly, the conditions of education are so bad that the literacy test is practically of little or no gain. I agree with the Commission that the education you want for the population of Ceylon in order to make them sufficiently advanced to carry through the form of government which the Commission suggest is experience in government itself, and experience not only in government, but in hearing during the electoral period what the Government really means and what it really intends. I might say that there is no Party Government in Ceylon now and I do not think the Commission contemplated any Government of that kind. There is to be no Prime Minister, and therefore there is no collective responsibility. I have made these constitutional questions the subject of special study, and constitutionally I holly believe in what the Commission Report in favour of these Committees having administrative and legislative functions with a Chairman at the head appointed by themselves, who shall hold the ordinary position of a Minister. That appears to me to be the real method of progression, and I think it is on that that the Commission really found the suggestion they made.
I do not for a moment propose to make anything like a critical examination of detail; by a critical examination I mean an analytical examination of detail. I do not know that it would be critical. That is a matter for another place and another form of tribunal. All that I desire to do here, as one of those who have most carefully studied this document, is to commend this Report to the utmost
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of my power to the favourable attention of all those who are interested in these great questions (for they are great questions) and to ask the Government particularly whether they are proposing to take any steps to make the Report a working reality. If the proposals were adopted, and they are founded on a unanimous Report after most careful inquiry, a real advance would be made in the Constitution of Ceylon. And we should do a little more than that because, owing to its size and prosperity, Ceylon, I think I may say, is a most favourable country for putting into force a Constitution of this kind which, if it succeeds as I believe, will be of enormous advantange in all the great questions between East and West which touch the British people and the British Empire in all quarters of the world. I have not proposed any Resolution because I do not want to make this in any sense a Party discussion. I will therefore conclude by asking the noble Earl opposite the Question which I have placed upon the Paper.
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR DOMINION AFFAIRS (THE EARL OF PLYMOUTH): My Lords, I agree with the noble and learned Lord the Leader of the Opposition that the matter he has raised is an extremely important one. Your Lordships will agree, I think, that the Report of the Special Commission over which the noble Earl, Lord Donoughmore, presided, is a very comprehensive one and that we are indeed very greatly indebted to all those who collaborated in drawing it up. The noble and learned Lord has gone into the provisions of the recommendations in very considerable detail this afternoon. I do not intend to follow him into those details, not because I do not think that he had every right to allude to them or that what he said about them was not extremely important, but rather because I am not really in a position to do so this afternoon, and I think it would be useless for me to do so in so far as we are still waiting for the considered opinion of the Governor with regard to the recommendations.
The Report of the Commission was published in the Island in July of last year, and a very prolonged debate on the proposals of the Commission was begun at the end of September in the

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Legislative Council and continued at intervals to the end of November, and I think the one point that emerged from those debates was that there was no real general agreement either in favour of or against the various recommendations of the Commission. While the debate was in progress the Legislative Council sent a request through the Governor to the Secretary of State asking him not to take any action upon the Report until he had received and had the opportunity of considering the views of the Legislative Council. The Secretary of State replied to that request in a letter to the effect that he would most certainly assure them that no action would be taken on the recommendations until he had the very fullest opportunity of considering what views they wished to put before him.
At the same time he expressed to them the hope that it would be recognised that the recommendations of the Commission had been framed after very full and very careful inquiry, during the course of which all interests and parties had had an opportunity of being heard, and it was his opinion, he pointed out, that those recommendations ought to be considered as a whole. While, no doubt, minor modifications might be necessary when those proposals were put into operation, at the same time he was not prepared to consider any amendments in principle which would upset the general balance of the recommendations; and he continued by suggesting that if it appeared that a substantial majority of the inhabitants of Ceylon were not prepared willingly to agree to give the scheme a trial he might feel compelled to re-open the whole question of what constitutional changes should take place. If that had to be done, of course it would be necessary, as things at present stand, to proceed in due course to the election of a new Council, and to allow time for further consideration of the question. He concluded by saying that he fully concurred with the recommendation of the Special Commission to the effect that the grant of complete self-government was really out of the question at the present time, and he wished to make it quite clear that any refusal or failure to accept the scheme which was recommended by that Commission would not in his opinion in
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any way tend to expedite the possibility of a grant of complete self-government.
I must go back for a moment, and point out that daring the course of these debates a very large number of resolutions were proposed by individual members. The resolutions can be divided into three classes—(1), a protest against certain criticisms made by the Special Commission on the attitude of Legislative Councillors towards the Government and Government officers under the existing Constitution; (2), a demand for the grant to Ceylon of full responsible government; (3), criticisms of the main proposals of the Special Commission with regard to the reform of the Constitution. I understand that in the main these resolutions were carried by considerable majorities, but the resolutions which come under the third head were very numerous and were not always consistent; in fact, they were in many cases contradictory and showed that there was obviously a considerable divergence of opinion in regard to certain proposals of the Commission, and that of course is very important. I think it also became clear that many of the criticisms directed at the Commission's proposals had regard to the effect of those proposals on the demand for an immediate grant of complete responsible self-government.
After the more important of those resolutions had been voted upon, the Governor communicated to the Legislative Council the substance of the letter of the Secretary of State to which I have already referred, and after that he had several informal conferences with the principal groups of the Legislative Council; but as far as we have been able to find out no very definite result was reached at those conferences. The Secretary of State has received the report of the debates, but he still awaits the considered views of the Governor with regard to the Report of the Commission and his recommendations as to what steps should next be taken, and I think your Lordships will agree that until that Report has been received it is obviously impossible for His Majesty's Government to indicate definitely exactly what line they will take. The real difficulty, as far as I understand it, is to discover where really the balance of opinion in Ceylon lies. As I have pointed out, many resolutions have been passed in the Legislative Council with regard

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to this Report, but they have not in every case been consistent, and until we receive a Report from the Governor indicating on which side as a whole the balance of opinion in Ceylon lies it is very difficult to say exactly what action His Majesty's Government will be in a position to take. I think, however, that I ought to point out that at present no considered or practicable alternative scheme to that put forward by the Special Commission has emerged from the debates in the Council, and the proposals of the Commission still hold the field.
There is reason to believe that a considerable body of opinion in Ceylon would not be unfavourable to the adoption of the Commission's proposals with certain modifications, but, if it is proved that public opinion on the whole is strongly averse from accepting the Commission's proposals, it is clear that the preparation of an alternative acceptable scheme would be a matter of considerable time, and it would be impossible to make a forecast of the steps which it might ultimately be found possible to take. I think I might add in conclusion that the Report of the Special Commission did deal very fully with the question of the grant of full responsible government, and the Commissioners were convinced that this grant of full responsible government was in present circumstances impracticable. The Secretary of State fully shares these views and if there is to be a search for an alternative policy—I mean if we are driven to that—it must be understood that that search would have to be conducted on that basis. I regret that that is all that I am able to say this afternoon.
THE MARQUESS OF READING: My Lords, a debate on the question of the Constitution of Ceylon must necessarily be of considerable importance, and I do not think that your Lordships have any cause to complain of the answer that has been made by the noble Earl on behalf of His Majesty's Government. These are very difficult questions which require very careful consideration, and I agree entirely with what has been said by my noble friend Lord Parmoor and also by the noble Earl. Gratitude is due by all of us to the Commission over which the Earl of Donoughmore presided for the great care, thought, attention and study which they have given to what obviously
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is a very difficult question. I am impressed even more by the difficulties after listening to the noble Earl who has, of course, recounted to us what has happened in Ceylon and the action taken—so far as it is action—by the Secretary of State. It seems quite clear that this is not a matter upon which any Government can act in a hurry. There must be most careful consideration given, and the only question that I would desire to put to the noble Earl, if he can answer it, is whether he can give some indication, if possible, of when it is thought the Governor's considered answer may be given.
I understand this Commission reported somewhere about the end of June last year and, no doubt, time must be occupied, as it has been occupied, for the purpose of eliciting opinion in Ceylon. The Governor would, very naturally, desire to know what was to be said in the Council before he came to his conclusion. I understand, also, that part of the time has been occupied by consultation, more or less unofficial I presume, with members of the Council for the purpose of ascertaining their views. For my part I am quite content to wait until we have the considered view of the Governor, and then His Majesty's Government will, no doubt, tell us what steps they propose to take. I would desire, however, to have an indication so that we may form some opinion. This matter cannot be too long delayed, and I imagine the Governor must by this time be very nearly in a position to state his views. Even then there must be some further delay because the Government will require time to examine the matter with the assistance of the officials they may call in. For my part—and I speak on behalf of the Party with which I am associated—I accept in substance (no one will commit himself to all the details) the conclusions at which the Commission have arrived. I think these recommendations really embody the wisdom and sagacity of those accustomed to give thought to matters of this kind and we shall support them whenever, and if it becomes, necessary.
LORD OLIVIER: My Lords, I should like to associate myself with the noble Marquess in the hope that we may be able to get a little further indication as to what are the prospects of further information

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at an early date. I have myself been interested in Ceylon all my life, I have had political friends in Ceylon all my life, and I have followed the constitutional difficulties there. When the noble Earl, Lord Donoughmore, and his Commission reported, I and others interested in Ceylon were extremely encouraged, because we thought that they had done a great work in Ceylon for the solution of a very difficult position, and from what I heard from friends in Ceylon I hoped that the Report would have general acceptance. But as the noble Earl has said there has been a number of resolutions criticising the Report and criticising observations of the Commissioners and so on. What is the real gravamen of that mass of resolutions as regards the actual criticism of the proposals is not yet clear. That is what we are trying to get at.
As the noble Karl says, there is difficulty in making out what may be called the public view with regard to these proposals. The most controversial proposal, as I understand, is that of putting Ministries into Committee and having commissions for dealing with various subjects which I think is a very ingenious suggestion. I want to know whether the noble Earl can inform us what means are likely to be taken to ascertain what he calls the public view on this matter. Is the Legislative Council at any early date due to be dissolved, and does His Majesty's Government think that in a General Election the Secretary of State should put forward as an issue: "Here is the Report, do you accept it, or do you reject it?" I should like to know whether that is, in the view of the Secretary of State, a reasonable way of ascertaining public opinion upon the subject. Of course the electorate at the present time and the political Parties at the present time are not precisely what they would be under the new arrangements proposed, so you would be asking the old electorate with regard to views about which we should like to consult the new electorate.
I should be glad if by the indulgence of the House we could have a little further information from the noble Earl as to what course is proposed to ascertain this opinion, and when we are likely to get it. I fully agree with my noble
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friends on my right and on my left that it would be very unsatisfactory that a really helpful effort in dealing with this great public question should be frittered away and come to nothing, and that the whole thing should be started again in the very difficult circumstances which, as the noble Earl has pointed out, would then arise.
THE EARL OF PLYMOUTH: My Lords, I can only speak by leave of the House, but I should like to be allowed to say that I know that the Governor is fully aware of the desire of His Majesty's Government that his Report should be received at the earliest possible opportunity. But, as I have pointed out, the difficulty lies in the fact that it is extremely hard to discover exactly on which side public opinion in Ceylon lies with regard to the various recommendations. There are a number of provisions and recommendations which have proved to be controversial and I think the Governor has had great difficulty in making up his mind and discovering exactly what line opinion in Ceylon thinks should be taken.
The noble Lord opposite has suggested that one means of finding out public opinion there might be through a General Election. I really do not know whether that would be possible or not or whether that is contemplated. I am afraid I am not in a position to tell your Lordships definitely to-day, but I have not heard that it is contemplated, and I doubt, in the present circumstances and in view of the fact that the electorate would be very different from what it would be if the new Constitution were put in operation, whether that would be a very useful way of attaining that end. I am afraid I can only assure your Lordships that this Report will not be delayed for a moment longer than necessary and that the Governor is fully alive to the desire of His Majesty's Government that his Report should be received here at the earliest possible moment.
LORD PARMOOR: My Lords, with your Lordships' permission I should like to add one word. I sympathise very much with what the noble Earl has said and that is why I put my Question in the form of asking whether they are taking steps to carry out the recommendations. I do hope that when the time comes the suggestions

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in the Report will be really considered on their merits, and that this will be the immediate consideration after all these other matters have been ascertained. I thank the noble Earl. I should have liked to hear him express a somewhat sterner desire really to carry out what the noble Marquess has described as a
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great scheme. That scheme was designed by a Commission of which the Chairman and members were specially qualified to deal with constitutional principles of this kind.
House adjourned at ten minutes before six o'clock.