HL Deb 10 July 1930 vol 78 cc401-14

THE DUKE OF ATHOLL had the following Notice on the Paper:—To ask whether His Majesty's Government has extended credit for the sale of Cuban sugar to the Russian Soviet Government, and, if so, what is the amount and value; also whether the provisions of the export credits scheme include benefit for foreign produce as against British Colonial, and, if not, why did His Majesty's Government not insist upon British-grown sugar being used in this instance; and to move for Papers.

The noble Duke said: My Lords, I desire to inform the House at the outset that I have no intention of calling for Papers. My first duty must be to thank Lord Ponsonby for his courtesy in refraining from dealing with this subject before to-day. Like many other people I was astonished to read in the Press that not only had a firm of brokers accepted a contract in New York to supply 50,000 tons of Cuban sugar to the Soviet Government, but that last month the same firm sold 130,000 tons of sugar, valued at about £1,000,000, to Russia, this sugar having been refined in England and a nine months' credit having been given under the British export credits scheme. I wish to make it perfectly clear that I make no reflection either upon the brokers or upon the refiners or upon the merchants who have carried out this deal. It is rather the other way, for they have seen a good opportunity of doing legitimate business and have seized it. I may also congratulate them on its future success without being numbered amongst the false prophets, for the deal is bound to be successful whether the contractors are paid by Russia or whether they are not, because the British Government have underwritten the due and just payment.

The last portion of my Question may seem to show that I do not appreciate why Colonial sugar was not used in this instance. This, however, is not the case, for I fully realise that British-grown sugar enjoys a subsidy and Colonial sugar a preference, and that the obvious answer of the Government to me will be that there is nothing to prevent British sugar being used for Russian business if the sellers are prepared to forego a subsidy or a preference of 3s. 9d. per cwt. Obviously a rate of duty of this amount must have the effect of making the articles benefiting from it unavailable for other destinations than the country guaranteeing it; so that is not going to be one of my points. I am also the last person in the world to wish personally to attack the Export Credits Department, who are always courteous, and always trying to be helpful.

What I am trying to get at is this. Why is there all this effort to give nine months' credit to Russia which does not need it? And why, on the other hand, does His Majesty's Government make such a difficulty in giving credit or assistance to the British Colonies to save the sugar industry which is their very existence? Let us look at this Russian deal first of all from a purely business point of view. In the first place consider the risk. Very obviously the risk was one that neither a financial house nor a bank could undertake, otherwise the Government credit would not have been required. Credit, we are told, has also been arranged in New York for what I may call the American end of the stick, for £50,000. Not only does the smallness of this sum make me feel pretty certain that this is not an American Government credit, but also at the moment, I understand, the United States are refusing to take even timber from Russia that is now on the high seas in British ships because they allege that it has been cut under conditions which are akin to slavery. So I assume that the credit was through the ordinary channels.

If this is the case in America why could not the same thing be done here, where there are no difficulties being put by His Majesty's Government in the way of trading with Russia, slavery or no slavery? Why was it necessary to give credit, thereby making our own Government responsible for any default? So far as this country is concerned Russia is a defaulting nation, and the defaulters are not a group of Russian firms but the Russian Government. As Lord Brentford pointed out the other day, the Russian Government have a trade balance with us of £20,000,000 a year, and it seems inexplicable that they should be given further credit instead of being asked to pay for the goods. From the business point of view Lord Ponsonby, when he was challenged the other day, stated that Russia's defalcation had nothing to do with the case, because that matter was under examination, or words to that effect, and, therefore, should be put on one side when arranging the new credit, or in other words loan to the Soviet Government, because it is a loan.

It is rather a curious argument. Can you imagine any bank with a large frozen loan being anxious or willing to give fresh credit to any individual or firm unless this fresh credit was going to lead to recouping the business and unless there was an understanding that any profits made would go towards paying off that frozen loan? So, in the first place, I want to ask whether any arrangement has been reached or any bargain made with Russia respecting the money which she undoubtedly owes us? And has Russia undertaken that after the competent authority has settled what the claims against Russia due to us really are, the debt will be promptly paid? There was an opportunity for bargaining and I want to know why that was not taken.

Then I want again to point out to your Lordships that Russia is a single unit and responsible only to herself. Therefore, there are no means of coercing Russia as one could coerce a Russian firm. She has already defaulted with impunity, and if she does so again there is nothing to stop her doing so, as she is not only judge and jury but the prisoner and the State as well. Even if we were on the most friendly terms in the world with Russia and even if she had always paid up honourably, we should still always have at the back of our minds the political situation. It seems to me absurd that there are greater difficulties in arranging credits for certain other friendly Continental countries, who at least can be brought to book if they default, than in arranging credits with Russia, with which country diplomatic relations might be broken off at any moment. No doubt the time will come when we shall have more friendly relations with Russia. No doubt the time will come when Russia will recognise that her present propaganda is contrary to the ethics of civilisation, and possibly the time will come when she will have paid up her debts. But in the meantime we have no earnest of these things.

In the export credits scheme Russia was definitely excepted and the Government have removed the ban and are obviously at the back of this new policy, which I think they will not deny. I would like to ask whether the Government have considered the risk in the case of diplomatic relations being broken off, even temporarily, with a nation with which we are on very doubtful terms of friendship. Instead of the risk being taken by a firm in the ordinary way, His Majesty's Government have guaranteed the gamble, and if the gamblers lose, the people of this country will have to pay. I hold most strongly that in the circumstances our Government should not go into highly speculative business of this sort—a business which is not likely to lead to any very great result if we are to judge by the best period of trade with Russia when we were on friendly terms. We may well be excused if we are led to conclude that the Overseas Trade Bill is simply being used as a cloak at the public expense to assist trade with Russia in a manner which would not be tolerated by more open methods such as a State loan.

The other point I would like to make shortly is: Was the risk worth the candle? If it had been a question of selling manufactured goods such as cotton I could have understood it, because the great bulk of the work would have been performed within the British Isles and thus materially have relieved unemployment, and the raw material would have represented but a small part of the total value. But in this case, if the reports are correct, we learn that the British firm sold 130,000 tons of Cuban sugar valued at £1,000,000 to Russia on British Government credit—or so we read. That is to say that the sugar was apparently bought much below its cost of production. It came from Cuba and the cost of refining it, could not have been more than £150,000 or something of that sort. It may be that it was not so much, but I am putting it high. Assuming these figures to be roughly correct, am I to understand that British export credit was given up to 60 or 70 per cent. on the sum of £1,000,000—that is the total sum—or was it on the sum of £150,000, which is the British sum?

If it was given on £1,000,000 it is a scandal that this Government should give credit to help Cuba to off-load its bounty-fed sugar, thus helping the Cuban situation against the British Colonial situation, other than the small difference made by the depletion of world stocks, which is a gain to a certain extent. If the credit was given on the sum of £150,000, the smaller sum, the refining sum, the matter was not really worth bothering about, and could easily have been arranged without Government credit. I therefore ask if the credit was given on the whole amount or only on the British part of it. Perhaps the excuse may be made that Cuban sugar when it comes to England becomes ipso facto British. That may be the excuse of the noble Lord. But surely this matter depends rather on the amount of work put into it in Britain. I am sure that the noble Lord, who once was the distinguished member for a Scottish constituency and a leading light in the Young Scots Society, if I remember aright, some years ago, does not contend that if he had at that time worn a kilt it would have made him ipso facto a Scotsman. I cannot see why selling Cuban sugar here should necessarily make it British.

Let us contrast this deal with the treatment served out to our own Colonies, whose sugar business is now hopelessly involved and whose plantations are gradually petering out as they come to the end of their ratoons and are reducing the amount of cane that they are planting. Lord Passfield, the Secretary of State for the Colonies, told us the other day that when he heard that there was an impending crisis in the Nest Indies, he laughed and said: "Another sugar crisis! The West Indies have weathered former crises and I hope they are not going to come to an end now." The noble Lord, the Secretary of State for the Colonies, is also credited with having said to a very influential deputation which went to see him on the subject, that he was very sorry he could do nothing with regard to the sugar business in the West Indies, but he could assure his audience that if this crisis did end in finishing the industry the Labour Government would see what it could do for those thrown out of employment. I see the Labour Party is getting a little thin on the Benches opposite.


Go on with your reading.


I shall have the courtesy to wait for the noble Lord, Lord Ponsonby, who is quite capable of taking charge. But it is not what Lord Passfield has said. It is the general attitude of the Government, which is more anxious to trade with Russia than to preserve the existence of the Colonies. Much less a sum than that which they have risked losing in Russia would have been money spent more profitably if it had been spent at this time in safeguarding the existence of the West Indies and Mauritius. But the present Government look upon the British Colonies, so far as I can make out, as an incubus, and upon Russia as an asset of our Empire. I would like to ask the noble Lord, Lord Ponsonby, who no doubt has the figures, if he will let us know the amount of export credit given in the case of Russia, for which country export credit was not intended, since the present Government assumed office, and the amount given for all other countries combined, excluding the British Empire, which perhaps might be given separately if export credits are available for that purpose. I do not suppose they are.

In conclusion, there are two points that I should like to make shortly. May I ask His Majesty's Government if they have made certain that this sugar will not be or has not been sold ahead by the Soviet Government to another country? It is rather an important question. I would like to know if they have made any inquiry on that point, and if they have ascertained or bargained that it is for the direct use of the Russian people only. If not, it is quite possible that the Russian Government, with its nine months' credit, will off-load this sugar in exchange for the equivalent in cash, or something else, from another country. In any case, there is nothing to prevent this being done and I should not be one hit astonished, if the noble Lord were to make inquiry, if he found that some arrangement of that sort had been made. Finally, may I point out that in 1911 in the days of the Tsar, the then Liberal Government declared that unless Russia were allowed to export 300,000 tons of bounty-fed sugar westward, the British Government would withdraw from the-Brussels Convention. Now, in the days of Communism, when Russia has reached the happy state that certain members of the present Government are so anxious to imitate in this country, they are not only unable to export sugar, but they actually have to import it. I think this gesture of friendship with Russia has been but a sorry advertisement of the Government's acumen, either from a political or from a business point of view. I hope that the noble Lord will be able to allay our fears in regard to what is, after all, more a matter of business than anything else. I beg to move.


My Lords, before the noble Lord replies may I say a few words in support of the remarks of the noble Duke? Last week we had a debate on this subject in the course of which I raised this question, but, as the noble Duke has said, it was decided that direct debate upon this matter should be reserved until to-day. I also raised the general principle of these export credits. Are we to understand that the Government propose in the future not to apply export credit guarantees to British goods only, but that foreign goods, like this Cuban sugar, may be imported into this country and re-exported to Russia under the guarantee system? On that occasion, I ventured to say, this House was not given a satisfactory reply. The noble Lord read out an extract from certain regulations which, so far as my memory serves roe, merely stated that Colonial and foreign produce might be dealt with under these regulations. He gave no satisfactory answer as to what constituted Colonial produce or foreign produce.

I hope that in his reply to my noble friend's Question to-day, the noble Lord will be able to elaborate a little more clearly and precisely what is actually meant by that regulation. I also hope that he will be able to assure the House that in future, perhaps as a result of that debate and of the debate to-day, the Export Credits Department will take note of the necessity of dealing only with British goods, or at any rate with goods which have the very largest possible amount of British workmanship in them. That is the only point that I wish to make in this debate. I do not wish to detain the House any longer, because a Royal Commission is coming on, and with these few words I beg leave to support the remarks made by my noble friend.


My Lords, I am obliged to the noble Duke for having put his Question so very concisely and briefly and for having excused me from having to answer the latter part of the Question. I will endeavour to be equally brief, and also to avoid the many side issues that necessarily arise when the question of Russia comes before the House. To begin with, I think that both the noble Duke and the noble Viscount are rather under a misapprehension as to the Government's position in this matter. In so far as they object to the Government having lifted the ban against Russia, that, of course, is a subject of dispute, but in so far as they are objecting to certain processes of commerce, to certain credits being granted to certain firms in certain cases, they are criticising the Advisory Committee. It is the Advisory Committee through whom all these transactions pass. It is the Advisory Committee who take into account all the necessary circumstances before they pass any one of these schemes, and they require to be satisfied that there is not any great risk which would involve them in considerable loss before they pass a scheme. It is therefore on their responsibility that these particular transactions with regard to sugar, or any other transactions with any other countries, are passed and allowed.


I do not want to interrupt unduly, but I should like to ask whether it is the Government or the Advisory Committee that removed the ban on trading with Russia.


I quite understand that point. The noble Duke said that he disapproved of the removal of the ban. The removal of the ban in August last was the Government's decision, but these particular transactions, with regard to sugar or any other commodity, are entirely in the hands of the Advisory Committee.


May I ask the noble Lord whether it is not a fact that there are certain regulations by which the Advisory Committee must be guided, and to that extent at least the Government are responsible for their action?


Yes, the whole procedure is governed by the Overseas Trade Acts, 1920–1929.


And certain regulations passed under them?


There may be certain regulations under them, but at any rate the Government, qua Government, do not act in this matter at all. They do not examine the applications or transactions. These all come under the Advisory Committee. Another point on which I think both the noble Duke and the noble Viscount are under a misapprehension is that the export credits guarantee scheme was concluded for guaranteeing the payment of bills in connection with export to various countries, and the Overseas Trade Acts, 1920–1929, provide for the granting of guarantees in connection with the export from this country of goods wholly or partly produced in the United Kingdom. The emphasis is not on the producer, whether he be Colonial, foreign or British, but on the exporter. The credit is given to the exporter and, in the case of sugar from Cuba, the sugar comes in here, a duty is paid on it and it goes through a process of refinement of which both the noble Duke and the noble Viscount, in his speech in the last debate, underestimated the value—it amounts, not to 5 per cent. or 10 per cent. of the value, but to something over 30 per cent. That is to the advantage of the British exporter and manufacturer, who gets credit under the scheme and is able to employ a considerable number of people, which is of advantage to the trade of the country.

Then the noble Duke asked if we were taking into account that there is great risk in having any dealings with Russia at all. Here we come across the difficulty which arises in these debates of mixing up these narrow commercial transactions with individual firms and the larger question of Russian State Debts and the claims of property-holders and bondholders. I can only repeat once more that there is no connection between the two, that the political repudiation of their Debt is a matter for consideration by this Government and the schemes that have been before us in 1924, and again to-day, are the subject of negotiations between the Foreign Secretary and the Soviet Government. Those proceedings are in an entirely different category to these isolated commercial transactions. It was, I think, Lord Brentford who said on the last occasion that he did not consider that political considerations interfered with our trade with Russia.

It is rather difficult to say to what extent it would, but I have been asked more than once what would be the result of breaking off our relations with Russia—should we not be saddled with these further debts? I do not think that that would be the case. I am rather inclined to agree with Lord Brentford in this connection. I do not, think it would make the slightest difference in these isolated commercial transactions, and in not one case has there been a bad debt so far as Russia is concerned. Therefore the Advisory Committee no doubt are inclined to consider it good business, and they are prepared to pass applications made for credits connected with Russia. The noble Duke asked for some figures—to what was the face value of contracts issued in respect of Russia and other countries? The guarantee is given on the face value of the whole contract.


It is given on the whole million; that is, on the Cuban sugar before it came as well as the refining?


The refining is not such a small proportion of the value as the noble Duke seems to think. I think it comes to a good 30 per cent., and I do not make myself responsible for the figures which the noble Duke gave. It obviously would be inadvisable and improper for me to enter into details with regard to any contract undertaken, but with regard to general figures I may tell him that from August 1 last, when the scheme was extended to Russia, up to the end of June, the figures in regard to Russia are £2,26,000, and other countries £4,210,000, making a total of;£6,476,000.

The noble Duke was rather inclined to be, I think, unnecessarily sarcastic with regard to our attitude towards Russia in comparison with our attitude towards our own Colonies. I do not think his remarks were really justified. In this whole scheme the desire of the Government has been to improve trade. It has considerably improved trade by enabling exporters and business people in this country to carry on trade more expeditiously. There is no doubt that Russia requires an increasing amount of the manufactured articles which we can supply, and we have every reason to believe that this scheme is likely to prove of great value in the way of encouraging commerce and reducing unemployment. We are as mindful as the noble Duke of the plight of our Colonies with regard to sugar. It has been constantly before this Government, and it is having the very close attention of the Government to see how their plight can be relieved. I do not think it is in the least necessary to accuse His Majesty's Government of any callousness in that direction, simply because they happen to be taking a line rather more active in the direction of improving our trade relations with Russia.


My Lords, the noble Lord referred to myself and to the speech which I made last week. Will he forgive me if I say that he has still not got the point which I tried to put to him then? I was responsible for the working of this scheme for same time, and I quite understand the ordinary commercial practice that when I, as a merchant, export to a merchant firm in Russia or in any other country, the question before the Advisory Committee is as to the stability of that foreign firm and the likelihood of that firm, Russian or German or other firm, to meet its bills when due. That is a question for the Advisory Committee, the members of which as business men are better able to form a judgment as to whether any particular merchant firm in Russia, or any other country, is able to meet its obligations, than are His Majesty's Government. It seems to me, however, that the noble Lord has not quite faced the position that in regard to Russia the Soviet Government itself is the importer.

The Soviet Government itself is the sole agent for foreign trade, and therefore what the Advisory Committee have to consider is a question which His Majesty's Government can consider much better. It is not a question of the stability of, or likelihood of payment by, the importing firm. It is a question of the credit simply and solely of the Russian Government. The bills guaranteed under this scheme are bills given by the Russian Government to meet obligations for payment for particular sugar or other commodity. What is the good of referring to any Advisory Committee of business men in the world the single question: Are the Russian Government likely to implement their bills when they become due or are they likely for political or other reasons to repudiate them? That is a matter for His Majesty's Government. They alone can give a sound decision. It is a political, a Governmental decision as to whether the Government of Russia are likely to meet their obligations or not. It is not quite right that the noble Lord should shelter himself on this question of Russian trade behind the Advisory Committee, because that Committee are not in a position half as good as the Government themselves to know whether the Russian Government are likely to fulfil their obligations.

In regard to that I think the noble Duke was quite right. It is a question which must depend upon the political situation, whether the Russian Government are likely to pay their bills at due date or not. The noble Lord said that the previous conduct of the Russian Government with regard to old obligations was not in question. That may be so, but on the other 'hand if you are dealing with debtors who have in the past, and even quite recently—there is the Lena Goldfield, case—failed in their obligations, then I ask the Government whether they are justified in lending the British taxpayers' money to Russia, not in order to finance the bills of English firms here, but in order to guarantee the bills of the acceptor, the Russian Government? While I approve entirely of the export credits system where there are commercial reasons and not political reasons, where the political reason is the dominant factor then the Government must themselves take the full responsibility. If that is agreed then the noble Lord must tell us that His Majesty's Government are quite satisfied that the Russian Government will in all circumstances, even if diplomatic relations are again broken oft, fulfil their obligations in this respect, so that the English taxpayer may not be put to any loss in regard to them.


My Lords, perhaps with the leave of the House I may reply to the specific question put. The answer is that His Majesty's Government, in coming to the decision they did in August last, dealt with the political problem and got it out of the way for the Advisory Committee. By making that decision they made, so to speak, a declaration that they considered that Russia would meet her obligations with regard to all these commercial transactions, and so far in a year there has been no reason to regret having made that decision.


Then you take full responsibility?


By making that decision in August last the Government accept the responsibility. When the noble Viscount refers to things like the Lena Goldfields concession, those refer really to the pre-Revolution obligations, and they are another matter.


My Lords, there is one point that I do want to press, and this is the only opportunity. The noble Lord has told us that in the particular case in question 30 per cent. of the whole amount provides work for British industry. What I want to ask the noble Lord is whether His Majesty's Government are prepared to issue an instruction to the Advisory Committee for the future that what they mean by goods "partly produced" is that at least 75 per cent. of the workmanship of such goods to be guaranteed shall be British workmanship? If the noble Lord can give an affirmative reply to that I am sure it will give great satisfaction all over the country.


I think your Lordships will realise that I am not in a position to make a statement, or accept a statement, of that kind.


Will His Majesty's Government consider it?


I shall be very glad to communicate the noble Viscount's opinions to the Government.


I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

House adjourned during pleasure.

House resumed.