Lords Sitting of 8 September 1931

Preamble
The LORD CHANCELLOR having summoned their Lordships in accordance with the Resolution of July 31 last, the House met at a quarter past four of the clock, The LORD CHANCELLOR on the Woolsack.

NATIONAL FINANCES: MESSAGE FROM THE KING.
THE EARL OF CROMER: My Lords, I have a Message from the King under his Royal Sign Manual, respecting the present position of the national finances, which His Majesty has commanded me to deliver to your Lordships.
THE LORD CHANCELLOR (LORD SANKEY): My Lords, His Majesty's Message is as follows:
"The present condition of the national finances, in the opinion of His Majesty's Ministers, calls for the imposition of additional taxation and for the effecting of economies in public expenditure. His Majesty recommends the House of Lords to give their earnest attention to any proposals for these purposes which may be submitted to them for their concurrence."
THE SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE MARQUESS OF READING): My Lords, I beg to move that His Majesty's most gracious Message be now taken into consideration.
Moved, That His Majesty's most gracious Message be now considered.—(The Marquess of Reading.)
On Question, Motion agreed to.
THE MARQUESS OF READING: My Lords, the Message from His Majesty which your Lordships have just heard read brings directly to your Lordships' attention the reason for the summoning of Parliament. I doubt very much whether any of your Lordships imagined when last we met in the month of July that we should be meeting this day under the present conditions, and on behalf of His Majesty's Government I shall explain more fully to your Lordships the reasons which have led to this course being taken. Would your Lordships first permit me to assure you that I am deeply sensible of the unexpected honour of leading this House. I form one of a comparatively small Party in your Lordships' House and, but for recent events, I could not have hoped to occupy this position. In the present emergency, however, there are no divisions of opinion between Conservatives and Liberals and, I trust, some representatives of Labour. We are united for the present purposes in the interests of the nation and as a national duty re-

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gardless of the political opinions which in normal times divide us. Consequently, I would respectfully ask your Lordships to give me your support in the conduct of the business of the House. Your Lordships may rest assured that I shall make every endeavour to discharge this responsibility in accordance with the traditions observed by those who have preceded me.
Your Lordships are already aware of the main features of the recent political crisis which led to the formation of the present Government and I do not propose to refer to them in great detail. But may I mention briefly the most salient features in order that the position may be clearly understood and that you may realise the necessity for the proposals which, in due course and within a short period, will be submitted for your approval. It is beyond all doubt that the financial emergency developed more acutely almost immediately after your Lordships had adjourned. There is also no doubt that there were reasons for uneasiness before. There were those, among them some of your Lordships, who had expressed opinions that the financial methods to which recourse had been had for some time past would lead the country eventually into a state of real difficulty. This is not the moment to enquire upon whom the responsibility must rest. It is not the moment either to discuss how it is that this situation has arisen, because we are faced with the difficulty and it behoves us to do our best to meet it.
Shortly before Parliament adjourned, as I learned recently but did not know at any rate with any accuracy at the time, there had been great drafts upon the deposits of money in this country. When Parliament rose, within a very few days, indeed, almost immediately, the situation became more acute. Day after day the drain of gold and of deposits became more severe. Credit had been obtained in America, as you are aware, for a large sum in order to meet the drafts that were being made upon the gold and the deposits in this country. But that threatened to be exhausted and about the 10th of August the Prime Minister, who had gone fore his holiday, returned because of the serious situation. The crisis in its immediate aspect was financial. It was not political in any
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sense, though of course in its indirect aspects it was bound to have relation to the political conditions. But what led to the crisis was something apart altogether from politics—that is to say, the immediate cause was the withdrawals which were taking place daily.
We may well pause for a moment to enquire into the causes of those demands from abroad which culminated to such an alarming degree. The main outstanding cause, I think, must be attributed to a lack of confidence which arose about this time in the stability of the pound sterling; what is sometimes termed a crise de confiance, not, perhaps, quite accurately translated by literal English, but which really means, as I understand it, that hitherto there had never been any doubt that whenever they wanted their money they could withdraw it, that if they had pounds sterling here it was to be regarded as gold to the amount of the pounds sterling, and that whenever any deposit was made there would be no loss if they wished to withdraw that deposit, and that the amount would be returned to them just as if it were gold. Unfortunately during, particularly, the last few months the situation in foreign countries had developed adversely to our financial security in those countries. The situation as it presented itself at this time really does not require painting in lurid colours, because it was so clear that I challenge any who may be inclined to oppose such arguments as I am putting forward to deny that there was a crisis, that it was financial, that it was a very serious menace to the prosperity of this country, and that unless it was tackled immediately, without delay, it was impossible to state how much loss and destruction might overwhelm us.
At this time the Prime Minister had returned. I have no intention of travel ling through the various stages of the meetings that took place. I want to pass over them very quickly. The Prime Minister returned, and immediately, having had discussions with his Cabinet and, I understand, with a Cabinet Economy Committee, called a meeting, and sent for the Leaders of the two political Parties, and placed the situation before them. The situation then— I may put it in a few words—was that these withdrawals which had been taking

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place daily had brought about a state at this time, towards the middle of August, in which the drafts had been rapidly exhausting the credit obtained in America. There were consultations. I need not go any further into them than to say this, that both the Conservative Leader and the then Liberal Leader, Sir Herbert Samuel, who, in the absence of the Leader of his Parliamentary Party, Mr. Lloyd George, represented the Liberals, discussed the matter with the Prime Minister, and Mr. Chamberlain, who was then seeing the Prime Minister, and Sir Herbert Samuel assured him of their support provided—this emerged either at the first or subsequent meeting—that adequate economies were made.
I pause for a moment before going further into it, because it is necessary to remember how we stand on this subject of economy, which, no doubt, will form part of the discussion that will take place in your Lordships' House at a later stage when we can go into it more in detail. The difficulties which had given rise to this crise de confiance arose largely from the situation in our own country; but not. entirely: it would not be fair to say that. I think we must remember that there were difficulties in foreign countries also—more particularly within a few months before the crisis here—in Austria, of a great bank there, and, subsequently, the financial crisis of which you are aware in Germany, with consequent repercussions in almost every capital of the world, and certainly with an effect upon the financial situation of every country of importance.
It also had another effect. It tended to cause depreciation in the currencies of those countries which were not too stable, and it caused nations with large deposits in this country, which perhaps they had not thought of withdrawing, to take them from here in order that they might have them in their own vaults or safes, so that in case of any difficulty they would have the gold there in their vaults to meet any situation which might arise in their own country. With it also there was this doubt about our own position. Until a recent time—I will not indulge in any word which might give rise to controversy, and, therefore, I will not particularise—but certainly until recent times this country took pride in the orthodoxy of its method of finance. We were careful to balance our Budget,
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we were careful that our Revenue should be in excess of our Expenditure, we were careful that we had a sufficient sum to put aside for the Sinking Fund in order that proper provision should be made to meet the reduction of the Debt when that fell due. All this had happened, but anxiety was expressed abroad because of the expenditure which was prevailing in this country, not only expenditure on vast enterprises, but also perhaps—and indeed because of its amount assuredly—the most important was the borrowing of capital in order to meet the annual expenditure, as it was then, for unemployment insurance.
The figures are not very important to-day, and I do not propose to discuss figures at this stage; that will come later when we have the Bills before us. It has already been stated that the drafts upon the Exchequer were equivalent to £1,000,000 a week, which would represent approximately £52,000,000 a year. That sum was being raised and used for the purposes of unemployment pay and was occasioning concern. I think it is not unimportant to add also that with unemployment prevailing, as it does, in other countries attention was being directed to our unemployment insurance and to the effect of the "dole" upon the finances of the country and the general situation. No doubt that led to a closer examination of how we were financing our insurance system. Without going into the figures it is sufficient to say that very large drafts were being made on the Exchequer by means of borrowing, and obviously it was an unsatisfactory system of finance, which has been denounced many times, both in another place and when it has come before your Lordships and outside. But it prevailed, and I do not pause to enquire why.
That gave rise to anxiety and there was another feature to which, I think, we must pay serious attention. With these borrowings for unemployment there was another matter—I am inclined myself to regard it almost as the most important feature—which has given rise, and may continue to give rise, to difficulties which we must meet. That is in relation to the balance of trade. Some of your Lordships may view it from one aspect, some from another. Some may consider there is a remedy to which others will object, but this at least I think we shall all agree, on whichever side of the

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House we may be sitting, that it is imperative for us if we wish to regain prosperity, if we wish once more to stand where we have stood hitherto as really the international centre of the world, and if we wish to maintain our position in that respect with all that it means, to strive to regain the balance of trade which we have lost. Again let me say that I will not give figures to-day, interesting as they are, but I can say, and do say, that last year, as some of your Lordships may know, the balance sank almost into insignificance.
One has to bear in mind that imports continue to come into this country and that it is essential that we should have them. I am not attempting to state the exact figure, but for this purpose it is sufficiently accurate to say that we spend something like a thousand million sterling a year in the purchase of the food and the raw material, the cotton, oil and tobacco and various other commodities which we import. They have to be paid for. If our exports are not sufficient, taking into account always, of course, what we term invisible exports, shipping, insurance and all the attendant means of earning money which go to help pay abroad for what we have bought—taking all that into account we still have to remember that if the export trade suffers, as it has done, the balance of trade may be unfavourable to us and that we must make every attempt to regain that. I venture to impress that upon your Lordships because I confess I regard it in some respects as more serious even than the methods of finance to which we have recently had recourse, because these we can cure by taxation, by economies. We can balance the Budget, we can redress the situation; we can cure that; but if the balance of trade goes against us and continues against us it is an extraordinarily difficult thing to envisage what will happen to us in the future. All I desire to say with regard to that at this stage is that these matters must engage the attention of your Lordships and everybody in the country. At the proper time, whenever that may come, we shall have to devote ourselves to ascertaining the best method of helping industry and helping to regain the situation which we had in former times.
Now, my Lords, may I pass again to the history I was giving you? I have
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been rather tempted if you will forgive me to dilate upon two subjects which I thought of such importance. After these conferences had taken place, as I told your Lordships, in August, His Majesty came to London on the morning of August 23, a Sunday, having ascertained by that time what the situation was and realising that there was a political crisis imminent even if it had not yet taken place. The difficulties in two sentences were that the Conservative and Liberal Leaders were ready to support. the Government if the Government would carry out the economies which were necessary in order that we should be able to put ourselves in a situation to get further credits should they become necessary. After some discussion it became apparent that the then Government was not able to give that assurance. The Prime Minister, the Chancellor of the Exchequer, the Secretary of State for the Dominions and, I think I am right in saying, the noble and learned Lord on the Woolsack were ready to meet the difficulties. The trouble arose over some details into which I am not going at this moment. Sufficient be it to say that the assurances then given of the economies to be made which the then Government could carry were inadequate according to the view of the Leaders of both the other Parties, were insufficient for the purpose of giving security abroad and consequently would be ineffective in stemming the tide which was running against us.
As a result, when Mr. Ramsay MacDonald found that there was a considerable number of members of his Cabinet who would not agree and would resign if effect was to be given to certain views, he came to the conclusion that he could not carry on with the Government as then constituted and then there was resignation. His Majesty, if I may be permitted to say it, rendering most valuable assistance in his constitutional capacity, then brought about a conference with the other Leaders and as a result the National Government was formed. I wish I could be quite sure that National Government is quite the correct term. It was hoped it would be a National Government, but in consequence of what has happened since it only has a small representation of the Labour Party so far as I am aware at

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present. They are very distinguished members of it, leaders of it, but nevertheless it cannot be said to represent the Labour Party in its entirety.
I deeply regret that that is the situation. I speak not only for myself, but if I may be permitted to do so I speak the views of those who were leading both Conservatives and Liberals at the time. We deeply regret that the then Government had not—they must forgive me for using the expression—the courage to face the situation and do what was necessary in order to stem this adverse current. If that had taken place we should have had a, much better situation to-day. If that had happened the result would have been that throughout the world there would have been satisfaction that we were working together as a nation, as some of us had hoped might be the ease before this crisis happened, and that we were presenting a united front to meet the difficulties. I dare say I may be expressing something which may sound even absurd at this moment and, of course, I speak for myself alone, but I can only say that I hope that in times of difficulty that may arise it may yet not be impossible for a really national Government to be formed in which we may all stand together to face whatever difficulties are presented to us.
I have detained your Lordships at some length upon this situation, and I propose now to go rapidly forward to what has happened since. Of course, when once the new Government was formed, we devoted ourselves assiduously, as you would expect, to considering how to remedy the situation and to get over the crisis. Bills will be proposed in another place and will come before you. Let me remind your Lordships that although a Finance Bill, certified as such by the Speaker of the House of Commons, may not be altered by your Lordships, you yet play, particularly in an emergency of this kind, an important part, inasmuch as there is a month within which the Bill may be rejected or accepted, and, when time is of such importance, I feel quite sure that when it comes before you, if you approve of the proposals that are put before you, you will not hesitate to give an immediate assent without delaying for one moment longer than is
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absolutely necessary to examine the situation.
I have now passed over various matters that bring us almost to the present date. We have to consider now how to restore confidence. That the crisis had to be met the late Government admitted. That they set to work to remedy the situation is beyond question and has been stated by them in public speeches. Where they failed—or, at any rate, the reason that led to the downfall of the Government—was that they were not prepared to make economies that were adequate. I am not going into the details of those economies. I only wish to deal with one, and I should not mention it but for the fact that it has already been referred to on various occasions, that it formed part of Cabinet discussions and has been mentioned in the public Press. The whole question—I may be wrong, and perhaps I ought not to put it so high as to call it the whole question, but the important question that was raised was in regard to the cut, as it was called, to be made in the unemployment "dole." I would ask your Lordships to spare a few minutes to examine that point, and then I shall detain you for only a few moments. I ask you to examine it because I think this is the most important matter with which we have to deal at the moment. The noble Lord opposite will, of course, tell us, if he speaks in this debate, whether I am right or not, in the assumption that this was the breaking point. My only authority for stating it is that it has been so stated in the public Press by a number of those who were taking part and consequently I feel at liberty to discuss it also.
What are the facts? It was suggested, apparently, that there should be a reduction of ten per cent. in the unemployment "dole" on all the payments except those relating to children. Your Lordships may be aware that the amount in respect of children is 2s. That was to be unaffected by any cut that was to be made. For the rest, the cut would apply to a man and his wife and to adult dependants and so forth. One of the most important features, to my mind, at this moment is that from 1929 to 1931, that is, in the last two years,

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the index cost of living, as shown by the Board of Trade figures has been reduced by 11½ per cent. What was thought adequate in 1929, with the then value of the shilling, had risen by 1931, the time of which I am speaking, by 11½ per cent., and the real value of the unemployment "dole" that was being paid at this time and is still being paid is 11½ per cent. more than was thought adequate—I lay stress on this—in 1929 and during the currency of the late Government's occupation of these Benches. There was no question of raising it, and nobody would dispute that it was adequate. Accordingly, when you come to 1931, the cut that was proposed and is discussed was not one which reduced the real value of the money that was to be paid—that is, the purchasing power—nor can it be said that the cut was in excess of what was thought sufficient in 1929 and hitherto.
I submit to your Lordships that this is a most important point. Let me remind you also that, if you look back—this is the last figure with which I will trouble you—to 1924, you will see that, taking into account the increase in unemployment allowances, the decrease in the cost of living and the greater purchasing power of money between 1924 and the present day, it is estimated that the real value of the allowance has increased by 36 per cent. since 1924. There has been no attempt to reduce it by anything like that figure. The only attempt, as I understand it, in the discussion that occurred and that brought about the political crisis was an attempt to cut by 10 per cent. which was 1½ per cent. less than the increased value of the money that is being given and has been given since 1929. I cannot but think that this is not unreasonable in view of what has happened. If it was right in 1929 to give whatever the figure may have been—let us assume that for a man and his wife and two children it would amount to 30 s. in a week—and if you deduct nothing for the children, as I have said, all you would do would be to deduct, if this proposal is to be made effective, 10 per cent. of the amount received by a man and his wife; and then he would be receiving more than was actually the case, he would be able to purchase more and would get more than he was able to obtain in 1929. It is this that led to our difficulties.
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There is one further factor that must not be forgotten. I have not yet referred to it, and will take only a moment or two. I refer to world opinion. When attention was being concentrated upon the events in this country, there was published a report of the Economy Committee, over which Sir George May presided, and that had a very great effect abroad. It gave in an effective form a statement of what was happening, it explained our situation and, among other things, it said that the prospective deficiency for 1931–2 would be £120,000,000, including the Sinking Fund. I only wish that would prove to be right, but that is what was said. That drew attention to our affairs, and foreign authorities and institutions all gave their attention to this point and said: "How long can a country go on if it persists in methods of finance of this character?" The result was the deposit withdrawals of which you are aware. Perhaps one factor of which I might tell you, and which it is important that you should know, is that on Sunday, August 23, when His Majesty returned from Scotland, in spite of the credits that had been obtained to meet the drain on the gold of this country, the withdrawals of deposits were very nearly exhaustive. I ask those who are familiar with finance—and there are many such among your Lordships—to put the picture to yourselves of what that meant if we could not get further assistance—further credits. My Lords, it was that which led to the crisis and eventually to the formation of the Government.
All I desire to say to you upon this is that I trust that after the explanation that has been given, and all that your Lordships have read and heard about it, and after this debate, we may still have the support of this House—that you will think that we were right in the course that we took. It has been urged quite recently, at one of those meetings of outside bodies which seem to exercise so much control upon our political destinies, though they form no part of either the House of Commons or the House of Lords, that what should have happened was a General Election, and the criticism was made of this Government that it had no mandate from the country. Mandate, when the house is on fire! It is like asking you to go before a meeting a week ahead to dis-

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cuss what you shall do if another fire occurs. At that moment action was necessary—swift, decisive and effective action. It had to be taken at once. That was no time for a General Election, and I doubt very much whether noble Lords who sit opposite will venture to plat such a suggestion before your Lord ships.
The only other point to which I will refer, and I would ask you to bear with me for a moment—I shall not be longer than a moment or two, because I am well aware that many of your Lordships understand the situation as well as if not better than I do—is that sometimes we talk lightly of the depreciation of the pound. Sometimes those who have not studied the problem point out that we were off the gold standard in the War and only returned to the gold standard some years after the War. War is a very different emergency from financial. In war conditions everything is at stake. There are many other conditions to which I might refer which would differentiate war emergency from financial emergency, but I will not take up your Lordships' time by referring to them. Once you have restored the gold standard—whether it was right or wrong at the particular moment I do not propose to enquire—you must not allow yourselves to be forced off it, otherwise I say with all the solemnity that I can command that we should be courting a disaster which it is really almost impossible for any of us to calculate in the end. I may say just this. In the first place it would be a great blow to our credit and to the position which we have held. It would be a very severe strain upon the financial stability of this country. It would further depress our trade and industry and cause further unemployment. It would produce a great fall in State revenue, and inevitably bring about inflation, with all its disastrous consequences, and in the main it would affect the poor more than the wealthy, contrary to what is sometimes preached by those who have no understanding of these things.
The wealthy, it is true, may suffer very severely, but it does not touch their vital necessities of life. With the poor it affects the food that they can eat, the clothes that they can buy, and the coal that they can burn. It strikes at the
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very root of living for them, and I should deplore it not only because of what it would do to the credit of this country but even more because of the effect which it would have upon the standard of living of the working people of this country—the effect it would have upon the purchases they could make, and the effect it would have upon their savings, and upon our savings bank institutions. Friendly societies and trade unions would also suffer. And it is idle to say, as some have argued, that wages would then have to be adjusted and raised. I ask your Lordships to imagine the difficulties which you would then have in regard to exports if you did that, having regard to the competition which prevails in foreign countries, and the prices in those countries with which our exports have to contend. It is quite impossible to adopt that suggestion. Then it would also affect even pensions, and perhaps the person most affected, because of the small sum which he receives, is the person in receipt of the unemployment "dole." He is the man who would suffer most heavily. To him it would really be a saving and a benefit to prevent the shilling falling to 9d. or 6d.
I have said all that I desire upon the subject to-day. It is so wide a subject, and, of course, has so many ramifications that one has to be careful not to trespass unduly upon your Lordships' time. Whatever happens, in spite of all the difficulties which may be presented, I believe that we in this country are able to meet the position—that the situation, critical as it may have been and may be, is one which we can confront, particularly if we have union among ourselves as to the course to be taken. I believe that by the proposals that will be made, and which I trust your Lordships will support, we shall have the satisfaction of upholding our position in the eyes of the world, of restoring confidence in the stability of our financial position, and of supporting our national interests, so far as we can, by legislation and its consequences. I do believe in the common sense and right feeling of the working people of this country, especially at a time of national emergency. They have been tried before, and some of us have seen in recent experiences the result of appeals to them in matters which, when they understand, they are quite ready to fall in with.

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And if the matter is presented to them straightforwardly and in a fair light have no doubt of the result.
Of course, if their opinions are to be deflected by references to what has been termed a "bankers' ramp"—whatever that may mean—or a conspiracy of some international combination for the purpose of ruining the Labour Party, as I have seen it put, or of bringing about the downfall of the late Government—if that happens, no doubt many of them may be misled. But if these matters are really brought to their notice in a fair spirit, and with due regard to all the difficulties that both the late Government and the present, Government have to confront, I have no doubt whatever of the answer. I believe the country, as a whole, will rally to the support of a Government which has but one object, to serve the interests of the nation. The Government will do its utmost, according to the best of its capacity and wisdom, to carry the country through the present difficulties, and I trust that your Lordships will see fit to give it your full support. I beg to move, That an Humble Address be presented to His Majesty, thanking His Majesty for his most gracious communication recommending this House to give their earnest attention to any proposals for the imposition of additional taxation and for the effecting of economies in public expenditure, and to assure His, Majesty that this House will adopt such measures as may appear best calculated to relieve the present condition of the national finances.
Moved, That an Humble Address be presented to His Majesty, thanking His Majesty for his most gracious communication recommending this House to give their earnest attention to any proposals for the imposition of additional taxation and for the effecting of economies in public expenditure, and to assure His Majesty that this House will adopt such measures as may appear best calculated to relieve the present condition of the national finances.—(The Marquess of Reading.)
LORD PASSFIELD: My Lords, my task in following the noble and learned Marquess the Leader of the House rendered all the more difficult because as I am sure he will believe, with a very large amount of what he said I find
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myself entirely in agreement. The differences between us—because I am afraid there are differences, which I have to express to some extent—really do not turn upon most of the matters to which the noble and learned Marquess has alluded. I must ask the indulgence of the House if I endeavour to set forth in my imperfect way, not an alternative history of the crisis, because there is no call upon me to do that—I agree with the historical account of the noble and learned Marquess—but to set forth in the best way I can what is our position. Especially as this is a Motion upon which it is, of course, impossible for us to go to a Division. Your Lordships will recognise that the form of the Motion is one with which we cannot do otherwise than entirely agree, and consequently to take a discussion, if it were in the nature of a vote of confidence, upon a Motion upon which we cannot possibly go to a Division would be unfair. But I am sure that is not intended, and I shall have the indulgence of the House, I hope, if I try to explain what is our position.
In the first place the noble and learned Marquess alluded in his closing remarks to the desirability of forming a really National Government. The noble and learned Marquess, I noticed, very carefully did not claim that His Majesty's Government at present is what can fairly be called a National Government. He hoped that it might become a National Government; he wished that somehow or other we could be united to that extent. By a National Government in this connection is generally meant an arrangement by which His Majesty's Opposition disappears, and under which there is no formal body to do its part in the Constitution. I believe that His Majesty's Opposition is a necessary part of our Parliamentary government—if indeed it is wished that our Parliamentary government should represent democratic control. Unless there is His Majesty's Opposition at all times there is not an alternative Government, and consequently the electors have not the choice of saying whether they will have one Government or the other. It is approximating to something which is not Parliamentary democracy but a dictatorship which relies upon the approval of the whole people.

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We have seen such things, and they can exist. But the British Constitution requires that there should be His Majesty's Opposition, and I should think it was a misfortune if there was not His Majesty's Opposition in being at all times. That does not mean that we are not united, to use the words of the noble and learned Marquess, for the public interests regardless of the political opinions that in normal times divide us. If we are separated at the present time it is not because of the political opinions which in normal times divide us, but because we have no confidence in His Majesty's Government with regard to proceedings which we can only gather in advance in this crisis, and if we are acting as an Opposition at this moment it is exclusively and purely because of our difficulties about the way of serving the interests of the nation at this moment.
I am sure I need not disclaim here the fallacy, into which so many people fall, of thinking that one's own side represents the only way of serving the national interest, or the right way of doing it. That is a common fallacy to which we are all occasionally subject. But we can all serve the national interest, and yet differ as to the way in which that national interest can be best served. And consequently our difference of opinion is as to what is in the national interest. I must continue that discussion, rather to clear up the position and state the facts of the case as to whether this Government can properly be called a National Government in the ordinary sense. I must admit that it does represent a coalition of the Liberal and Conservative Parties, possibly with some individual dissentients, as there must always be. But substantially you do have the whole of the Liberal and Conservative Parties in Parliament united, and, what is more, you have the Leaders of those two Parties submitted to the organs of their respective Parties. As far as they exist they submitted the question for their approval, and the two Parties so consulted almost unanimously gave their approval and support to His Majesty's present Government. Therefore it is a genuine coalition of the two Parties. But the Labour Party, which was the largest Party in another place, and I think still is the largest single Party in another place, is in an entirely different
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position, and I must ask your Lordships to bear with me if I just give you a few figures.
Of the Cabinet of the late Government the present Government takes five members, leaving sixteen; it takes, I think, four of the non-Cabinet Ministers out of about fifty, leaving forty-six on the other side; and it takes out of something like 250, whom we call back benchers in another place, apparently about half-a-dozen. That is to say, certainly nine-tenths of the Labour Party in another place have refused to support His Majesty's Government. What is more important, the late Leader of the Labour Party did not, like the Leaders of the Conservative Party and the Liberal Party, consult his Party. He did not lay the matter before them and he has not the support of the Party, because when the matter was laid before the Party by the Secretary to the Party they almost unanimously repudiated the proposal. I do not say whether that is a good thing or a bad thing. I am not justifying it or pleading it or anything of that kind, but it is necessary to face the facts, and if you get at those facts—the position is not of my making—it is quite clear, I venture to say, that whilst His Majesty's present Government is a coalition of the Liberal and Conservative Parties, it cannot claim to have the support of the Labour Party or at any rate of not more than one-tenth of that Party, and cannot even claim to have more than nine members of the Labour Government out of something like 70. That is to say that of 70 principal people you may say there are about nine who are on the side of His Majesty's present Government and some 50 or 60 (I have not the exact numbers) who have refused.
In this House we are at all times but a feeble band. We have lost two out of our Front Bench and four or five out of those who sit behind, but we are still a majority of the small number that we were before. Consequently, whether for good or for evil, this is not a National Government. This is a coalition of the Liberal Party and the Conservative Party—I am not in the least criticising or blaming them—and we resume the position of His Majesty's Opposition which we occupied until 1929. I do not want to call the Government names but it has been called by its own members an Emer-

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gency Government. I do not at all dispute the statement of the noble Marquess, who, of course, has so much more knowledge than I have, and I do not at all dispute his description of the financial crisis out of which this has come. You had the emergency of the drain which was serious, and I shall have a good deal to say about it because it is of some importance. In my reference to my own position and to the position of the Party I forgot to express the regret of my noble Leader, Lord Parmoor, that he is detained by family illness in Germany and is not able to be here to-day. But he quite definitely authorised me to say that he was entirely on the side of the Labour Party and on the side of the late Labour Government in this matter, and his position is entirely and wholeheartedly that which I have been endeavouring to express.
To come back to the drain, I agree very cordially and very sincerely as to the seriousness of that crisis. I agree also that it was necessary to meet it, and that it was necessary to meet it in the emergency in the way practically in which it has been met. There was no time at that moment to do anything else but simply support ourselves by bonds. But I should like to point out that, as the noble Marquess has said, that drain had no necessary relation whatever to the solvency of the country, to the wealth of the country or to the balance of the assets of this country over its liabilities. It was purely a drain on short-term money held in this country. I shall say something about that short-term money held in this country, but I want to say straight off that we agree that it is desirable, indeed, extremely important, that we should have a balanced Budget. I should like to say that, whatever strength the Liberal Party of the past has put into getting a balanced Budget, at all times the Labour Party has been equally insistent upon the need for a balanced Budget.
We did not begin the series of Budgets in which the real Revenue was not equal to the actual Expenditure and in which the hypothetical deficit was met by one device after another which would have staggered Mr. Gladstone in his time. We did not begin that. It has been going on, as noble Lords know,
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for a good many years since the War under Chancellors of the Exchequer who are not members of the Labour Party. In regard even to the particular evil to which the noble Marquess drew attention of actually borrowing money to pay the weekly deficit in the Unemployment Insurance Account, may I remind noble Lords that it was not the Labour Government which started borrowing on the Insurance Fund in order to keep up those payments. We never desired that, though we have had to continue it under certain circumstances. After all, we have not had many Budgets to handle and the Labour Party has been frequent in its criticisms, and has said that we ought not to borrow but that we ought to balance our Budget in the ordinary legitimate way by raising taxation sufficient to meet the necessary expenditure of the country. Over and over again the Labour Party has said that.
And I go further. The noble Marquess will excuse me reminding him of the enormous borrowing during the War and of the advice that was given at the time by Labour members and also by political economists that we should do better to raise more in taxation and less by loan; that whilst we were conscripting men we should at the same time conscript wealth, fairly and evenly. Instead of which the Chancellors of the Exchequer at the time preferred to borrow rather than to take the money in taxation. The Labour Party was constant in protesting against that, and I hope we shall certainly support the present Government if they are going to balance the Budget by raising the necessary amount of revenue to meet the necessary expenditure. That we have no difficulty in undertaking to do. The taxation will be heavy. The figures that the noble Marquess has given I am afraid are still far within the mark, as he probably knows better than I do by this time. I anticipate that the taxation will be heavy if you are going honestly to balance your Budget, as I hope you are.
With regard to the economies, when the Leaders of the other Parties met the Prime Minister, as the noble Marquess has said, they stipulated that there should be adequate economies. They also hoped, I assume, that there would be a balanced Budget. At any rate it was

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the Labour Party which was insisting on there being a balanced Budget and that the Budget should be balanced in the only honest way—that is, by raising in taxation the necessary sum to meet the Government's necessary expenses. Let me say straight away, it is the policy of the Labour Party, as it is the policy of all political economists, I suppose, certainly of all the political economists who have ever belonged to the Liberal Party, that that taxation must be raised in accordance with the canon of taxation the principle of which is that it must be raised in proportion to the ability to pay. I should like to see the noble Marquess when he brings forward the Finance Bill in your Lordships' House making proposals adequate in amount to balance the Budget by new taxation and adequate to prevent any deficit, and for raising that taxation in accordance with the canon of taxation in which he believes—that is, in proportion to the taxpayer's ability to pay.
Now come to the question of economies. Naturally it was our duty as a Government while we were in office, in the last few months in particular, to give very careful attention to the question of economies that could be made. I can assure your Lordships we sat many painful hours going over those economies to see what, could be done. I need not remind your Lordships that economy does not mean necessarily cutting down expenses. That is not necessarily economy. You have to exercise a real economy, and not lose more by attempting to reduce your expenses than you would if you continued them. You have to act as you do in your own personal capacity. Economy is to be sought not merely in reducing the amount of your expenses. That may be terrible extravagance. Economy has to be sought wisely. We were prepared to make all the economies which we could discover as feasible, and in the long run wise, for the community, but that had nothing to do with preventing the withdrawal of gold on short-term liabilities that was necessary in order to secure the solvency of the Government.
I would like to point out that there is a very real need in my opinion for economy in this country. In my opinion this country is spending too much of its income on personal luxuries of one sort
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and another. I am not referring to any one class, or to any one person. Too large a proportion of the total income of the nation is now being consumed in mere living, a good deal of it, I venture to think humbly, in ways which are positively injurious to living. But I am not on that point. It is consumed in merely living, and not sufficient is being devoted towards saving—that is to say, towards the necessary increase of capital without which this country cannot be prosperous. I quite sincerely believe that economy is a very pressing and real need of this country, but I would call your Lordships' attention to the fact that the economy which is required is an economy that can only be carried out by the individuals concerned. It is they who are devoting too large a proportion of the national income to mere personal consumption day by day, and not setting aside enough of it for saving and investment and that increase of capital which is required. The Government is an individual like the rest, and the Government ought to take care that it is not spending too much on mere living. But the great bulk of the national economy which is required in my opinion can be carried out only by individuals in all classes. I should wish to see us living more simply, and devoting more of that income to improvement and the increase of efficiency. That is the kind of economy which is necessary. We have also to increase our productive efficiency—on the one side our mechanical efficiency, and on the other side the efficiency of the human factor. Economy in government is part of this economy. We should stop waste. We may even postpone new development. We might slow down such increase of expenditure as is not normal at the moment.
I have always said that the unemployment insurance scheme needs reforming. I may say personally that I myself during the last twenty years, ever since there has been an unemployment insurance scheme, have never given it my blessing. I have not done so from the very beginning. I was not in favour of it, but it has served, in the terrible times we have gone through, remarkably well in averting still greater evils. It ought to be improved, but I want to warn your Lordships that improvement of the unemployment insurance scheme will not

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necessarily mean that you will save any money. The unemployment insurance scheme errs at this moment because it is the cause, I am sorry to think, of the demoralisation of some of the people concerned, especially of the young people. There is no cheaper way of keeping people than giving them a weekly "dole," but it may be a ruinous, extravagant way of keeping them to give them a weekly "dole" as a weekly "dole" if you can find a better way of doing it. I can assure you there is no cheaper way of doing it. But it may be extravagantly costly unless you accompany the "dole" by something which will cost you a little money. Now we want improvement in unemployment insurance.
I want to point out that the proposals for economy which were pressed upon the late Government by the Leaders of the two Parties were exclusively reductions of Government expenditure in departments which would affect adversely the poorer people of this country. The whole of the economies—I think I am right in saying the whole of the economies—which were pressed upon us by the Opposition Leaders, as they were then, and which had been singled out by the May Committee, were reductions of Government services, Government enterprises of one sort and another, which had been adopted for the benefit in the main of the poorer classes of the community. If we have to cut down the Government expenditure, if we have to economise, if it be economy, I do not think your Lordships would wish that the whole weight of those economies should fall upon the poorest classes of the community. At any rate, we do not wish it.
THE MARQUESS OF READING: Hear, hear.
LORD PASSFIELD: I am glad to hear the noble Marquess say "Hear, hear." I hope when the list of economies comes up we shall see that those economies are taken in due proportion from all sections of the community, taken in proportion to their ability to pay, not a 10 per cent. cut of unemployment benefit alone, not even a 10 per cent. cut of all incomes.
THE MARQUESS OF READING: Will the noble Lord forgive me? I am not sure whether I correctly understood him, but did the noble Lord say that we had pro-
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posed economies which would fall exclusively upon the poor, "the very poor," were the words, I think, the noble Lord used.
LORD PASSFIELD: I hope I have not misrepresented what the noble Marquess himself said, that the Opposition Leaders insisted on adequate economy, and I think those economies, so far as there was any specification of them at all, were the economies adumbrated in the May Report, or some of them, and those economies I say fall exclusively upon the poorer section of the community.
THE MARQUESS OF READING: That is rather a different thing from the statement which I understood the noble Lord to make. I understood him to say that the Leaders of the two political Parties stipulated that the economies to be made should be adequate, and then the implication of the noble Lord was that the two Parties required those economies to fall upon the very poorest of the poor.
LORD PASSFIELD: I promptly withdraw any unfair implication. I did not at all mean that. Allow me to try to state my point with a little more fairness. One of my great criticisms of the May Committee Report was its specification of £96,000,000 a year of economy, and that the economies almost exclusively—nineteen-twentieths of them at any rate—would have fallen upon the poorer sections of the community. Those are the economics specified in the May Report. I certainly understood that the economies which the Opposition had in mind in asking for adequate economies, when they thought the total of economies which we saw our way to making only amounted to so much and not to £96,000,000—I certainly understood that they had in view the economies suggested in the May Committee Report or some of them. We do not know at present what are the economies which the present Government are going to bring forward. I rejoice if I have been wrong. I rejoice if these economies are not going to fall wholly or mainly upon the poorer classes of the community. I rejoice if they are going to be shared, as the late Government insisted they ought to be shared, in due proportion with equal sacrifice by all sections of the community. I rejoice if I am mistaken, and I shall certainly apologise to the

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noble and learned Marquess more fully if I am so agreeably surprised as to find that those economies do not turn out to be such as touch mainly the poorer classes.
But the noble and learned Marquess will not mind my referring to the fact that he did say that there was actually a specification that unemployment insurance was to bear a large share of these economies. There was even a figure mentioned which was insisted on. I was not present, of course, and it was only reported to me, but we were told that the economies we had suggested were not adequate and that another figure was given by which they must be raised—£25,000,000 or even £30,000,000 was mentioned—the bulk of which was to come out of unemployment insurance. That was what we were told was insisted upon before the economies could be considered. adequate. At any rate, I should be very glad if that is not so. If the cat in unemployment insurance only amounts to £12,250,000, that is a big sum, but it is a very small part of the economies which are desired. If it was said that we broke over that, that would be comparatively little.
Now I want to come to another point which I venture to think is of more serious importance, and I hope your Lordships will bear with me a little. It is as regards the future. This crisis has arisen out of the drain on short-term obligations incurred by the City of London. Steps have been taken to meet that drain for the moment, but for the moment only. This emergency surmounted, the situation will remain open to another crisis at any moment quite irrespective of the solvency of this country merely because the finance houses of the City of London have accepted short-term obligations, money on deposit for short terms, to an extent which is very large but the amount of which is not known. It is not known to the Bank of England, it is not even known to these houses themselves. Each one knows his own amount. Each one knows that he has undertaken to pay on demand so many hundreds of thousands or a million pounds, but they do not know the aggregate of the liability incurred. The Bank of England does not know, the Government does not know.
These short-term obligations, these short-term liabilities are not a new
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feature—of course they are an old feature—in the City of London. They have been going on for a hundred years. But before the War they were practically covered by equivalent short-term obligations of other countries to the City of London. They were constantly kept more or less balanced. Now we are told—your Lordships will find it in the Macmillan Report—that there is a very large adverse balance, not due to anything connected with imports and exports, but due to the fact that foreign countries, as the noble and learned Marquess said, because they were uncertain of the money of their own country, have been in the habit of keeping their money in London. Whether it is £200,000,000 or even as much as £300,000,000 there is that daily liability of the finance houses of the City of London to these foreign countries, and against that they have no reserve—none whatever. They hoped that everything would go well, because the loans were carefully made, and in case of need these finance houses go, as they went last month, to the Bank of England and ask for gold and are able to get gold.
Now the gold reserve of the Bank of England was created by Statute and exists for an entirely different purpose. It was never intended to meet these short-term obligations of the City of London. It was intended and was expressly devised as security for the fiduciary issue, for the Bank of England notes. It is held for that purpose, and now we find that these houses in the City of London have let themselves in for these large obligations which they must meet at a moment's notice and that they have no reserves against them, and that they have asked the Bank of England, so to speak, to keep these reserves. That means that the operations which have been taken to meet this sudden drain have been taken by the Government—not by the Bank of England—at an expense which will not come to less than £6,000,000 or £8,000,000 this year. It is an expense to the Government which the taxpayers will have to pay and it has been incurred simply because these finance houses in the City of London in the course of their business have accepted this money on deposit at low rates of interest and have let it out

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elsewhere at much higher rates. And they glory in it, because they get these large profits.
It is not a question of a "banker's ramp" or anything of that kind. They have acted in pursuit of legitimate business and one of them explained and justified it to the Macmillan Committee. He said, "I do it because I get money on it." But they kept no reserves and they have gone to the Bank of England for reserves kept for quite another purpose. I want to ask the Government what steps they are going to take. This is not a matter of immediate importance, of meeting a drain; but I want to ask what steps they propose to take to deal with the situation which is thus revealed. There is always a danger that this two hundred or three hundred millions will be drawn upon. It may be due to mere scare, mere fright, mere alarm of foreign countries. It may be malice. There is that possibility which we cannot overlook. It may also be politics. It may be part of the political movement of different countries. They may say, "Let us draw gold from London." I do not think that this country can afford to go on letting us be subject to the menace of this sudden drain which boils up in the course of a few weeks so that £30,000,000 or £50,000,000 is taken from London. We cannot afford to let the gold go for fear of making matters worse, and then we have to go borrowing in New York or wherever it may be, to find the reserves which these finance houses have deliberately not provided for themselves.
Are we going to allow this to go on? I cannot help thinking that at least the amount of that liability should be known. I do not mean that it should be known to the public, but at present it is not known even to the Bank of England or to the finance houses because each one only knows his own liability and does not know how much other people's liabilities may be, or whether the total is £200,000,000 or £300,000,000. I cannot see why it should not be made necessary for anyone doing that business to give notice to the Governor of the Bank of England confidentially so that the Governor may know at any moment what this market liability to the world at large amounts to. Then the question will arise who is to pay the necessary costs of the reserves which
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ought to be kept against these liabilities. Shall we be asked to pay that cost out of the taxpayer's money? There has been in recent years too much of the habit of trade or industry when bad times come going to the Government and asking to be supported and helped and subsidised at the expense of the community. That is not the kind of Socialism of which I approve, but it is the kind of Socialism which has been practised in recent years. It has been practised with regard to these balances to the extent that it will cost the country £8,000,000 for what is done by the present Government. The amount of £8,000,000 will be added to your taxes in order to balance the Budget and to repair the omission of these financial houses to keep their own gold reserve against their own short-time liabilities. There is no mystery about it, and the extraordinary thing is that neither they nor the Bank of England nor the Government know whether it is £200,000,000 or £300,000,000 that ought to be provided against. Is the Government now going on in that state of ignorance? I hope that when the noble Marquess brings forward in this House proposals which arise out of this emergency he will tell us what the Government propose to do to stop that very serious hole in the defences of this country.
I must not go on. I will sum up. We are faced, not by a National Government in the sense of supersession of the Parliamentary Parties or the supersession of the alternative provided by His Majesty's Opposition. What we now have is not a National Government but, as the Prime Minister has himself said, a co-operation of persons, not of Parties. That may be good or bad. At any rate the Labour Party stand outside. We stand apart and we resume our place as His Majesty's Opposition. We shall have to vote, if we must vote at all, against any vote of confidence in the Government, and we shall do so, I beg your Lordships to believe, not because we are upholding any sectional interest or are not as keen in maintaining the national interests, the interests of this country as a whole, as noble Lords opposite may be. I hope we may be given credit for that. But we are free to differ from noble Lords opposite in

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the view that we take of what will serve the national interests. We think that the Budget ought to be balanced, but we think that it ought to be balanced honestly, by raising sufficient taxes, in proportion to the ability to pay, to meet all the necessary Government expenditure. We want a. careful scrutiny of that Government expenditure. We want to avoid waste, for waste is no good to anyone. We are prepared to contemplate that there should not be at all times the same speed in increasing the obligations of Government.
But you will not set back the clock. You will never have a Government providing smaller public or social services for the people. It is the business of the Government to go on increasing those services. But I can understand that there are periods when that advance must be checked, when it is not prudent to press it on at speed; and perhaps this is one of them. We shall have to look very carefully into any so-called economies proposed that are merely reductions of Government expenditure without a proper calculation of whether those reductions are not really extravagances, through being obtained at the cost of national efficiency. If it means that you are lowering the standard of life, of the technical efficiency and productive efficiency of your population, then it is not real economy. It is extravagance against which we shall protest. There is sufficient money. This country is rich, and there is sufficient income from which the Government can get the necessary taxation.
LORD BANBURY OF SOUTHAM: For how long?
LORD PASSFIELD: As long as the income is produced, of course. That is quite clear. Noble Lords who think that the income is produced merely by the proprietors of wealth and debentures and all the rest of it, and do not take into account the real producers, those who are working by hand or by brain at production, are mistaken. There is a dead capital which is not producing, and is not even helping to produce, but is levying a heavy toll upon the production that is being carried on. I say again that it will not be economy to cut down services so as in any way largely to impair the efficiency of the producers, either by
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hand or by brains. I say that this will not be economy, and I hope that when the noble Marquess produces his economies we shall find that he has not included any of that kind, or we should have no alternative but to oppose him.
I would say only two things more. I will speak first of the cut in unemployment benefit. Whatever may be said about that, be it remembered that the unemployment benefit has never been sufficient for subsistence. It was never intended to be sufficient. In 1911 when the scheme was introduced, and repeatedly in my hearing in another place, successive representatives of the Ministry of Labour have always said that the benefit is not intended to be equal to the cost of maintenance. Let me give you a proof of that. Your Lordships will be aware of what is done under the Poor Law in relieving destitution. I wonder whether your Lordships are aware that over a very large part of England where the unemployed are aggregated, in about one-third of that area, the out-door relief given by public assistance committees to a man and wife and two children, or whatever other unit you take, is actually more than the unemployment benefit. That is, say, the amount of unemployment benefit at present given is less than the public assistance authorities under the Poor Law allow for the relief of destitution.
There has been no proposal to cut down the rates of out-door relief, although that too, of course, is public expenditure. Nobody has proposed that the out-door relief paid in Newcastle, Liverpool, Manchester or any of those places should be reduced and everybody will admit that those rates are merely to relieve destitution and are not excessive. In those places the unemployment benefit is literally either 1s. less than the Poor Law authorities allow for relieving destitution, or it amounts to the same. When the proposal is made to make a cut in those amounts, you have to ask yourselves whether you are not trenching on the amount necessary to maintain those families in health and efficiency. We say that we think you are, and that it ought not to be done. Consequently we have reluctantly come to the conclusion that we have no confidence in the programme that is about to be brought before us by noble Lords opposite.
THE MARQUEES OF SALISBURY: My Lords, I think perhaps your Lordships will feel that this debate ought not to close without an assurance on behalf, as I believe, of the great body of your Lordships that we are most anxious to give that support to His Majesty's present Government for which the noble and learned Marquess asked just now. We recognise that at a moment of very great national emergency these statesmen have come forward and, sinking their old Party differences, have joined together in order to save the country. We honour them for what they have done, and we intend to do our best to help them in the work which they have in hand.
The noble and learned Marquess deprecated our attributing any blame for the present state of things in the present debate, but I really think, after the speech to which we have just listened, that it is necessary one word should be said. I am acutely conscious that many Governments have been guilty of overspending in the past—I wish it had been otherwise—but, of course, all that previous Governments have done sinks into insignificance beside the record of the late Government. The noble Lord who has just sat down appeared to be wholly unconscious of the position in which he and his late colleagues stand. They are responsible for a state of things unexampled in English history. The noble Lord told us at great length of the particular position which the bankers occupy, and discussed short-term loans and long-term loans. The important thing is this, that when the late Government left office, they left the country face to face with a deficit of £120,000,000, which they had no means, so far as we know, of making good. They brought the country to the brink of a precipice, and the noble Lord did not seem to have the least consciousness of what the country was going to say about him when the country had an opportunity of speaking. I do not mean the noble Lord personally, but the noble Lord and his colleagues.
I think it is impossible to exaggerate the gravity of the position in which this country has been placed by the direct actions and negligence of the late Government. I do think that perhaps there is a certain advantage to be gained from what has happened. At any rate I think the country has become convinced in a way in which it was never convinced
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before, that this country has not got a bottomless purse—that there is a limit to which expenditure can go; that you cannot squander money for unnecessary school buildings, and an unnecessary standard; that you cannot spend money on roads which are not required and which are built upon a scale far beyond the means of this country to support; that you cannot scatter hundreds of thousands of pounds in paying people to be idle, for that is the effect of a good deal of the unemployment legislation. Henceforth, we know that all these things are impossible. It is a great lesson which I hope will be laid to heart. If the noble Lord and his friends think they can get off from the judgment of the country by talking about what the bankers have done, arid about short-term and long-term loans, they make a great mistake. We stand here behind and beside the Government—the noble Lord will not have it that it is a National Government, but it is the fault of the noble Lord and his friends that it is not a National Government—in order to do our best to rescue the country from the precipice over which the late Government were intending to drive it.
EARL DE LA WARR: My Lords, it is with a great sense of trepidation that I rise to speak to your Lordships on a subject which we all know demands very great knowledge and experience. On the other hand, I cannot help feeling that those of us who are not prepared to support this present Government do owe it, to the House of Parliament to which they belong, and to the country, to state their reasons. May I first pay my humble tribute to those who have been prepared, in some cases to do what amounts to sacrificing their political lives, and in many cases sacrificing what is far more precious, their sacred political convictions, in this period of emergency. If I may be allowed to go farther on a personal note, I desire to say that I only wish I had been sufficiently convinced that the measures which this Government are likely to take—because we do not know exactly what they are going to be—are likely to improve the situation for this country, and that I could find myself aligned with my political Leader, to whom I owe so much, in his great undertaking.

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At the present moment, we are all of us mainly absorbed by the problem of balancing the Budget. This problem, grave as it is, does seem to me to be possible of exaggeration. I think the noble Marquess, Lord Reading, really said the same thing in so many words. He said that what really counts for this country is the state of industry and the balance of trade, and that no matter how much you balance your Budget, unless you can get a readjustment and balance of trade, then you may really do more harm than good. As we are all agreed, therefore, that the balance of trade, the state of industry, and the state of the Budget are so unavoidably interwoven, I hope your Lordships will not think I am speaking off the point if I ask you to consider for a moment what really is the position that we have to face today. Lord Salisbury attempted to put the whole blame for the present situation upon the Labour Government. I am not going to take up that point, because whether it is true or not that the late Government was responsible for greater budgetary increase than previous Governments, I believe we have got to go far deeper than any such point as that.
The real position is that it is difficult to balance the Budget because the industries upon which the Budget is dependent for revenue are not in a position to pay their share of taxation. Fm the last nine or ten years, rightly or wrongly—and those who have not had great experience in finance find it very difficult to answer this question—the central banks of this country and of many other great countries in the world have steadily pursued a financial policy of driving down prices. They may be right or wrong, and I do not venture to judge on that issue; but if you are going to drive down prices without driving down costs at the same time, then you are bound to find yourselves in the position in which we are to-day, with industries not at all profitable, and therefore unable to balance your Budget. The logical course to follow if we support that policy of driving down prices is to drive down costs also. We all know perfectly well that the only way in which we can drive down costs is to tackle the two major costs to-day that are hanging over the community; one is the burden of Debt, fixed interest charges, and the other is the burden of wages.
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If we think for a moment we must agree that there is no Government in this country, either in existence or that we are likely to have, that would be prepared to face that policy right through to the bitter end—and, when we pursue it, it is not the least bit of good doing so unless we do pursue it to the bitter end. Certainly it is not the policy of this Government; rather it is proceeding in exactly the opposite direction. instead of tackling the problem of costs in the economies that we imagine it is going to effect it actually is far more likely to proceed in the direction of further driving down of prices, because almost every economy that. has been mentioned, certainly every economy that I recollect for the moment in the Report of the May Committee, is an economy at the expense of the consumer—not at all an economy in the costs of production. In so far as—in spite of the large amount of imports into this country—the bulk of our consumption in this country is consumption of goods produced in this country, the economy must be at the expense of the consumer, who would otherwise have bought a majority of British goods with his money. How is that going to help British industries to pay a higher dividend and a higher tax?
It may be necessary that certain economies, quite apart from what I have been discussing, should be made, and here most certainly I must say that I am probably not speaking for those with whom I sit on these Benches. I think a lot of us have felt for a long time, in spite of the sympathy which we must all possess for those men who, possibly for years, have been earnestly and honestly striving to get work, but have been unable to do so—in spite of that. sympathy, many of us have felt that there are certain abuses with regard to the Unemployment Insurance Fund that must be tackled; and I would go even further than that, and say that, if further economies are needed, personally, and speaking purely for myself, I would rather see those economies made out of a, further reduction in expenditure on those lines rather than a reduction on the productive services—the productive social services, the health services, housing, drainage, afforestation, roads, agricultural education and agricultural research, and agricultural marketing;

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because in regard to every one of those services, I am quite convinced that for everything we save on them we are going to lose in social value. And I know that one of the minor reasons which personally made it impossible for me to join this Government was that I knew perfectly well that, if one went back to one's old Department to make cuts in certain services, one would only be waiting for the time to get back there to reimpose them, because one knew that they were really productive.
We have all got to admit that there has been a crisis, and that unless we are prepared to put up alternative methods dealing with that crisis we really are taking up an impossible position in opposing the present Government. From that point of view I must confess I was just a little bit disappointed in the speech of the noble Lord, Lord Passfield, because I did not notice in his speech any really constructive alternative. The first alternative that I can suggest to your Lordships is an alternative that has been discussed by members of all Parties for a very long time, that of a revenue tariff. I cannot for the life of me make out why this Government, composed as it is of a vast majority of Conservatives, is gathered round the present Chancellor of the Exchequer in his desperate attempts to prevent a revenue tariff in this country. It is an open secret that the majority of the last Cabinet was in favour of a revenue tariff. I see a member of that Cabinet here: I do not know if he is going to rise and deny that fact. We also know that the vast majority of the Conservative Party are in favour of it.
The noble and learned Marquess, Lord Reading, spoke as though the only Party to be criticised for not sacrificing its prejudices was the Labour Party. There is only one Party in the State to-day really pledged to the complete maintenance of Free Trade, and that is the Liberal Party. And I understand—again, these matters have all been kept very quiet, it is very difficult to know what really has happened, and I speak subject to correction—but I understand that while the majority of the last Cabinet were in favour of a revenue tariff, and we know that the Conservative Party are in favour of a revenue tariff, the reason why it cannot be adopted is that it was considered so necessary to have every Party
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in the Government that the prejudices of the Liberals, who refused to make any change in their opinions, even at this time of national emergency—
THE MARQUESS OF READING: I must ask the noble Earl to give me the authority for that statement. Is he making it on any authority, or is it a chance venture? I will deal with it the moment he has given me the answer to that question.
EARL DE LA WARR: When I made the statement I said I had nothing in black and white, because the matter has been kept secret. We really do not know.
THE MARQUESS OF READING: I must tell the noble Earl, if he persists in the statement which I am a little surprised that he is making, that I am not asking for black and white; a man's word is good, whether it is written or whether it is not. What I was asking was whether he was making that statement on authority. There is not a word of truth in the statement that anything has been given up. The truth is that during the whole of these discussions the question of tariff has not even been discussed.
EARL DE LA WARR: Of course, I must accept the noble and learned Marquess's assurance, because he has been concerned in the negotiation, which I have not. Perhaps I might ask him another question? Why is it, if there are a comparatively small number of Liberals contained in a Government composed of a very large number of Conservatives, who are presumably for a tariff, that we do not have a tariff put forward? Perhaps it is that the Conservatives do not wish at the present moment to produce a tariff. Well, why not? Perhaps they will tell us that the form of tariff that would be likely to be introduced for all-round revenue purposes would not be large enough for the purpose. But surely they will admit that it would be very much larger than anything they have ever dared to impose themselves when they had a large majority, and it would certainly be useful, giving even their present Front Bench the courage to put into operation the policy which their Party has always preached in the country. It has been suggested that the tariff is being kept as a bonne bouche for the General

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Election that is coming. I am sure that is not the case at a moment like this when we are all being called upon to meet a grave national emergency. Rather it is, I think, a genuine attempt to arrive at an agreement for a national policy. But I would ask noble Lords who look at the matter from that point of view whether it is really worth while having an agreed national policy when in the main it seems to be based on an agreement not to do what you really believe.
So much for the position with regard to the revenue tariff. There are certainly very objectionable features in it especially to those who have been brought up in Free Trade principles. But surely, at a moment like this, all of us have to be prepared if necessary to revise our principles. Certainly, it would have the effect of producing a considerable amount of revenue and of saving us from a very large number of what are, I think we all admit, productive economies. It would undoubtedly give at the present moment great encouragement to some of our industries which are hardest pressed and it would undoubtedly help what the noble Marquess referred to—the balance of trade. In fact, I might go as far as to say that it would be the only proposal in any of those that are likely to be put before us which would tend rather to diminish than increase the number of the unemployed.
There is another economy. The last Conservative Government passed an Act for the derating of industry. That Act was very much criticised at the time because a large amount of the derating was on perfectly prosperous businesses such as breweries, tobacco companies, and many others. This year, I understand, the payments in respect of this Derating Act are likely to amount to something like £32,000,000. Again I speak subject to correction of my figures by those who know more of the subject, owing to their official positions, than I do, but I am given to understand that very large economies amounting to something between £10,000,000 and £15,000,000 might well be made on this expenditure on subsidising what are perfectly prosperous industries. I would suggest before we cut down our productive or our social
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services that we had very much better cut down expenditure of that character.
Then we come to a subject on which I would only throw out a word—the Sinking Fund. That is a subject which, having regard to the amount of my financial knowledge, I certainly approach with the greatest timidity and trepidation. One cannot help feeling that at a time like this it rather appears to be pretending to have a surplus in your Budget useful for Debt repayment when such a surplus does not exist, if you insist on paying off the full amount every year of round about £50,000,000 on the Sinking Fund. At a time like this it would be very much better surely either to lighten the burden of taxation on industry or else to use that money in productive services which might in future lead to a more prosperous condition of industry than to continue this expenditure at the moment.
Those are three proposals which I mention to your Lordships to show that there are other alternatives, surely very much more productive than what has been suggested hitherto. It is perfectly true that they will not save us from drastic economy, but some of them might well be used in greater or lesser degree to mitigate some of the cuts in our most productive services. The danger at the present moment surely is that the whole moral force of the nation may become directed towards a purely negative goal. If the Government are not to spend and the local authorities are following their lead and are going to stop spending, if we are told also that individuals are not to spend, as certain dignitaries of the Church have suggested, who is going to spend? Surely, the time must come when we have to ask ourselves, "If nobody is going to buy, who is going to sell, and if nobody is going to sell, who is going to produce?" Surely, there is the terrible danger that this magnificent national effort, as we all realise the intention of this effort of the National Government to be, may in fact actually intensify the very depression from which we are suffering, may actually drive down to further disastrous levels the price level which we really want to raise and actually leave us with so many more unemployed men on the Fund that they may more than eat up the saving which the proposed cut of

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10 per cent. is likely to make for the Fund. That is the position and that is certainly one of the dangers.
But those of us who oppose this Government have to face this position. Credits had somehow or other to be obtained. Those credits, we were told, could only be got on certain terms. We were also told that the mere fact of balancing our Budget was not sufficient. The last Government was prepared to balance its Budget and, I understand, had agreed actually on figures of economies and taxation that were going to balance the Budget. We were told that this was not enough. It is possible that a Budget with fewer economics, containing in it a revenue tariff and other proposals that we have been discussing, might equally have been unacceptable to the financiers who, we hoped, were going to give us the credits. Therefore we have to ask ourselves how far we are prepared to put up with dictation from the foreign lenders. If we need the money, and have no reply to make to the financier who lays down humiliating terms, then, presumably, the financier is at liberty to make any terms he likes to propose. Was that really the position? I do not think it was.
After all, when we consider the position of those countries which were not prepared to advance us credits except on certain terms, were they really in a position to be so dictatorial? Last night I listened to an address by Professor Henry Clay, one of the spokesmen for the Bank of England, and we were told that the foreigner would lose very much more than we would if we went off the gold standard. The very suggestion of going off the gold standard is repulsive to most of us, but supposing we had been prepared to say to the foreign lender, "You are quite at liberty to say we must balance our Budget; we will balance our Budget; but if you attempt to dictate to us terms as to how to balance our Budget, then there is a limit beyond which you cannot go, and if you go beyond that limit, it will mean that you will drive us off the gold standard." What was the position? We would have been in the position of being the only country of those three—I am thinking of the United States, France and England—with a balanced Budget. Neither of those two other countries are
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going to be within millions of balancing their own Budgets. We know also that the security of this country is still colossal, and equal to that of any country in the world.
But what effect would going off the gold standard have had upon those two countries? As I understand it, going off the gold standard means that we need no longer ultimately pay in gold, and that we can pay in notes, which means that foreign countries would have to take their credits, if they wanted to withdraw them, in the form of goods. It would also mean a depreciation of our pound. That would mean surely a tax on imports. It would mean imports becoming more expensive if our pound went down, and, vice versa, it would mean a bounty on our exports. The Conservatives have all along been saying it is essential that imports should be made more expensive. Therefore, why need we necessarily be so afraid of going off the gold standard? Surely the risk is not likely to be very great, because the United States of America and France are neither of them, with their steadily restricting export market, in a position to face our taking action such as that. We may well be told—the noble Marquess did tell us—that the risk of going off the gold standard would be far too serious for us to take. That is a subject on which, naturally, I will not venture to dogmatise, but surely sooner or later—I am speaking here very much in terms of a question mark—we have in this country got to be prepared to face the possibility of admitting that our pound may not have been for some time, and is not at the present moment, really worth, in terms of international exchange, twenty shillings. This Government has been formed for the purpose of compelling the nation to face up to unpleasant realities. Are we quite sure that this is not the unpleasant reality that we may in the long run have to face?
It is a platitude to-day—and it is admitted again and again in the Macmillan Report—that in 1925, when we did return to the gold standard, the pound was not then really worth twenty shillings. What has happened—I am speaking purely as a layman—during the last five or six years to make us feel that the pound has in any way appreciated in value? Surely there has been nothing but a

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steady deterioration in our trade position. The question before us is not whether it is desirable that the pound should be worth twenty shillings, but whether in actual fact it is worth twenty shillings, and whether, if it is not, we may not in the long run be driven to face that fact. I would not attempt myself to answer these questions, but they do seem to me sufficiently relevant to make it quite impossible to support the present Government. There is no reference to the gold standard, and I understand may not be any in the speeches of the official Opposition. I find it difficult to line up entirely four square with them until they are prepared to face what I believe is the logical consequence of being against the proposals that are likely to be put before us by the National Government.
If we are not prepared to accept the terms of the foreign lender, either we have to be prepared to balance our Budget in some different way, such as by means of a revenue tariff, or we have to be prepared to challenge the foreign lender's position and let him know, if he acts in a way which we consider to be unreasonable, that the effect of his action would be to drive us off the gold standard. But such a state for the moment is inconceivable unless we are absolutely convinced that every other possible step has been taken. Therefore, I would appeal to the Government even now to reconsider its position on the question of a revenue tariff as a means of balancing the Budget, as a means of giving temporary assistance to industry without at the same time having to make most disastrous cuts in services which, I think we must all admit, are productive, useful and necessary for the continued efficiency of this nation.
LORD ARNOLD: My Lords, the noble Earl who has just sat down has raised the question of a revenue tariff, but this is scarcely the occasion to deal with that, and, therefore, I will not reply to him in any detail. I will merely observe that he appears to be labouring under a somewhat widespread delusion that a revenue tariff is in some way different from any other tariff. It is precisely the same. A revenue tariff means Protection, and, whatever else may be said for it, in my view there is little that can be said for it as a means of raising money
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for the national Exchequer or for anything else. You could not possibly put forward a more wasteful or more expensive method of raising revenue. I will undertake to say if and when a revenue tariff comes to be discussed in another place, that the amount of money which, in the end, will be obtained from it, when everything is taken into account, when all the concessions have been made which will have to be made, and when the cost of collection has been taken into account, will not be more than £20,000,000 to £30,000,000. That would not go very far in the present emergency though it is worth having if you can get it by wise means, but in order to get that sum by a revenue tariff an infinitely greater amount than that will have been taken out of the pockets of the people.
The noble Marquess, Lord Salisbury, who I am sorry has left the House, certainly did not respond to the suggestion of the noble Marquess, Lord Reading, that there should not be any great controversy this afternoon. The noble Marquess, in a speech singularly devoid of logic, if I may say so, laid the whole blame of the situation which is facing the country upon the Labour Government and the "dole." He did not mention anything else. What are the facts? What is it that has brought about this unexampled Situation, not only in this country but in other countries? First and foremost of all there is the cataclysmic and unprecedented fall in commodity prices. Was the Labour Government responsible for that? Secondly, there is the hoarding of gold by the United States of America arid the Government of France. Was the Labour Government responsible for that? Thirdly, there were the difficulties on the Continent, the difficulties of several continental Banks and the deplorable condition in Germany. Was the Labour Government responsible for these things?
Then, coming to our own country, there was the Hatry smash, and over-speculation on the Stock Exchange. I see that out of 280 companies whose prospectuses appeared in 1928 already 106 have apparently been wound up without one penny of assets or very little in the way of assets. Was the Labour Government responsible for that? They were not even in office then. Then there

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was the position in Australia—was the Labour Government responsible for that?—the collapse in China, the boycott in India, difficulties in South America. Wherever we look the world is faced with difficulties for which there is no precedent in history and the noble and learned Marquess comes here and says it is all the fault of the Labour Government. A more perverted argument or anything more removed from the facts is difficult to imagine.
Then there is the question of the "dole," and on that I should like to say one or two words in reply to the noble and learned Marquess the Leader of the House. He based his whole case, like the Prime Minister, on the argument that as the cost of living has fallen since 1929 by 11½ per cent, and that it was only proposed—I presume it is really the proposal also of this Government—to take 10 per cent. off the "dole," therefore everything was quite all right. That shows an entire lack of appreciation of what the "dole" is. As my noble friend Lord Passfield pointed out it never has been even a subsistence allowance. The noble and learned Marquess seems unaware of that. Let me point out to him that the "dole" for a man and wife and two children is 30 s., and it is proposed to cut it by 10 per cent. bringing it down to about 27 s. It is true that the children's allowance is not to be touched, so that perhaps the figure ought to be 27 s. 6d. In many places rent can well be 10 s. a week and that leaves about 17 s. or 17 s. 6d. for coal, food for four people, clothing and all the other things necessary simply to carry on life at all. The truth is it cannot be done. It is a proposal which I believe when it is exposed to the country will excite very strong criticism. It is regarded by large numbers of people who are not in sympathy with the Labour Government or with the Labour Party as a mean and shabby proposal this beginning economies with the poorest of the poor.
Not only, as my noble friend pointed out, is it economically unsound because it depresses these people who already have not enough to live on to an even lower level, but it means that the children will be ill-nourished, not properly fed, and cannot grow into strong efficient citizens capable of taking their place as producers. It is a thoroughly
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wrong policy. If the Prime Minister thinks that because the cost of living has gone down 11½ per cent. and the "dole" is only to be cut by 10 per cent. that it is really a blessing to the unemployed, he will find when the time comes that he has made a very great mistake. Moreover, has it occurred to the Government and the Prime Minister that if the "dole" is cut because the cost of living has fallen, it should follow as a corollary that if the cost of living rises the "dole" should be increased? If and when the cost of living rises is the noble and learned Marquess going to come forward and say, "Well, we cut the 'dole' when the cost of living went down and now the cost of living has gone up we will increase it"? Of course he knows perfectly well he will do nothing of the sort.
It is not to the point to say that children's' allowances are not going to be reduced. It is the total family income with which we are concerned, and that is going to be reduced from 30 s. to 27 s. or a little over. That is what matters. It does not matter whether the reduction comes from the parents' or the children's allowance. If I have a bowl of water and take a cupful of water from one side of the bowl the water in the bowl is reduced by that amount. It does not matter from which side of the bowl I take it, the water is reduced, and what is being proposed is to decrease the total family allowance, and that is what matters. I shall observe with great interest when the Government, proposals come before this House whether they mean equality of sacrifice. The Prime Minister in his broadcast was eloquent on the necessity of equality of sacrifice and he has referred to it again and again. Is there going to be equality of sacrifice? Does it means that if the "dole" is cut by 10 per cent. the Income Tax is going to be increased by 10 per cent., that is by 2s. in the £, from 4s. 6d. to 6s. 6d.? If not where is the equality of sacrifice? You cannot get at the rentier class by indirect taxation. Does the noble and learned Marquess give us to understand that when the proposals of the Government are made known it will be seen that there has been anything whatever that can be fairly described as an approximation to equality of sacrifice? Of course the Gov-

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ernment will not do that and I thought at the time that it was an extremely unwise way for the Prime Minister to make his case.
I will not deal further with that because there will be an opportunity to refer to it when the Government proposals come before the House, but before I sit down should like to refer to one or two matters which I think have escaped attention hitherto. The noble and learned Marquess, in his very emphatic speech in opening the debate, seemed to imply that really there is no other side to the question, that nothing whatever could have been done but what has been done. Is that really true? Was it necessary to charge the Labour Ministers who refused to cut the "dole" with being lacking in courage because they would not face the situation and would not do all that the bankers and foreign financial interests wanted? When my noble friend Earl De La Warr referred to dictation the noble and learned Marquess shook his head as if it were almost shocking to mention the word.
What did happen? Undoubtedly there was a, serious position and it was necessary to do something. The view taken by the Leaders of the Opposition and some of the late Ministers was that it was necessary at any cost to get a foreign credit immediately. What happens? Mr. A, on behalf of the Government, goes to the City to see Mr. B in regard to raising a credit in America. He says: "Well here we are. You know the position. We must have a credit, a big credit. Can it be done?" Mr. B says: "Well you know the position, Mr. A. I am not dictating—of course not, I am not a politician—but at the same time if you want money I cannot help saying there must be some change in the present social programme. Shall I ring up New York? "He rings up Mr. C, in New York, and Mr. C says that of course he would not dream for a moment of dictating. "At the same time, if you ask my opinion, I do not think there is much chance of getting it unless something is done about the unemployment 'dole'. We don't like it and we read day after day in The Times that the 'dole' is ruining the country." There you have it. That is where the responsibility really lies. For months the Tory Press have been telling foreign countries that the
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country is going down. "Of course," says Mr. C, "I am not dictating, but if you want a credit I think it can be managed if certain things are done about the 'dole.'" Mr. B reports that to Mr. A. Of course we are told there is no dictation, but in essence that is what does happen—and did happen.
I do not say that I agree with my noble friend—I have come to no conclusion—but I do say his case is a matter for argument as to whether this sort of thing is to go on and we are to be reduced to the level of a second-class Power. It is a matter for argument whether some other course should not have been followed. After all, France and the United States would not have let us go off the gold standard. They could not afford to do so. Credits would have been forthcoming if courage and resolution had been shown. Moveover, we have about £133,000,000 in gold in the Bank of England now. The Macmillan Report—this is not some wild Socialist statement—said that that amount could go down in their opinion to £75,000,000. You had nearly £60,000,000 of gold there. Was it ever considered whether anything could be done to help the position out of that £60,000,000 which the Macmillan Committee said was available and could be used? Then, again, nothing has been said about the mobilisation of readily negotiable foreign securities. Whenever that is mentioned, the Government Press jeer at Labour as if they knew nothing about finance. The total amount which I suppose would have been taken away from London was not, likely to be more than about £200,000,000. It might have been less. Perhaps not more than 150 million pounds.
There are in the country at the present time foreign securities readily negotiable to a vastly larger sum than that, quite apart from the very much greater sums of securities not readily negotiable. I suppose the total investments of all kinds are perhaps still about £2,500,000,000. That is not at once available of course, but there is a vast sum of readily negotiable foreign securities which have never been called upon, and arrangements could have been made to make them available either for sale or as security. I believe that, if there was no other way in which the corner could be rounded, it might have been rounded in that way. But no

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sufficient consideration was given to these matters, and there was no insistence upon this being done, and so the Labour Government fell, and this so-called National Government came into office. I am not going into that matter at length, as my noble friend Lord Pass-field has dealt with it. Personally, I profoundly regret that all the Labour Ministers did not leave the Tories to act in their own way. I do not see that any useful purpose has been served by leaving a handful of Labour Ministers in this so-called National Government, where their very fewness emphasises that it is not a National Government and brings out the bareness of the land.
I will not speak much longer, as the time is late, but will say a few words only in conclusion. I am glad that the noble Marquess did not say this, but I notice that we in the Labour Party are being charged in the columns of the Government Press with being unpatriotic and working against the national interests. I suggest that we have enough silly talk of that kind in wartime, and that we ought not to be troubled with it in times of peace. We are not unpatriotic and we are not financial ignoramuses. We have gone very carefully into the financial matters. Speaking for myself, I think I have been quite as long in the City as the noble Marquess opposite. I know how panicky the City is, and I have never believed all that I was told there. One of the very first things that was inculcated in my mind at the beginning of my financial career was never to pay any attention to the City because it is always wrong. It has nearly always been wrong in recent years. The actual cause of the financial crisis was due to certain financial houses in the City of London. I do not think the noble Marquess will deny it.
LORD BANBURY OF SOUTHAM: I do deny it.
LORD ARNOLD: I am not speaking of the noble Lord opposite, who always speaks up for the City in all circumstances. The noble Marquess will not deny that the actual cause of the crisis was unwise trading, borrowing short and lending long, or lending insecurely.
THE MARQUESS OF READING: As I have been challenged, I may be allowed
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to answer. I certainly deny it. The noble Lord has confused two things—unwise over-trading and short-term and long-term borrowing.
LORD ARNOLD: I have not confused two things. I did not refer to long term borrowing, but to long-term and insecure lending. That was the cause of the crisis, and the noble Marquess knows as well as I do that what I say is right.
LORD BANBURY OF SOUTHAM: Let me point out to the noble Lord who has just sat down that he and the noble Lord, Lord Passfield, have both said that the chief cause of the crisis was long-term investments against short-term borrowing.
LORD PASSFIELD: I never said that at all. I said that the cause was incurring short-term obligations without any reserve.
LORD BANBURY OF SOUTHAM: I understood the noble Lord to say that, and certainly the noble Lord, Lord Arnold, quoted the Macmillan Report in support of it. If the noble Lords had only read The Times this morning they would have seen a letter on the leader page pointing out that Mr. Dalton, who was a member of the late Government, said exactly the same thing, and quoted the Macmillan Report. The gentleman who wrote gave the true version of the Macmillan Report.
LORD PASSFIELD: It was not the true version.
LORD BANBURY OF SOUTHAM: If he will only look at The Times he will see. I will make a summary of what the Report actually did say. Briefly, it said that it had been surmised that Great Britain has been financing foreign long-term investments by means of an increase in her short-term liabilities. Then the Report goes on to say:
"We have accordingly made it our business to collect for the first time as full a summary as possible.… We were prepared to find that these totals might give some support to the fears expressed above, but in fact they are reassuring."
Then they go on to say that, between the end of 1928 and March, 1931, there had been a decrease from £302,000,000 to

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£254,000,000. Therefore the statements made by the noble Lords and by Mr. Dalton are incorrect.
LORD PASSFIELD: May I be allowed to say that the letter in The Times and the quotation from the Macmillan Report referred to the wrong paragraph? If he reads through the Report he will find that my statement is absolutely correct. The gentleman who wrote to The Times, like a great many people who write to The Times, quoted the wrong paragraph.
LORD BANBURY OF SOUTHAM: Can the noble Lord get over the fact that it is stated that, instead of these being an increase in these investments, there has been a decrease, though the Macmillan Report stated that they were prepared to find an increase? The facts were reassuring.
LORD PASSFIELD: That refers to foreign investments, not to short-term obligations.
VISCOUNT WIMBORNE: My Lords, in common with those with whom I generally act in this House, I welcome the formation of a National Government. Imperfect though in some respects it is, yet in the present great crisis no other course would be available. It is, moreover, only fair that the inevitable unpopularity which attaches to retrenchment should be snared by all three Parties in the State. The nation is certainly under an obligation to the Prime Minister for having made such a solution possible. Regardless of Party or personal interests, he has responded to the dictates of patriotism. His own Party may criticise him now, but before long events will amply vindicate his judgment of the facts and his honesty in facing them. In the meantime, he has the personal consolation of a clear conscience in the weighty decision he has been called upon to make. A National Party has been formed to man the ship of State, but the task is not only to keep her off the rocks but to bring her safely into port. For that reason I deprecate that at this early stage of the voyage there should be talk of limiting the tenure of office of the present occupants of the Front Bench, or of an appeal to the country.
The present Government is not an ad hoe association of heterogeneous elements, but springs from the recognition of the menace to public safety, and
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on the higher plane of that admission is the union of all good citizens to a common end. I fail to see how the statesmen who have come together under the pressure of a serious national peril can contemplate disbanding and resolving themselves into their various components, to oppose each other at the polls on minor points of difference and probably as the result of that disunion, to defeat the object that they are now joined to promote. Party difference has been laid aside with comparative ease, bat, transferred to the clash of the hustings, they would break out and assert themselves disastrously. And this is all the more unfortunate, in that the main cleavage of opinion is on the subject of Tariffs, which cannot be dissociated from the present problem of making both ends meet. Nothing could be more quixotically inopportune than to consult the electorate at the precise moment when we all are smarting from the cut in the "dole" or wages or salary, and before the good results of the surgical treatment have had time to make themselves felt. I have great faith in the good sense and public spirit of the British elector, but to subject him to the acid test of voluntary renunciation and surrender, before the fruits of economy and solvency are harvested and evident, is uncalled for and impolitic. It is playing into the hands of those who would lull him into a dangerous lethargy, who would pooh-pooh the crisis as nothing but a banker's disingenuous panic, and who would demand not sacrifice but further profligacy.
These rumours of an early Dissolution are unofficial, but I hope we may hear they have no foundation. Such an assurance would go far to stabilise confidence. The duty of the present Government, as I see it, is not merely to effect economies, not merely to call a halt to profligate extravagance, and not merely to balance this and next year's national Budget. That would be a short-sighted and a rather craven estimate of present needs and future prospects. Not so simply and speedily can difficulties be overcome, or the responsibility now assumed be acquitted. Two problems of first-class magnitude confront this generation. The one is the dislocation of the economic machine: the other is the advent of the Communist doctrines. The present stagnation of trade furnishes the revolutionary spirit of the day with a pretext

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and an opportunity for attacking the old order of society and finance; so that if only partial and temporary expedients—however wise and sound as far as they go—are contemplated and enforced, a proximate recurrence of the trouble of to-day will not have been averted. It is not enough—though it is much—to restore British credit for the time being. A remedy must be sought for the worldwide depression we endure, and the shallow illusions of Soviet insolvency must be exposed and discredited.
What is so mystifying to both lay and expert minds is that in a world literally flowing with milk and honey there should be trade depression, privation and penury. Never before in recorded history has the world been so rich in all the prime commodities of our daily use or needs. There is an abundance (if not, as some say, a plethora) of wheat and wine and oil, of rubber, tea, and coffee. Never before has civilised man possessed so up-to-date and efficient a machine for the transport of these and other raw materials, or a more efficient plant for their manufacture into objects of consumption. Moreover, highly sensitive distributing agencies regulate their consignment and disposal. Ours is not the case of the ancient world, when the threat of scarcity and famine was a constant menace to society and a grave concern to the rulers. Our trade depression, and the lowering of the standard of life which results, is artificial and unjustified. Then what is the cause of this?
In attempting to frame an answer we are confronted with an embarrassing conflict of views on the part of the experts, bankers or economists. Some attribute it to one cause, some to another, with a corresponding diversity of remedies. There is, however, one factor, the existence of which is not ignored by any, so far as I know, of the searchers for explanation and redress. That factor is gold. Far be it from any layman, in your Lordships' house or elsewhere, to descant on this thorny bristle of technicalities. There is, however, one fact which is patent to us all, and that is: the unexampled maldistribution of the precious metal which has taken place since the War, and its recent accelerated concentration in a few hands. The cellars of the Federal Reserve Bank of the United States will shortly contain half the
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amount of the visible gold in the world; and we know of the formidable accumulation in the Banque de France. Most of these gigantic reserves are sterile, in that they are withdrawn from the active creation of credit, with the result that such dwindling gold supply as remains for that purpose appreciates in value. In all lay humility I think we may subscribe to the deduction that as gold expressed in terms of commodities rises in value, so commodities expressed in terms of gold must fall in value. In fact prices fall, and unless there be a corresponding lowering and adjustment of salaries, wages and debtors' obligations—which anyone can see presents grave difficulties to effect—a disequilibrium results which must produce economic chaos. Here then, if not alone or mainly responsible, is an aggravation of the present malady. The producer of primary articles can no longer do so at a profit, though he is disbarred by all the conditions of his lot from doing anything else. His purchasing power of manufactured articles vanishes. A vicious circle of trade stagnation comes into existence.
I insist on this because it seems to make clear the fact that whatever the claims of gold are—and they are indefeasible—to be the universal medium of exchange and the standard of deferred payments (as we learnt at school), it is, unaided and uncorrected, too inflexible a medium for the modern world of complicated commercial relations and political upheavals. Some form of a managed gold standard is essential. The Macmillan Report says so; and far too little attention has been accorded to that very able document. But to manage the gold standard there must be international agreement and co-operation. This Government possesses the requisite authority and prestige to enter upon the task of inaugurating international conferences that may lead to such a solution.
Money probably existed before letters. It plays a foremost part in human relations. Its main function is to provide a medium for mutually profitable exchange of commodities or services; but it must also guarantee stability of prices at a convenient and accepted level. If it fails to do so its failure is complete and irretrievable. Who can have watched the coincidence between the vast and accelerated accumulation of gold, to

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which I have alluded, and the sensational and disastrous fall in the value of prime commodities which has occurred since the year 1929, without suspecting the interplay of cause and effect? Nothing else will account for it. Nature has not been so much more profuse in production. The consuming powers of man have not suffered such a decline. The appreciation of gold is the main factor. It may be asked how this can be put right? Courage, confidence and international cooperation are the underlying essentials of credit. This Government can do much to promote them. But time will be needed.
LORD STRICKLAND: My Lords, the noble Lord who recently held the seals of the Colonial Department has no rival in this House in the art of marshalling and manipulating statistics. He attempted to prove that the Government of to-day is not a National Government by setting up proportions as to the number of Ministers in the Government representing the several Parties. That method is neither democratic nor constitutional. He ought to have reckoned the number of electors in this country who polled their votes at the General Election for the representatives of the Liberal and Conservative Parties and their principles as contrasted with the number of Socialist electors. If he had put that proportion of the real cleavage of opinion in the kingdom before your Lordships, your Lordships would have seen that we have now got a National Government after years of waiting. We have got the National Government that the people deserved, that embodiment of the will of the people of which the people of this country have been deprived by the noble Lord and his colleagues even since they have been in power. The Socialist Leaders have been in power as a Minority Government, as an undemocratic Government and almost as an unconstitutional Government, taxing capital and enterprise to destruction. To-day those who love constitutional principles will feel that they can breathe freely and hope for justice, because we have a Government which does represent the majority of the registered electors of the people of this country, and let me add that on constitutional principles the majority of the electors as recorded at
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the General Election have a right to be represented and to be governed by leaders who come before them with declared principles until another General Election has taken place.
The noble Lord who leads for the Socialist party attributed the present difficulties principally, if not solely, to the excessive amount of short-term credits given abroad by houses in the City: this is but a minor cause as the Macmillan Report to which reference has been made superficially is remarkable for having suggested remedies for many evils and also for that which he emphasises, and it is there pointed out that the remedy for that exuberance of granting short-term credits was that the Bank of England should encourage and cooperate to a greater extent in making liquid certain gilt-edged securities held by English owners abroad. The figure of these liquifiable securities does reach the total suggested by the noble Lord opposite (Lord Arnold), of over £2,000,000,000; the Macmillan Report indicates perhaps half that amount. That remedy has been in process of being achieved since the Macmillan Report was published about two months ago, but that deals with only one small and minor cause of the difficulties now before your Lordships' House. The main cause of the present difficulty is that one political Party after another has been auctioning its principles before the electors by bidding for votes with lavish expenditure and it required a strong Government not afraid of the polls to stop following that road to ruin. That is the main cause of England's position. And behind that the moving factor that has turned the balance of trade against us has been the conversion of the trades union movement—admirable in its inception and in its original organisation in bargaining for fair wages—the conversion of that philanthropic movement by the noble Lord and his Socialistic friends of forty years ago into a political movement instead of its being an industrial movement. That is the real cause of our present trouble—the workers were made use of for political purposes and led towards the precipice.
The noble Lord who has just sat down gave too much weight to the unequal distribution of gold as the cause of our trouble and suggested an unachievable regulation thereof by an agreement of

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all the nations! That is also an exaggerated view of the importance of one factor in this situation, a relatively minor factor in comparison with high cost of production. It is no more possible to restrict the movement of gold by legislation than it is to make this world perfect by Act of Parliament. Those who have raised the taxes on land in this country unjustly until landowners are merely unpaid tax gatherers find that the laws are evaded—they can tax land no more. They then turned round to see if they could tax something else that was visible on land and thought they could grab it, but when they tried to tax the holders of gold they discovered that the holders of gold could put their gold where it was safe elsewhere, and no effort of legislation will prevent gold remaining liquid and located just where it may please the owners thereof.
LORD MELCHETT: My Lords, the debate which we have had this afternoon has been chiefly characterised by the fact that so few noble Lords who have spoken seemed to realise the seriousness of the situation with which we are faced and the desperate urgency of the condition of the country. There is a great deal of force in some of the points made by noble Lords opposite. Some of the points I agree with, but they are at the moment out of the question. A very urgent crisis arose and action had to be taken: we are now faced with the result of that action. A National Government has been set up, and £80,000,000 has been borrowed. Possibly something else might have been done, but it was not. This is what has been done; this is the situation with which we are faced. We are now faced with the problem of balancing our Budget. For the moment that can be done, measures can be brought forward for economies and taxation which will make the Budget balance on paper for the moment, but it is not going to make the succeeding Budget balance. It is not even going to make it certain that the Budget will be balanced in six months' time. The Budget proposals made in April are about £200,000,000 wrong now. The proposals that are going to be put forward this week may easily be £50,000,000 or £60,000,000 wrong in a few months' time.
I think we are faced with a situation of such desperate urgency that the Govern-
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ment must at the earliest possible moment come before this House and explain to us what they propose to do in order to restore the balance of trade, to which my noble friend Lord Reading referred. That is the point that we have to look to and that is what we have to discuss. There is no doubt that we are faced with a situation in which either commodities and securities are going to rise or currencies are going to fall. Nothing can prevent one of those two alternative occurring. The Government has to make up its mind which of the two policies it is in the long run going to adopt. For the moment the situation will be dealt with by the balancing of the Budget and the obtaining of this large credit, but it is a mere palliative. I am perfectly certain that the present Government realise that as well as anybody else.
I beg the members of the Government, who have the most serious and the most urgent difficulties to face, to exclude nothing at all from their minds, and to have no prejudices in regard to theories which they formerly entertained. We have heard from noble Lords opposite that they were prepared to institute a 10 per cent. revenue tariff. I have never been able to understand myself what a revenue tariff was. A tariff is a tariff. To talk of a revenue tariff is begging the question. But the importance of their statement is that, though they had no mandate from the country for a tariff, they were prepared to institute it. I think that that creates an interesting precedent so far as this Government is concerned. They have no mandate from the country for anything except to get the country out of the extraordinary mess it is in. I am perfectly certain that the country and Parliament will support them in any reasonable measures which they bring forward which will make it possible for the industries of this country to make profit, because if the industries of this country cannot make profit they cannot pay wages, end the Chancellor of the Exchequer cannot get his taxes. You may put up the Income Tax to 10 s. in the £, but if the number of the pounds coming into our pockets is not sufficient the yield will be inadequate to re-establish the national finances. I hope that within a few days the Government will come forward with some constructive pro-

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posals which can alone justify the step which they are taking at the present time.
THE FIRST COMMISSIONER OF WORKS (THE MARQUESS OE LONDONDERRY): My Lords, at this late hour I hardly think your Lordships will expect me to make a long speech, and it is not my intention to do so. If I were to devote myself to answering all the questions that have been asked and to following all the speeches which we have heard in this debate I should occupy a far longer time than I think would be convenient to your Lordships. I hardly think that is what your Lordships expect. We owe a debt of gratitude to the noble Lord who has just spoken for bringing us back to what I might term the realities of the debate. I have understood from what noble Lords on the other side have told us that they realise and agree that there is a crisis, but I hardly think that in their minds the crisis has the same magnitude as it has in my mind and the minds of those with whom I am associated on this side of your Lordships' House. Still, they agree that there has been a crisis. Yet, we have listened to a debate in which they have made no constructive proposals. They have not told us how the actual crisis is to be averted. They have directed their attention to telling us on more or less Party political lines how in future we should deal with those problems which they think have not been solved.
My own position, standing at this Box at this moment, is not one which one accepts with unalloyed pleasure. When I received an invitation to join this Government, I accepted it from a sense of duty. I felt that when we were called upon to assist in a national emergency it was the duty of every one of us to do so. I regret extremely that we have to agree that this cannot be called an entirely National Government by reason of the fact that a great many of those who were in the late Government have not seen their way to co-operate with the Prime Minister in the appeal he has made to the country. The noble Lord, Lord Passfield, has told us that he thinks it is necessary that there should be an Opposition. I should have thought that if he realised the crisis as he tells us he does
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he would have occupied a far better position in backing up his old chief in carrying the country through the danger in which I think he agrees it stands at the present moment. Instead of that we have what is called an Opposition some of whom admit that there is a crisis while others pay lip service, if I may use the expression, to the crisis. I think it was the noble Earl, Lord De La Warr, who said that the crisis was exaggerated.
I listened to the statement which the Prime Minister made in another place a short time ago. He made a very practical statement. He gave us the facts as they are and which I do not think the majority of people are inclined to dispute. The noble Lord, Lord Arnold, has made suggestions which show that he is inclined to dispute the facts which have been put forward by the Prime Minister. I sincerely hope that the influence which naturally goes behind the words of the noble Lord, Lord Arnold, will not have any effect on the people of this country. in the emergency we are in at the present moment I feel that it is the duty of every patriotic citizen to do what he can to restore confidence throughout the country, and I am quite sure that by an Opposition who do not actually believe, if I may use the expression, that there is an emergency great harm is being done throughout the country.
The noble Viscount, Lord Wimborne, who spoke later in the debate addressed to your Lordships a very interesting speech, in which he touched upon many of the subjects which all of us who have paid attention to public affairs have naturally been considering for some considerable time. But the object of his speech was a very specific one. He wished to receive from the Government—I do not think he went so far as an undertaking, because I do not think he would commit himself to asking a question of that description—but he was hoping that this National Government would continue for some time and suggested that by giving out its intention to continue in office for some time confidence would be restored. I do not feel that any Government is able to assert that there will not be a General Election. We all know that the Dissolution of Parliament is a Prerogative of the Crown, and that is why it is impossible for anyone to give an undertaking of that

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description. But I am not sure that the suggestion of the continuance of any Government really carries out the purpose which the noble Viscount has in mind. He praised the people of this country with one hand, if I may say so, and he withdrew the praise with the other. Personally I have no fear of the electors of this country. I do not believe that anything can stampede the electors of this country in a case of emergency, and I am sure that whenever they are called upon now they will rise to the occasion as they have invariably done in the past. I do not think that is really a question which should be put in this House. When a Government has just come into being it is surely premature, and perhaps inopportune to suggest that steps should be taken that it should remain in the position it is in. This Government has come into power with a plan in mind. It carries, we understand, a majority in another place. I feel that it is our duty and the duty of the noble Viscount—I know he will discharge it—to do everything we can to support the Government and to restore that confidence which is necessary for the re-establishment of that confidence in this country which should exist abroad.
I feel that in his weighty speech the noble Marquess made the proper appeal to your Lordships' House and to the wider audience which will read that speech. He has put it on grounds of absolute necessity as the Prime Minister has done in another place. But I would venture to go further almost than anything the noble Marquess has said. I see very little actual difference, though they are different in character, between this and the crisis which faced us some 17 years ago almost at this very time. When the people of this country realised that practically at the gate there was an armed enemy they responded with an enthusiasm and a unity which carried us to the end of a dire and bitter struggle. The crisis which is upon us is almost an invisible one to a great many of the people of this country. It is well-known, apparent, and obvious to those who have studied the question. The danger is that the people of this country may not realise the greatness of the crisis with which we are faced at the present moment.
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The noble Lord, Lord Arnold, has spoken of the Labour Party which constitutes the Opposition. The noble Lord, Lord Passfield, gave the number of Ministers who had failed to follow the call of their Leader and the number of members in another place. I would venture to suggest, and I do not think that noble Lords will altogether quarrel with me, that the most eminent members of the Labour Party, those men who have been responsible for its inception and who from the beginning built it up until it has reached its present dimensions, were so impressed with the crisis which faced them that they were prepared, with all the difficulties that confronted them, with all those sentimental differences of opinion which after all, weigh a great deal with any one, to support what they believed to be right in the interests of the country. That, I assure your Lordships, will impress the great mass of the population of this country.
I do not feel that I should detain your Lordships any longer. I have ventured to express to you what I have in my mind, that we in this crisis should realise that it is necessary for us to restore confidence abroad. I am quite sure that when the people of this country realise the seriousness of the crisis—and I wish noble Lords would do more to make them realise it fully—they will stand shoulder to shoulder, and as one man proclaim before the nations of the world that we are a strong and united nation, prepared to set our house in order and to resume and maintain the position we have always held among the nations of the world in the past.
On Question, Motion agreed to nemine dissentiente, and Address to be presented to His Majesty by the Lords with White Staves.

BUSINESS OF THE HOUSE.
THE MARQUESS OF READING: I now move that this House do adjourn until Thursday the 17th inst. I do not think there will be anything to bring forward before then.
Moved, That the House do now adjourn till Thursday, September 17.—(The Marquess of Reading.)
LORD PASSFIELD: Would the noble Marquess say what the business will be?
THE MARQUESS OF READING: I cannot say at the moment. I suggest a long adjournment so that we may
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Know what will be coming on. Two days' notice will certainly be given.
Question, Motion agreed to.
House adjourned at half-past seven o'clock.

HOUSE OF LORDS.
[From Minutes of September 8.]

CENTRAL ELECTRICITY BOARD (MIDDLESEX LANDS) ORDER, 1931.
Special Order in respect of the compulsory acquisition of easements or other rights for overhead main transmission lines in and over certain lands situate in the County of Middlesex:
Laid before the House (pursuant to Act) and referred to the Special Orders Committee.

MID-CHESHIRE ELECTRICITY (EXTENSION) ORDER, 1931.
Special Order in respect of part of the rural district of Bucklow in the County of Chester:
Laid before the House (pursuant to Act) and referred to the Special Orders Committee.

MINISTRY OF HEALTH PROVISIONAL ORDER (CHEPPING WY COMBE) BILL.
Report from the Committee of Selection, That the following Lords be proposed to the House to form the Select Committee for the consideration of the said Bill; namely:—

E. Abingdon,

L. Braye,

L. Ormathwaite,

L. Loch (Chairman),

L. Wavertree:

Agreed to; and the said Lords appointed accordingly: The Committee to meet on Tuesday, the 22nd instant, at eleven o'clock; and all Petitions referred to the Committee, with leave to the Petitioners praying to be heard by Counsel against the Bill to be heard as desired, as also Counsel for the Bill.