HL Deb 21 September 1931 vol 82 cc96-132

My Lords, the noble and learned Lord opposite is right in his assumption. What I propose to do as a matter of form is merely to take the first step, and that is to move now that Standing Order No. LIV be read. That is purely formal, but it has to be done before a Motion can be made that we should suspend Standing Orders. I do not propose to make that latter Motion until the Bill is received, because a reason must be given in that Motion for suspending Standing Orders and the Bill is not yet before your Lordships. I think the most convenient method of getting a debate is first to move that the Standing Order be read, and that is the Motion I now make—that Standing Order No. LIV be now read.

The necessity for calling your Lordships together at an earlier date than was expected when this House was adjourned has arisen because of circumstances, beyond our control, which it becomes necessary to explain more fully to your. Lordships. The consequences of recent events have imposed upon the Government the painful duty of introducing a Bill for the temporary amendment of the Gold Standard Act, 1925. I will tell your Lordships in a very few sentences what that Act contains, and then I will proceed to explain more fully why the specific provisions of the Bill have become necessary. Tinder the Gold Standard Act, 1925, which, your Lordships will remember, was the Act under which the gold standard was, in familiar language, restored, at any rate to the extent to which that Act could do it, the Bank of England was bound to sell gold bullion on demand at the fixed price of £3 17s. 10½d. per standard ounce, provided that such sale took the form of bars of a certain weight. That seems a little incomprehensible unless one has studied these things, but that is the form in which the matter has to be dealt with, and was dealt with at any rate, under the Act of 1925.

We propose that that obligation shall be suspended. I will explain a little more fully directly what that will mean. It is to be suspended until His Majesty, by Proclamation, otherwise directs. There have been some suggestions, I have noticed, that this provision was to operate only for six months. That is a mistake. The Bill itself will operate until there is a Royal Proclamation otherwise directing. There is a provision relating to six months, which I will explain to your Lordships a little later, but it does not apply to this subsection, which affects the convertibility of notes into gold. The situation of the foreign exchanges became so critical at the end of last week that the Bank of England, after consultation of course with the Government, decided in the national interest to place a restriction on the sale of gold, pending the passage of the, Bill. For that action, which was taken with the full approval of the Government, we propose by this Bill that the Bank of England shall be indemnified. Your Lordships will appreciate that this is necessary. We have not yet passed a Bill which repeals or in any way modifies the subsection of the Act of 1925 I have mentioned, which made it incumbent on the Bank of England to sell gold on the basis there described. The Bank of England has not been doing so, and consequently we must give them an indemnity for anything that has happened after September 18, that is Friday last, and that is one of the provisions of the Bill.

The only other provision of the Bill is one which deals with exchanges and gives power to the Treasury' from time to time, as may be necessary and expedient in the public interest, to take such steps as may become necessary hi relation to the exchanges. It is that provision which is to continue in force for a period of six months from the passing of the Bill. Inasmuch as this possibly goes a little further than has hitherto been done; except during the War, I will read the subsection to your Lordships, so that you may appreciate it. It runs as follows: (3) It shall be lawful for the Treasury to make, and from time to time vary, orders authorising the taking of such measures in relation to the exchanges and otherwise as they may consider expedient for meeting difficulties arising in connection with the suspension of the gold standard. This subsection shall continue in force for a period of six months from the passing of this Act. I shall have a little more to say upon that part of the Bill as I proceed, but first I desire to make it clear to your Lordships that the measure that is now about to be introduced does not affect the normal business of this country, which will proceed undisturbed. The banks are open, as your Lordships are aware, for the convenience of their customers, and there is no reason why sterling transactions should be affected in ally way. What has happened is that the link connecting our currency with that of the gold standard countries is, for the time being, severed. That is the effect of the Bill that is now being introduced, and that, of course, affects the gold standard or, in familiar terms, means that we are off the gold standard for the time being. The Stock Exchange has been closed for this day, pending the Parliamentary approval of the legislation that it is intended to bring before your Lordships. It should be borne in mind that no restrictions whatever are being placed on the free disposal of gold held in this country or sent to this country on foreign account.

The events which have led to this proposal are, in the main, familiar to your Lordships. I explained at some length on the last occasion when I addressed you the various reasons which had brought about the crisis which was then upon us, and I will only remind you briefly of those causes. The world-wide depression which began in America two years ago has spread to other countries and become intensified during the past year. It culminated in a financial crisis first in Austria and then in Germany, last summer. The tying up of funds in Germany had an immediate effect on London, as on banks in other centres, and these banks, desiring to strengthen their own cash position, recalled the funds that they had placed here. As your Lordships are aware, it has been a habit for a long time for banks abroad to place funds at the disposal of our Bank and to deposit them here. This has always been regarded as the most stable market and, in consequence of our trade and this habit of depositing money here and regulating payments through the exchange here, London has been the financial centre of the world. These funds have, to a large extent, been withdrawn. The demand in itself would have strained our position, but once the stream of withdrawals was well started, all the other difficulties and defects of our situation—namely, our Budget position, the enormous extent of our unemployment and our adverse balance of trade—were seized upon and formed the subject of much criticism abroad. The Bank of England raised a credit for £50,000,000 sterling from the American and French central banks, but within a very short time, about two weeks, these resources were practically exhausted.

At that stage the National Government was formed, and the programme which we announced for the balancing of the Budget had an immediate effect in restoring confidence. Your Lordships will remember that on the occasion of our discussion here we pointed out, speaking on behalf of the Government, the necessity, the imperative necessity, for balancing the Budget in order that confidence should be restored abroad, and we took steps as the Government immediately to give effect to that view. Unfortunately, His Majesty's Government did not obtain full national support, and the opposition that their proposals encountered and the political uncertainty thus caused undoubtedly compromised the revival of confidence.

The Government raised a further credit of no less than £80,000,000 from the New York and Paris markets. His Majesty's Government warmly appreciate the cordial assistance received in this matter, both from the Governments and the banks, in those markets, and I would like to emphasise, if your Lordships will permit, the most sympathetic and friendly assistance tendered to us both from America and from France and the anxiety of these nations, both themselves and also by their banks, to render any assistance possible at this time of crisis. Unfortunately, even this further credit was not sufficient. In the last few days the withdrawals accelerated sharply, and on September 16 the withdrawal was £5,000,000 in the one day. On September 17, last Thursday, it was £10,000,000 sterling; on Friday nearly £18,000,000 were withdrawn and on Saturday, which was only half a day, over £10,000,000 were withdrawn. Altogether, during the past two months, we have lost in gold and foreign exchanges a sum of more than £200,000,000 apart from agreeing to lock up more than £70,000,000 of our assets in Germany.

We informed both the United States and the French Governments confidentially of the position at the end of the week, and asked their views as to the possibility of obtaining further credits, but in both cases the replies, though most friendly and sympathetic, afforded no prospect of assistance on the scale that by that time was obviously necessary. Your Lordships have only to picture to yourselves the amount that might have been necessary when you take into consideration the withdrawals of which I have told you of the past three days of last week. On Saturday the position had become so serious that the Bank of England addressed a letter to the Prime Minister and the Chancellor of the Exchequer in the following terms:— I am directed to state that the credits for $125,000,000 and frs. 3,100,000,000, arranged by the Bank of England in New York and Paris respectively, are exhausted, and that the credit for $200,000,000 arranged in New York by His Majesty's Government, together with credits for a total of frs. 5 milliards negotiated in Paris, are practically exhausted also. The heavy demands for exchange on New York and Paris still continue. In addition, the banks are being subjected to a drain of gold for Holland. Under these circumstances, the Bank consider that, having regard to the above commitments and to contingencies that may arise, it would be impossible for them to meet the demands for gold with which they would be faced on withdrawal of support from the New York and Paris exchanges. The Bank therefore feel it their duty to represent that, in their opinion it is expedient in the national interest that they should be relieved of their obligations to sell gold under the provisions of Section (1) subsection (2) of the Gold Standard Act, 1925. To this letter the following reply was sent: His Majesty's Government have given the most serious consideration to your letter of the 19th inst. in which you inform them of the grave difficulties with which you are faced in meeting the obligations placed on the Bank of England by the Gold Standard Act of 1925 to sell gold in the form of bars to any person making a demand in accordance with the Act and of the dangers which you apprehend if that obligation is maintained. His Majesty's Government are of opinion that the Bank of England should place such restrictions on the supply of gold as the Bank may deem requisite in the national interest. They will be prepared to propose to Parliament forthwith a Bill giving indemnity for any such action taken by the Bank. Both the Government and the Bank of England have given anxious and careful consideration to the question whether, before we decided to suspend the con- vertibility of the currency, we should have allowed more of the gold reserves at the Bank to go out; but we have to maintain a certain reserve for eventual emergencies which no one can foresee, and it appeared that to allow further export of gold would simply benefit those who showed least confidence in us at the expense of others who had not withdrawn their balances.

The suggestion has often been made that the drain on our exchange might have been met by the mobilisation of our holdings of foreign securities, a course which was followed during the War. His Majesty's Government have directed their attention from the first to this point and have examined the subject with great care. The result of the investigation satisfied them that the position at present differs substantially for various reasons from conditions during the War. Apart from other difficulties it should be remembered that any resources obtained in this way could not materially affect the immediate situation, having regard to the extent and rapidity of the drain on the exchange. We are assured that the withdrawals which have been taking place have been predominantly, and until the last few days almost exclusively, for foreign accounts and that there is no evidence of any substantial flight of capital on the part of British citizens. Such cases, no doubt, have occurred, but arrangements are being made, with the friendly concurrence of the banks, to bring home to any offenders the unpatriotic character of such action. The situation will be carefully watched. Meanwhile, as I have indicated, His Majesty's Government are seeking powers in this Bill to take such emergency measures as may become necessary, and these powers, as I have explained, are asked for for a period of six months from the passing of the Bill.

His Majesty's Government have considered every possibility and it was only with the greatest reluctance that they were forced to take their present decision. It was one, however, which circumstances have forced upon us. The trouble from which the world is suffering is, in sober truth, a general crisis of confidence on the part of the international markets. We have restored confidence in our internal position, but we cannot restore confidence in the international position, and His Majesty's Government are therefore compelled to ask Parliament to suspend temporarily the provisions of the Gold Standard Act, and to authorise other measures to which I have directed your attention. Your Lordships may rest assured that His Majesty's Government will not, I am convinced, make an unconsidered use of these powers. But I feel sure that your Lordships will agree that they should be armed with the necessary authority to enable them to act, and to act swiftly, if contingencies should so require.

I am asking your Lordships to pass this Bill when it comes before you, without delay through all its stages as a matter of urgency. Our action will have indubitably world-wide repercussions and will increase the dislocation and instability of international trade and finance. At the same time, there is no need to exaggerate the difficulties. It is well to remember that for seven years after the War we were perforce off the gold standard, and there is no reason why we should not be on an even keel again provided—and this is the essential point—that the finances of the country are administered with the utmost care. If the balancing of the Budget was urgent and necessary when the Government took office, it is still more urgent to convince the world of our determination to maintain its balance after we have been driven off the gold standard. I would beg your Lordships to remember that this is not the case of a nation going off or being forced off the gold standard with an unbalanced Budget and uncontrollable inflation. In this instance the nation is being forced off the gold standard because of the temporary withdrawal of capital which had been deposited here and for which, of course, we are responsible for repayment. This country has undoubtedly enormous resources at its disposal, and the Government will, of course, continue to watch the situation and take such measures as may be possible to circumscribe the fluctuation in the exchange. The storm will pass beyond all question and we shall set to work to build up our prosperity anew. There is no doubt that we may have to adopt unusual expedients. These are unusual times. They demand unusual measures. But I have no doubt, and I feel sure that your Lordships will have no doubt, that our recovery is assured.

Moved, That Standing Order No. LIV be now read.—(The Marquess of Reading.)


My Lords, we have listened to an economic speech of great value, I think, at the present moment, and I am glad to say that it has nothing in it of personal recrimination or what I might call Party feeling. I know that the term "National" has been especially applied to the present Government. I would give a larger sense to the word "National" if it is used at all. "National" should be something on which the whole country is of one mind, and in that sense there is no nationality especially inherent in one suggestion about our economic difficulties or, perhaps, a contrary view which another Party may take on many of these matters. What does the noble Marquess tell us? Most clearly he divides the matter of his speech really into two parts—the balance of the Budget and our economic policy as regards other countries. I think that is a very fair definition of the two points with which he has dealt. I should like to say a few words, first of all, on the question of gold devaluation or inflation. I understand that is what the noble Marquess means when he refers to the special powers that are to be given to the Treasury, as I understand, for a period of six months. If I have mistaken him he will correct me, but that is what I understand him to mean.

How, then, does the matter stand? No one surely can object to the proposed amendment or repeal of the particular section of the Act of 1925. After all, our bank policy in this country is largely dependent on legislative enactments at particular times. We know from what he has told us that more gold has been taken out of this country abroad than is consistent with the true stability of the gold standard. Of course, I assent to that as a proposition which he has made. Let us analyse it for a moment. There is not the slightest difficulty, of course, so far as the repeal of the obligations now upon the Bank of England to sell its gold at a certain price is concerned. As the noble Marquess has told us, that is a matter entirely within our own cognisance. If we look back at the history of this country we know perfectly well that similar regulations or regulations in the same direction have been made, and properly made, from time to time. But the other question is a much more difficult one. It is an international question. I happen lately to have been abroad owing to unfortunate reasons which I need not mention, and the whole discussion raised in newspapers of the highest character in the district I was living in was not the discussion which we are having and have had in this country with regard to what is called balancing the Budget, about which I will say something later, but was that, apart from international arrangements and organisation, the wider question to which the noble Marquess has referred can never be definitely or satisfactorily settled. The question I want to put to the noble Marquess is this: Has that aspect of the matter been considered by the Cabinet and the Chancellor of the Exchequer? It is the important question. As far as I can see, we cannot deal with this matter by ourselves. We must deal with it as an international matter of the greatest importance to all the great industrial and other countries in Europe and America.

Just think what it means so far as devaluation or inflation is concerned. Personally, I certainly raise no objection to them. I have always thought that they are one way and to a great extent an effective way of dealing with our present financial obligations and difficulties. But I am not going to discuss them. What we have to discuss and to consider is how it is going to be done. I did not gather much information upon that point from the speech of the noble Marquess, but it is the real issue. It is a difficult issue. It is a substantial matter which I think we have sought to hide more or less in recent discussions so that we could settle these points by what is called balancing the Budget. Balancing the Budget, of course, is merely an internal matter about which I want to say a word by and by, but there never has been the slightest difference, as far as I know, between any of the Parties in this country as to the necessity for balancing the Budget. I can speak with absolute certainty that the last Government and the last Cabinet were prepared to balance the Budget and were determined to do it. The question which was raised vas not whether the Budget should be balanced or not; with that we were all agreed.

No doubt there was a substantial difference of opinion, which went very deep, on economic issues in this country, as to how and by what methods the balancing should be carried out so as to place, as it was said, an equality of sacrifice on the different persons involved. Everyone agrees that there must be equality of sacrifice. I am perfectly certain that the noble and learned Marquess does. No one differs on that point. The question is how is that to be carried out, and the difference which arises now is not on any question of principle—of course the Budget must be balanced—but on this question: Are the proposals made just, particularly towards the poorer classes? I do not, of course, propose to discuss this matter in detail now. No doubt it will have to be discussed more than once before your Lordships. But may I put it in this way? Important as the gold standard may be, still more important is a decent standard of human life to the working classes in this country. That is the first consideration, and that consideration will have to be faced and considered before the matter is finally determined.

I think I could deal more shortly with these matters if I referred to a statement which appears in The Times newspaper, and which, as I understand, summarises the proposals of the Government, which seem to be of the same character as those which the noble and learned Marquess has explained. But, as I say, I am not dealing to-day with matters of detail. We have to deal with one or two great economic principles, and in doing so to see that we are as fair as we can be to all parties, to the debtor and to the creditor, to the person with only the widow's mite—for this is as true to-day as it was two thousand years ago—and to those who have a large surplusage to spend on luxuries, in many cases of such a size that really the so-called burden upon them is almost inappreciable. Let me, then, just read from the statement that I have referred to. The first person I saw when I came to this House was, fortunately, the noble and learned Marquess, who helped me to understand how the position stood. The statement says: His Majesty's Government are securing a balanced Budget"— Well, I am very glad to hear that in one sense. Any Government would have to secure a balanced Budget. Where the difference arises is as to how the funds are to be raised, and on whose shoulders the burdens are to be placed in order that the Budget may be balanced. The statement continues: and the internal position of the country is sound. Well, of course, it is sound; but is that in accordance with some of the panicky speeches which we have heard? I saw it stated, I think to the detriment of the whole country, that scores of millions (that was the expression) of the working classes might be ruined or thrown out of occupation. I say that is a gross exaggeration—the grossest possible exaggeration, and it is a great pity that it should be said. I regret very much that these panicky suggestions should have been made.

I think the statement I have read from what appears in The Times is perfectly right. I am not questioning it. I agree with it entirely. When it says that the internal position of the country is sound I think that is a matter to be fully emphasised. We on this side of the House believe that the position of the country is perfectly sound. We believe that it has not been shaken, even by some rather extravagant suggestions that have been made. I cannot see any sign anywhere that the internal position of the country is not, in truth and in every sense, perfectly sound. I am not going into the question of the methods of balancing the Budget. The most astute criticism that I heard was that of the noble Lord, Lord Melchett, who not only declared that all the methods adopted by the Government were unfortunate, but that the one system which he would have preferred had been omitted—namely, the method of tariffs. I agree with the noble Lord that the methods adopted have been most unfortunate. I believe that Mr. Keynes said he never saw a document which, from an economic point of view, included so many errors as the document issued by the Government on the balancing of the Budget. I think that is right. I want to make it perfectly clear that I would never take any part against the balancing of the Budget, but I am bound to make every effort I can against throwing the obligations of that Budget upon the wrong shoulders.

The next sentence in this statement from which I am quoting is: This position must be maintained. Of course it must be maintained. Do you suppose that I am going to get up in your Lordships' House and say that, the position of the country being sound, it is not to be maintained? It is absolutely essential for this great industrial centre of the whole world that the position of our internal finance should be sound. The statement adds: It is one thing to go off the gold standard with an unbalanced Budget"— I am not prepared to negative that, because, whatever happens, it was the view of the last Government that there must under all conditions be a balanced Budget. The statement goes on: and uncontrolled inflation; I do not suppose we ever desired uncontrolled inflation. That inflation ought to be controlled I agree. That it will be controlled under Treasury provision is the way in which I hope and desire that this Bill may pass. But, there again, it is not a question of economic principle in the sense in which the noble and learned Marquess has used the term. The question is a different one; it is the question of whose shoulders should bear the burden; and, as far as I have any power in political life, it will be used to protect the Christian standard of living in this country among the poorer classes, which is of the utmost importance, both for the morality and the future of the country.

The statement goes on: The ultimate resources of this country are enormous. Of course they are. I cannot understand why any statement should go about suggesting that we were rushing to ruin, so that if we did not in the next moment do something all our industries and all our working classes would suffer. It is not that at all. I had hoped at one time that the matter was quite settled—I do not want to go into Cabinet questions—and I went away thinking that the balance had been effected without impinging upon two very controversial points, the revenue tariff, which I consider to be a form of poll tax on the poorer classes, and the reduction of unemployment, benefit. After all, these people are in the position of assures. They are entitled to get the benefit for which they pay, although the insurance may have told against the insurance company, which in this case, of course, is the country itself.

Then the statement says: And there is no doubt that the present exchange difficulties will prove only temporary. I quite agree. It is ridiculous to suppose that our country with its enormous resources is going to be upset by what is, after all, a temporary matter. So far as it is an internal matter, let us set about dealing with it at once. I regret that our Chancellor of the Exchequer, if I may use that term of Mr. Snowden, in his Budget appears to have understated what the obligations were likely to be. It is a very difficult problem, and it was a very difficult matter at the time. I would back him up to the hilt in saying that the Budget must be balanced, and that it could not be left in a position which eventuated in a deficit of something like £70,000,000. Those appear to me to be the matters with which we are dealing to-day. By all means, let the Government as far as we are concerned here have the powers they desire. On the other hand, do not let them deal with an international question as though it were a question which merely affected the people of this country. If they do that, we shall fail.

As regards the balancing of the Budget, it is purely an internal matter. Of course you must make the Budget balance. Then our internal finances will be sound, and, internationally, we shall be in a position of enormous power. I deprecate very much the language of fear and panic. I do not suppose your Lordships feel it, but it seems to have been preached as part of the doctrine which has brought about the present conditions. Let us say, on the contrary, that there is no question of our internal soundness; that we, the English people, will deal with all the obligations which vie have honourably incurred, and that, as regards international matters, we are prepared to meet the difficulty which in our view can only be met by international concord and international agreement.


My Lords, I do not suppose there is any member of your Lordships' House who dues nut realise that this Bill deals with a grave quite agree that it is situation possible the gravity may be overestimated; none the less the definite step taken to shift the dealings of this country from the gold standard is one requiring grave consideration. I hope that no one will think that in saying the few words which I propose to say from these Benches I am speaking in any sense in hostility to the Government. I feel quite satisfied that all those who sit with me, as well as myself, have no desire whatever to embarrass them in any way, and any criticism that we may offer will not be unfriendly, and, we even hope, may sometimes be of use.

The speech made by the noble Marquess in introducing this discussion was one which I thought explained in admirable terms exactly the question with which we have to deal. The speech to which I have just listened is one that has left me in a state of complete and absolute bewilderment. I am wholly unable to understand what the question about balancing the Budget has to do with the question as to whether or not subsection (2) of Section one of the Gold Standard Act of 1025 shall cease to have effect, notwithstanding that subsection (1) of the said section remains in force. The remarkable thing about the speech of the noble Lord who has just sat down is that he said the balancing, of the Budget was the sole question we had to consider.


May I interrupt for a moment? What I dealt with was the statement made by the Government themselves as regards the balancing of the Budget and also as regards the other matter—the international aspect. As the noble Marquess said, we were discussing the whole question, and I dealt with the actual words used.


I really do not know what the noble Lord is talking about. The noble Marquess made no such reference to the international settlement of this matter. That is a thing distinct from the balancing of the Budget.


Of course it is.


I understand the noble Lord says the proper thing to consider upon this Bill is how to settle this difficulty internationally. Now he says it has nothing whatever to do with settling the Budget. If it has nothing to do with settling the Budget, why have we been discussing how the Budget is to be settled during the last half-hour? Why should a matter of this sort, which is an extremely perplexing one, be made even more perplexing and confused by such references as the noble Lord made to the necessity of maintaining the standard of living of the poor? That is a question upon which I do not suppose that anybody in this House has any difference of opinion. The truth of the matter is, I do not suppose the noble Lord was speaking to this House or to the other House, but to another audience which may be addressed later from a different arena.

But, as the noble Lord has begun to discuss these matters, let me suggest one thing he could do, which I should regard as a very great service indeed in the present crisis. It has been currently said that the whole of these difficulties are due to what is called the bankers' ramp. It is said there was a conspiracy of bankers who designed to get rid of unemployment benefit, and to accelerate or aggravate this crisis for the purpose of securing that end, which people think to be an utterly unfounded falsehood, and I believe that the noble Lord knows that it is so. It is, therefore, not asking him too much, as the Leader of his Party in this House, to get up and say so, in order that when that falsehood is repeated, as repeated it will be, on a dozen platforms in the next six months, we may be able to say that those in authority on behalf of the opposition have crucified the lie in public. That is one thing I think he might have done.

The next thing that I think needs consideration, which was not discussed, is a matter with which admittedly I am unfamiliar and which may be very delicate ground. It is quite plain from what the noble Marquess said that, while this country has abundant assets to meet all claims, the claims are capable of being enforced instantaneously, and the assets can only be realised after a lapse of some considerable time, and that that is the explanation of why it is that this Bill has become necessary. The thing that troubles me about that is this—that situation must be due to the action of a large number of people who are called financiers in the City of London, whose names we do not know, whose capacity for finance we do not know, who would receive profit if those transactions came through profitably, but who have let the nation into this trouble when, unfortunately, disaster has overtaken them. That seems to me to be a most unsatisfactory state of affairs. I cannot help thinking that there ought to be some inquiry conducted as to why it is that this situation has arisen and whether it would not he possible by some means to guard against its recurrence in the future.

I may have wholly misunderstood what the actual facts are. If I have misunderstood, certainly the noble Marquess will correct me, but as it appears to me there seems to have been a very serious lack of judgment on the part of the people who have been able to place us in this position. There is only one other thing I want to say and it is this. It seems to me that unless some steps can be taken to check the continual flow of gold into the vaults of New York and Washington these difficulties must recur.


And Paris.


And Paris. But it is New York and Washington where the gold has largely gone. We are told 45 per cent. What we are told may be untrue, but at any rate there is a very large flow to those places. It does appear a strange thing that the commercial operations of great nations should be hindered by something which really appears to me to have very little to do with commerce at all. There was a great writer who once said that life seemed to him to be nothing but an ironic procession with the laughter of the Gods in the background. If celestial laughter can be assumed how the divine beings must laugh when they think that gold is extracted from the quartz reefs of South Africa and put to be guarded by machine guns in the vaults of other countries, and that that operation has caused widespread trouble and distress throughout the whole Continent of Europe! I do not think anybody would doubt that it would be very much better if the gold had been allowed peacefully to slumber where it had been placed by Providence. At any rate, unless something is done to prevent the continuance of such a condition it seems to me that gold standards will have to be abandoned everywhere for the simple reason that there cannot be enough of the material to satisfy them. I can only say in conclusion what I said at the beginning, that I have only the most anxious desire to help this Government through a most difficult and critical period in our national history, and any word that I shall say, even if it appears to be unnecessarily critical or acute, will have no purpose whatever except that of attempting to make plain the matter under discussion in the hope that the suggestion may be of value.


My Lords, I had hoped, when a little mere than a fortnight ago I went abroad for what I then thought was to be a month's holiday, that the National Government which had then been established in this country would have protected us from the necessity of the measure which is brought before your Lordships this afternoon. I had believed that that confidence of foreign investors which had been shaken by the reckless expenditure and mismanagement of the last two years of Socialist misgovernment would have been restored by seeing that this country was determined to put an end before it was too late to that waste of public money and was determined to make an effort to face the facts and to reduce its expenditure within its income. I share to the full the feeling which my noble and learned friend Lord Buckmaster has just expressed that the proposal which is before us this afternoon is a grave matter. I have seen in some newspapers a suggestion that this is good news. Ever since we painfully won our way back to the gold standard some six years ago it has been the constant effort of the. Government, I think, and the constant effort of the financial authorities in the City of London to maintain the gold standard to which we had been restored, and I cannot regard the necessity of departing from that standard as anything but a very grave matter for this country. But, while it is a grave matter, I think it is fair to say first of all that the reason why it has become imperative to take the step which His Majesty's Government advise us to take this afternoon is a different reason from that which confronted them when they assumed office.

At that time the facts were, as we were assured on unimpeachable authority, that the confidence of the foreigner in the stability and indeed in the sanity of British government was so shaken that there was a real danger of panic, a flight from the pound which would have led to immediate and irreparable disaster. So far as I have been able to judge during my absence abroad, I do not think that that is the reason why this step has become necessary to-day. So far as I have been able to glean information I have learned that the trouble which threatens us to-day is largely at least due to the fact that there is grave financial difficulty in several foreign centres and that the foreigner is calling in his sterling balances, not from any doubt as to the stability of British finance under its existing Administration, but because it is important for him to bring his resources home to meet the difficulties with which he is confronted, and he sees in sterling the easiest and surest way of achieving that end. That, I think, if I am correctly informed is a reassuring symptom.

To my mind there can be no doubt at all as to the duty of every patriotic citizen of this country in the consideration of the measures which His Majesty's Government have found it necessary to introduce. The Government alone can be in possession of the full facts, the Government alone can be in a proper position to judge as to the necessity for the step which they invite Parliament to take. I am confident that it is the duty of every patriotic citizen to back the Government in their decision and to do their best to bring it to a successful end. I would add that it is our duty not merely to pass the legislation but also to act on the advice which the Chancellor of the Exchequer gives with all the authority of his office and of the Cabinet for whom he speaks, that we are individually to do everything we can to prevent putting any additional strain upon the foreign exchanges.

I should almost have been tempted to leave the matter there were it not for the remarkable speech to which we listened a little while ago from the noble and learned Lord the Leader of the Opposition. I confess to sharing to the fall the bewilderment which my noble and learned friend Lord Buckmaster expressed in trying to relate the speech to which we listened to any subject which was matter of debate in this House. The noble and learned Lord explained at great length that he and those for whom he spoke were passionately determined to balance the Budget. This Bill is not a Bill to balance the Budget. His speech might have been relevant if the debate had been on the economic proposals of the Government presently to conic before your Lordships' House; but since the noble and learned Lord introduced the topic I would say that his speech seemed to me to indicate complete failure to begin to understand what is intended by the expression "to balance the Budget." The noble and learned Lord explained that the question which he and his colleagues discussed was how they were to get the funds to balance the Budget. The problem before the Government and the problem before the country was not how to raise the additional taxation, but, how to reduce expenditure, and the fact that the noble and learned Lord should get up in this House and say that the one thing that troubled him and his colleagues was how they were to raise funds shows that they did not begin to understand what it was that the situation demanded.


One moment. Of course the raising of the funds was one part of the problem. Economy was the other part. They are two sides of the same proposition.


They were two radically different sides of the same proposition, and the only one which the noble and learned Lord seems to have considered was how we were to get the funds. He went on, in terms which, no doubt, were intended, as my noble and learned friend Lord Buckmaster imagined, for a different audience to this House, to assert that he would never be a party to lowering the standard of living of the working classes. The acts of the Socialist Government of which he was a member were acts which, if they had not been checked when they were, were going to lower the standard of living of the working classes of this country to an extent undreamed of in any economies which the present Government propose. It is because I and those who think with me realise that the effect of the mad orgy of expenditure into which the Socialist Government had plunged the country would inevitably be to lower the standard of living of the working classes of this country almost to the starvation limit, that I and, I think, those who think with me support the Government in taking the steps, even at this last hour when they first have the opportunity to do it, to reverse the process, to lower the expenditure of the country and so to enable the standard of living of the working classes to be maintained.

I pass from that irrelevant speech to add only two sentences. First of all, I desire to reinforce, if I may, the powerful appeal of the noble and learned Marquess the Leader of the House, when he said that the introduction of this measure does not indicate any possibility of relaxing the necessity for economy and the bringing to fruition of proposals to that end which the Government have in hand. Consequently I will add this for myself, if I may: that to my mind the proposals to reduce expenditure, sound and necessary as they are, are only one step towards meeting the problem that we have to face. Merely economising is not going to put the finances of this country straight. The second and more important step—perhaps I should not say "more important," but the vital step, is that we should proceed to restore the balance of trade, that we should proceed so to manage our affairs that our exports may be sufficient to meet our liability for the imports on which we depend for our livelihood and for the existence of our country. For my part, while welcoming any proposals that His Majesty's Government bring forward for purposes such as those that we are discussing to-day, I should like to add that, to my mind, it is a matter of extreme urgency, of vital importance for the continued existence of this country as a great commercial and industrial nation, that we should lose no time, but take effective steps to ensure that our export trade shall increase, that our imports of unnecessary articles, or rather of articles which need not be imported, should be reduced and that the trade balance of this country should be restored to that level upon which our prosperity in the past has been built up and our existence in the future must necessarily depend.


My Lords, I venture to intervene in this debate for a few minutes because I would suggest that, in connection with the Bill that will shortly be before your Lordships, there is a lesson that may well be drawn from the situation in which we find ourselves. The last speaker put the whole of our difficulties down to the vast expenditure of the Socialist Government. He knows perfectly well that we inherited from the previous Administration the difficulties under, which we labour. He knows that we found, point by point, item by item and Department by Department, the same type of proposals of activities which we continued during our period of minority government. He knows that as well as I do, and he cannot deny it. The position which we have reached to-day can probably be traced to two main causes, and he knows that one of those is not the expenditure of the Socialist Government. This question of going off the gold standard is one which I do not believe to be the disaster that so many make out. We were off the gold standard up to 1925, and we seemed to manage fairly well. On the whole, I think there is something to be said for its being a good move. It ought undoubtedly to help our export trade, and I would remind your Lordships that it is in our export trade that far the biggest proportion of unemployment exists.

My complaint about this measure to take us off the gold standard is that, as usual, after all the advice that is tendered by the banks to successive Governments, that advice has come too late. If that advice had been given to the previous Administration, with all the weight, with all the importance, with all the pressure that the Governor of the Bank of England and other leading financial experts can bring to bear, do you suppose that the previous Government would not have brought a precisely similar Bill before this House and the other House of Parliament It is entirely a question of the advice which the banks tender to the Government. The noble Marquess the Leader of the House knows that as well as I do. He knows that, in the present monetary position, we have a Government controlled by the banks. It is not a conspiracy, as was suggested from these Benches. It is simply the ordinary commercial activity of men mho have to consider the interests of their shareholders, and the interests of those shareholders demand that the banks shall make the utmost profit that they reasonably can and that, when, through mismanagement or misguided financial policy, they get into difficulties, then they shall go crying to the Government to get them out at the national expense. We have a bankers' Government, carrying out a bankers' policy to meet a bankers' crisis caused by bankers' mismanagement.

I need hardly remind you that some of the leading bankers have themselves pointed out this position. Mr. McKenna., year after year, has pointed out in the Midland Bank's circular the dangerous position into which the banks were leading us. I was reading yesterday the issue of October, 1929, of the Midland Bank Review, in which Mr. McKenna said that overspending or over-lending was the cause of the present weakness of sterling. He went on to say: The fact stands out incontestably that Britain has been heavily over-lending.… and this has taken the form of a too rapid increase in the net indebtedness of foreign countries to Great Britain on short-time account. In the same way, at the beginning of the year, he said that the weakness of sterling was attributable solely to over-lending by this country. There are countless similar quotations which might be brought before your Lordships. The advice given by the bankers is usually disastrous, and the remedies they propose are usually too late. We have had countless examples of that in the past. I need only remind your Lordships that during the War due to financial advice we preferred to rely upon loans rather than taxes. Then we had the Cunliffe Committee, and turned to deflation, which the father of the present Lord Melchett said was the principal and main cause of this country's trouble in 1926. We then returned to the gold standard. Noble Lords said how proud they were to return to the gold standard, but it was the return to the gold standard in 1925 which created the difficulties of our export trade from which it has never recovered.

Let me try to explain how those difficulties arose. We then brought down the pound to a 10 per cent. difference, so that, if we had to sell an article say in Paris, to bring a profit to the manufacturer at the rate of exchange 125 frs., when we returned to the gold standard, in order to sell that article and make a profit it was necessary either to sell it at 125 frs. plus 10 per cent., or we could not sell it in competition and lost the export trade, or else we had to sell it at 125 frs. and the manufacturer made no profit, and dividends and stocks and shares went down. Thus we got into the position in which we are to-day. One reason why I welcome going off the gold standard is that it puts back again the position of the pound in relation to foreign currencies, and will enable us to regain part of the markets that we lost in 1925.

We have heard a, great deal about the irrelevance of the Budget. Let me say why I think the Budget has some relevance to our discussion to-day. The economy proposals of the Government include the proposals of the Budget—proposals which I believe will do infinite harm to the nation. Amongst other proposals is the suggestion of equality of sacrifice, and there is no doubt about it that the present Gold Standard (Amendment) Bill must mean a rise in the prices of imported goods. It may in all probability mean some rise in the prices of internal goods, and these rises in prices will affect the unemployed. They will have, with which to buy these goods, less means owing to the 10 per cent. reduction in the unemployment insurance benefit, and at the same time there will be a rise in the cost of living due to the Bill now before the House. Surely, therefore, the Budget has some relevance. Surely the Government will consider withdrawing the Economy Bill, or at least those aspects of the Economy Bill which involve a 10 per cent. cut in the unemployment benefit, because of the additional burden which the recipients will have to bear by reason of the rise in the cost of living owing to this Bill. The Government have already given way in the case of the teachers by reducing the cut from 15 per cent. to 10 per cent., and have already given way as regards the police, and have said that they would reduce the cost to the police because of the injustices involved. They have also agreed to consider the question of the Navy and the injustices involved in the reduction of naval pay. Surely, then, it is not too much to ask that the Government shall give way on the saddest aspect of the whole of the problem—the difficulties of the unemployed in living on a smaller benefit in view of the rise in price levels.

I cannot understand why the banks advised this Government and the previous Government that only a foreign loan was possible. Why should we have been compelled to suffer the humiliation—I quote from The Times—of going cap in hand to the United States and to France to ask for these loans, which have a, direct bearing upon this question of the gold standard I A foreign loan was in fact the worst possible solution, and the banks were responsible for that advice. It means that we are sending abroad interest to the amount of £7,000,000 a year, which in the case of a domestic loan would have been available for expenditure in this country. It means that we have given a large commission, one and three quarters per cent., to the banks, which is of course very pleasant for their shareholders. I cannot see why a domestic loan, which would have mobilised the patriotism of our people, might not have put us in a position when the bringing in of this Gold Standard Bill would have been unnecessary.

The fact is that the Conservative Party, which forms the bulk of the present Government, have always failed in the direction of foreign finance. For the last one hundred and fifty years, whenever on finance we have come into contact with foreign countries, the Conservatives have been responsible for mismanagement. It was due to their failure that we lost the American Colonies, and Mr. Baldwin was responsible for the disastrous settlement made with the United States in 1923. The amazing debts settlements with France and Italy were infinitely worse than the settlements which those countries were able to make with the United States, and worse than our own debt settlement with the United States. As was said by Mr. Bonar Law, it was such as would reduce the standard of living in this country for a generation, and would be a burden upon us which no one who talks of it now has any conception of. That is the position to which we have been brought by years of this type of settlement. As the Daily Express said: It was the most tragic and the most bungled transaction ever concluded by a British statesman. There is no doubt about it, the lesson to be drawn from this Bill is that in this country industry suffers from bankers' control. We have endless examples of that.

The bankers are naturally, and from their point of view perfectly rightly, concerned with their own shareholders. I see members of your Lordships' House who are directors of these banks, and rightly watch over the interests of their shareholders, although I am certain that they do not consider the directors' fees which they draw. Take the Midland Bank, for example, which is under the Chairmanship of Mr. McKenna. That bank pays annually £50,000 in directors' fees, and amongst those of your Lordships who are directors of that bank are Lord Denbigh, Lord Ashfield, Lord Jellicoe and Lord Kylsant. I do not know whether Lord Kylsant is still a director. In the same way with other banks, they must be concerned, and this is the lesson I want to emphasise to your Lordships, with the question of the dividends they pay to their shareholders—dividends of from 16 to 20 per cent. Therefore, it is unwise that we should leave the control of the Government of this country under the direction of the bankers at the time of monetary crisis. I do not say that the bankers control the Government in times when there is no monetary crisis, but in times of difficulty the final voice must come and does come, in fact, from the bankers. So long as the Bank of England is a private institution and the private banks are under private control the nation suffers from that divergence of interest. Industry demands rising prices, credit expansion, buoyancy in finance. The banks prefer deflation, as they have proved in the last ten years, and a state of affairs under which we have a falling price level. Of course a falling price level assists the wealthy and what we call the rentier class. As the price level falls the man with a fixed income is able to buy more and more. That is a position in which the banks benefit.

The root cause of this position was dealt with by the noble Viscount, Lord Wimborne, in this House some days ago, and I want to remind your Lordships of the words he used. Speaking on the 8th of September he said: 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. Then he went on to say— Our trade depression, and the lowering of the standard of life which results, is artificial and unjustified. And he asks, "What is the cause of this?" The cause of it is, there is no doubt about it, the sort of system the results of which we are seeing and experiencing to-day.

The United States have actually had to go to a system of barter between themselves and Brazil in order to prevent, on the one hand, the destruction by burning of the coffee crop of Brazil and, on the other hand, the destruction by burning of the wheat crop of the United States. They have to barter wheat against coffee in order that the people of one country may have coffee and the people of the other country may have wheat, because of the failure of the monetary system of the world to respond to the needs of the people. So the task of the Government and the lesson the Government must learn out of this is that, first of all, they have to take international action to use gold properly in the world. They have to consider the question of the gold exchange standard. They have to take the action recommended by the Macmillan Committee to see that international steps are taken to raise commodity prices. They have, in my opinion, to take into account the remonetisation of silver so that the purchasing power of China and India can be rehabilitated. They have to prevent the banks taking control of national interests in the future. They have to control and own the Bank of England. They have to direct credit as recommended, again, by the Macmillan Report.

Finally, I might remind the Government that it is no good making pious requests to British nationals not to sell British stock and buy American stock. There is ample evidence that there is this sale of British holdings and the purchase of foreign holdings in some of the great issuing houses. That factor ought to be dealt with not by pious requests to people to refrain from unpatriotic action, but by definite legal action to secure that such unpatriotic action shall in fact be prevented and not merely dealt with as a request. Personally I am in favour of the Bill, but it is essential that the lessons which can be learned from the factors which are forcing the Government to take action shall be learned and shall be used unless we are to have a recurrence again and again in future periods of the most unfortunate position in which we find ourselves to-day.


My Lords, I feel bound to follow the observations which have fallen from the last speaker in view of some remarks he has made about banks and bankers, remarks which I feel to be wholly unjustified, that bankers advise the Government in moments of national crisis with a view only to their dividend policy and their shareholders. Such an absurd statement—


I want to say at once that I did not say "only." I said they are bound to be influenced by the dividend policy with which their shareholders are connected. They are bound to be influenced by that, and I reiterate it and do not withdraw it.


I accept what the noble Lord has said, but I do not see the difference in the least. The whole point is that they are influenced, and unless they are unduly influenced by the point of view there can be no point in the noble Lord's observation. I should like to put these very simple figures forward rather as a contradiction of that suggestion. Take any average bank: some are larger and some are smaller. They have a capital of about £15,000,000 or £20,000,000, deposits of £300,000,000 or £350,000,000, and loans of between £100,000,000 and £150,000,000. The things they have to look to and regard are the general public welfare and the prosperity of the country so that they can continue to carry on the very difficult and arduous business of looking after the money of the people who entrust their money to them, and providing sufficient funds for the industrial and commercial world. I am not one of those who will dispute for a moment that there has been and that there is to-day a conflict in ideas as to what is good for finance and what is good for industry. I agree with a great deal that the noble Lord said about that. But the suggestion that bankers influence the Government upon a consideration of their dividend policy is, I think, most unjustifiable and one that should certainly not go out to the country without most deliberate contradiction.

I would go further and say that it is true that the Bank of England from time to time has to give advice to the Government, but I think so far as the joint stock batiks are concerned they have not been frequently consulted on questions of policy in the past decade. The Bank of England has pursued a policy of deflation which, for my own part, I think has been unfortunate in its result, and my predecessor in your Lordships' House continually and constantly commented upon the same point. I agree to a large extent that it has brought this country into an unfortunate position that has gone on unchanged from the Act of 1925 to the Bill which is now before this House to reverse the process that we then adopted. It is exactly upon that point that I wish to make one or two observations. As regards the Economies Bill, I cannot see how it is possible to have this Bill and the Economies Bill.


Hear, hear.


It is possible to have one or the other but not to have both; in fact it will be proved to be impossible. This Bill will make a very steep rise in the cost of living and it will be impossible for the Government to maintain the whole of the provisions of the Economies Bill. I would most earnestly appeal to the Government to make such rearrangements as they can before it is too late to mitigate any great hardships that may fall upon some of those people whose monetary wages will be reduced as the result of the Economies Bill. We really must get out of our heads the idea that money is a reality in any sense of the word. It is purely a calculation, and this calculation will have to be made very quickly and very often in the course of the next few weeks. It will have to be watched very closely by the Government, otherwise difficulties will arise.

It is quite true that, speaking in this House last week, I advocated tariffs as a means of solving some of our difficulties, and I received some commendation from Lord Parmoor during this debate. If I understand what he said, lie is now in favour of tariffs, otherwise I cannot see how he could possibly have approved of a single word I said. A noble Lord opposite shakes his head, but otherwise I fail to understand how Lord Parmoor could have approved of anything I said the other afternoon. But tariffs, of course, are being brought in hour by hour as we sit here. The greatest tariffs are being built up round this country, and I am very glad to see it. As I left for London this morning I met a young man on a bicycle, and on either side of his handlebars he had strings of onions. He was a Frenchman. He had arrived at Southampton with his onions and his bicycle, and he was bicycling round the countryside selling those onions to my own kitchen gardener. It causes your Lordships to laugh. Well, I thought it was very funny myself. I thought nothing in the world was more ridiculous. I thought I had better go to the gardeners whom I could see at work and say: "Well I had better dismiss you. You are no use. This country has no use for your work. Do not dig the garden, but go back to your cottages, and I will ask this very pleasant young man to bring me all the onions and lettuces that he can grow in France." Fortunately the effect of the currency transactions that are taking place from hour to hour will be that that is the last load of onions that that pleasant young man will bring to this country for a very long time to come. And I hope that, if matters develop in a satisfactory way, the gardener that I was referring to, instead of being dismissed, will plant seine onions himself.

There is no doubt about it that a large tariff is being built up to-day, and a large bonus on exports. But I beg the Government to realise the effect of their action and to bring in a regulated and scientifically-governed tariff for the industries of this country, so that, as and when we stabilise our currency, that will be a resting place for us to arrive at a proper valuation of the pound. If that is not done, in the interval fluctuations of sterling will be far greater than they need be, and the uncertainty of industry will prevent industrial firms from taking the full advantage that they might otherwise get out of the situation that has temporarily been created by the fall in the value of sterling.


My Lords, I think, after the debate that we have had, it is necessary for me to trouble you with very few observations. It is worthy of note that, as regards the Bill itself, there is no opposition. As I understood the speeches of the noble and learned Lord who leads the Opposition and of Lord Marley, no opposition to the Bill which we are at present discussing is intended. It is at least satisfactory to observe that there is universal consent in this House that the Bill should be passed. Probably because there was no opposition to-day, the noble and learned Lord who leads the Opposition strayed into other matters which I should have expected would have been discussed more closely when we got other Bills from another place. I do not propose to travel into a number of matters referred to, partly because they have been answered already, and partly because they will have to be discussed when the Economy Bill and the Finance Bill are before the House. I do not think it would be useful at this moment to deal with the various points raised in regard to those Bills, and there are only one or two observations that I desire to make in reply to the debate.

I confess that I was rather surprised at the argument of the noble and learned Lord the Leader of the Opposition, with regard to balancing the Budget. I was glad to observe that he agreed, as I understood that he and his Party did, that the Budget must be balanced. But I thought he was on very insecure ground when he said that there had always been readiness to balance the Budget, because he seemed not quite to realise that that was a little inconsistent with increasing your expenditure month by month, and borrowing at the rate of at least £1,000,000 per week in order to finance your expenditure, instead of taking it from revenue. That can hardly be called balancing the Budget. The other question to which he addressed himself was the international situation, and I desire to say that I agree with many of the observations he made in that respect, and also with the remarks of my noble and learned friend Lord Buckmaster on this subject. It is an amazing phenomenon to observe that you have in two countries, the United States and France, approximately three-fifths or three-fourths of the world's gold, and yet currency is supposed to be based on gold. The whole of the gold available for the world is insufficient to maintain the gold currency if two countries are to retain so large a proportion of it.

It is a very difficult and wide subject, and it will be useless to discuss it at any length to-day. But for some considerable time past many of those who pay attention to the finances of this country and of the world have been devoting thought to this very subject, and His Majesty's Government—I mean the past Government; the present Government have not had the opportunity—have also, from all that I have learnt, been attempting to arrive at some kind of concerted action. It has not yet been found possible. Unfortunately, as very often happens, when you strive to get international agreement there are various reasons why one Power or another does not wish to go into the conference at that moment—good reasons, according to its own view, but they make it impossible to hold a conference unless you can get all those chief countries interested to join. All I desire to say at this moment is that this Government will certainly lose no opportunity that may present itself, and will spare no effort, to bring about something in the nature of concerted action, and that we shall attempt by every means in our power, and so far as we legitimately can, to bring about discussion which may result, and we hope will result, in an amelioration of the present situation. I agree with those who think that it is impossible to go on as we are—I am speaking of the world, not of this country. We are forced off the gold standard because of the demands that are made upon us at this moment, when America has something like £900,000,000 in gold and France something between £450,000,000 and £,500,000,000, making roughly £1,300,000,000 to £1,400,000,000, although I do not think it is too much to say that £2,000,000,000, if as much, is the total amount of gold that exists in the world.

If currency is to be based on gold, it is obvious that some kind of remedy must be found, or at least some action must be taken which will enable currencies to remain more stable. I do not propose to discuss that part of the subject further to-day in the answer which I wish to make to what the noble Lord the Leader of the Opposition put to me with regard to international action. My noble and learned friend Lord Hailsham made sonic very apposite observations, as I thought, in relation to the reasons which have caused this country to depart from the gold standard, and I think it most important that we should all of us constantly bear in mind the crucial tarts with regard to it. Even at the risk of repetition, I would venture to remind your Lordships of the position. At first we were in difficulties because of the so-called crise de confiance in which various countries began to criticise our financial methods and to doubt our financial stability because we were not balancing our Budget. Whether it was for the reason that we were borrowing for the purpose of meeting our expenditure, or whether it was because of the balance of trade, is, for this purpose, immaterial. There was that criticism and we had to meet it.

We set about meeting it. We took steps to balance the Budget. The balancing of trade is a matter which is being enquired into, and, for the moment, all we can say is that that also we must do our very utmost to restore. That being the position, if nothing more had happened I do believe confidence would have been restored by that alone, especially if we had been able to present to the world a really National Government. Unfortunately, there was opposition, and statements were made both outside the House of Commons and inside it which led to a renewal, not unnaturally, by foreign countries of a feeling of insecurity, of instability in this country, with a consequence that, although we had restored confidence for the time being, it began to recede. But I should be sorry to say that was the main cause, because I do not think it is; it is part of it. There were also other political discussions into which I will not enter, and these all helped.

But I do not believe that was the main cause of what has happened. What has really brought us down from the gold standard is that other countries are themselves so disturbed in their financial and economic situation, their currencies are in such danger, that they have been forced to withdraw all the available sources of supply that they had to put them into their own vaults, and to keep them in their own safes to meet the difficult situation that confronts them all the world over, with the consequence that whereas the practice has been to keep large sums in this country, those sums have been withdrawn by other countries in order that they should be able to have them to meet whatever difficulties might occur in those countries. They wanted to be sure that whatever difficulties did arise in their countries they would have this money in their own vaults to meet them. It is very much the same thing as the unfortunate practice of hoarding which has grown up during the last few months, and which has acquired considerable dimensions throughout the world. I refer to the desire to hold all in money, and not to invest it in enterprises, not to put it into any undertaking, but merely to hold the money with the idea that if a bad time is coming, it is better to have the money itself than to have it in some kind of security.

The only further observations I think it is necessary to make will be in reply to some remarks made by the noble Lord, Lord Marley, who was dealt with very pertinently, I thought, by my noble friend Lord Melchett. I will not attempt to repeat any of the arguments that he used, but I could not help noticing this. The noble Lord, Lord Marley, was attacking bankers, not of course personally, but because of their position, and he actually used the expression—an amazing expression, if he will forgive me saying BO, for a noble Lord to use who was a member of a Government which was treaty with the Bank, a Government that was in treaty with the bankers before they made way for the present Government, a Government that the bankers were advising at the request of that Government—that this Government is controlled by the Bank. What does it mean? An observation of that kind made by a noble Lord who has held a position in the Government is serious, and it ought not to be made without evidence.

I quite appreciate the criticism that may be directed to our banking system. I quite understand the observations that may be made as to whether or not there should be greater control of the Bank of England by the Government. All those are matters which are open to observation. But for a noble Lord who must have had the opportunity of knowing the position which his own Government was taking with the Bank, to make the observations he did about the bankers who served his Government loyally and well, as his Leaders have acknowledged, really passes my comprehension. I will say no more about it, because I do not think the bankers require any defence. I think what has been said by my noble friend Lord Melchett is sufficient. The noble Lord quoted one of the most eminent bankers in the City, Mr. Reginald McKenna. He was so delighted with what Mr. McKenna had said and the advice he had given that he quoted one or two passages from what he had said. Mr. McKenna is head of one of the biggest banks and is himself a critic in certain respects of some things that are done, but it is a curious thing that a banker should commend himself so much to the noble Lord, Lord Marley, considering the attack he was making upon the bankers, among whom Mr. McKenna is so great an ornament.

I will make only one other reference to the noble Lord's speech, which travelled over much ground that we may have to discuss on another occasion. He will forgive me saying that he made one observation which showed, as it seemed to me, a complete lack of understanding of the present situation. He asked us, we in this country who are under no difficulty at the present moment in finding sterling but who are in difficulty of finding foreign currency—he asked us, we in this country who can find all the sterling that we want but who have to come off the gold standard because of the difficulty of finding exchanges in foreign countries—he asked us why we raised a, foreign loan and why we did not raise a sterling loan. May I ask him, if he got the sterling loan what would he do with it? What is the use of it? What, on earth does anybody want a sterling loan for in this country? To meet this difficulty you want your foreign loan because by it you get the foreign currency, and then you can buy what you have to pay for on your exchanges by drawing on the credits that you have either in dollars or francs. If you have it in sterling, it is of no use to you for that purpose. You have to convert it into the foreign currency. It means you have to use the sterling to buy the foreign currency, and, therefore, the only credits or loans that were of any use to us at that moment were foreign loans. Those were the only loans that could be of any value in this situation. I only refer to these things in order that there should be no misunderstanding with regard to them.

I hope when the Bill is presented to your Lordships that you will be able to pass it through all its stages if it comes, as I hope it will, from the other House as it was presented; but meanwhile all that I need do is to propose the Motion which I have read and for the moment leave it at that. The concluding word I would say to your Lordships is that in this situation we in the Government, and no doubt all who have thought on the subject, have striven by every means in our power to keep the country on the gold standard. We were bound to do it. We were bound to honour the obligations into which we had entered so long as we possibly could, and in my judgment we could never consider any other position so long as we were able by any means to carry out the obligations into which we had entered. We have now had to come off the gold standard through circumstances beyond our control. Now it is our duty as a Government, as it is of all those who are interested in the welfare of the nation, to concentrate so far as we can upon the future of the country, to restore it to the position it held, and meanwhile to do everything we can to prevent the consequences which might otherwise happen and which have been prophesied from any depreciation in the value of the pound sterling.

On Question, Motion agreed to.

THE CLERK ASSISTANT (MR. H. J. F. BADELEY) read Standing Order No. LIV as follows: No Motion shall be granted for making any new Standing Order, or for dispensing with a Standing Order of this House, unless notice shall have been given in the Minutes to consider of the said Motion.


My Lords, I move that Standing Order No. XXXIX be now read.

Moved, That Standing Order No. XXXIX be now read.—(The Marquess of Reading.)

On Question, Motion agreed to.

THE CLERK ASSISTANT read Standing Order No. XXXIX as follows: No Bill shall be read twice the same day; no Committee of the whole House shall proceed on any Bill the same day the Bill is committed for the first time; no Report shall be received from any Committee of the Whole House the same day such Committee goes through the Bill, when any Amendments are made to such Bill; no Report shall be received from any Standing Committee with regard to any Bill the same day on which such Bill is reported from such Committee, when any Amendments have been made to such Bill either in Committee of the Whole House or by the Standing Committee; and no Bill shall be read the third time the same day that the Bill is reported from the Committee. It is the duty of the Lord Speaker in no case to put a question contrary to this Standing Order.

House adjourned during pleasure.

House resumed.