Lords Sitting of 6 June 1934

Preamble
The House met at a quarter before four of the clock, The LORD CHANCELLOR on the Woolsack.
NEWCASTLE-UPON-TYNE CORPORATION BILL. [H.L.]
Presented pursuant to leave given yesterday and read 1ª.
STOCKPORT EXTENSION BILL.
Read 2ª, and committed: the Committee to be appointed by the Committee of Selection.

MILITARY MANOEUVRES: MESSAGE FROM THE KING.
THE EARL OF CROMER: My Lords, I have to convey to your Lordships the following Message from the King:
"I have received your Address praying that I will make two Orders in Council under the Military Manoeuvres Acts, 1897 and 1911, the drafts of which were presented to your Lordships on the lath day of February and the 6th day of March last, respectively. I will comply with your advice."

MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (WEYMOUTH AND PORTLAND JOINT HOSPITAL DISTRICT) BILL. [H.L.]
Read 2ª (according to Order).
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (SOUTH MIDDLESEX AND RICHMOND JOINT HOSPITAL DISTRICT) BILL. [H.L.]
Read 2ª (according to Order).
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (STOKE-ON-TRENT) BILL. [H.L.]
Read 2ª (according to Order).
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (STEYNING AND DISTRICT WATER) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (MILFORD HAVEN) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (MORLEY) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (BURNHAM AND DISTRICT WATER) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Amendments proposed by the Committee made.
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (HERRIARD AND DISTRICT WATER) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Amendments proposed by the Committee made.
MINISTRY OF HEALTH PROVISIONAL ORDER CONFIRMATION (SHEPPEY WATER) BILL. [H.L.]
House in Committee (according to Order) on re-commitment of the Bill: Amendments proposed by the Committee made.

FOREIGN EXCHANGES AND DEBTS.
THE EARL OF LIVERPOOLhad the following Notice on the Paper:—To ask His Majesty's Government—

1. Whether they intend to deal in the near future with the whole question of foreign exchanges;

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2. Whether they propose to introduce legislation to prohibit credit facilities to defaulting foreign Governments who have made no arrangements for the liquidation of their debts or the payment of the interest thereon;

And to move for Papers.
The noble Earl said: My Lords, the two questions which stand in my name have been placed on the Order Paper because a large number of people, both in this country and outside, are greatly disturbed at the situation which has come about over the question of foreign exchanges. I think it is common knowledge that practically every chamber of commerce, not only in this country but in other parts of the British Commonwealth of Nations, has passed a resolution very much in the same tone as that passed by the London Chamber of Commerce, in which they expressed the opinion that the question of dealing with these foreign exchanges is one of outstanding importance. The resolution of the London Chamber of Commerce in its last paragraph says that:
"International money payments, whether in respect of interest or debts or reparations, can only be received in the form of goods, or services, against which no corresponding export has been made."
I do not want to give a large number of examples, but I am in a position to state the case of one large firm which was asked by a foreign country to quote for goods which they desired to purchase in this country, and when the people in the foreign country were asked for security of payment for the goods which the English firm were able to supply, they said they were extremely sorry but the goods could only be paid for in the currency of that country, and that currency could not leave the country. The manufacturers themselves are obliged to keep up the efficiency of their works, and, as we all know, when the depression came in 1931 every one did his best to help the country, and has gone on doing so. The firm whose case I have quoted have done their utmost to keep their business together, but, owing to the fact that their export trade has decreased to such an extent, they have been obliged to go into liquidation, with the result that nearly 2,000 men have been turned out of employment.
Perhaps I may quote a very eminent foreigner who spoke to me, and who is not unknown to members of His Majesty's Government who attend the international conferences, though I cannot give his name. He said that this was the only country in the world with a stable Government at the present time, and, difficult as the subject of the exchanges was to tackle, he believed that we were the only people who could initiate any discussion upon it with the other countries of the world. His Majesty's Government initiated the Economic Conference and perhaps most members of His Majesty's Government, or any Government which was in power in this country, were getting just a little bit tired of conferences, because even if we tried our hardest we were not met quite with the same sympathetic support from the other side. Speaking on the question of the last Economic Conference, he said that although it had failed to a certain extent—perhaps entirely—he believed that every country that took part in that Conference desired it to be a success. It seems that a paragraph which appears in the journal of the London Chamber of Commerce rather states the position when it says that general international agreement had so far not been materially successful, and adds:
"There probably never was a time when there was so much fear, suspicion and hostility among Continental nations. There is no general desire that their neighbours should be prosperous, because confidence is lacking."
We always seem to be trying to pull chestnuts out of the fire, and I suppose it will be our task again, if anyone has to do it, to try to deal with the stabilisation of finance.
A very curious position has arisen over these foreign exchanges. Some of us know—and this was also placed before me by a very eminent industrial firm in this country—that some of our undertakings which absorb a very large amount of British money have actually declared dividends on their undertakings and yet, owing to the varying action of the exchanges, these dividends have never been paid in this country. They have been declared on the condition that the exchanges shall improve. I do not suppose such a thing has ever happened before, and I hope it will never happen again.
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It struck me very forcibly that the Chancellor of the Exchequer, who is always extremely anxious to get as much money as he can, probably would be very glad when that condition of affairs ceases, because he loses revenue from Income Tax. It may be argued, I do not suppose with much force, that those who invest their money from this country in foreign countries had better not have done so; but without the support of our nation a great many of the younger nations would never have come to the prosperity that they did.
I come now to the second Question, and after what has taken place in the House of Commons and what I have seen in the newspapers, I feel I must be very guarded in what I say. One does not wish in any kind of way to stigmatise any foreign country, whatever our thoughts may be on the subject. At the same time I must thank the noble Earl who will reply, for sending me a copy of the resolution of the Economic Conference. In paragraph 2 it says:
"The conditions in the debtor countries vary considerably and it is not possible to lay down a uniform treatment applicable to all cases. But debtors should make every possible effort to meet the service of their debts and to fulfil their contracts. It is indispensable, indeed, for the restoration of credit that contracts should be respected in the absence of modifications agreed between the parties concerned."
I understand that there is an association here—I think it is called the Foreign Bondholders' Association—and it does seem to me that, if we are to achieve success in this aspect, we should have rather more than their backing, considering the amount of British capital that is spread all over the world. If I might name only one country, perhaps the largest of all, it is South America. We have had an example in the last few weeks of a country that has struggled against enormous difficulties, largely dependent on agricultural produce—namely, the Argentine—doing all it possibly can to meet its debt, but at the same time we have got on the opposite side also a country, which never before has defaulted on its foreign loans, not making a very great effort to meet its obligations at the present time.
It does seem to those who asked me to speak on the subject that Chile, if I may take that country as an example, considering everything in that country has

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improved so largely in the last two or three years, might make some effort to deal with the question of its foreign loans. In yesterday's newspaper I noticed that they have dealt with their Treasury bills, but that does not of course include loans by foreign countries. There is another country which I am glad to see has moved in the matter and which I was told yesterday, as a matter of fact, had been urged to move more quickly, owing to the fact that these two very insignificant Questions of mine had been on the Paper for the last month, and that is Greece. I do not suggest what caused the delay in this case, because that would mean bringing in the name of a foreign country. Probably most of us know the cause, but I think it best not to mention it in your Lordships' House.
The condition of affairs which I have endeavoured very briefly to indicate does seem to call for some concerted action, because those who asked me to speak feel that our industries will never prosper until the export trade of this country, and indeed of the countries who owe us money, gets on its feet again. Whatever we may think about various kinds of expedient which have been put into force. they can at best be only palliatives. Until we can get the trade of the world going—and I think we are all agreed in this House that one country alone cannot do it—until we can get some concerted action I feel that we shall never get to prosperity and the countries that owe us money will not get to prosperity. It is for these reasons that I have placed these two Questions on the Order Paper, and I beg to move for Papers.
LORD STRABOLGI: My Lords, I think it will be agreed flat the noble Earl has performed a great service in putting these two Questions, which are of such paramount importance, on the Order Paper. My noble friend Lord Sanderson has been watching this matter, and has asked me to say a few words on behalf of the Opposition in regard to it. The two Questions that the noble Earl has put down raise matters that bring up principles on which opinions cut across all Party frontiers and I do not think any noble Lord of any Party could say that he was speaking for even the majority of his Party in all the views he gives on this question; but I can say this on behalf of the Labour Party. This matter of the exchanges has been very
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closely discussed in the Party, particularly since the events of 1931, and has been the subject of very close examination by the best committees we could appoint. We are very firmly of opinion that much more energetic steps should be taken by His Majesty's Government, starting with the British Empire and with what I would call the economic British Empire, which I will explain briefly in a moment, to bring about some stability in exchanges.
To-day the merchant cannot possibly tell what he is going to get for his goods in sterling values at the time they are delivered and paid for. The buyer of raw material is in a similar predicament. You have to-day people buying forward from foreign exchanges to cover their commitments in that way, and it is one of the most disturbing factors in world trading conditions. We have been pressing as a Labour Party for more energetic action so that we may get some stability of the exchanges as between country and country. The level of the exchange does not matter so much. Stability is of more importance. I think we have learned a great deal since the panic days of 1931, when the Prime Minister stumped round the country waving bundles of German marks, saying that they were worthless, and that that was what the pound sterling was coming to, and frightening the wage-earners and business men wholesale. We have progressed a great deal since then.
To-day you have the extraordinary anomaly of a very great Exchange Equalisation Fund used alternatively for keeping the pound from rising against the dollar and the franc, or, as at present, to prevent the pound from falling too rapidly. I repeat that I think it is agreed that the level of the exchanges does not matter, but what does matter is to have stability, so that merchants and traders may know where they are. How could this be brought about? Surely we could have been much more energetic with regard to our own Dominions; at any rate we could have ensured a sterling union there. But things are now better. The rupee is pegged to sterling. Even the Egyptian pound is pegged to sterling, and the South African Union, having gone off gold, makes the position easier. Starting with the British Empire, if we could get a stable unit of values represented by the pound sterling, which is

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now for this purpose fortunately off gold, it would be of tremendous advantage. If you like, fix it at the value of 100 principal commodities—wool, wheat, cotton, copper and other principal Empire products—and keep it stable in that way. That would be of tremendous advantage to world-trade and particularly to our Empire trade.
Then we have the economic empire. By that I mean the other countries who went off gold with us, who do a tremendous trade with us, and keep their currencies as far as they can stable with ours, and who are great buyers and sellers with us. These countries include our principal customers, Scandinavia, Portugal, the South American countries referred to by the noble Earl, Finland, and so so. We should bring those countries into association with the British Empire in making a great sterling union with a stable unit of exchange between them. I think if the matter had been handled properly when the United States departed from the gold standard with the object of raising the wholesale prices of primary commodities, as recommended by the Macmillan Committee and as canvassed at the World Economic Conference referred to by the noble Earl, possibly the Americans would have come in and made a dollar sterling block, which would have covered a very great portion of the world and would have been of great advantage to commerce.
So far as I can make out, apart from the abortive World Economic Conference into which we went (I say it with great respect to His Majesty's Government) without any real preparation at all, and still more without any real policy which was understood by the people who had to take the decisions—apart from that, we have allowed this matter to drift. We operate our Exchange Equalisation Fund in secret on no known or disclosed principle. At the present moment the pound is at a rather low level; it has been going gradually down. That should not alarm any one, because it is to our advantage in many ways. There are many reasons for that, but I think we have a right to complain, as an Opposition, of the lack of a definite and energetic policy on the part of His Majesty's Government with regard to this very great problem.
With respect to the present fall of the exchange, I understand that that is not the result of any deliberate policy on the
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part of the Treasury and the Bank of England. It is caused by the withdrawal of short-term funds from London. One of the causes of the 1931 crisis was not the wickedness of the Labour Government, as the noble Marquess, Lord Salisbury, hinted in his very interesting speech the other day; the reason was largely due to the fact that we had an enormous sum in short-term foreign loans held in London which had been, as your Lordships know, re-lent in a great many cases to Germany, Austria and other countries at a higher rate of interest. There were also certain other factors into which I need not enter. Foreign lenders became alarmed and withdrew their funds. We lost gold, and the result was a crisis, a panic, and the fall of the Labour Government. That was not the fault of the Labour Government at all. It was the fault of a system which led to the accumulation of these very substantial sums of short-term money in London. Now the information that we have at present is that these short-term funds have been accumulating again and are now practically up to the 1931 level. To-day we do not lose gold, because the export of gold is prohibited, but the exchange goes down as these funds are withdrawn. I do not say this because there is anything to alarm us; quite the contrary; but it is part of the picture as showing the lack of policy.
The noble Earl referred to the prohibition on foreign lending, and deplored the fact that we were not now allowed to develop distant primitive countries as we did in the past. I entirely agree, if I may respectfully say so, that it is a great pity we cannot use our surplus funds to do as we did in the past to develop overseas countries and particularly those in our own Empire. What is the sense of keeping such a tight hold on the export of capital, and at the same time leaving this immense accumulation of short-term money in London, which at any time may be withdrawn to the embarrassment of our exchange? The present deposits, I understand, are in the neighbourhood of £450,000,000, and we are back practically to the 1931 level. In 1930, when the Macmillan Report was published, one of the most prominent findings was the danger of this short-term loan position in London, and the prophecies of that Committee were unfortunately fulfilled.
Therefore the two suggestions that I propose to make to His Majesty's Gov-

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ernment on behalf of my noble friends are, first of all, the necessity of a really energetic policy to see if we can get a great sterling block with all the countries who are prepared to make a stabilised unit of exchange, which would be of great advantage to every one concerned; and secondly, that this question of the short-term loan position in London should be examined with a view to some better form of control over it. I think the noble Earl must have rather slipped up—if I may use such an expression—when he put down the second part of his Question with regard to the suggestion that countries in default should not be given credit facilities. We apparently are going to find ourselves in that position after June 15 vis-a-vis America. I do not want to say very much about that, and I am speaking personally, but I am bound to say that I agree very much with what fell from the noble Earl when he expressed grave doubts and apprehensions about our policy of incurring a default. We are a very great creditor nation and I think it will be a very serious matter indeed if we are adjudged defaulters on our American debt.
I hope I have always been consistent in this matter. I have always said that in 1923 Mr. Baldwin could really have done no other than make the settlement he did make with the United States of America. He has been tremendously attacked for it but in all the circumstances of the time I believe it was imposible to make any other settlement than that. Now, apparently, we are going to be adjudged defaulters. I must say that I regret it very much indeed. I have read very carefully the pronouncement of the Chancellor of the Exchequer, I have read the White Paper and all the Notes that have passed, and I have heard many debates in another place on this question. I think it is a very great pity that this situation has been allowed to arise. It is partly because we have not discussed the whole question of prices and exchanges in Washington with the present President of the United States and his predecessors. We have allowed the matter to drift on, and we see the present result.
I am going to say—I do not know that shall carry all my, noble friends with me—that it would have been better on this occasion to have paid. Eventually the money goes in goods. It may have
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meant a fall in the sterling exchange, but if it was a controlled fall in the exchange that would not really matter so much. I consider that the question has been grossly mishandled in the higher interests of the British people. I make these last observations with great diffidence because it is a difficult subject and it leads to sharp conflict of opinion in all Parties. But I must say I think the noble Earl is to be congratulated on bringing forward this extremely important Motion. I for one await with the greatest interest the reply of the representative of His Majesty s Government and the remarks of other noble Lords.
THE MARQUESS OF READING: My Lords, I think my noble friend has rendered a service by bringing this matter before your Lordships' House, although I must admit that I see great difficulty in expecting an answer which would be of any value at this moment from the Government. However, they have a very ingenious representative in the noble Earl and probably he will find something to say which will be of assistance. There can be no doubt of the importance of the subject, especially to a country like this which depends for so much of its prosperity on its exports. It is unnecessary in your Lordships' House to expatiate on the difficulties with which we are confronted at present by reason of control and restrictions of exchange, tariffs, quotas, and various other expedients which make the ordinary medium of exchange impossible. Whatever control we may use with regard to money or currency, we cannot forget that it was in order to facilitate the process of exchange that money was invented. Now we have the difficult situation that payment cannot be made.
One very good instance was given by my noble friend and cases might be repeated almost ad infinitum. It is useless to export goods, because if you part with money from this country, whatever payment is to be made accumulates in another country and is not able to be transferred here to the exporter. Consequently, the exporter is kept out of his money. I do not at this moment propose to discuss all the difficulties caused by depression in trade and its effect upon currency. The only thing I would say—I do not profess to be an expert, but I have some practical

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experience of the subject, and I have read much that has been written upon it —is that certain well-known economists attribute the whole difficulty that has arisen in our trade—that is, world trade, I am not referring specifically to this country—to currency, that is, to monetary troubles. That would lead one into a long discussion into which I am not going to enter now, but what is important is to know from the Government whether it is possible to take any steps, and if so, what steps the Government propose to take, in regard to stabilisation of exchange.
Personally I am under no delusions with regard to it. I suppose it is axiomatic to say that stabilisation must be preceded by greater certainty than there is at present, especially in relation to War Debts and costs and prices. Indeed, until you get a greater return to prosperity in the world it is quite impossible to have that confidence in the value of your medium of exchange which would enable the Government of any country to fix upon the value it would put upon its own currency for the purpose of stabilisation. All that depends upon greater certainty in regard to prices. Where you have these very low prices for commodities it inevitably must result that no stabilisation can be made until prices have risen and until also there is some greater certainty. I suppose that in truth one might say that at the bottom of the difficulties with regard to stabilisation is lack of confidence. That lack of confidence arises largely from low prices and uncertainty of what the future is going to bring, and leads, as sometimes seems to many who have studied the question, to a consequent exaggeration in the minds of those trading as to what is the future of their own exchange or the exchange of the country with which they are dealing.
I realise the difficulty of the Government taking any steps until there is greater certainty, but, after all, there is in the world at present a domination of sterling. I would like to know from the noble Earl who replies for the Government whether it is regarded as quite impossible to take some preliminary step for the purpose of arriving at some measure of agreement, not necessarily a final agreement. I see the obstacle to that, but some step must be taken to put
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us in the way of arriving at stabilisation, which must be a long process. I do not wish to take up the time of your Lordships in discussing this difficult subject, but I am anxious that the noble Earl should give us some reply in regard to it so far as he possibly can, and give us some encouragement, because all those engaged in trade, and especially in export trade, do realise the extreme difficulty of making contracts ahead in the existing conditions of great economic nationalism throughout the world.
I am not going to be guilty of discussing the subject which was referred to just now by the noble Lord, Lord Strabolgi, especially at this moment. All that I would desire to say with regard to it is that I do not agree with him in the observation which he made that the Government are to blame, as I understood him to mean from his remarks, for not making the full payment which it was incumbent upon them to make at the present moment. For myself, I would be most anxious, as I am sure would all your Lordships, that some payment should be made for the purpose of impressing upon the American public and the world generally that this country has not entered into the category of defaulters. Had it been possible to arrange with America, I feel quite sure that the Government would have availed themselves of that situation—if they had only had some indication that it was possible. I do not know the exact details of what has passed between this country and the United States of America with regard to it, but I feel that if the Government had done what has been suggested by the noble Lord, Lord Strabolgi, and paid the amounts due up to the present—that is to say, not token amounts, but the whole of the instalments payable up to now and which would be payable on June 15 and again on December 15 of this year—the consequence would have been such a disturbance in the world exchanges, inasmuch as we cannot pay in goods and services, that we should have had a recurrence of, or at any rate some return to, the depression from which we in this country have, to some extent at any rate, emerged since the year 1931.
LORD STRABOLGI: Would the noble Marquess excuse me if I interpose? I am sure that he does not want to misrepresent me, and he has not misrepresented me very greatly, but it is really

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important that I should explain that my complaint is that the present situation has arisen in which we are faced either with this enormous payment or with default. I think that with a better handling of the problem it need not have arisen, and we could well have avoided the position of default.
THE MARQUESS OF READING: The noble Lord may have greater knowledge on this subject than I. All that I would say with regard to it is that I have understood from the first—and at one time I was in a position to know—that every attempt has been made by this country, not only to get into negotiations but to reach an agreement, in order that we might make an end of this situation, avoid all discussion about repudiation, and come to some conclusion as to the means by which a settlement should be reached. It must be remembered that it does not affect this country only. We are rather inclined to forget that we have given up very large sums of money due to this country, and that we depend for the amounts which we have to pay to America upon other countries—I mean depend in the sense of receiving from foreign countries the amounts which we have to pay to America. That has always been made clear, but it may be sometimes forgotten. If you once assume, as I must assume for this purpose after what the noble Lord has said, that he means the Government might go back to the former stage, that is, seeking to obtain from other foreign countries the money which is due from them in order that this country might be enabled to pay the instalments due to America, then it must be pointed out, as I think the Chancellor of the Exchequer's Note states quite clearly—and it must be undisputed—that that would bring about a return to the difficulties which we have suffered during the last few years and from which we have not yet emerged.
It is useless to talk of paying sums of this character when you realise that they cannot be paid by goods or services. There are various means of overcoming that, but I do not know how the noble Lord or any one else thinks that these moneys can be paid unless payment is to be made by goods and services. But that is entering into a subject which is very delicate at this moment, and the only reason I have made these observations is that I do not think that it is
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quite fair, controversially, to blame the Government for the situation which has arisen. As I understand from the noble Lord, particularly from the explanation given by him, he thinks that the Government have been remiss in the attempts which they have made in the past.
I am only putting before the House such information and such knowledge as I have. As I have said already, it may not be so great as that of the noble Lord, but I really do not think that anyone can fairly say of this Government, or of any Government of this country, that it has not been ready at all times to make a reasonable settlement, with regard not only to our own Debt but to all Debts; and that is almost a preliminary to anything approaching a world stabilisation, because you cannot have a world stabilisation of exchanges unless you deal with War Debts. So long as War Debts remain as they are, casting their shadows over the world, no one feels certainty as to what his position is. You have those two main items: the difficulty with regard to the outstanding world indebtedness, which is not simple, and then you have of course the trade question of prices and of getting the right balance of structure in prices, which is essential before ever you can reach stabilisation. I shall hope to hear from the Government that some attempt may be made and that some information may be given on the subject.
VISCOUNT ELIBANK: My Lords, I should like to thank the noble Earl, Lord Liverpool, as the other noble Lords who have spoken have done, for putting down this Motion this afternoon, because there is no one who is in any way connected with trade or business who does not feel the great trouble which is caused by these fluctuating exchanges in all parts of the world. I do not wish to go over again the points which have just been so clearly expressed by the noble Marquess and by the other noble Lords who have spoken, but at the same time, when the noble Earl asks the Government whether they intend to deal in the near future with the whole question of foreign exchanges, then I think he asks the Government a question which they are unlikely to be able to answer, and I do not expect any definite reply from the noble Earl who is going to answer for the Government upon this subject.

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I do not understand how it is possible to-day, with the monetary conditions which exist in different parts of the world, to stabilise what we call foreign exchanges. With certain countries on gold, with other countries off gold, and with exchanges fluctuating from day to day, largely due to the condition in one country, I do not see how it will be possible to do anything of that nature at the present time. I think there is no doubt that so long as the United States of America remains in the state of uncertainty in which she is with regard to the value of her dollar, it will be quite impossible to come to any parities between the different principal countries which would have the effect of stabilising the exchanges. At the same time the noble Marquess, Lord Reading, did refer very shortly to another matter which I think is of the greatest importance, and with regard to which I believe something could be done. The Empire countries, to-day, are in a much better position for stabilising their exchanges than any other countries in the world. They have a parity, to-day, or proportionate values vis-a-vis the United Kingdom, and I see no reason why the Government, even if they are unable to investigate the question of the stabilisation of foreign exchanges with any hope of success, might not be able to do something in regard to the Empire which would make a start in that direction. I think it is quite possible that a sterling union could be created between the different countries of the Empire, and I have no doubt that if such a union were created, under certain conditions other countries, like the Scandinavian countries, who are already working in with the sterling currency, would probably be prepared to come into this union.
I understand that even with regard to that point there is still some difficulty; that until central banks are established in all the different parts of the Empire it would be very difficult to create the necessary machinery in the different parts of the Empire, for the purpose of maintaining such exchanges in a stabilised condition. But at the present moment Canada is in progress of creating a central bank; New Zealand has already done so; South Africa already has one, and also Australia; and India is in course of creating a central bank. Therefore,
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within a very few months there will be the foundation of the possibility of creating a sterling union within the Empire, and at all events of eliminating, so far as a quarter of our world's trade is concerned, the difficulties connected with the exchanges. That is the point which I really wish to make in connection with this question, and I wish to ask the Government whether they can see their way at least to take that matter into consideration, even if they are not able to deal with the question of foreign exchanges.
With regard to the last part of the Question on the Paper, I cannot agree with the noble Lord, Lord Strabolgi, that these questions of American Debts have been grossly mishandled. So far as I have been able to judge, and I have followed the matter very closely, as far as one is able to do so, every Government which has dealt with this subject since it arose has treated it in the most practical and most reasonable way. It is all very well to get up here and say, "You night do this, or you may do that," but there have been enormously difficult factors to deal with in the United States itself—factors of which most of us are cognisant, and with which many of us have sympathy. Nevertheless, they have existed, the principal one being that they insisted upon these Debts being paid. I for one have nothing to say against any act of any Government concerned which has had to deal with that matter. Not only that, hut I should like to congratulate the Government upon the Note that was issued yesterday with regard to this subject. It is one of the clearest, most lucid and convincing Notes that have ever been issued with regard to a similar matter. With regard to the question of default, well, if Senator Johnson likes to consider that this country has defaulted that is his own affair. I do not believe that the large majority of his countrymen will share that view. Those are the few remarks that I wished to make in regard to this question.
THE UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (EARL STANFIOPE): My Lords, some of your Lordships have thanked the noble Earl for having put down these Questions. I confess that I hardly share that feeling, because although the noble Marquess opposite was more than kind in the re-

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marks which he made about myself, I cannot think that I have the real knowledge to deal with a question of such great complexity, and I am well aware that there are many of your Lordships who have that knowledge. I am all the more grateful, therefore, to the noble Marquess for the remarks he made, with which I entirely agree, and I am sure your Lordships listened to them with the greatest possible interest.
With regard to the question of War Debts, your Lordships are well aware that the Government have always separated entirely the question of War Debts from debts of the ordinary character. It has always been made quite clear, I think, by every Government in this country, that War Debts were brought about by non-productive expenditure, and that therefore they are in a separate category. That point is not raised by the Question on the Paper, but it was raised by the noble Lord opposite. I agree, again, with the noble Marquess, that the noble Lord seems hardly to have followed what has been going on between this country and the United States, and hardly seems to have heard of the Johnson Act, which made it clear that unless the whole debt was paid a country would be considered in default, and that therefore there was no question of making a token payment and not being considered in default, having regard to that Act.
Further, he made no reference, as the noble Marquess did, to the fact that this country is a great creditor country as well as a debtor country, and that, therefore, it would be not only a question of our paying a vast sum to the United States but of our asking our debtors to pay large sums owing to this country. I think any one who realises what these questions of debts are will appreciate that it is putting the whole question of exchanges once more into the melting pot and making it more difficult. So far from our not having tried to come to an agreement with the United States, the matter has been constantly under discussion. Every opportunity has been taken of discussing the matter with the authorities of the United States, and we are still ready, as the White Paper clearly shows, to discuss the matter still further, in order to arrive at an agreement. We have not repudiated the Debt, but merely say that under present conditions while their tariffs prevent our goods going into
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the country and we find it difficult to render services having regard to their shipping laws, the matter cannot remain as it is at the moment and must be discussed still further with a view to arriving at an agreement.
With regard to the Questions on the Paper, they are matters which have been engaging the attention of the Government ever since it came into office. Your Lordships will remember that the matter was raised at the Economic Conference last year. The noble Lord, Lord Strabolgi, stated that the Government went into that Conference without any preparation and without any policy. He appears not to have read the Paper produced and the statement made by the Chancellor of the Exchequer, which in fact dealt with this particular point. The Chancellor of the Exchequer on June 14, talking of the objectives of the United Kingdom Delegation in the financial sphere and the efforts which we hoped would be made—namely, to get a recovery in prices and greater stability in the relative value of currencies—said:
"There remains a third objective to which the United Kingdom Delegation attach the greatest importance—namely, the abolition of exchange restrictions. At the Stresa Conference held nearly a year ago"—
that is to say, in 1932—
"and at many other international meetings resolutions have been passed condemning exchange restrictions in general terms. But the United Kingdom Delegation recognise that in practice exchange restrictions will not be abolished until the exchange difficulties which have given rise to them have been overcome. The United Kingdom Delegation trust that the Conference will take positive action to attain this end. A rise in wholesale prices of foodstuffs and raw materials, and an increase of world trade would contribute powerfully to reduce exchange difficulties, and would assist in bringing to an end both standstill arrangements in respect of short-term debts, and transfer difficulties as regards external indebtedness as a whole."
The Chancellor went an to point out that the exchange and transfer difficulties would be greatly diminished by the resumption of normal international lending, and finally put forward as a positive proposal that the Conference should examine some means by which those countries which need financial assistance in order to enable exchange restrictions to be abolished could under appropriate conditions obtain it from those countries which

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possess an available surplus of gold reserves. In a sentence, the Government felt that exchange restrictions were the result, and not the cause, of the present world situation. The main cause, in the view of the Government, is the tremendous fall in prices, particularly of agricultural and primary products, with no corresponding fall in costs. That was clearly brought out by the noble Marquess opposite, and it is a view with which the Government entirely associates itself.
There are three ways of obtaining an equilibrium in prices. The first is by depreciation of currencies in terms of gold so as to keep them stable in terms of goods. The second is by a policy of deflation designed to bring down costs into equilibrium with reduced prices, and the third is by an increase in prices brought about by concerted action between the various countries in their monetary and credit policy, and also by attacking the problem from another angle and reaching agreement for the regulation of output of primary commodities. The third policy is the one which has been followed by His Majesty's Government.
Your Lordships will realise that, so far from the Government having done nothing, they are attempting to attack this question in a variety of ways. Your Lordships know far more about these matters of trade than I do, but we are endeavouring to get an increase of consumption in regard to milk under the milk policy of the Government, which was recently announced in another place. We are endeavouring to raise prices in regard to wheat by the wheat quota arrangements and by the wheat arrangements which are being still discussed by various great producing countries, which countries we still hope may be able to come to an agreement among themselves. That, as your Lordships realise, is not a matter in which the Government can help very greatly, because we are a consuming country and not a, producing country in regard to wheat. Similarly in regard to rubber. There, again, there are restrictions proposed with a view to raising prices. Our belief is that until the great producing countries find that the price which they get for their products enables them to get some return over the costs entailed in producing them, you are not going to get any real increase in trade, or any equalisation in
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the exchanges or improvement in the trade of the world.
Wherever trade restrictions exist, throughout the world their effect on our export trade is carefully watched by the Government Departments concerned. Further than that, the Government has set up a Committee which was referred to by my noble friend Lord Liverpool, which includes representatives of the Association of British Chambers of Commerce, of the Federation of British Industries, and of banking interests, to maintain full and constant co-operation between all the various interests concerned.
My noble friend was good enough to tell me some of the points that he was going to raise, and therefore I have been able to get some information about them. Your Lordships, of course, would not expect me to go into the difficulties of exchange between this and every other country, but I propose to deal with two that my noble friend -touched upon, the cases of the Argentine and Greece. This country, as your Lordships know, imposes no exchange restrictions, and it also remains the world's best customer. The noble Lord opposite referred to the large number of short-term deposits which are made in this country. I do not know how he proposes to keep them out. The bank rate at the present moment is at an extraordinarily low figure, and yet capital keeps on coming into this country. Why is it? The reason is that foreigners all over the world have confidence in this country and in the Government of this country, and the reason why they withdrew those balances in 1931 was entirely the fault of the Government of the day, because their action at that time destroyed the confidence which foreigners had in this country, and they withdrew their balances.
LORD STRABOLGI: Why are these short-term deposits being withdrawn now?
EARL STANHOPE: Because there are other countries which now are felt to give a sufficiently secure return, and, as the noble Lord pointed out, other countries give a far higher rate of interest than does this country. Therefore foreign deposits are quite certain to leave this country as confidence returns throughout the world and the

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higher rate of interest attracts capital away from this country to countries which give a higher rate than we do.
As regards the Argentine, which is one of our largest foreign markets, by the Anglo-Argentine Agreement of May, 1933, it was provided that the sterling arising from our imports from the Argentine should be made available for the sterling requirements of British creditors and British export trade and British companies, after setting aside a reasonable agreed sum for the service of the Argentine Government foreign debt due to other nations. As the result of the Agreement our frozen debts prior to the Agreement have been largely liquidated, either in cash or in bonds which command a satisfactory price, and we have increased our share of the Argentine's imports. As regards Greece, I think my noble friend referred to a company which had sold some goods to a foreign country, by which I think he meant Greece.
THE EARL OF LIVERPOOL: I wished to avoid the mention of any foreign country; I did not think it tactful.
EARL STANHOPE: I think it would help matters if I referred to one or two countries. I need hardly say I am not going to make any attack on them. This country is a very good customer of Greece, particularly in regard to currants, and it is certainly entitled to fair treatment as regards our exports to that country. When Greece first imposed exchange restrictions the amount of commercial indebtedness to this country was very considerable, and the Greek law passed in April, 1932, providing that foreign commercial debts should be repaid by instalments of 10 per cent. every six months undoubtedly caused much hardship to British creditors. With the lapse of time this volume of frozen indebtedness has no doubt been reduced, but in the meantime the position of Greece as regards her foreign exchange reserves has greatly improved, and it would seem both reasonable and possible that a more liberal treatment should be accorded as regards the outstanding commercial debts due to this country.
In regard to current trade, the chief difficulties, so far as the Board of Trade are aware, arise from import restrictions rather than from exchange restrictions, but from time to time various cases arise
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in which it appears that this country is not receiving the equitable treatment to which it is entitled, and of course these cases are at once taken up with the Greek Government in order to ensure that no injustice is done to British interests. If the particular case to which my noble friend referred is one that he would like to give me, I can assure him the Board of Trade will do their utmost to have. the matter enquired into further.
The second Question on the Paper, in regard to legislation to prohibit credit facilities to defaulting foreign Governments, is of course at the present moment rather an academic question, because an embargo exists against all foreign loans. As a matter of fact if my noble friend will look at the Stock Exchange List he will find that the price of foreign loans to Governments which have defaulted is at such an extremely low figure that they would find great difficulty if they tried to raise another loan in this country. As my noble friend knows better than I do, London has always taken the view that a debt should be repaid before a new debt is incurred, and that would no doubt be the policy which the investors in this country will continue to hold in the future as in the past. As regards the World Conference resolution which he quoted, the Council of Foreign Bondholders which has been in existence since 1868, has rendered great service to British holders of foreign bonds. More recently a new body, the League Loans Committee, has been formed under the chairmanship of Sir Austen Chamberlain, and that has dealt with conspicuous fairness and success with the question of various loans issued under the auspices of the League of Nations.
My noble friend referred to the case of chile. As he said, Chile has never defaulted before on her foreign loans. For over one hundred years Chile had punctually met her foreign debt obligations, but in August, 1931, she was compelled to suspend payments completely on her external debt. This external debt amounts to approximately £260,000,000 sterling, out of which the Government debt amounts to some £90,000,000 (requiring an annual payment of over £8,000,000), of which about one-third is held in Great Britain and nearly two-thirds in the United States of America. The reasons for the inability to continue

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foreign debt payments were partly budgetary and partly lack of foreign exchange, but in both cases the root of Chile's difficulty was that over 80 per cent. of her exports consisted of nitrates and copper for which the demand had fallen off to an unprecedented degree. Chile had in fact put four-fifths of her eggs into one basket, and the basket had proved to have a large hole in the bottom of it. The difficulties of her situation were apparent to all, and it was generally recognised that her default on her foreign debt was for the time being inevitable.
It is happily true that in recent months there has been an improvement in the position of Chile, and an agreement with certain short-term creditors involving an annual payment of £60,000, was recently announced. It is to be hoped that this improvement will continue, and Chile's admirable record in the past would appear to justify the belief that Chile will approach her long-term foreign creditors as soon as she is in a position to make some definite offer to them. But our view is that Chile still has very great difficulties to face, and perhaps these have been somewhat minimised by some of the accounts given of that country lately in the Press. Her exports have increased somewhat, but chiefly as the result of clearing arrangements under which Chile does not have the free control of the foreign exchange resulting from her exports. There is a very large volume of frozen commercial indebtedness which it has not yet been possible to liquidate, but a beginning has been made, and quite recently the Chilean Minister of Finance allocated approximately £64,000 to liquidate frozen peso balances held by United Kingdom exporters and others at the rate of 125 pesos to £1. remains to deal with the problem of sterling debts owed to United Kingdom creditors who have, owing to the Chilean legislation in force, not yet been paid by their debtors the pesos required to cover the debts at the present rate of exchange.
We are asking the Chilean Government to take the necessary measures to enable a satisfactory settlement of these sterling debts to be reached, and this is a matter to which His Majesty's Government attach great importance. The resumption by Chile of payments to her foreign bondholders is, of course, also a matter of the greatest interest to this country,
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but the prospect of this must clearly depend on the revival of the market for her chief exports—namely, the nitrates and copper to which I have already referred. So far from the actual level of exchange not making any difference, I can assure the noble Lord opposite that that is not the view of those who are creditors in respect of Chilean bonds or of Chilean trade. One of the chief difficulties is of course to find a fair level between the creditors and debtors of Chile. My noble friend Lord Liverpool referred to the confidence which is lacking in Continental countries. That of course is a matter which very definitely affects the exchange, and as he knows, we have been doing our very best to improve the feeling throughout the Continent, but the situation at Geneva at the present moment has not been very helpful in that direction.
The noble Lord opposite referred to the Exchange Equalisation Fund and I think, riot for the first time, his Party has not quite grasped what the Equalisation Fund is. It is an attempt to try and keep the pound sterling at a fair level with other currencies. It is not used to depress it greatly one moment and to elevate it another moment. It is used to equalise it as far as we can throughout the year. As he knows, wheat and other products will come pouring into this country during the next four or five months from Canada and elsewhere, and during that time sterling is likely to be flowing out. That is probably a time when the Equalisation Fund may be used—I am not in the inner secrets of how it is used—to keep sterling up. At a later moment, when the flow of wheat and raw products begins to slow down, then it may be that the Equalisation Fund will be used in the opposite direction. But so far from trying to depress sterling as against either the franc or the dollar, that is not the purpose of the Equalisation Fund. It is an attempt to try and smooth out fluctuations between the pound sterling and other currencies. Of course that becomes impossible when other nations take on great changes in their currencies. We have recently seen what happened in the United States. Then of course any possibility of getting stabilisation of exchange as between this country and the United States is bound for the time being to come to an end.
The same thing applies in regard to the British Empire. My noble friend

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Lord Elibank raised the question of having a sterling area which would include the whole of the Empire. As he said, quite rightly, it is impossible to get a sterling area until you get a central banking system in each country, but a good deal more than that is required. Until the Governments of the various parts of the British Empire agree to unite their policy in regard to sterling on the same basis it becomes impossible really to get sterling pegged at a definite level.
I think there is not much further that I can say to your Lordships. I have endeavoured to answer the points that were put forward by my noble friend, and I only wish once more to make clear that in the view of the Government the whole question of the stabilisation of exchanges must depend on an improvement in prices relative to the actual cost involved. Once you can get the countries which produce primary products in particular, but all countries too, to put their prices and their costs at a figure which enables them to make a fair profit, then we may begin to look forward to the time when the exchanges will once more become more stable. That is the policy which the Government are endeavouring to pursue, and we hope that we shall be able to obtain some success. I am afraid I have no Papers to lay in regard to the matter because, as my noble friend knows, most of them have already been made public.
THE EARL OF LIVERPOOL: My Lords, I do not propose to make a speech in reply, but there is one question I should like to ask the noble Earl. I did not understand what he said in regard to Chile. Do I understand that representations are being made there? I did not quite catch what the noble Earl said about that.
EARL STANHOPE: In reply to the noble Earl, I may say that the matter has been taken up with the Chilean Government and His Majesty's Ambassador there is making representations.
THE EARL OF LIVERPOOL: I beg to thank the noble Earl for his reply, and to withdraw my motion for Papers.
Motion, by leave, withdrawn.

POST OFFICE (SITES) BILL.
House in Committee (according to Order) on re-commitment of the Bill: Bill reported without amendment.

UNEMPLOYMENT BILL.
Debate resumed (according to Order) on the Motion for the Second Reading moved yesterday by Lord Rochester.
EARL BUXTON: My Lords, I shall not detain the House at any length on the present occasion, because I do not think anything very fresh can be added to the debate. This is the twenty-first Bill which has been before the House since the Act of 1920 came into force. Many of these Bills were of a temporary nature, although some were intended to be permanent, but circumstances occurred from time to time which have rendered them practically waste paper now. I hope that the Bill which is before your Lordships to-day will have a longer life than my noble friend behind me seemed to anticipate. My noble friend opposite made a kindly reference to myself when he was introducing this Bill. I had the honour of being responsible for the original Act of 1911, and while he was speaking I thought what a tremendous change has taken place in our social life since that time. That was the first time in which Parliament, by an Act, had dealt with the unemployed man—unemployed through no fault of his own. His position was then recognised in an Act of Parliament. Before that he only had the Poor Law to fall back upon, with all its degradation and all its difficulties.
The Act of 1911 was a modest one. The contribution was 2d. for a man and his wife, and the benefit was 12s. We then had this principle of insurance applied only to about 2,000,000 people. Now it is applied to 10,000,000 people, and that number will soon be extended by many more millions. The contribution is 10d. from the employer and the employed, and the benefits to a man with two children amount to 30s. I hope my noble friend behind me will, at all events, think That is an instalment of what he is desirous of having in the matter of benefits. That Act, to which I have referred, was framed upon an insurance basis—namely, that the contributions and benefits should practically be equal, but the

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contributions paid were somewhat in excess of the benefits paid out. That Act went on, and in the end there was a large surplus. After the War, in 1920, the operations of the Act were extended to 10,000,000 persons and, unfortunately, soon after that, there came the unprecedented unemployment which practically brought to an end the original insurance scheme and also brought to an end the conditions of the benefit. Those who had not paid contributions were given the benefit.
I need not dwell on what actually occurred during those years. The upshot of the whole matter was that instead of the insurance scheme continuing on an insurance basis it became, to a large extent, a relief scheme for about half of those unemployed in the country In 1929 the Labour Government appointed a Royal Commission, and the Bill we now have before us is to a large extent the outcome of the Report of that Royal Commission. Though I do not agree altogether with the Bill, I congratulate the Government on the courage they have shown in introducing a Bill containing proposals of such a far-reaching character and upon the way in which the scheme has been worked out. The Bill is divided practically into two Parts. Part I deals with the insurance alone. To my mind that Part of the Bill is very satisfactory and is founded on that proper insurance basis which ought to apply in the case of unemployed insurance. My noble friend behind me objected to the scheme because, he said, there was too much solvency about it and the benefits, therefore, were not what they ought to be. I think he forgets that the Government of 1929 appointed the Royal Commission on the clear understanding that it should report in what way the insurance scheme could be made effective and at the same time be made solvent, so much so that the Government asked the Commission to produce an Interim Report on that very basis.
At that time every one of their leaders supported the scheme of insurance as then drawn, and I am surprised my noble friend should have gone hack on that and should have said that the scheme ought not to be solvent in order that the benefits may be increased. I do not know whether he remembers that the amount of benefit under the Labour Government
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was 3s. or 4s. less than the benefit which is now accepted as suitable under present circumstances. The noble Lord applied to this Bill a word which I think he had borrowed. He called it a "rotten" Bill, because the benefit under it was not increased. If the present Bill is a rotten Bill what must be said of the Bill of the Labour Government in which the benefit was 3s. or 4s. less? Perhaps he will be able to find some adjective which will describe that Bill.
A great point of the scheme in Part I is that it applies the principle of insurance on a solvent basis, which will result, as unemployment diminishes, in either increased benefit or reduced contributions. One of the main proposals is the appointment of a Statutory Committee. That Committee is to consider from time to time the question of the solvency of the Fund and is to report to the Minister. In my opinion that is a very good step which will tend to stabilise the contributions and benefits at a lower standard in the case of the contributions and a higher standard in the case of benefits. It is an Advisory Committee which might very well have been appointed before, and I think we should have been saved a good deal of the financial difficulties into which this scheme fell because successive Governments treated the matter year by year as a separate affair and had no special knowledge of or control over what ought to be proposed.
In my opinion this Committee is a satisfactory body from the point of view of control. It is entirely under the control of the Minister and the Minister is entirely under the control of Parliament. Any question with regard to it can be raised in Parliament and the matter can he properly discussed. One or two special matters are to be referred to the Advisory Committee—namely, whether, agricultural workers should not be brought within the purview of the Insurance Acts, and whether the black-coated community also should not be included. It is quite certain, I think, from the clauses of the Bill and from what has been said by Ministers, that it is intended to include both these classes of persons. I venture to think that it is rather a mistake that the Government did not take the bull by the horns and bring both these classes at once within the purview of the Insurance Acts.

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There is one other proposal to which I attach importance and which I think is very satisfactory. That is that those who have been in insurance for five years or more and have not been given any benefit are to have their period of benefit enlarged according to the number of years they have contributed, if they lose their employment. I have always had sympathy with those persons who for many years past have borne the burden of the insurance scheme. They have contributed and other persons have drawn benefit. It reminds me a little of the story in the Bible of the man who employed men and paid a penny both to the man who worked the whole day and also to the man who only came in at the last moment. That seems to me unjust and I have never quite agreed with that story. Here you have a man who has been in employment, say, for ten years, paying contributions regularly all that time and when he falls out of employment he gets exactly the same benefit and is subject to the same disadvantages as the man who has been paying contributions only for a certain number of weeks. I am glad to see that that that anomaly is to disappear.
There are three points with which I am sorry the Government have not dealt in this Bill. One was referred to by my noble friend behind me. That is the amount of the accumulated debt which the Government are putting on the Insurance Fund. The second is the extra shilling which it was proposed should be given in the case of children, and the third is that the cuts are not to be restored at the same time as the reduction is made in the Income Tax. As regards debt, there never has been a real opportunity of fully discussing it. It seems an unfair position that is taken up by the Government. This debt of £105,000,000 was accumulated during a period of great unemployment, during a period in which the insurance scheme was swamped by those who had not paid contributions but who were receiving benefits. The Royal Commission said that a large proportion of this money ought to have been paid by the country and ought not to be put as a burden on the insurance scheme.
For many years past both employers and employed have paid very heavy contributions, up to 10d. a week and even more. I do not think it is quite realised
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what a tremendous burden this Insurance Fund has been on industry. Each man employed, roughly speaking, costs trade £4 a year. That is an amount which is a very heavy charge and almost a crippling charge in some cases on industry. It will be an enormous advantage if the insurance scheme can be put on a proper basis so that all improvements will go to the benefit of the Fund and at an early stage contributions can be materially reduced. To put all this debt on the Fund means very considerable delay in the likelihood either of benefits being improved or of contributions being lowered. It is an unfortunate thing which the Government has done. As regards the 1s. for children, I think if that had been allowed it would very largely have solved the difficulty of the family budget. As regards the cuts I think it is very like taking the gilt off the gingerbread when the unemployed have to wait three months for the cuts to be given back.
One other point in connection with which I would like to say a word is with regard to a person being considered genuinely unemployed. I think everybody will agree that if a man or woman is given a bona fide offer of work under suitable conditions and refuses it unemployment benefit ought thereupon to cease. It has always been a difficult problem to find a suitable way in which that could be done. At one time when the Labour Government was in office there was what was called the genuinely-seeking-work proposal before Parliament. I think the Government, and I congratulate them on it, have proposed words which will meet the difficulty, the difficulty being that you must not, put too much of the onus on the unemployed man or woman. The onus of finding work cannot rest on them because they cannot find it. It must rest on the Labour Exchanges. It is for them to find opportunities for employment elsewhere and if then it is refused that will put a man or woman out of benefit.
We hear it stated from time to time that there are a considerable number receiving benefit, especially those who are receiving benefit without having paid contributions, who do not seek work but who are, as it is called, "living on the dole'." So far as my information

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goes—and I believe it is a fact—the amount of that form of malingering is very small indeed. I believe there is a very small percentage of those receiving benefit who are living on it and have no intention of seeking work because they prefer living on the "dole." I believe that is a fact, and I think it is a very great tribute to the self-respect of the British working man that that should be so. I am not sure that it may not be due also to two other factors. One is that they get very bored when they are not in work, and the other, and I think perhaps an even greater cause, is that the wife gets bored when the husband is always at home. But whether it arises from either of those causes, at all events I think it is a satisfactory sign of the times that there is extraordinarily little of this malingering and of drawing benefit when a man ought to be at work.
So much as regards Part I of the Bill. As regards Part II, I am sorry to say that I am not quite so much in accord with that Part of the Bill. I thought that my noble friend in introducing this Bill put the whole Bill at rather too high a level in his appreciation of it. I think he spoke of it as the greatest social Bill that has been introduced for many years, and so on. I do not mind his crying up his goods, but he ought to remember the adage that "Self-praise is no recommendation." I for one think he put his Bill on much too high a plane, at all events as regards Part II. Part II is dealing with those who are not paying contributions and who receive benefits without having paid them, and I am glad to think that there are now included not only those in insured trades but those in other trades as well. The difficulty is to find some form of central body which will be able to deal with this whole matter. I think there is general Agreement that the administration ought to be more centralised than it is at present, and that at all events all connection with the Poor Law ought to disappear as regards this question of relief and of benefit. There is general agreement upon that, and it is also thought that there should be greater uniformity of treatment throughout the country, combined of course with a certain amount of elasticity.
In my opinion the proposal of Part II is centralism run mad. The proposal of the Bill is that a central body shall be
880
appointed and that that central body shall be entirely out of the control of the Minister and entirely out of the control of anyone, even of Parliament. I think that is going much too far. The only control exists in the first instance, when the rules and regulations are being made providing for the way in which they are to administer the Act. Those rules and regulations, it is true, are to come before Parliament for its assent. But after all they will be very widely drawn, and will be really no check upon the actions of the central body. After they have been passed, as I read the Bill and the explanation given yesterday by my noble friend opposite, the central body will be entirely free of any Ministerial or Parliamentary control. I think that that is a mistake. I believe that under the present conditions and under other conditions, for those who are subjected to tests or who will come under the Bill, it will be a great safety valve if they can feel that under certain conditions and in certain circumstances they can appeal in the first place to their local authority, in the second place to the Minister, and in the third place to their Member of Parliament, who can, if necessary, raise a question in the House. All those safety valves will now disappear, and those who feel themselves aggrieved will have no opportunity of bringing their case in any way before the public.
In addition to this body being so centralised, it is also, under the Bill, an unknown quantity as to how many members there shall be, who they shall be, and what their functions shall be. The only thing which is certain is that their salaries are put on the Consolidated Fund, so that no question shall arise in Parliament in regard to them. I do not think that that is a satisfactory thing, for, after all, this central body will have no fewer than some ten million people under their control. I think the proposal of the Bill goes much too far in that respect. We are agreed that some reform will have to be made in the lower forms of inquiry. The Bill, as I understand it, will to a large extent duplicate the present authorities. The central body are going to supersede the public assistance committees by some 300 advisory committees, as they are called, which they themselves will appoint, who will be entirely and directly under their control

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and with whom Parliament will have nothing to do. I think that Part of the Bill is very objectionable. It is very unfortunate that the Government should have gone so far as they have in their centralisation proposals.
There is one other point, and it is a very novel one, in connection with the central body. Up till now local authoritites have had grants from Parliament and they have administered those grants. Now for the first time they are asked to contribute for the purposes of the central body, without having any control whatever over the expenditure. That seems to me to be an altogether wrong system of local administration.
I do not want to detain the House at any length and therefore I will not say more than one word in reference to the question of tests to which my noble friend Lord Marley referred. I confess it seems to me that if you have benefits paid where there are contributions, the beneficiary is entitled to claim his benefits under certain conditions, but where he has not paid any contributions, it seems to me essential that his fitness and his means ought to be shown before relief. No doubt that may give rise in some cases to difficulties and to vexation, but these can be minimised and have been immensely minimised of late years. I am sure that all these authorities and committees have been settling down, and there is far greater fairness being displayed than there was at first. With regard, for instance, to the family budget, in this Bill that is immensely improved, and I think that on the whole it has now been put on a, fair basis.
I have tried very shortly to go over the various parts of the Bill which I think are good and the parts which I think are bad, and perhaps I may add one word in conclusion. It is this: the expenditure on unemployment is enormous, and of course it is expenditure which is altogether unremunerative, but I feel that in spite of its size and in spite of the fact that no doubt a certain amount of waste and perhaps a certain amount of fraud may be entailed, the expenditure, great as it has bean during the last few years, has been well worth while as far as the country is concerned. I think so on two grounds. In the first place, for the first time in our
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history, in the last few years the expenditure on unemployment has kept together the homes of millions who have had to draw benefit, and has relieved them of what must be the most frightening of all feelings—namely, the overhanging cloud of unemployment, which before unemployment insurance was introduced was far heavier and weightier than it is now, because at that time there was no means of relieving it. At all events, though the benefit is a pittance in a way, it does get rid of that overhanging feeling of anxiety, and it has kept together body and soul and the homes of millions.
I believe also that the fact of having these hundreds of thousands and indeed millions receiving benefit, and maintaining their families and their health and morale, has prevented this country, during the very bad times we have been going through, from suffering from any social upheaval. I believe that without this benefit we might have been in the throes, I will not say of civil war, but, at all events, of great disturbance and great distress. We have passed through these bad times, and I do not think we have had any serious disturbance with regard to unemployment. There may have been deputations or something at which the Police have had to interfere, but I think it is a great tribute to this country and to the unemployed, and to the way in which they have been handled, that during all these difficult years, with two or three millions of unemployed, we have had no disturbance of any sort or kind that mattered.
I understand that there will be no Division on this Bill. Personally, I could not have voted for the Bill because of Part II, but I could not vote against it because of Part I. I am saved the trouble of abstaining from voting because there will be no Division; but if I may end on this note, I would congratulate the Government on having endeavoured to deal with this matter in a large way. I hope that they will be successful in their efforts, and that this Bill may assist the country and the unemployed and the taxpayer. Whether it will do so or not remains to be seen, but at all events it is a great effort on their part, and to that extent I congratulate them on its production.
LORD AMULREE: My Lords, no one in or outside this House speaks with greater authority on insurance and insurance benefits than the noble Earl opposite, and it is to be regretted that he does not see his way to give wholehearted support to the entire Bill. To that extent I am in disagreement with him, although as to many of his criticisms I feel certain sympathy. In my opinion this measure is to be commended on two main grounds. The first is that it brings order into what might be described, without undue severity, as chaos. For many years, as the noble Earl pointed out, the arrangements for helping work-people who are the victims of unemployment have been of a makeshift character, devised with reference to no principle except that of temporary expediency. The unemployment insurance system has been twisted out of all resemblance to its original conception. Money expended on what is essentially a relief service has been derived in the most haphazard way from the Unemployment Insurance Fund, from the Exchequer, and from the local rates. The proposals in this Bill have the effect of restoring the unemployment insurance scheme to the position which it should occupy as a social institution of peculiar value and significance.
My noble friend, in his Second Reading speech yesterday, referred to the fact that the benefits derived from unemployment insurance are obtainable as of right. That is true. Every person who is a fully-paid member of the scheme, who has, so to speak, paid his entrance fee and kept up his contributions, is able in the event of involuntary unemployment to obtain weekly payments without the slightest surrender of his natural pride or independence, and without any feeling that he is imposing upon his fellow-countrymen. A scheme of this kind, I submit, is of the greatest national value, and should be maintained with the utmost solicitude. It is essential to such a scheme that it should be self-supporting; otherwise, the benefits received from it cease to be quasi-contractual in their nature, and become simply a form of public charity. No one, therefore, who holds, as I do, that the working classes of this country are moved by feelings of good citizenship and desire, as far as possible, to maintain their independence, can do otherwise than approve of the
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measures now proposed to put the unemployment insurance scheme on a sound financial basis, and to safeguard, as far as is humanly possible, against any impairment of that basis in future.
The second ground on which I think that this Bill is to be approved is that it affords a broad and firm basis for the future development and exercise of a social duty of the first importance. I refer to our duty, through the State, of helping those who are in need. I do not think that those who are responsible for this Bill would wish to claim that it achieves finality. There are features in which we may reasonably expect that the future will bring developments and improvements. I agree with what the noble Earl who last spoke said about the black-coated employee. The Bill makes comprehensive provision for maintaining in periods of unemployment the whole of the able-bodied wage-earning population, as well as those non-manual workers whose income does not exceed £250 a year. Non-manual workers who earn more than £250 a year are excluded from both Part I and Part II of the Bill. The effect of that exclusion is that if a person has been employed as, say, a draftsman or a bookkeeper at £5 or £6 a week, and he becomes unemployed and is in need of assistance, his only recourse will be to the local Poor Law authority. He will not have been insured against unemployment, and he will not be eligible to apply to the Unemployment Assistance Board which is to be set up under Part II of the Bill.
I appreciate the present difficulties in extending the income limit which at present marks the boundary of the proposals in the Bill. They arise, I apprehend, from the inter-connection between unemployment insurance and health and old age pensions insurance, and from the necessity of providing under Part II of the Bill a workable definition by which the inclusion or non-inclusion of a person within the provisions can be easily determined. I venture to hope, however, that the last word has not been said on this subject, and that the difficulties will be carefully examined with a view to the removal at some future time of what must appear to the plain man as anomalous. I venture also to surmise that experience in the administration of Part II of the Bill may show

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that some rectification of the frontiers between the Unemployment Assistance Board and the Poor Law or public assistance authorities may be desirable. I say this while at the same time admitting frankly that I am not prepared to point to any respect in which I think the present provisions of the Bill should be amended. So far as the subject is capable of being treated a priori I think the proposals are the best that can be immediately devised. The subject is one, however, on which much light will he thrown by two or three years experience; and I trust that those who will be responsible for, or concerned with, the administration of this measure, will act on the view that the arrangements here set down are not necessarily fixed and rigid for all time.
My noble friend in charge of the Bill submitted the argument that, since the Exchequer was to provide all but a small percentage of the funds to assist those coming under Part II of the Bill, it was necessary that the administration should be made a function of the Central Government. That argument is, I think, unanswerable, and disposes completely of any suggestion that the class of persons to whom Part II relates should be dealt with by the local public assistance authorities. Apart from such argument, however, I think your Lordships should welcome the proposals of this Bill for the reason that it will no longer be necessary for a working man in need of assistance through a long period of unemployment to apply to the Poor Law authority. I am willing to concede that Poor Law administration is humane and considerate, and in relation to the aged, the infirm, the children, and the suddenly destitute it is a social service the value and importance of which cannot be overestimated. Its attitude to the able-bodied unemployed, however, has become associated with an unfortunate tradition, so that if we look facts in the face we are bound to recognise that there are thousands of respectable working-class people of the very best type who would suffer the severest privation rather than put themselves on the parish and incur the stigma of pauperism.
I suggest to your Lordships that social arrangements, under which self-respecting people most in need of help and deserving it, are deterred from making their
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want known, should be altered; and I think it is one of the great attractions of this Bill that it gives the public duty of assistance a fresh start, free from Poor Law associations, and therefore able to build up its own practice and tradition. I hope that its practice will be characterised not only by firmness against imposition, but by considerateness and courtesy, so that no person whose poverty is due to industrial causes will be deterred from applying for the assistance that is available to him. While it is true that he gives twice who gives quickly, it is also true that he gives twice who gives with a good grace.
I am glad to see evidence in Part II of the Bill that the existence of need is to be an essential condition of the payment of allowances. The only other conceivable scheme would be that a fixed sum should be paid irrespective of need. To my mind such a system, quite apart from considerations of economy, would be entirely unjustifiable. It would be quite impossible to devise a fixed payment which would be appropriate to every case. In some instances the payment would not meet the full necessities of the case, and unless it could be increased the individual concerned would suffer hardship. This happens, as your Lordships are no doubt aware, in the case of unemployment benefit payments which are fixed payments made irrespective of need. In many instances where there is sickness, or where there are high rents or other similar circumstances, the unemployment benefit has to be supplemented by the public assistance authority. If, however, fixed payments are to be increased to meet the needs of a particular case, a means test, or needs test, is clearly implied; and I am at a loss to understand how those who object to a means test in toto would meet this difficulty, unless they are prepared to deal with persons in need after the manner of Procrustes and ignore the hardship and suffering entailed.
I should also submit to your Lordships that to make payments from public funds to large numbers of persons irrespective of their needs would discredit the whole scheme in the eyes of the recipients themselves. Nothing is more familiar to men with experience than the fact that the indiscriminate disbursement of money earns, not the gratitude, but the con

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tempt of the recipients. My noble friend in charge of the Bill was, in my submission, entirely right when he said that opposition to a means test was only comprehensible on the view that it is opposition to a means test administered or conducted in a particular way. The Board are given by this Bill the widest latitude in determining the basis upon which needs shall be assessed and resources taken into account. Clause 38 provides that where a person applies for assistance and is already in receipt of income from another source only part of such income shall be taken into account. In so far as the clause limits the discretion of the Board it is mainly in the direction of securing to applicants for allowances not less, but more, generous treatment than strict regard to their needs would enjoin. The policy of the Board will be expressed in regulations which will need the approval of your Lordships before it can become effective. In these circumstances we can expect that the means test to he adopted under Part II of the Bill will not be harsh. It will certainly not be a "destitution" test, but will be such as to commend itself to reasonable men.
If I appreciate the intention which lies behind this measure it is that working men and working women who have fallen on evil days through industrial causes shall be dealt with on such a basis that all the requirements of the case with respect to the maintenance of bodily health and morale and industrial and technical training shall be co-ordinated, and that the authority charged with this important social duty shall approach its task with a full consciousness that it is concerned with persons whose restoration to the ranks of industry is not only desired by themselves but is of vital importance to the country. That, I take it, is something of what my noble friend in his Second Reading speech intended when he referred to the scheme as being industrial in its outlook. As one who has had some contacts with industry and has gained some knowledge of both employers and workpeople, it is a feature of the scheme with which I am in most profound sympathy, and which I sincerely commend to your Lordships.
THE EARL OF KINNOULL: My Lords, I did not expect that many noble Lords would he here this evening. I expected that they would have gone to Epsom, but it does seem to me rather curious that
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when a measure relating to betting comes up noble Lords in large numbers will stay till midnight, whereas here is a Bill which affects the livelihood of millions of peope in this country, and only a few noble Lords can come. One curious thing I have noticed in this debate, and that is that the three spokesmen from the Government side have all been National Labour Peers. Not one Conservative Peer has yet said anything. We were treated last night to a very eloquent speech from the noble Lord, Lord Elton, who, I am sorry to see, is not in his place, and I noticed with what pleasure noble Lords opposite enjoyed his speech. After all, a political renegade is always popular in his new camp. We on this side feel some satisfaction that his attacks on and renunciation of his former Socialist creed relieve us of any prospect of his knocking at our door for readmittance when we form a Government. The noble Lord made great play with the question of the solvency of the Unemployment Fund. Listening to his speech one would have imagined that solvency was the only thing that counted at all. Apparently it does not matter that millions of people are living at the starvation limit.
Twenty-one million pounds have been filched from the pockets of the unemployed by the means test in order to balance the Budget, in order to produce a surplus, and now this Bill is produced to put the Unemployment Fund on a solvent basis. The money received from the means test has now been given, through the last Budget, to the well-to-do to make them better-to-do. The noble Lord, Lord Elton, referred to the doctrines and works of Lord Passfield and Mrs. Sidney Webb. I am really surprised that so erudite a gentleman as the noble Lord has not realised that the whole theme of these works is the abolition of the Poor Law system. The noble Lord further stated that statutory bodies were ultimately responsible to Parliament. That is not true. Parliament can no more question the action of the proposed Unemployment Assistance Board than it can question the action of the Judges of the High Court. Our objections are that it sets up a bureaucracy, a Fascist bureaucracy, and it perpetuates the Poor Law principle.
The noble Lord also referred to Circular No. 1069 sent out by the late Minis

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ter of Health, Mr. Greenwood. I am going to quote the words he used:
"…the late Labour Minister of Health, who is nowadays repeatedly denouncing the means test, was responsible for a circular—No. 1069—in January, 1930, in which he insisted upon the means test being rigorously applied to the agricultural and other unemployed uninsured workers who then had nothing save the Poor Law between them and destitution."
I have the circular here, and with your Lordships' permission I am going to read a portion of it:
"It has been brought to his [the Minister's] notice that certain boards of guardians have made a practice of excluding, either from the grant of outdoor relief or even from the grant of any relief at all, certain categories of persons, such for example as single men, able-bodied men as distinct from their families, or persons who have been on relief for long periods. The Minister recognises that the mere bulk of the problem with which the guardians are confronted may create a tendency to adopt such rough-and-ready methods of classification. It is true that they may be intended merely for the guidance of relief committees and may permit in doubtful cases of reference to the full board, or a revision committee who have power to disregard the general rules. The fact, however, remains that such rules tend to become too rigid in their application and the Minister desires to point out that a general refusal of outdoor relief to particular classes without regard to individual circumstances is contrary to one of the first principles of Poor Law administration …"
Later in the circular he says:
"'Mothers' (that is to say widowed mothers) should not be expected to earn unless satisfactory arrangements can be made for the children."
What does that mean?
Let us see how the Manchester Guardian of the 4th January, 1930, in-interpreted that circular. In a leading article it said:
"The circular is a shining example of the way in which conditions can be bettered without legislation. Under the late Government pressure was too often exerted towards the less liberal interpretation of the guardians' duties. The Memorandum issued by Mr. Greenwood indicates a complete change of spirit. There is no suggestion of extravagance or reckless distribution of cash. But there is the sympathetic understanding of the needs of poverty which ought to lie at the root of all Poor Law work."
The noble Lord implied that Mr. Greenwood was responsible for the present means test, but surely with his vast erudition he ought to be well aware that
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the means test is as old as the Poor Law system. The whole intention of the circular was to relax the harsh administration which had been imposed by the previous Tory Government. The circular was designed to secure more humane treatment for the destitute and especially for widows and children, disabled ex-Servicemen, and blind persons.
Before concluding I must just make a reference to the question of the allowance to children, which has been already dealt with by my noble friend below me who spoke yesterday. The Bill leaves the allowance of 2s. a week to children exactly where it was. I think it is a crying scandal that only 2s. a week should be allowed to keep a child. How can anybody keep a child on 2s.? I would ask your Lordships how you would like to do it. Would my wife like it if I gave her 4s. a week to keep my two chidren? Malnutrition is rampant, and no wonder. The future generation will be sickly, ill-nourished, and a disgrace to the civilised world. Why should England, the country that prides itself on being the most civilised nation in the world, tolerate such a state of things in the midst of plenty? Youth is being demoralised by ill-nourishment, it is being demoralised by poverty, and there is no stamina in it.
Then this Bill, in perpetuating the means test, is creating a feeling of hatred amongst the working class. The Government admit saving £21,000,000 by the means test, as I have already said, in order to balance the Budget and produce this surplus, which has been done at the expense of the poorest of the poor. This is a grave injustice on people who cannot help themselves, who are out of work for long periods through no fault of their own but because of the fact that the capitalist system has broken down. Responsibility for the treatment of the unemployed is to be taken completely away from Parliament. Under Part I of the Bill the Statutory Committee is not really responsible to anybody, and certainly under Part II the Unemployment Assistance Board is not responsible at all. The poor are to be ground under the heel of a pitiless bureaucracy only equalled by that which is being dealt out by Herr Hitler in Germany to-day. In conclusion I would like to say that there is only one good point about the

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Bill, and that is it will make the Government so unpopular with the electors of the country that it will ensure our return at the next Election.
LORD KILMAINE: My Lords, I do not wish to detain the House more than a few minutes, but I do wish once again to ask the Government if they cannot see their way to do something more to rid this country of the curse of unemployment. I have been assured by several people that relief works are a hopelessly uneconomic undertaking, but I quite fail to see why that should be so. We do not consider the Army as an uneconomic undertaking, and I beg to suggest that we might recruit an army of able-bodied unemployed, house them under canvas like troops in the field, clothe them in some good blue or brown overalls, with some distinctive badge on the collar, treat them in fact like Territorials out for their summer training. The work that the unemployed army thus recruited could do would be the planting of trees, the reclamation of marsh-lands, and the prevention of coast erosion, all of which occupations, I submit, in spite of assurances by the spokesmen for the Government to the contrary, would be perfectly suitable for any able-bodied, healthy man, under, of course, suitable skilled direction. These directors or foremen could be some of the many ex-officers who are now trying to exist on very small incomes or small pensions. I am sure they would welcome the chance to get some useful and healthy work to do during the summer months.
If extra money is needed to finance such a scheme of work, then again, I suggest, it would be a most suitable way of employing money raised from a national lottery or sweepstake. In this connection may I correct a surprising mis-statement made by the right reverend Prelate the Bishop of Winchester during the Committee stage of the Betting and Lotteries Bill? He brought forward as an argument against a national sweepstake that the Irish hospitals had lost revenue since the establishment of the Irish sweepstake, and that their income from voluntary sources had fallen considerably. Now, having resided in Ireland for many years, I happen to know quite a lot about the Irish hospitals. I used to subscribe to several of them during the years I lived
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in Ireland. When I left in 1923 the hospitals were hard hit. Many of them had heavy debts to pay off, and three-quarters of the people who used to support them by voluntary subscriptions had left the country after the very inglorious surrender to the forces of disorder by the British Government of that day, and they took what was left of their fortunes with them. I can positively assure the House that but for the assistance given to the hospitals through the Irish sweepstake many of them would long ago have had to close down. So much for that argument against the sweepstake.
I fully admit that the present National Government have probably done more for the country than any other Government of recent years. When they came into office they found the country in a parlous state. During their tenure of office the country has recovered to a very remarkable degree. That has not necessarily made for a popular Government. Noble Lords connected with Ireland will, I know, bear me out when I say that it was often the landlord who tried to do most for his tenants who got shot first. This Government by some of the things they have done, or tried to do, and still more by a lot of things they have not done, have earned the cordial dislike of a great many of the people of this land. This last Betting and Lotteries Bill, for instance, is a highly unpopular measure. People do not want to be improved by what is called grandmotherly legislation. The man in the street considers that if he wants to buy a sweepstake ticket he has a perfect right to do so, and the same with any other form of betting or gambling. I need not mention other things. I hope to see this Government returned to power at the next General Election, and if they can bring themselves to make a really big effort to rid the country of unemployment I think that when the time comes they will be able to go to the country with every prospect of success.
THE LORD CHANCELLOR (VISCOUNT SANKEY): My Lords, at the close of this debate it is hardly necessary for me to detain your Lordships very long, as it is clear that the House is determined to give the Bill a Second Reading. Permit me, however, to address your Lordships quite briefly first on the general scope of

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the Bill, during which I may be able to satisfy some of your Lordships' doubts on one or two points which have been raised, and subsequently to give an answer to the questions which have been addressed to the Government. First as to the general scope of the Bill. The problem of unemployment is one which it is to be feared will engage not only many Governments but many countries and for many years to come. In such circumstances it is best to endeavour to settle a structure which will stand the test of time, but to be quite prepared to fill in or alter details according to needs and situations which may arise. I venture to suggest to your Lordships that the structure of this Bill is one which should commend itself to the House. It is the first measure introduced in this country dealing comprehensively with the whole of the able-bodied industrial unemployed. It has been framed after very careful examination and consideration of the Report of the Royal Commission on Unemployment Insurance, and it consists of two parts, one dealing with unemployment insurance and the other dealing with unemployment assistance.
Permit me, for a moment, to use a neutral term with regard to unemployed persons, and to call them persons who are not at work. The Bill introduces a system under which persons who are not at work will be divided into three great classes. There will be those who have insured themselves against unemployment. When they happen not to be at work they will be entitled, as a right, to insurance benefit, just as anyone who has made a contract say, for example, with an insurance society is entitled to benefit. Secondly, the Bill will deal with those who have lapsed from insurance. By the hypothesis, these men being no longer insured, or not being insured, will not be entitled to insurance benefit, but they will be entitled to unemployment assistance. Thirdly, there will be that large class of our fellow-countrymen who are sick, aged or infirm, not entitled to any insurance benefit, who do not come under the provisions for unemployment assistance but who will receive public assistance from the community.
Dealing with the first of these great classes, those who are entitled to insurance benefit, it must always be recollected that insurance is in the nature of
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a contract and, to put it quite generally, you are entitled to get what you pay for. The most important thing of any insurance scheme, whether it be a public one or a private one, in justice to the assured, is that it should be financially and actuarially sound. This is one of the problems of the present Bill; and it has been solved by setting up, as your Lordships are well aware, a specially constituted Unemployment Insurance Statutory Committee who will be guardians and protectors of the Fund.
Let me pass from the first Part to the second Part of the Bill—namely, to those who have lapsed from insurance and who are not entitled to relief from the fact that they are insured against unemployment. These persons come under the central authority, the Unemployment Assistance Board, and it is this part of the scheme which has given many of us the greatest anxiety. It may be claimed that by the first Part of the Bill the insured are now safely placed upon a true insurance basis, and know exactly where they stand, and that the Fund has been made safe and stable. Those who have lapsed from insurance are provided with a regular procedure of relief, which everybody is devoutly thankful does not carry with it the stigma of the old Poor Law. At the moment their rights will in purchasing power be higher than they have ever been before, but it is most necessary that something in the nature of a means test should be applied to those who come under this second part of the national scheme. Here everything will depend upon one thing. Eyerything will depend on the administration. Parliament may legislate never so wisely, never so humanely, never so logically, but Parliament cannot administer. It can take care as far as possible that the administration shall be just, but you will never be able to make administration a cast-iron system. It is not desirable to do so. In the interest of the unemployed themselves you must have elasticity.
But the danger of elasticity is that it may lead to improper administration. Whatever is best administered is best. If we are to have Pharaohs administering this Act, it will be a failure. We have the same problem with magistrates all over the country. One bench of magistrates may take quite a different view of offences from that which another bench

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takes. The administration of this Act does not call merely for qualities of head or merely for qualities of heart, but a difficult combination of both head and heart which it is so difficult in human affairs to obtain. Parliament, however, will be doing its best by framing, as far as possible, regulations along which those who administer the law must work. I do not believe that there is more than an infinitesimal proportion of our fellow-countrymen who shirk work, or who do not desire to work. I believe practically every Englishman is only too glad to get a job and thanks God if he does so. Further, in this Bill the gap between the ages of leaving school and entering insurance has been closed, and the duty of providing instruction for unemployed children has been imposed on local authorities. So far with regard to the structure of the Act.
Let me now endeavour to reply to some of the questions which have been addressed to the Government and here let me deal first with the speech of my noble friend Lord Marley, covering at the same time the speech of my noble friend the Earl of Kinnoull. I do not complain for a moment of their somewhat hard criticism of the Government. They naturally entertain very strong views upon that subject and they are entitled to express them. But I very much wish sometimes that the unemployed question could be argued without adjectives. I am sure we should get on a good deal better if we tried to use arguments instead of adjectives, and I am sure my noble friends will not blame me for suggesting that to them. Of course, if you do what the noble Lord, Lord Marley, does, and if you do what the noble Earl, Lord Kinnoull, does—that is to say, regard this Bill as an accursed thing—and if you use the somewhat cynical expression, "Can any good come out of Nazareth?" then of course any stick is good enough with which to beat the Bill. But I venture to suggest to the two noble Lords that everything will depend upon the administration of the Bill, and it may very well be that both Lord Marley and the Earl of Kinnoull will live to see their prophecies falsified. They will not be the first persons who were called to curse but who remained to bless. Forgive my saying one thing to them. They say—and they are entitled to say—"Ah, but when the Labour Government come in we will re-
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peal the Bill." Well, I am afraid the noble Lord, Lord Marley, will have to wait a little time for that, and perhaps when he has waited a little time, may I suggest he will be a little wiser?
May I deal—because I ought to deal seriously—with some of the points raised by my noble friend? One of the first points made by the noble Lord, Lord Marley, was this. He rather suggested that the Bill was of a bureaucratic character and that there really was no actual control by Parliament. The words he used were:
"… the Unemployment Assistance Board is not responsible to Parliament … [It is] a body which is not subject to Parliamentary control."
He is not quite right there. The noble Lord, Lord Marley, is a very busy man and he has not the opportunities afforded to me of having people to look up matters for him. It is generally accepted that any system of assistance according to need can only by operated on the basis of discretion exercised by an authority in close contact with the personal circumstances of the applicant and the local background. That is what you have to provide. The existence of such a discretion is irreconcilable with direct Ministerial responsibility for every individual decision, carrying with it the liability to constant Parliamentary questioning in individual cases. Of course the noble Lord will see the impossibility of such a thing as that, and as a practical man he will not desire it.
But the proposals in the Bill represent, I submit, an attempt to ensure to the Unemployment Assistance Board a proper degree of administrative independence while at the same time providing opportunities for Ministerial control and Parliamentary criticism if the Board's general administration is not satisfactory. Permit me to refer you to one or two safeguards. There is the requirement that the Minister must approve various administrative matters. I have in front of me dozens of them. I will only quote one, but it is one of the most important. The Minister must approve the procedure for the issue of allowances. That is in Clause 42 (1). Then there is the requirement that the Board must obtain the Minister's approval for any arrangements it may make for the provision and maintenance

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of training courses. That is in Clause 37. I must give the next instance rather more fully.
A measure of Parliamentary control is secured by (a) the requirement that the regulations under Clause 38 to set up a basis on which need is assessed and allowances granted must be sanctioned by an affirmative Resolution by both Houses of Parliament before coming into operation—Clause 52 (3) and (4)—(b) the annual Vote required for salaries and allowances of the officers and servants of the Board and for the Exchequer contributions to the Unemployment Assistance Fund (Clause 47);(c) the annual report to Parliament of the Comptroller and Auditor General upon the Board's accounts;(d) the annual report of the Board to the Minister; and (e) the procedure with respect to rules made by the Board. I will therefore venture to suggest to my noble friend that on second thoughts he will come to the conclusion that the statement which he made with regard to Parliamentary control was made in rather too wide and too exhaustive terms.
Now I come to another matter to which the noble Lord referred, and with this I want to deal only very briefly, because although it touched me very much I am not quite sure how far such a statement advances the cause here. The noble Lord, Lord Marley, in his speech said something about "slave camps." That adjective is not quite merited. He said:
"… the camps have been called 'slave camps,' and I believe it is not an inapt description."
Of course the noble Lord may have visited them, in which case I unhesitatingly and without a moment's thought accept what he said. I have not visited them, but what I rely upon is a report which was made by a special correspondent, Mr. Phillpott, of the Daily Herald.
I think that his articles appeared on March 15, 16, 17 and. 19, 1934. Of course I am not going to quote the whole of them, but amongst. other things which he said are these:
"I went out to see the gangs at work. They were at it cheerfully, and the gangers were unobtrusive. There was no slacking on the one hand or goading on the other."
"There are of course variations in the diet….I have seen the meals prepared
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and served. They are good, and there is no stint of quantity."
"Punishments do not exist."
"…. all the officials I have met have an obviously sincere and self-sacrificing, faith in the voluntary system, and a complete belief in the potentialities of the lads they are trying to 'recondition."
That may be true. That is the account given by the special correspondent of the Daily Herald. All that I am saying is this—because unfortunately I have been generally acting as a Judge and not as a politician: If that statement is anywhere near the truth—and it is out of the Daily Herald—I should a little think the phrase "slave camps" a misnomer.
The next point which the noble Lord made, and which was made with very great propriety if I may say so, and very great emphasis, by the noble Earl, Lord Kinnoull, is about the 2s. allowance for children. I am not going to say that 2s. is enough for a child. I do not believe it is. But let us just see what the facts are. Of course it is quite impossible to imagine a child going up to the place where he can get the money, and saying: "Give me my 2s.," and to contend that 2s. is enough for the child. If you look at it in that detached way it is ridiculous. But at any rate let me put the facts. Since 1924, 2s. has been the rate of allowance in respect of each child under fourteen years of age of an unemployed person in receipt of unemployment benefit. I am not saying that that proves that the 2s. was right; all I am saying is that there have been different Governments in power during that period, and they continued the allowance of that sum. That rate of 2s. was not reduced when other benefit rates were reduced in 1931.
May I give a figure? I apologise; I am not so good at figures as the noble Lord. The cuts in benefit rates are restored by this Bill, so that from July 1 a man will get 17s. instead of 15s. 3d. for himself, and he will have 9s. instead of 8s. for his wife. Let us take the figures now for a man and his wife and a child. I do not think it is fair—I will not say "fair," because the noble Lord wishes to be as fair as I do, but I do not think it is scientific, to look at it and to say: "The man has 17s., the woman 9s., the child 2s." I think you must put the whole sum together and say that the man,

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woman and child have 28s.—17s., 9s., and 2s. Now, while the sums paid to the unemployed man are calculated separately, the total amount is of course spent as a single sum towards the maintenance of the family. The Statutory Committee will eventually have to consider whether any surplus from the Unemployment Fund shall be spent upon an increase in the sum paid to men with families, and, if they think it should, whether the children's allowances should be increased.
But I want to point out this to the noble Lord, because it obviously escaped his attention. It is perfectly true that the man gets 17s., the woman 9s. (making 20s.) and the child 2s. (making 28s.). But if, when noble Lords have an opportunity —I do not ask them to do it now—they will be good enough to look at Clause 38, subsection (2) of the Bill, they will discover that a man in that case may go to the Unemployment Assistance Board and try to get more, and if he proves that he has special merits he may get more. Personally I do not dwell too much upon that subsection, but all I do suggest to the noble Lord is that as a matter of arithmetic it is not quite in the right perspective to say that because 2s. is not enough for a child it is a great fault in the Bill. I am not saying personally that I should not like to see it very much more. That is my view; but that is not the point. It may be my personal view, but all I am saying is this, that I think you must take into consideration the whole amount, and I think you must also take into consideration that clause under which the man may go to the Unemployment Assistance Board.
The noble Lord, Lord Marley, said—and here his arithmetic, if he will allow me to say so, is no better than my uninstructed arithmetic, but I have got instructions—
"… the Fund, in order to maintain the solvency by which the Minister sets so much store, is actually making a profit out of children of £750.000 a year …."
Now that is wrong. It is entirely erroneous. The point is dealt with on pages to 2 to 4 of the Government Actuary's Report. Let me give the figures. The estimated income from contributions in respect of boys and girls under sixteen is £760,000 per annum, of which only one-third is paid by the boys and girls themselves. Against this contribution must be set the estimated cost
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of reducing the minimum age for receipt of benefit to sixteen, which is £230,000; the estimated cost of the extension of dependants' benefit, £75,000; the estimated contribution from the Unemployment Fund to the cost of courses of instruction,£425,000; and the estimated cost of administration, £95,000. These total £825,000, which is £65,000 in excess of the income derived from the lowering of the age of entry.
There was a point made by the noble Lord, Lord Marley, and indeed by one or two of the other speakers, including I think my noble friend Lord Buxton, with regard to the means test. It is hardly necessary for me to labour the necessity of the means test. We none of us like it. It may be a disagreeable necessity, but a necessity it is. Let me put an argument or two about it. The expression is a short way of referring to the principle that a man should be assisted according to his need. Obviously a man's need cannot be determined apart from the question of his resources. He is in need only to the extent that his resources are insufficient. The justification of a means test becomes most apparent when the alternative is considered. The only alternative to a means test is a payment irrespective of need. See what that means. If payments are made without regard to need it must follow that they are more than some and less than others of the recipients need, and it would lead at once to most appalling injustice. What is to happen to the man who does not get enough? Is he to make shift on an inadequate payment? Clearly that would involve hardship. Then on what basis is the inadequate payment to be supplemented? There can he only one answer, and that is, by reference to his needs.
The real difficulty of the means test, I submit, is not because it is either unjust, cruel or hard. I think the criticism of a means test is often confused with criticism of a particular kind of means test, and that the opposition to this Bill is due largely to the fact that the Bill provides that the resources of an applicant which are to be taken into account shall include the resources of all the members of the household of which the applicant is a member. Many people who would not object to a strictly personal means test do oppose the "household" principle by which the

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resources of sons or brothers and sisters or parents are taken into account. The answer is this. If an authority determining allowances according to need finds that an applicant is living as a member of a well-to-do household, that he is already provided with bed and board and other necessaries, how can they decide with any regard to the realities of the case that he is in need? They are justified in taking the facts as they find them and the facts are that, thanks to family solidarity, the applicant's needs are already being met. Everything in this case, and this is one of the difficulties, will depend upon administration. I am confident that if this measure is going to be properly administered, I shall live to see the day, if I live long enough, when the noble Lord will get up and say he has made a mistake. Do not misunderstand me. I am not saying that this Bill cannot be improved, but I am saying that on the structure of this measure it is a real attempt to put this debatable matter on a proper footing.
Now comes the next point referred to by Lord Buxton and by my noble friend also, and that is the debt of the old Unemployment Fund. What is to be said about that? The answer is as follows. The problem of the debt of the Unemployment Fund cannot be considered in isolation, apart from the other recommendations of the Royal Commission affecting the Exchequer, the circumstances in which their recommendations were made, and the total financial burden falling on the Exchequer under the Bill. If you look at the Report of the Royal Commission on the finance of the Unemployment Fund as a whole, no support can be there found for the demand that in the existing changed circumstances of to-day the Exchequer should take over a part of the debt charge. Even if the question of debt were looked at in isolation, much might be said as to the clear propriety of repayment. The worst of starts would be given to the new scheme, a fundamental feature of which is its continued solvency, if it were thought that debts could be incurred, only in the course of time to be written off.
Permit me here to give a few figures which I am really giving in answer to Lord Buxton on another point. The estimated cost to local authorities during the "standard year" of the relief of the able-bodied unemployed which will be
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transferred to the new Board is £6,500,000. Of this sum the local authorities are to contribute £3,600,000. The authorities, however, receive block grants from the Exchequer which amount to about 23 per cent. of their total expenditure. The effect of this is that the sum which authorities will have to find from the rates will be about £2,100,000 a year up to March 31, 1937, when this matter, together with the block grants, will fall to be reviewed. Against this sum there is to be contrasted the expenditure in respect of able-bodied unemployed falling directly upon the Exchequer, for which provision of a figure approaching £50,000,000 has been made in the current financial year. The disbursements from local rates, therefore, amount to less than 5 per cent. of the charge in respect of the relief of able-bodied unemployed not entitled to benefit. In addition there is the Exchequer contribution to the unemployment insurance scheme, which for 1934–35 is estimated to be £20,500,000.
I was a little disappointed at the remarks on Part II of the Bill by the noble Earl, Lord Buxton, who certainly made the best speech which has yet been made, if I may be allowed to say so, on Part I of the Bill—I am not talking about the noble Lord who introduced the Bill because, of course, he is on our side. I think 'what he meant was that he rather disliked the idea of what he called centralisation. Centralisation is an admirable thing for two reasons. The first is that the central authority is going to put up most of the money, and the easiest thing in the world—I am not attacking the local authority; I should do the same—is to spend somebody else's money. If the central authority is going to put up the money I suggest that the administration of the money ought to be in the central authority's hands. I have already pointed out the very small proportion which the local authorities will have to contribute. Forgive my dealing with one other point. I am only now putting a point which may be wrong but which is my personal view. One of the great difficulties of the old Act has been the different way in which it has been administered in different towns. In some towns you had an administration which—I do not want to say too much about it, but it was unsatisfactory. In

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other towns you had a far more—I do not want to use a depreciatory adjective —charitable way. That has produced, no doubt, very great discontent. The great point about centralisation of administration is that you are able to have even administration and the way you get that is to make settled rules and as far as possible let the local administration run on these lines.
I hope I have answered with one exception all the inquiries of noble Lords, but I have left one point over because it was a point on which the noble Lord found a most ardent supporter in the most reverend Primate last night. "Why," he said, "do you not raise the school-leaving age?" Let me first of all remind the noble Lord that this Bill is not primarily an Education Bill, it is primarily an Unemployment Bill. I want also to point out that there is nothing in this Bill from start to finish that in any way prevents or prejudges the question of the raising of the school-leaving age. The answer to the most reverend Primate and my noble friend is that while the raising of the school-leaving age would take the age group fourteen to fifteen off the labour market, and would certainly have some effect on unemployment in the age group fifteen to eighteen, it would not, as they no doubt realise, put an end to such unemployment, largely because juvenile labour is very immobile, and shortage of labour in one area cannot be made good, at any rate completely, by a surplus of unemployed juveniles in another. In any case, therefore, it would still be necessary to make provision for the fifteen to eighteen group along the lines of the Bill. The Bill has been drafted with the utmost care so as not to prejudice the question of the raising of the school-leaving age. There are thousands of people in this country, whose opinions are entitled not only to respect but to consideration, who hold that the school-leaving age should be raised. I express no opinion myself upon it; it is no part of my duty tonight. It has nothing to do with this Bill. All I do say is that merely as an argument the contention that by raising the school-leaving age you will reduce unemployment is as sound as twice two are four.
But the most reverend Primate was then quite right in saying, "Well, if you are not going to raise the school-leaving
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age, and if you say you are going to have all this instruction and all these classes, what are you going to do for them? This Act is going to pass in a few weeks' time. What have you done?" And he posed a series of questions. The first question was: Are schemes being prepared by the Ministry of Labour and the Board of Education in consultation? The next question was: What is being done to secure well equipped buildings and suitable teachers? The next question was: How is continuity of attendance to be secured? The next question was: Should the Board of Education be responsible?
Let me answer these questions. First, Are schemes being prepared by the Ministry of Labour and the Board of Education in consultation? Answer—Yes. The scheme in accordance with which authorities will have to submit their proposals for dealing with unemployed juveniles is already under consideration by the Ministry and the Board. I am not going to describe everything that has been done. It would take me too long. But I should like to say that the Ministry have had the advantage of receiving on this point very full reports on the problem as a whole from the National Advisory Councils for England and Wales (the Chairman of which is Lord Goschen) and for Scotland (the Chairman of which is Lord Elgin); and I think we owe our best thanks for what they have done.
In answer to the next question: What is being done to secure well equipped buildings and suitable teachers? these two matters have been particularly referred to in the letter to authorities asking them to make surveys. The replies show that there should in most cases be no serious difficulty in providing suitable buildings. If necessary, the erection of temporary buildings for this purpose will be approved by the Ministry of Labour. With regard to continuity of attendance, no one in this wide world knows how that can be secured, and nobody can secure it. This is inherent in any scheme which is designed to deal with young persons only as long as they are out of employment. As soon as they get a job again you lose continuity. That is one difficulty of the problem. It is, however, possible to give these young persons very useful instruction and training, even though it cannot be a course of instruc-

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tion such as they would receive in an ordinary school.
The last question was: Should the Board of Education be responsible? Well, the reasons why we think that the Ministry of Labour should be responsible are these. It is essential that one Department only should be responsible for dealing with the service in relation to Parliament, for framing policy, and for carrying out administrative decisions. No man can serve two masters: it is difficult enough to serve one Department. That means that it is only natural that the Department should be the Ministry which has already conducted this service, though on a smaller scale, for ten years. In any case the provision of instruction for unemployed juveniles is closely bound up with questions of employment and unemployment existing and prospective, on which the Ministry, not the Board, is the expert Department.
The noble Earl, Lord Buxton, in his speech this afternoon made a point that the Bill is not specific enough in Part II with regard to the functions of the Board. It is a very complicated Bill and is bound to be so, and I do not blame any noble Lord for making a slip and for overlooking one or two of the clauses, but the functions of the Board are set out in Clause 35 (2) and the constitution of the Board is set out in the Sixth Schedule. I think that everybody who reads that clause and that Schedule will come to the conclusion that the suggestion that the Bill is not specific is hardly one that can be justified.
With regard to Lord Kilmaine's suggestions, first of all I should like to thank him on behalf of the Government for the
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support that he gave. He certainly made some very valuable suggestions as to creating employment and so forth. I am quite sure that we shall receive these and give due weight to them. Of course, I cannot make any promise; I am not the Minister. But then there was another matter to which the noble Lord referred —something to do with sweepstakes. All I can say with regard to sweepstakes is that perhaps to-day of all otihers is the day on which we take the most charitable view of sweepstakes. I have now endeavoured to answer all the questions. I cannot hope that I have converted all my noble friends, but at any rate I have done my best to answer them. I think your Lordships will find that if this Bill, when it becomes an Act, is fairly and properly administered, none of us will ever regret having voted for the Second Reading.
On Question, Bill read 2ª, and committed to a Committee of the Whole House.

TRUSTEE SAVINGS BANKS (SPECIAL INVESTMENTS) BILL. [H.L.]
EARL STANHOPE: My Lords, I beg leave to introduce a Bill to amend the law with respect to the investment of moneys received by the trustees of trustee savings banks in respect of special investments; and to move that it be read a First time.
Moved, That the Bill be now read 1ª.—(Earl Stanhope.)
On Question, Bill read 1ª, and to be printed.
House adjourned at ten minutes past seven o'clock.