§ Order of the Day for the Third Reading read.
§ LORD TEMPLEMOREMy Lord, in moving that this Bill be now read a third time, I will, with your permission, carry out the undertaking that I gave yesterday to two noble Lords, my noble friend who sits behind me and the noble Lord opposite, to answer certain questions on the Third Reading. I will take first the 56 two main questions which were asked me by my noble friend Lord Mancroft. He asked, first of all, a specific question as to the gold which is bought with the Account in Paris, and earmarked there, whether it is left in France or is brought immediately to London. The answer to that is that the gold is, of course, at the complete disposal of the Account, and I can hardly he expected to say more in this connection than that it is shipped to London or elsewhere from time to time as may suit the convenience of the Account. The second question which the noble Lord put, he asked once or twice, and I do not know whether it was a sort of rhetorical question or whether it was a question to which he wanted an answer. The question was: How long is America going to go on giving 35 dollars an ounce for gold? I am afraid that I could not undertake to deal in this debate with the currency policy of another country, and I can only refer the noble Lord to recent utterances by the American authorities on this subject. Perhaps, however, I might repeat what has been already said in another place, that our action in presenting this Bill has the entire accord of the American authorities.
I will turn now to the questions of Lord Arnold, and I think, although I may take a little more time, it might make it clearer if I read his questions and then gave the answers afterwards, because the matters are a little complicated. He put to me certain related technical questions, and also a more general question in regard to the use of the Account. The technical questions were as follows: (1) Does the Issue Department have gold bought for it through the Banking Department, or through any channel other than the Exchange Equalisation Account? (2) If the answer is "Yes" does the Exchange Equalisation Account hand over immediately gold or securities for the difference between £4s.11½d. and £7 per ounce? (3) If the Exchange Equalisation Account does not hand over the difference, but is debited by the Bank of England with the difference, is not the effect to leave more funds in the Exchange Equalisation Account for more purchases of gold and so forth, than if the difference had been made good by the Exchange Equalisation Account immediately? (4) Also, if the difference is not made good immediately, how can this be reconciled with Section 25, subsection (3) of the Finance Act of 57 1932, which begins with the word "Whenever"?
The answer to these questions is that the Issue Department may acquire gold either in the market or, as is the course normally followed, from the Exchange Equalisation Account, but the accounting arrangements in regard to the difference between the market value and the fixed value are precisely the same in either case. If, for example, the Issue Department bought in the open market at £7 an ounce, it would immediately receive in cash, from the Exchange Account, £2 15s. an ounce. If, on the other hand, it buys from the Account, then the Account pays £7 for the gold but resells to the Issue Department at £4 5s. The net effect is precisely the same, and, as I stated yesterday, the Account has reduced its sterling resources and therefore its power to buy further gold, but holds as an asset the excess value of the Issue Department gold which must, on the winding up of the Account, be made good to it from the Issue Department. I hope the noble Lord will see from this explanation that there is no ground for his fear that the Account has been left with more funds for the purchase of gold than if the difference had been made good at once, because, in fact, the difference is made good at once as the Act directs.
The noble Lord's general question, as I understand it, was as follows. He asked me whether it was the case that the Account could enlarge its gold-buying powers by transferring gold, bought at£7, to the Issue Department at £4 5s. and whether this was not contrary to Parliament's intentions. My answer to that is that the noble Lord is perfectly correct in saying that the powers of the Account are not limited to one single purchase of gold up to its maximum resources. It is in the nature of a revolving fund; when it buys and sells it can buy again. When it sells to the Issue Department its power to buy again is less than if it sells in the open market. I cannot, however, agree with the noble Lord when he says that there is anything contrary to Parliament's intentions in all this; nor can I accept what I think is at the back of his mind, that there is no limit to the extent to which gold is passed to the Issue Department. The practical limit is, of course, the needs of the Issue Department itself in relation to the internal currency position.
58 The noble Lord referred to the reduction made in the fiduciary note issue last December. While a modest reduction such as that then made from £260,000,000 to £200,000,000 is a possible method of adding to the resources of the Exchange Account, my right honourable friend the Chancellor of the Exchequer took the view that it was not a suitable method for dealing with larger demands, and that the more correct course was to approach Parliament openly for an increase in the statutory borrowing power on behalf of the Account, as is now being done in the Bill before your Lordships. I hope I have answered—I have clone so to the best of my ability anyhow—the questions raised, and I beg to move that the Bill be read a third time.
§ Moved, That the Bill be now read 3a.— (Lord Templernore.)
§ LORD ARNOLDMy Lords, I am very much obliged to the noble Lord for the full reply given to my questions, and for the trouble which he has taken, and which he invariably does take, in handling these very difficult and technical questions in your Lordships' House. I do not propose to make a second speech on the Bill this afternoon. Your Lordships were good enough to give me a patient hearing yesterday. I have listened with great interest to the replies, and would like to have an opportunity of studying, syllable by syllable, the precise purport of what the noble Lord has said. As I understand it, it does appear that the limit of operations by the Exchange Equalisation Account in regard to the £200,000,000 authorised in this Bill is not confined to that £200,000,000, but that the amount in certain circumstances may be very considerably greater. Whether that is, or is not, in accordance with the intentions of Parliament might be a matter for argument, but I am not going to detain your Lordships longer this afternoon.
LORD STRABOLGIMy Lords, I am very sorry indeed that I could not come down to the House yesterday, because I missed three admirable speeches which I have since read with the greatest attention and pleasure. May I be allowed at the outset to congratulate Lord Mancroft, of whom, when he entered this House, I prophesied that he would bring very weighty arguments to our debates on financial questions? May I also be 59 allowed to follow up a very interesting question which Lord Mancroft put? I regret that I gave very short notice to Lord Templemore about this, but I feel it is of great importance. The accounts are open, apparently, or will be open later on, to the examination of the Public Accounts Committee. The Public Accounts Committee, on which I have never served, but of which Lord Mancroft has been, I think, Chairman, has the function really of looking for irregularities or mistakes in the accounts, and does not really deal with policy. Policy is dealt with, to a certain extent, on the Estimates on Supply days in another place, and policy is dealt with in debates on broad questions which we have in this House. If this information is to be given only to the Public Accounts Committee, will that Committee be invested with any powers to raise questions of policy on the working of the Fund?—because obviously there will not be many cases where there is any mistake or extravagance in the actual accounts, which is the principal concern of the Public Accounts Committee. But if the Public Accounts Committee is invested with some power to put questions on policy, that, I submit, would be most valuable from a national point of view, and I hope that Lord Templemore's reply meant that that would be the case. Then they would not have, so to speak, simply an accounting power but also a power of questioning the reasons for the operations of this Fund.
I venture also, in view of the great importance of this subject, to offer one or two other observations. I think we are all agreed that the declared object of this Fund is admirable—the stabilising of the exchanges—things being as they are and having this antediluvian currency system under which we all suffer together with this out-of-date fetish of gold. Under all those circumstances, some such system as this Tripartite Monetary Agreement is required to stabilise the exchanges, or the unfortunate merchants and shippers would never know where they were. But I am bound to make some criticisms of the very need of such a Fund. I see that the noble Lord, Lord Mancroft, yesterday explained that he was not a financier and the noble Lord, Lord Templemore, immediately corrected himself and admitted that he was not a financier. Well, I am not a financier either. May I give a definition of a financier which was given 60 to me by a very great financier himself? He said that the difference between a financier and a burglar is that the burglar does not wear a top hat. But though I am not financier I make no excuse for commenting on the subject.
§ EARL STANHOPEAre you a burglar?
LORD STRABOLGIWell it depends on what has to be burgled. I do on occasions wear a top hat, but that does not make me a financier. But the people who seem to know least about this subject are certain of the financiers themselves. They are the people who are subject to panics, who move this so-called hot money about in a panic. Yet all members of your Lordships' House have to take an interest in this question, which after all affects the day-to-day lives and prosperity of all His Majesty's subjects throughout the British Empire. We are practically all affected by what goes on in this particular Committee which operates the Equalisation Fund. I think the time has really come when some protest should be made against this insane buying of gold on both sides of the Atlantic. As things are, it may be necessary, just to tide us over until we can find some more scientific and more modern method of keeping the exchange system stable. But in the meantime think what could be done with this money if, instead of buying gold with it and burying it, we could buy goods with it, for those who need them. It would not be £200,000,000 worth of goods that we could buy; it would be seven or eight times that amount, using the modern machinery of credit.
May I draw attention to this other fact? There is, according to the pundits, too much gold at the present time in the world. I think all three noble Lords who spoke yesterday referred to that fact. The high price of gold has drawn unsuspected stores of the metal from India, it has led to old mines being reopened and mines which would never have paid in the past being worked. As a result there is something in the nature of a glut of gold at the present time. What is happening now is that immense quantities of gold are being mined by great effort and at great expense from holes in the ground on the Rand or in the Urals and brought over here at very great expense and buried in other holes in the City of London, as was pointed out by a right 61 honourable friend of mine in another place, and also in one of the best newspaper articles I have ever seen in a paper which I am sure the noble Lord opposite reads, and which I make no apology for quoting. When this Bill was first introduced a leaderette in the Daily Express put the matter cogently when it protested against using the public money to buy gold, to get it out of a hole in the ground in one part of the world and to bring it here, guard it, and pay interest on it in another hole in the ground.
I for one am net content to see this system continued, and I know I am speaking for my Party in this matter. We think the breathing space that we now have should be used to go into this whole question anew. M. van Zeeland has come back from Washington where, as we know, he has been undertaking the very important task of trying to find some means of reopening the channels of trade. That is one remedy for the present state of affairs, and I pray that he will be successful. But while we are trying to reopen the channels of trade cannot we try to find some better and more scientific system of arranging an international currency between the various states? That is just as important as opening the channels of trade of the world. We have practically cut off foreign lending from this country. We are still a great creditor nation and the old trading system never worked unless it allowed foreign lending. There are all kinds of restrictions in this country upon the ordinary functioning of the credit system, and we are going to all this expense and risk of tying up public funds in this way.
I offer those general observations, and I should like to offer one more. In the past when there has been a great new influx of gold into the world markets it has always led, after a certain time lag, to a great expansion of trade. The opening of the South American gold mines led to a tremendous expansion of trade and prosperity especially in Europe. Then we had the opening up in succession of the Australian and Californian and South African goldfields with similar expansions of trade and wealth. And now the Russian goldfields are providing immense quantities of the metal. Why is it that this time this great addition to the gold available 62 is not followed by another great trade expansion? The trade expansion which is going on at present is artificial, being largely caused by the expenditure on armaments by nearly all nations. It may not last. There is something wrong, and I do not propose here to suggest remedies. It is a matter for the best brains in the country to apply themselves to this problem without prejudice, to try to work it out internationally. But I do agree with my noble friend Lord Arnold that the situation may become quite dangerous in the future and it may lead to a heavy loss.
I repeat a suggestion I have made to your Lordships before in this matter. I would like to get all the greatest economists I could find in the country and elsewhere, put them under the Chairmanship of the present Minister of Education, lock them up somewhere, and keep them there until they found a solution. I mention the Minister of Education because I have so greatly enjoyed his speeches, which show an extraordinary insight into this subject. That is no reflection on the noble Lord, Lord Templemore, either—they might go as Chairman and Vice-Chairman respectively and they might be kept there until they found a solution. I am speaking on this next matter for the Labour Party. We at any rate recognise this problem. We are not hostile to this Bill, and we are not hostile to the principle behind it, things being as they are. In addition, we favour it because it is a step towards recovering State control of currency and credit, which we should never have lost. It was lost some centuries ago, when the Lombards first came to London and taught us banking, and we have kept it in private hands ever since. But we are gradually, I hope, beginning to recover the State control of currency and credit, and undoubtedly this Exchange Equalisation Fund is a step in the [...]rection. That is the best thing we ca[...]v for it.
§ LORD TEMPLEMOREMy Lords, the noble Lord did not give me notice till just before this debate began that he was going to speak, and therefore I am afraid I cannot go into the various questions which he raised. I do not really think he expected a very long answer. I am obliged to him, I am sure, on behalf of my noble friend and myself for the rather 63 terrifying invitation he held out to us. But there was one point which he did raise, which I think was rather an important one. He was talking about the Public Accounts Committee, and here of course he and the noble Lord behind me, Lord Mancroft, have the advantage of me, because they were in another place and know all about this Committee, and what it does. I never was in the House of Commons, and I am afraid I know very little about what these various Committees do. The noble Lord asked if the Public Accounts Committee was going to be vested with any special powers in connection with the examination of this Exchange Equalisation Account. I cannot answer that. I can only say that the particular point that he raised is no doubt an important point. Anything of that kind, naturally, coming from a member of your Lordships' House is worthy of consideration, and accordingly I will bring the point to the notice of my right honourable friend in another place.
§ On Question, Bill read 3a, and passed.
§ House adjourned during pleasure.
§ House resumed.