Lords Sitting of 21 July 1939

Preamble
The House met at eleven of the clock, The LORD CHANCELLOR on the Woolsack.
PREVENTION OF DAMAGE BY RABBITS BILL [H.L.]
Returned from the Commons, agreed to, with Amendments.
WEST SURREY WATER BILL [H.L.]
Returned from the Commons, agreed to, with Amendments: the said Amendments considered and agreed to.

AIR MINISTRY (HESTON AND KENLEY AERODROMES EXTENSION) BILL.
Order of the Day for the Second Reading read.
LORD TEMPLEMORE: My Lords, on behalf of my noble friend Lord Munster I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Lord Templemore.)
On Question, Bill read 2a, and committed: the Committee to be proposed by the Committee of Selection.

MILK INDUSTRY (No. 2) BILL.
Order of the Day for the Second Reading read.
11.5 a.m.
THE PARLIAMENTARY SECRETARY OF THE MINISTRY OF AGRICULTURE AND FISHERIES (THE EARL OF FEVERSHAM): My Lords, you will be aware that milk policy has been the subject of a great deal of attention for a number of years. We have had a series of measures designed to provide temporary assistance to the milk industry against the effects of emergency conditions. Certain comprehensive proposals in regard to the industry were put forward by his Majesty's Government in a White Paper in the summer of 1937, and a Bill to implement these proposals was introduced

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into another place in November last. The provisions of that Bill were wide in scope and far-reaching their possible effects; inevitably they were the subject of much controversy and eventually the Bill was withdrawn so that the whole problem of milk policy could be re-examined. The present position is that, quite apart from the controversial nature of the subject of milk, there has been no time this Session to introduce any fresh comprehensive proposals. But existing legislation, which provides for Exchequer assistance on milk used in manufacture and the financing of schemes for increasing the demand for milk, in particular the milk-in-schools schemes, expires on 30th September next. Moreover, English and Scottish Milk Marketing Boards took steps to put into effect as from 1st October, 1938, a very important part of the proposals contained in the White Paper which were the granting of increased quality milk premiums so as to encourage and accelerate improvements in the quality of the milk supply.
The Bill now before your Lordships accordingly provides, up to the end of September, 1940, for three things—first, Exchequer contributions towards the cost of the premiums that are being paid by boards on quality milks; secondly, the continuance of Exchequer assistance in regard to the milk-in-schools schemes and further Exchequer assistance for any cheap milk schemes for mothers and young children; and thirdly, for limiting, on rather a new basis, milk producers' losses in respect of milk sold for butter or cheese manufacture. The first two parts of this programme are designed to lead to an increase in liquid milk consumption by gaining the greater confidence of the public in the purity and cleanliness of the milk supply and by taking steps to encourage milk consumption by those who need it most and are least able to afford it. The third part is necessary to protect milk producers from the serious effects of conditions over which they have no control—for example, the price level of imports of manufactured milk
products—and so make them better able to play their part in carrying out what is now the constructive parts of the programme.
I think there is agreement on all sides that the main objective of policy, both from the point of view of the milk producers and of the nation as a whole, is
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to increase the consumption of liquid milk. Although this Bill is necessarily a measure of limited scope it is a further contribution to the solution of that problem. Clause 1 provides for Exchequer contributions to milk marketing boards, for the two years from 1st October, 1938, to 30th September, 1940, towards premiums paid by them to encourage quality milk production. This was foreshadowed in the White Paper of 1937 and the premiums have in fact been paid by the two main milk marketing boards. It is accordingly proposed to recoup them by Exchequer grants.
Clause 2 provides for the milk-in-schools scheme up to the end of September, 1940, and for any cheap milk scheme for expectant and nursing mothers and children under five. It differs from the previous provision under Section II of the Milk Act, 1934, in several rather important respects. There is no overriding financial limit to the annual Exchequer grant as there has been in the past. Up to October, 1938, the limit was £500,000 a year and this year it has been £750,000. It is estimated that the actual grant for next year may be £1,000,000, which is considerably higher than the grant in previous years. A change has also been made in the formula governing the maximum rate of Exchequer grant that may be made to milk marketing boards to enable them to carry out the necessary arrangements. They will now be able to cover the full real loss incurred by boards. It will apply retrospectively as from October, 1938, so as to cover in particular the increased cost of the milk-in-schools scheme during the current year, due to increasing consumption and to the increased distribution margin allowed for this service since last October.
My noble friend the President of the Board of Education recently described in your Lordships' House in replying to a Motion of the right reverend Prelate the Bishop of Winchester the steps that are being taken to secure that the greatest possible advantage is taken of the milk-in-schools schemes, and I believe that no one can doubt the Government's desire to see the development of these schemes. As regards mothers and young children, although a scheme was introduced by the Scottish Milk Marketing Board for its area early this year, it has not been possible to begin such a scheme in

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England, but I am now glad to be able to say that agreement has within the last few days been reached with the English Milk Marketing Board as to the financial basis for such a scheme and I understand that the Board will submit a scheme at a very early date. In the meantime I can, I think, give a general indication of the lines that the scheme is likely to follow, which will be broadly similar to those of the Scottish scheme. It will provide for the supply of milk to local authorities for the purposes of their maternity and child welfare arrangements at a price of 2d. a pint, which is 1s. 4d. a gallon, and is little more than half the ordinary retail price. The purpose of the scheme is to enable the local authorities to extend their present services.
The development of the scheme will depend in the first place on the initiative shown by local authorities and in the second place on the response from the mothers and children. It will be for the local authorities to prepare their proposals and submit them for the approval of the Minister of Health. The scheme is designed to increase consumption by those who at present consume too little milk, and I am sure that local authorities will do everything within their power to encourage mothers and children to participate in the scheme. They will be able to authorise the supply of milk to the consumer free or for part payment or for full payment of the reduced price of 2d. a pint. The balance of the cost of any milk supplied to mothers and children at less than 2d. a pint will fall on the local authorities' funds under existing maternity and child welfare arrangements. The Exchequer grant until the end of September, 1940, will be sufficient to bring the Board's returns on milk supplied under the scheme up to an average of 1s. 2d. a gallon on the year. The rate of any grant for the future will be reviewed before the end of September, 1940, in the light of the experience gained. It is further proposed that the distributive margin on milk sold under the scheme shall be not more than 8d. a gallon. There is, of course, no compulsion on any distributor to supply this milk, but I hope that distributors will co-operate to make the scheme a success.
I now come to Clauses 3 to 5 of the Bill. These are designed to place a
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bottom in the market for milk used in the manufacture of butter or cheese. It is important to remember that under this Bill we are proposing to give very substantial assistance to milk producers by way of encouraging quality milk production. This represents a change of emphasis in our milk policy and it constitutes the main method of helping the industry during the two years to which the Bill relates. Assistance on milk for manufacture accordingly becomes a supplementary safeguard only. Its object is to prevent the persistence of low prices in the milk product market from jeopardising the success of the main proposals for encouraging quality milk production. It is, therefore, proposed to change the method and basis for granting such assistance. In future, this will depend on the course of prices of imported butter or cheese over six-monthly periods. Payments will be limited to certain standard quantities of milk. This is in accordance with the general principles of price insurance provisions, and production is not, of course, limited to those quantities. On present contract terms and in the light of present price relationships, the level of price insurance under this part of the Bill may, for the year 1938–39, be assessed, in the case of milk for butter, at 6.1d. per gallon in winter and 5.2d. in summer, and, in the case of milk for cheese, at 6.3d. per gallon in winter, and 5.1d. in summer. These are average figures for six-monthly periods. Remembering the purpose of the proposals, I think it will be found that they afford a reasonable measure of security for milk producers.
The Bill can, of course, only be regarded as an interim measure. Nevertheless, it provides for quality improvement in the milk supply, which is an essential feature of a sound national milk policy directed towards achieving increased liquid milk consumption. In the Government's view, however, the desired increase in liquid milk consumption is dependent not only on improvement in quality but also on improvements in method and organisation, particularly on the distributive side, leading to a reduction in costs and eventually in retail prices. The objective of permanent milk policy must be a self-supporting milk industry, assisted only so far as may be necessary to prevent the price structure

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from being undermined by low prices of competing milk products from overseas. In pursuance of that end, the Government is continuing to seek a means of approach to problems some of which, as the House will be aware, raise acute controversial issues. It has been suggested that the Government should initiate an expert inquiry into the costs of distribution. It must be remembered that a good deal of information derived from various sources is already available as to costs of distribution of milk, and the Government do not propose in the present Bill, which is essentially an interim measure, to ask for special powers to undertake a further inquiry. If, however, in connection with any further examination of the whole problem which is being undertaken, it is found necessary to add to our knowledge on this subject, the Government will take the necessary steps to this end.
Another aspect of long-term policy to which I should like to refer in connection with this Bill is the Attested Herds Scheme. My right honorable friend has recently had under review the future of this scheme and its relation to milk policy, and he has reached the conclusion that the payments made under the scheme in respect of disease eradication should be considered as far as possible independently of the various considerations affecting milk policy generally. It would be inappropriate in a purely interim measure such as the present Bill to include any long-term provisions relating to this matter. On the other hand, it is desirable that some indication should be given at this stage of the future of the Attested Herds Scheme as a disease eradication measure. It is the intention of the Government to introduce legislation, at the first suitable opportunity, providing for the extension to September 30, 1948, of the period of operation of the relevant provision under the Agriculture Act, 1937, which at present expires on January 31, 1941. But in so far as payments made solely in respect of disease eradication are made by way of compensation for the additional expenditure incurred in ridding a herd of tuberculosis and qualifying it for attestation, they should not be of indefinite duration, This principle is already applied in the case of the alternative bonus per head of cattle under the Attested Herds Scheme, which is payable over a period of three years, and it is proposed that after January 31, 1941,
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milk bonus payments under this scheme shall likewise only be received by an individual owner for a period of three years in all, including any period prior to that date in respect of which bonus has been paid. It is also proposed that the rate of this milk bonus up to September 30, 1943, shall be the same as at present—namely, one penny per gallon, or its equivalent in bonus per head. I am not in a position at present to indicate what the rate of bonus will be in the period subsequent to that date, but the matter will be reviewed during the preceding period in the light of the progress made by the scheme and of other considerations, and as long notice as possible of any proposed changes will be given.
Other matters of long-term policy will also require further consideration in the near future, but in the meantime I commend to the House the present proposals and I hope that they will serve to promote the interests not only of the milk industry but of the whole nation. I have taken longer than perhaps might have been expected at this sitting to elaborate some of the proposals contained in this Bill, because, as your Lordships will appreciate, I have to-day been able to make an announcement which my right honourable friend was not in a position to make when the Bill was being considered in another place. I beg to move.
Moved, That the Bill be now read 2a.—(The Earl of Feversham.)
11.28 a.m.
THE CHAIRMAN OF COMMITTEES (THE EARL OF ONSLOW): My Lords, I want to raise one point only, which concerns Private Bill legislation. I must trouble your Lordships to throw your minds back some three years, when two Bills were brought into your Lordships' House, one by Poole and the other by Glasgow. It will be remembered that about three and a half years ago there was a nasty outbreak of typhoid on the South Coast of England, and Poole was especially a sufferer. The Corporation of Poole, very properly and rightly desiring to extend every protection they could to the inhabitants of and visitors to Poole, brought in a clause in their general Bill dealing with pasteurisation of milk. In the same Session quite a different scheme was brought in by

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Glasgow in a proposed Provisional Order. Under the Scottish procedure that Provisional Order was considered by my right honourable friend the Chairman of Ways and Means and myself, and we decided that the proposal was so novel that it should be brought before Parliament in a Bill. Glasgow then turned their Provisional Order into a Bill.
There was considerable objection from various interests to the proposal made by Poole. Among those who regretted that Poole had brought in this clause, although the Government admitted that they were perfectly right in doing everything they possibly could to safeguard their population, it was felt that this scheme of pasteurisation had better be dealt with by general legislation, rather than by particular legislation. I need not enumerate the numerous difficulties presented by this proposal to proceed by Private Bill. It was possible for the Minister of Health at the time to give an assurance to Poole that the danger of infection there was no greater than anywhere else in the country. To put the matter shortly, after a good deal of discussion my noble friend Lord Halifax, who was then leading your Lordships' House, said these words:
"In these circumstances the Government have reviewed the whole matter and I am authorised to announce that it is their intention to bring forward long-term legislation dealing with general milk policy in the near future."
He also said:
"I am bound to agree with my noble friend Lord Cranworth that a question such as pasteurisation would be and must be more properly dealt with in general rather than local legislation. Consequently it would not be the wish of the Government that any provision to enforce it should be admitted in a Private Bill during the present Session."
On that the Poole clause was withdrawn, and Glasgow dropped their Bill.
Now that speech of my noble friend Lord Halifax was made on April 27, 1937, and, as your Lordships are aware, in this spring the first Milk Bill was introduced in another place. That Milk Bill included provision for pasteurisation, but circumstances arose which necessitated the dropping of that Bill and the introduction of this Bill which my noble friend Lord Feversham has told you is of an interim character. What I would like to ask my noble friend is this. Supposing—I have not had any information
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that such an intention exists, but Bills for the next Session, as your Lordships are aware, are in process of being prepared—supposing some local authority brought in a Bill such as the Poole and Glasgow Bills for next Session, and deposited it in November, what attitude would the Government take in regard to that matter? Would they adhere to the view that such a proposal would be inopportune, and that an inquiry into the matter of pasteurisation would be difficult in the case of proposals put forward to your Lordships in a Private Bill? Because it is quite possible that a local authority—I have absolutely no information, as I have said—having seen the proposals of the Government, may bring them forward in a Private Bill. In any case I think we ought to ask the Government what attitude they would take if such a course was pursued.
11.34 a.m.
LORD SNELL: My Lords, the noble Earl who moved the Second Reading of this Bill very wisely disarmed possible critics of it by confessing it was an interim measure. On those assurances we have no desire to oppose the Bill, but if it were put before your Lordships' House as a final or satisfactory solution of the milk problem we should feel that it ought to receive very careful thought and criticism. The Bill, however, is not of fundamental importance, but it does review, as I see it, the mechanism of distribution and makes proposals for the modification of that mechanism. There is a growing appreciation of the need for a greatly increased consumption of milk, but I feel that it will be a long time before the general public are convinced that milk is as safe as its food value is undoubted.
My own experience has been an almost continuous desire to avoid milk because of the dangers that were at least at one time associated with its consumption. There have been great questions raised as to the purity of its production, the dangers of its distribution, and so on, and therefore anything that we can do to assure the public that pure milk is now to be regarded as a possibility will be of very great value. Parents are, of course, being continuously educated in this matter by seeing the improved health of their children owing to school milk-consumption schemes, and the details of this Bill will appropriately be examined on the Committee

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stage. I only desire to say that what the noble Earl, the Chairman of Committees, has said about Lord Halifax's declaration is of some importance. Even under the pressure that exists in other departments it should have been possible, before now, to have made proposals for that long-range legislation which was then foreshadowed, but we have no desire to prevent the Second Reading of the Bill before the House.
11.38 a.m.
THE MARQUESS OF CREWE: My Lords, I am fully aware that at this time of day it would be idle to lament over the fact that the supply of milk and of dairy products generally is conducted under purely artificial conditions, or to shed a tear over the days—the old days which we all remember—when milk, cheese and butter were articles of ordinary consumption, to be bought and sold on the ordinary principles of competition, Therefore we have to consider the proposals of this Bill as being in a sense forced on His Majesty's Government. How far it is possible to proceed within a reasonable space of time to implement the intentions which the noble Earl stated in general terms to be in the mind of the Government, and how far this is to be regarded as a purely interim measure, is, perhaps, a matter of some doubt. I think in view of the general stress of legislation we cannot anticipate any very early further step in advance on the lines which have been indicated.
The intentions of His Majesty's Government in producing this measure have been clearly stated—so far as possible to increase the consumption of milk at a reasonable price, and to ensure, so far as possible, that that milk shall be pure and free from the possibilities of disease. I am not quite sure how far the statement that fell from the noble Lord, Lord Snell, that there has been a general uneasiness with regard to the purity of milk which has distinctly limited its use, can be supported by evidence. There is no doubt that the fear of tubercular disease caused by milk has been widespread, and I think in some cases it has been exaggerated almost to the point of believing that so long as any cattle are tubercular the milk supply of the country is in danger. Now, that is an undoubted exaggeration because, as everybody knows, cattle may
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suffer from quite severe tubercular lesions without in any way affecting the purity of the milk which they give. At the same time, of course, we all agree that everything that can be done in reason to stamp out the appalling tubercular disease which, as we know, affects so many animals as well as human beings, ought to be encouraged in every possible way.
I am glad to notice one feature in the Bill, that although every respect is properly paid to accredited milk, yet that is not to be considered as the only milk in respect of which assistance can be given from public sources. As many of your Lordships know, great expense has been caused by the alterations to buildings in various forms in order to obtain a certificate for accredited milk. That has been in itself desirable, though it is obvious that it must, in the long run, whether the farm be private property or public property, add something to the cost of production. But it is undoubtedly true that a great deal of milk can be produced under reasonable conditions, and absolutely good milk for general consumption, in holdings which have not been able, in the technical sense, to obtain the accredited certificate. One point is, I think, worth mentioning—that quite apart from the permanent improvement required to obtain the accredited certificate, quite as much attention has to be paid to the manner and conditions in which' the actual milking is carried on, which for the purity of the milk is just as important as the provisions for light and cubic space, as demanded by the rules.
Perhaps I may be allowed, as coming from a part of the world where cheese is a main product, to express my satisfaction at the encouragement which the measure gives to farmhouse cheese-making. It is well known that in cheese-making so much depends upon the individual skill of the person who works in the dairy, and that generally speaking a finer product can be obtained in this way than can possibly be obtained by a cheese factory. Then, as regards the increased consumption of milk, I am not sure that it is always realised that milk, taken alone, is not regarded by everybody, for either children or grown-up people, as a really palatable form of nourishment. We notice the vastly greater percentage of milk which is used in some foreign countries as compared with Great Britain. Well, I do not know whether any in-

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formation is obtainable as to how far that consumption represents liquid milk drunk undiluted or unchanged, or how far it represents consumption in other forms. I have always felt that the countries are greatly to be envied in which the consumption of coffee and milk, either in the morning or in the afternoon, takes the place of the consumption of strong tea, which I believe to be an extremely unhealthy beverage. I think that any encouragement that can be given, by example or precept, to a larger consumption of milk in this way would be of distinct advantage to the country.
And I think we must all feel that the provision which will increase, as we hope, the consumption of milk in schools and its consumption by nursing mothers is an act of wise liberality on the part of His Majesty's Government, and I hope that a very large increase in the consumption in both these directions may be the result of this measure. I have nothing more to add, and I do not know whether it is likely that in the Committee stage some of the same Amendments which were moved in another place will be moved from the Front Opposition Bench. I am rather inclined to hope not, from what fell from the noble Lord, not merely because time presses, but because he regards this as a measure which will have to be dealt with in other details later on. In these circumstances, I hope and believe that the Bill will pass your Lordships' House in much the form in which it has been brought in for Second Reading.
11.50 a.m.
LORD LUKE: My Lords, I have no doubt that the milk control schemes have served a very useful purpose, but there is a small minority who have suffered severely from them. I refer to the hospitals. The cost of milk at the higher price they pay to-day as compared with 1932–33—the year before the milk control came into being—means about £115,000 more expense per annum to them. That is taking the average price per gallon paid in 1932 against that in 1939, and is only based on the average price for 1932; but hospitals used often to get special terms from friendly local suppliers of milk. This is a very serious matter for such hard-pressed institutions as voluntary hospitals. A hospital of 500 beds requires at least 100 gallons of milk a day. At present
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prices, one-quarter of the total cost of hospital provisions is for milk. The quantity of milk supplied to the hospitals is seven million gallons per annum out of a total of eleven hundred million gallons—under a 150th part of the whole milk scheme. No doubt more milk would be consumed if the price to the hospitals was lower.
It is the Minister or the Milk Board who can best suggest the means of giving justice to the hospitals in this matter. A 150th part is a very small section of the scheme, but a gesture of this kind at this time would be much appreciated by the committees and executive officers of these great homes for the sick poor. I would draw your Lordships' attention to the large quantity of milk sold at much under the hospital price to those who manufacture cheese and butter in this country—useful commodities no doubt, but they can be bought more cheaply from New Zealand. In fact, at the present moment, this country can get extra butter for nothing from New Zealand because that Dominion owes our investors a great deal of money and if we do not take her dairy products for interest on our capital New Zealand will not be able to pay us. The British Hospitals Association put this dear milk matter to the Ministry two years ago, but the case is more urgent to-day and the present Minister of Agriculture may not have heard of it. It is the high price charged to the hospitals that helps the milk schemers to charge the low price to the butter makers.
I am not asking for milk for the hospitals at the low price that butter manufacturers pay, but I am asking that the cost should at least be reduced to the price paid by them before milk control in 1932—that they should be saved this extra £115,000 per annum they now pay. Hospitals are not business concerns—they cannot raise their prices to their patients. Every penny of that £115,000 extra cost has to be obtained from the threepences a week that are paid by working men and the contributions of generous subscribers. I trust the Ministry and the Milk Controllers will arrange for some amendment to this Bill in Committee that will put this injustice right. May I express the hope with regard to the matter that has been discussed here to-day—that of the safety of milk—that it will not be headlined in the Press? Nothing has done more harm to the policy of those who are

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endeavouring to increase the consumption of milk than that particular report when it gets headlined and large space in the Press.
11.55 a.m.
THE EARL OF FEVERSHAM: My Lords, those of your Lordships who have participated in the debate on this Bill have unanimously voiced the view that if the future prosperity of the milk industry is to be secured it is necessary that the consumption of liquid milk should be increased. That is not only for the benefit of those who produce the milk but also for the benefit of those who consume it. Further, it is urged that if that objective is to be attained, it is necessary that the milk supplied should be of a higher quality inasmuch as it is free from disease and is clean. Perhaps it would be of interest to your Lordships if I gave you some figures showing the improvement that has so far been effected. I recognise, in submitting these figures, that they are only of a provisional character inasmuch as the schemes launched are still in progress.
The percentage of quality milk that is put on the market to-day—that is accredited milk and T.T. milk—is now 40 per cent. of the total sold. The total amount of milk sold in the year 1937–8 for England and Wales was 1,063,000 gallons. As I attempted to say in moving the Second Reading, we are tackling this problem on two fronts—one with the object of obtaining better herds, free from tuberculosis, and the other with the object of getting cleaner milk. The noble Marquess, Lord Crewe, referred in some most interesting remarks to the premiums paid for the attestation of herds. It may be of interest to the House if I say that the total premiums payable on milk from attested herds sold by wholesale are as follows: Since October 1, for tuberculin-tested milk from attested herds, 3¼d. a gallon has been paid; for accredited milk from attested herds, the same figure; and for ordinary milk from attested herds, 2d. per gallon. The assistance given to quality milk sold by wholesale which is not from attested herds has been, since October 1, 1938, when the Boards adopted the proposals set out in the White Paper, as follows: For tuberculin-tested milk, 2¼d. per gallon and for accredited milk, 1¼d.
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Your Lordships will see that encouragement is given to the milk producer either to produce milk of cleaner character or to get his herds free from the disease of tuberculosis, or to combine both these objects by coming under the attestation scheme and also getting a certificate either for T.T. milk or accredited milk. The persons who at present sell milk from attested herds are producing over 50,000,000 gallons per year. Your Lordships will see that great progress is being made in this direction. I agree that if this Bill were to be considered as a long-term measure it would be neither a complete nor satisfactory solution of the problems that confront the milk industry.
My noble friend Lord Luke has referred to the question of milk for hospitals, and a similar point was put forward by the noble Earl, Lord Cork, in a recent debate which my noble friend the President of the Board of Education said he would look into. My noble friend Lord Luke has said that this question may not have come to the knowledge of the present Minister of Agriculture. I should like to assure him that the Minister is well aware of the case enunciated by the hospitals, and I myself have been present on occasions when the view as expressed by the noble Lord has been put forward. Perhaps I may be allowed in those circumstances to deal with one or two aspects that my noble friend has raised. He has informed your Lordships' House that the increased cost to hospitals in the purchase of milk has been £115,000 as compared with the figure paid in 1932.
On previous occasions when representations were made it was pointed out that as far as the hospitals are concerned they are quite obviously large consumers of milk and are entitled to expect—as it is understood that they do in fact obtain—special terms for the purchase of liquid milk for human consumption. But it would appear that there is no more justification for the provision of milk at specially cheap rates with Exchequer assistance to hospitals than for such other essential requirements of hospitals as gas, coal, electricity, bedding and medicine. The fact that hospitals are doing beneficent work is surely not a reason why producers of milk should give preferential treatment to the extent of selling milk to the hospitals at an unremunerative level. I understand that the Milk Marketing Board

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have already granted such concessions as they usefully can, and it seems that in this instance compulsory beneficence should be no more required from the milk producers of this country than from any other section of the community. If hospitals are to obtain milk at prices below those at which other persons can buy it, the matter would appear to be one for consideration on social grounds, and I am sure that my noble friend in putting forward the case of the hospitals does not mean to imply that milk producers, or those engaged in the distributive side, should be put under a severe loss by selling at a special figure to these institutions.
The noble Lord, Lord Luke, has quoted the figure that was paid in 1932, but he will know that at that date the condition of the milk industry was such, owing to cutting both in the wholesale and retail prices, that the industry was as near bankruptcy as it has ever been, and had it not been for the adoption of the agricultural marketing schemes it would be true to say that a large number of the 150,000 persons engaged in the production of milk would have gone out of business. Therefore this is a question that cannot be solved merely by negotiation between those who represent the milk producers on the Milk Marketing Board and the hospitals. It is a matter which must surely he considered, as I said, on social grounds, and although that may suggest the need for a review of the maintenance and equipment of hospitals, that should be considered not only having regard to the expenses incurred in the cost of obtaining milk but also expenses incurred in the provision of other necessities for hospital maintenance.
My noble friend Lord Onslow, together with Lord Snell, has referred to the statement made by Lord Halifax in April, 1937, with regard to the Private Bills which were presented by the Corporations of Poole and Glasgow. As regards the question of pasteurisation, provisions on this subject are clearly unsuitable for a short-term Bill of the kind which is now before your Lordships' House. Further, the question is one which concerns more than one Department, and I regret that I cannot give any statement of the Government's view on the general question. But with regard to the particular question to which my noble friend has referred, I can
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at present only say that as far as local authorities are concerned it is open to them to promote Private Bills containing pasteurisation provisions, and that if they do so the Government for their part will consider these provisions on their merits. I am glad that those who have participated in this debate have given a welcome to the provisions of this Bill, and I trust that pending consideration of further policy and of the views of all sections of the milk industry therein and up to the time that any new proposals are put forward for a another measure, the limited provisions of this Bill will have gone some way to increase the consumption of liquid milk and to obtain a better quality and standard of milk consumed.
12.8 p.m.
THE EARL OF ONSLOW: My Lords, by leave of the House may I ask my noble friend a question to get this point cleared up? He said, if I do not misquote him, that if local authorities were to bring forward proposals for pasteurisation such as those proposed by the Bill of the Glasgow Corporation the Government would consider them on their merits. Does that mean any alteration of what my noble friend Lord Halifax said nearly three years ago? It was a definite discouragement to local authorities to proceed by Private Bill, and for obvious reasons. Supposing, for instance, any local authority were to bring in that part of the dropped Milk Bill which relates to pasteurisation, would the Government say it was undesirable that it should be proceeded with or not?
One reason why my noble friend Lord Halifax said, and very properly and rightly said, that the Government at that time discouraged local proposals was that those proposals would go to a Committee of your Lordships' House, and would be examined by that Committee as a Local Bill, and that would entail probably great expense to the local authority without possibly producing any conclusive results. I think everybody agreed with that. Supposing for the sake of argument the proposals made in the dropped Bill were introduced, have the proceedings which were foreshadowed three years ago gone so far as to enable the Government to express an opinion in regard to pasteurisation? I do not want to press the point, but I think my noble friend will see that it will possibly come into the minds of local authorities to bring the matter forward

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in Private Bills next Session, and it would be desirable that they should have some guidance because it would save them trouble.
12.11 p.m.
THE EARL OF FEVERSHAM: My Lords, the statement I made in regard to the point raised necessarily differs from that made by my noble friend Viscount Halifax in April, 1937, because at that time the long-term measures for the milk industry were in process of formulation. Your Lordships will recall that that Bill was withdrawn from another place owing to the acute controversy that arose concerning it. Therefore there is not at present before Parliament any provisions under the head of pasteurisation. I can only repeat to my noble friend that if local authorities wish to promote Bills incorporating pasteurisation proposals they will be considered by the Government on their merits.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

OVERSEAS TRADE GUARANTEES BILL.
Order of the Day for the Second Reading read.
12.12 p.m.
LORD TEMPLEMORE: My Lords, this is a bill to increase the powers of the Board of Trade to give guarantees for the purpose of encouraging our over-seas trade; and also to authorise certain financial arrangements in connection with such guarantees. Section 4 of the Export Guarantees Act, 1939, empowered the Board of Trade with the consent of the Treasury, to give guarantees in cases where the Board of Trade were satisfied that it was in the national interest that guarantees should be given, although the normal method involving consultation with the Advisory Council is not appropriate. The liability in respect of such guarantees was limited to £10,000,000 and it was provided in Section 5 of the Act that separate returns were to be made of guarantees given under Section 4, so that those transactions could be clearly distinguished from the Department's ordinary commercial business.
My noble friend Lord Sempill—whom am sorry not to see in his place—on the 1st May last introduced a Motion which led to a very interesting debate in this
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House. He impressed upon His Majesty's Government the urgent necessity of offering substantial credit facilities to countries whose independence we had guaranteed, so that we could assist them to remain economically independent while at the same time extending our export trade. These views were generally supported by the noble Lords who spoke in that debate. In reply I said that it had always been in the mind of His Majesty's Government that the amount of £10,000,000 provided in the Act which was passed in February of this year might not be enough, and I assured your Lordships that if the amount was really found to be insufficient, the Government would not hesitate to come to Parliament again with another Bill with the object of increasing that sum. It is permitted to me now to disclose the fact, which I naturally could not make public at that time, that in May last His Majesty's Government had already reached the conclusion that the considerable number of proposals for such guarantees which had been put forward for consideration and the amount involved, would make it necessary to ask Parliament to increase considerably the sum of £10,000,000 referred to. That is the reason for this Bill.
There is no intention of disturbing the provisions of Section I of the Export Guarantees Act, 1939, for the giving of guarantees after consultation with the Advisory Council in respect of ordinary commercial credits, and the present title of the Bill has been chosen with the object of marking the difference between the two classes of guarantees. Owing to the developments of the international situation which have taken place since that Act was passed last February, the Government decided that further steps were required to preserve the commercial and economic relations between the United Kingdom and other friendly nations. It is known that negotiations have been proceeding with several countries for the purchase on credit terms of goods manufactured in the United Kingdom. It is inevitable in present circumstances that a considerable proportion of these goods should be material and equipment for defence purposes. These demands necessitate the immediate increase of the limit I have just mentioned to the sum of £60,000,000 shown in Clause 1 subsection (2) of the Bill. I should like to make it clear at this point that whereas

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the former limit of £10,000,000 included interest charges, the sum of £60,000,000 now proposed excludes interest. This sum has been arrived at after a very full consideration of all the applications for assistance in relation to our available resources, bearing in mind of course our own essential needs in respect of munitions and armaments generally. Provision is made in Clause 2 of the Bill for the publication half-yearly of Returns as to the guarantees which have been given under Clause 1 for exports to various countries.
As regards Part II of the Bill, powers of a new kind are proposed to be given to the Board of Trade to overcome any difficulty that may be found in marketing the guaranteed securities. Up to the present the securities have been moderate in amount and no great difficulty has been experienced in selling them on the open market. Securities of much larger amount will have to be dealt with as a result of this measure, however, and Clauses 3 and 4 of the Bill set out the procedure to be followed which will enable the Board of Trade to purchase the securities with moneys advanced by the Treasury and to hold or to sell them as they may think fit, having regard to the conditions of the market. I beg to move.
Moved, That the Bill be now read 2a.(Lord Templemore.)
12.17 p.m.
LORD STRABOLGI: My Lords, in the last War the Germans established a battery of long-range high-accuracy guns on the Belgian coast among the sand hills and all our war vessels closing within a certain range came under a devastating fire. I see the noble Lord, Lord Man-croft, in his place and when discussing this Bill in face of what we used to call the Hindenburg battery, I must be very careful of my navigation also. With that preliminary, may I be allowed to congratulate the noble Lord, Lord Templemore, on the very concise and condensed way in which he explained this highly important measure. I see that it applies to all or any countries, and on behalf of my noble friends and myself, I should like to say how glad we are to see that New Zealand is still regarded as a country which should receive friendly assistance when in need of it. We had begun to think that the Turks, the Poles,
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the Rumanians and everyone else could come to us for assistance, but that our own kith and kin overseas, if they in any ay incurred the displeasure of certain money barons in the City of London, would be sent away empty-handed. We are very glad that that is not the case, and we do not regret the fact that we are deprived of a most devastating weapon at the next Election which we might have had if the Government had carried out what was apparently the original intention.
I was, however, somewhat alarmed to see to-day certain statements with regard to Poland. I understand that Poland wants assistance partly by way of loan and partly in the form of export credits. The trouble is that Poland wants to be able to buy urgently military equipment which she would have difficulty in obtaining here at once. If the Government are taking what I may call—I hope without offence to the noble Lord—a purely Treasury view of this matter, it may be very mischievous indeed. There is a shortage of equipment in this country for our own Armies. You have not yet got enough uniforms for the young men who are going into camp next month with the Territorials, for the new recruits, and so on. Naturally the Poles are having the greatest difficulty in purchasing for immediate delivery uniforms, boots and so on in this country. Surely it is necessary to strengthen the Polish Army as an ally of ours in resisting tyranny and aggression in the world, and it seems very short-sighted indeed to say that even if they can buy elsewhere with our financial help they should not do so. After all, we have ourselves had to buy munitions from the United States. I hope the noble Lord will not mind saying a word about that, because I think the public are rather disturbed about to-day's news.
I must now say a word with regard to Germany, and particularly to the Anglo-German Trade Agreement, which has a direct bearing on what we are doing now. We are admittedly guaranteeing weak borrowers in friendly countries. The noble Lord, Lord Mancroft, will not I think quarrel with that description. It is necessary to help these weak borrowers because of the really unfair methods which the German Government organisation engaged in forcing German trade is attempting to impose upon these markets.

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This £50,000,000 of additional finance will be largely cancelled out because of the operations of the Agreement which gives Germany preferential rights in buying raw materials with our help. In addition to the free sterling surplus left at Germany's disposal under this Agreement a large part of the amount which Germany is obliged under that Agreement to spend with Great Britain is spent on raw materials for her munition factories.
The result is that, thanks to our generosity, Germany is able to keep abreast of us and our allies in the present armaments race, this deplorable race in armaments which is going on. Were it not for this assistance given to Germany, the comparatively modest amounts of assistance given to friendly nations we are discussing would go a long way towards increasing their resistance against German aggression. In other words, while we are providing the taxpayers' money or putting it behind this obligation because we want to help our allies and friends to strengthen themselves, at the same time we are helping the Germans to keep their lead in the arms race—or at any rate, if it is not a lead in all respects, to keep their place, if I may put it that way. So we are strengthening the aggressor at the same time as we are trying to strengthen the potential victims of the aggressor, and to me that does not make sense.
Let me give an exact example. When the Germans marched into Czecho-Slovakia the military and technical experts who accompanied the German troops immediately took charge of the great Skoda works. Their first question concerned what raw materials were available. They were very disgusted to find that there were hardly any raw materials. Through these operations of the Anglo-German Agreement, they have been able to provide the raw materials to keep the Skoda works—I believe one of the finest munition works in Europe—going at full capacity, and actually 5,000,000 worth of raw materials entering the German munition factories in Czecho-Slovakia represent £50,000,000 worth of military material, which is about the amount of additional credits supplied tinder this Bill for our friends. My Lords, I really do not think this makes sense.
I will, if your Lordships will permit me, before I sit clown, say a word or two about the principles of this Bill, particularly with reference to certain countries in South-Eastern Europe. I also heard
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the speech of Lord sempill last May, and I know he was very disappointed that he had to leave your Lordships' sitting today. I am sure that our late hour of sitting on Friday must impress all observers at home and abroad and show them how serious the situation must be. The weakness of this policy is that it is a one-way policy. I suggest that we should do all we can to help our merchants and manufacturers to sell in certain difficult markets, but we do not do enough to help those markets to sell to us. In the past, when we used to invest in undeveloped markets in South America, for example, the money came back in the form of wheat, meat and other goods. You must buy from them as well as sell to them. One of the fallacies of many present-day politicians—apart from those who sit in your Lordships' House—is that they think we can sell all the time without buying.
In the case of the Balkans, which I should like to quote, you have a very important group of countries with a combined population of about 80,000,000 people and very large natural resources and of great political and strategical importance. I suggest, in the first place, that the Balkans should be treated as a unit. Bulgaria and Yugoslavia are two of the four or five countries to which I refer as being Balkan. Rumania is only geographically in the Balkans, I know, and I do not want to insult my Rumanian friends; they get very angry, I believe, if they are referred to as a Balkan Power; but geographically Rumania, Greece, Bulgaria, Yugoslavia and Turkey are all one. Turkey is so to a lesser extent, of course. I suggest they should be treated as a unit in this matter and that we should not differentiate in any way between the Yugoslavs and the Bulgarians and our other friends in buying their produce. My information, such as it is—and it is not always inaccurate—is that the underlying feeling to-day in Yugoslavia and Bulgaria is wholeheartedly in sympathy with our cause among the mass of the people. Never mind what the Yugoslav and Bulgarian politicians say or do, the mass of the people are with us and we should do all we can to encourage trade with all those Balkan countries.
They should be treated as a unit for that purpose. By organised bulk buying you could possibly do something to get over the difficulties caused by currency restrictions in those countries which have

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so often been explained by Lord Mancroft, and so I will not dilate on them. Otherwise you are simply risking all this money by creating a new mass of debt and giving these people no opportunity of paying it off. The problem, has, if I may say so, to be tackled in a very scientific way nowadays. It cannot be done by haphazard methods because the German rival to us has this advantage, that there is only one authority in Germany which acts as banker, importer, exporter, agricultural adviser, mining technician and marketing expert. That is all under one roof whereas with ourselves we have the Foreign Office, the Board of Trade, the Department of Overseas Trade and the Treasury, sometimes pulling against each other—if the noble Lord will forgive me; he will not admit it but he knows it is true—and then you have not got to the end of it. After that you have to go to the various trade associations and cartels in this country and then to individual manufacturing and purchasing firms, as the case may be, whereas the Germans, both for buying and selling, have the whole thing organised under one roof.
About the political importance of encouraging trade with the Balkans there will be no quarrel. But I also suggest that even when all this trouble is over, as I hope and believe it will blow over, and when we get settled, peaceful conditions again, with the reduction of armaments and so on by agreement, even then that great market in South-Eastern Europe will remain of great importance to our manufacturers and merchants, and I should like to see stable foundations for future trade laid now. If this Bill were properly applied, and if certain other provisions to which I will refer were put into force, such foundations would be provided; but an important factor is missing, and that is some method of buying in bulk in the great markets of Southern Europe.
I suggest that what you need is an organisation which will be the counterpart of the German organisation I have described, but, of course, suited to our conditions. That is, you want a semipublic corporation to deal with the whole of this area and with corresponding British organisations in each separate country. There is talk of an Anglo-Rumanian trade organisation, and I
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believe there is an Anglo-Greek trade organisation. These are no doubt very admirable bodies, but you want a single large trade organisation to deal with the whole area. Such organisation would, I understand, be welcome to the Balkan Governments. You should form this association not to deal with individual manufacturers or merchants in Britain, but to deal with trade associations in this country, with the Chambers of Commerce, the cartels and the trade organisations, so that there is no question of favouritism. You could, of course, form an organisation in which you could have one great manufacturer of electrical machines, another of aeroplanes and another of textiles and so on. I have no doubt they would do very good work, but you want something much bigger and wider than that which can deal with the buying capacity of this country as a whole and not simply be used for extending the sales to these markets.
It is the buying which is going to be the difficulty. I need only detail the tobacco difficulty. I am not convinced that you cannot use a great deal more Turkish and Greek tobacco in this country. You only want a few leaders of the women of this country to let it be known that they are only smoking Greek or Turkish tobacco or a blend of it with American tobacco and then it would become fashionable and everyone would smoke it. I can remember that before the War no gentleman would think of smoking anything but tobacco from Europe. He would never dream of smoking American tobacco. I smoked it but I had no inhibitions of that kind. More important than that are the raw materials and metals available in the Balkans. I know there are dfficulties. We buy much the same things from our own Empire but it is a matter of semi-State supervision and, above all, of the organisation of some semi-official body which can treat the problem as a whole and not just represent the interests of a few powerful separate companies. You want an organisation representing the whole British nation in helping trade with this important part of Europe. I refer particularly to the Balkans because, as I have ventured to suggest before, for some reason or other they have been largely neglected in the past by British merchants and we cannot afford to allow that neglect to go on. The same sort of organisation should also

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apply to other countries in Eastern Europe as well. We on this side of the House realise the necessity for this measure. We think it is a good measure and our only criticism is that this matter should not have been tackled on a larger scale earlier on. We do not wish to do anything to resist the passage of the Bill or delay its becoming law.
12.33 p.m.
LORD MANCROFT: My Lords, I think this Bill is a milestone in the history of Britain and also in the history of European freedom. I am in complete support of the Bill without qualifications. The noble Lord, Lord Strabolgi, will forgive me if I do not follow the line that he took; but I agree in principle for the most part when he said that some effort should be made to induce the tobacco firms and people dealing with metals to come to the assistance of, and take these materials from, Greece and Bulgaria. I agree that such action will assist to make the wheels of friendship between those countries and our country go round more freely. I could not help thinking as this Bill was being moved and explained to us by my noble friend how history repeats itself. Here are we doing the same things as the Athenians were doing 490 years before the Christian era. The Athenians in order to prevent the encirclement and enslavement of Greece by the Persians placed their armed forces and their fleet at the service of the Greek City States. The Athenians, to use words which your Lordships may recall from school days, with their put the power of their finances at the assistance of their allies. The Victory of Salamis followed. Under this Bill Britain with her armed forces is putting the power of her finances also at the assistance of her allies—Greece is still in the picture—so as to prevent the encirclement and enslavement of Europe by Germany.
This Bill has two facets: one of international or foreign policy so far as regards Great Britain, and the other facet is the enlargement of the working of this instrument of export credits in which I have taken some personal interest for the last twenty years. I have noticed that a number of persons, some in another place or on platforms outside this House, whether politicians or not, and certainly politicians on public platforms, have indulged
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in an orgy of masochism—in an orgy of self-abasement—in saying that we are in the wrong, that Great Britain and her allies and friends are in the wrong because they and we drew up the Treaty of Versailles and Peace Treaties and that these Treaties have brought about the present disturbed state of international affairs. I am not going to allow that hold statement to stand. I have watched political proceedings from 1918 and I challenge those who allege that the international troubles of Europe are due mainly to the stupidity or otherwise of those who framed the Treaty of Versailles and the Peace Treaties.
I hold in reserve that those Treaties rested as it were on the pivot of the League of Nations being a living factor to support the Treaties. If the League of Nations had been put into operation with the help of all who started it our troubles would not be those from which we now suffer. But we had and have to take things as we find them. I have no doubt that those who drew up the Treaty of Versailles and the other treaties, out of which we are told our present troubles and this Bill arise, drew them up in the expectation that the League of Nations system would be brought to fruition with the help of the United States of America. That fell through. One of the main supports was destroyed, throwing the whole of the working of the Peace Treaties out of gear.
What would to-day's critics of the Treaties have done at Versailles if they had had historical memories? They must have remembered this: though, not in my lifetime, but nearly so, that France has been twice invaded. M. Clemenceau had to remember that—the blood and tears and suffering of those two invasions. Then let us go back a little further. Would these critics remember how Prussia has in the past disregarded any treaty? It has to be remembered that you were and are confronted with a country which will respect no treaty. It is habitual for the German nation to break its word of honour whenever it suits its purpose. Let us remind the critics of the picture which Macaulay draws of Frederick the Great stealing Silesia from Austria and the disregard of the Pragmatic Sanction.
Do they remember also the action which Germany took in 1864, to steal the Danish duchies; then the action she took

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in 1866 to force Austria into war, in order to consolidate the interests of Prussia? Remember also how at that time Bismarck made use of the words: "I do not believe in conferences or verbal discussions, I believe in Blut und Eisen." He believed in bloodshed and violence. So the Germans do now, as they did also in 1914. Belgium did not invade Germany: Germany invaded Belgium. No "scrap of paper" or honourable undertaking meant anything to Germany. Nothing but force. That had to be taken into account in framing the Peace Treaties.
My noble friend Lord Halifax has said, with that chivalry which is characteristic of him, that he refused to believe ill of any person or any nation, and he gave Herr Hitler credit for honest intentions and was content to believe in the good faith of Germany. The breaking of an honourable undertaking between Herr Hitler, representing the German nation, and our Prime Minister is sufficient to show that those who framed the Treaty of Versailles, from which it is said that this Bill has now become necessary, made their compact with a people whose word of honour is not kept. They do not do as we do—have a row with a man, give him a licking and shake hands and make friends afterwards. You could not treat with Germany on those lines, no matter what peace treaty you made. It is doubtful whether the self-righteous persons who are now blaming us for the Treaty of Versailles would have made a treaty of a very different kind. Even if the Germans had not had Herr Hitler as dictator they would have set up some other Government and they would have broken every treaty they made. And, as one who watched the international peace arrangements after 1918, I will not allow to pass unchallenged the statement that we or our Allies were to blame in making the terms of the Versailles Treaty, so that it has given rise to avoidable trouble with Germany.
Then there is one other thing about which I feel strongly. This Bill is partly for the purpose of showing Germany that we are in grim earnest, and that we do not intend to give water and earth to the Germans, any more than the Athenians would give water and earth to the Persians. We intend to stand by to the full extent of our resources in men
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and money to prevent our friends from being encircled and enslaved by Germany. But in 1934 a mischievous and misleading, and I would almost say a hypocritical action was taken under the League of Nations Union, in organising what was called then the War or Peace Ballot—the words were afterwards altered to Peace Ballot. But
"Oh, wad some power the giftie gie us
To see oursels as others see us!"
How did the Germans regard the Peace Ballot? What did the Germans say when they saw that 11,000,000 people took sympathetic part in that Ballot? Those people who took part in the Ballot have a blameworthy and terrible responsibility to bear. Let them now pause and reflect on the trouble they have brought on the nation. The Germans said: "These people are decadent; they will not fight. What will they do if put to a test or if threatened? Will they resist? Eleven million have voted for peace." And we have now to pass this Bill in order to disperse from their minds the ill effects of that Ballot which was one of the principal causes of the German belief that we were not in earnest in defending our liberty. Then we have the heartfelt flummery of a popular leader like Mr. George Lansbury, and his journeys and visits through Europe, bleating for peace. What did the Germans think of that? What were they likely to think after they had seen 11,000,000 people vote for the Peace Ballot? Then, quite recently, there was a society which attracted many people, Was it called the Peace Pledge Union, at the head of which was the late Canon Sheppard?
All those things have tended to accentuate trouble, to put into the minds of the Germans the feeling that they could attack us and our friends and we should not stand up for the liberties and freedom of Europe. Hence this Bill. This Bill is part of our foreign policy, and we have been put into this position by the actions of the people to whom I have referred rather than by any avoidable mistakes, or lack of foresight, associated with the Versailles Treaty when it was being made.
LORD STRABOLGI: I am so enjoying what the noble Lord says that I hope he will go on with his argument and I hope he will complete it by referring to his friends on his own side who formed the "Heil Hitler" party in this country.
LORD MANCROFT: Is the noble Lord talking about Sir Oswald Moseley?
LORD STRABOLGI: No, I am talking about the noble Lord's friends. As he has mentioned my right honourable friend Mr. Lansbury—though he and I do not always see eye to eye—he should have mentioned the former activities of the noble Marquess, Lord Londonderry, and the present activities of the noble Lord, Lord Brocket, and of Lord Astor and the Astor family. He must not forget that, and I hope he will go on because what he is saying is so valuable.
LORD MANCROFT: I have no knowledge of what they have done, and in any case I do not think I am called upon to defend or attack them.
LORD STRABOLGI: Do not only attack my friends, then.
LORD MANCROFT: Well, I am going to make another further reference—namely, to the dislike by the Socialist majority of the London County Council for the Cadet Corps. When I was Financial Secretary to the Treasury I used frequently, to hear opposition by the Labour Party to the Government whenever we wanted to increase our defence forces. They opposed Singapore. Time after time in the lobby they opposed Supply for the Defence Services. These are the people who have brought the trouble on us caused by unpreparedness. When they come and tell us that we are guilty of having brought the international position to what it is now because we made the Peace Treaties, I think that those who live in glass houses should not throw stones.
Now let me deal with the export credits system, which is the other facet of this legislation. My noble friend has been kind enough to hint that I have had personal and long experience of the inner working of the export credits scheme. I feel great respect for the way in which the Advisory Committee and the officials of the Export Credits Department have made so useful an instrument of commerce as they have done out of this scheme. Let me say I am totally against anything of the nature of a State Investment Board. People who talk about a State Investment Board, if I may say so, really do not know what they are talking about. How can anyone—how could my
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brother if I had one—control or prevent me from investing my money where I wished? Suppose I wished to develop a tea garden in Assam, or a coffee plantation in Brazil, or set up an electric light works in the kingdom of Ruritania? You cannot control private investments by a State Investment Board. But for political reasons, as in a case like this, I think a Bill and control are necessary, because this is a matter which is quite different from private investment; it is for national purposes and losses, if any, should fall on the community and not on the private investor or his savings.
This Bill has been drafted as an instrument for loan making. It will act as a corrective and be as great a step forward in improving the methods of credit as the step forward in 1877 was when Walter Bagehot invented Treasury bills. I see a startling step forward in the use of export credits for overseas general lending implicit in the operations permitted by this Bill. I know there has been and there is an embargo upon the issue of foreign loans. But our past method and even our existing method of lending overseas is defective. I gave some figures during a recent debate in which the noble Lord, Lord Addison, took part, and showed that we had lent various sums to various countries, quite wrongly, quite undiscriminatingly, quite unjustifiably, and those who borrowed had no justification for asking for those loans. Take Brazil. We have sunk £160,000,000 in Brazil. Much of it was never justifiable because much of it was borrowed to pay interest on earlier loans. £152, 000,000 of that £160,000,000 does not pay the British investor one single farthing of income. I am not a shareholder in the Leopoldina Railway, but I recently saw the report. That is one of the Brazilian investments. There is probably £10,000,000 of the capital we found for that railway not paying us a penny. It ought never to have been lent. But it is easy to raise money here on account of the underwriting system and the flotation houses. They get their underwriting and their overwriting and their rake-off of one sort or another, and thus arrange for the public to lend their savings when an underwritten loan is advertised for public subscription. The public parts with its savings and holds the paper whether it turns out to be valuable or valueless.

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Had that Leopoldina money been lent to a concern in this country, it might have been spent and lost here at home by the people who subscribed it; for example, it might have been lost or given to the Secretary of State for Scotland to provide better roads for tourist traffic, for putting up more hotels for Scottish holiday traffic, or even for putting up a new ferry at Ballachulish—at any rate, if the general body of the population had subscribed and lost that money to Scotland or to any other part of the United Kingdom we should have had the resulting assets here although they returned the subscribers nothing; whereas money lent to the Leopoldina Railway, which I quoted just now as an example, is not only lost but is giving benefits to Brazil and not to ourselves. I quote that instance to show, as I shall proceed to show, how I think the Government, by the export credit system, can prevent waste of our savings in the future.
I do not know whether it is known to noble Lords what we have lost in overseas investments during the last 70 years—money which could have been saved in some degree had the borrowing and lending been done through the export credit system. Under that system the loans would have had to be justified, the amounts and uses would have had to be justified, the bills for the borrowing and the lending would have been for shortish dates; they would not have been irredeemable loans but would have had to be liquidated at fixed periods over a certain number of years. It was my duty to address the Incorporated Society of Accountants at Leeds in 1929, and on that occasion I made a calculation of our overseas loans in the sixty years from 1869 which I shall revise a little now in order to make this statement more up to date. For a number of years, as may be seen from the Board of Trade returns of overseas transactions which are published every March, we have lent abroad on an average, to bring us interest as shown by the Board of Trade, something like a total of £150,000,000 per annum. In seventy years to 1939 that would mean something like £10,000,000,000 which we have lent abroad. I have always said there should be a team of young economists set to find out what the figures actually are; as this is a hit-or-miss calculation as to what we
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have lent abroad in these seventy years, I put it at no less than £10,000,000,000.
I believe we had before the War a known amount of surviving investments. During the War we had to get rid of some of these investments to pay for some of our American purchases, but I believe that after the War we replaced some of these investments by further investments, so that we have now something like £4,000,000,000 invested overseas. That figure has been brought up to date by Sir Robert Kindersley. If we have to-day between £4,000,000,000 and £5,000,000,000 of surviving investments overseas, what has become of the balance? The difference between £4,000,000,000 or £5,000,000,000 surviving investments to-day and £10,000,000,000 or more lent overseas during the last seventy years is very great. There is a gap, even taking into account the repayments, and in my opinion the balance in that gap has been utterly lost. It looks as if not less than £2,000,000,000 or £3,000,000,000, probably more, has been lost by our undiscriminating way of lending abroad by public flotations on the market.
We are told we must lend overseas to keep up our exports. Be it so, but it is not good business for a manufacturer to lend money to enable a customer to pay for goods if the customer gives paper which later on he does not honour. That is only giving him your goods for nothing. That is what our overseas lending has been doing. It is no good to lend money abroad if people pay for our goods with their paper securities, and then after we have held the paper for a few years we discover that this paper is valueless. The British people have not benefited from transactions of that kind, they have lost by our market methods of floating loans to foreigners. The people who have benefited are the issuing houses who, once they have placed one loan, proceed on the principle of "Next gentleman, please." They have done their work, they have got their flotation and "ground floor" profits, and they allow the investor—for it is the investor and not the banks who hold these loans—to hold paper which events now prove to be valueless.
Under this Bill, however, a foreign Government requiring help for national purposes such as we are seeing here, comes along. It does not float its loan on the

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market, but has to go through the Export Credits Department and there you have some check as to what the borrowers do with the money. Before the accommodation is given, the proposal has to pass through an alembic of tests in various Departments and to be approved by the skilled brains which look after our public money. In that way we discover to what uses the money is to be put. Although I am not criticising what the noble Lord, Lord Strabolgi, has said about Poland, it is better that the loan should go through the export credit tests so that we may see what is to be done with the money. One must not forget this, that when America was forcing money on borrowers through its issuing houses in Wall Street in 1929, the world had a shock when it heard how the loans which were forced on Peru and other South American borrowers—the bonds issued by forced salesmanship in America—never reached the purposes for which they were intended. The bonds were issued in the United States, but nobody knew where the money went till afterwards, and there was much indignation. The noble Lord, Lord Strabolgi, is not quite right in demurring to the method now being pursued by His Majesty's Government with regard to the Polish loan. It is for their own benefit as well as for ours that the money should be lent for a specific purpose and expended in the most economical way. I am putting that aspect of the matter in euphemistic terms.
Some of our money lost in foreign lending has been lost because of the very stupid cry raised by the Labour Party, "Oh, the bondholders—the bondholders must not be protected." The Labour Party forgets that if you lend abroad and do not protect the people who lend the money by seeing that they get what belongs to them, people will not lend again. Overseas lending brings employment if the borrower is honest. It is all-important to make the lender feel his confidence has not been misplaced; he will then lend his savings to create exports. His Majesty's Government should have come along and taken steps with Brazil and Chile to see that wanton dishonesty is not practised on the English savings. I do not like to make that charge about Chile, but certainly Brazil has behaved very badly. By protecting the bondholder the Government are protecting labour also. Because if the bondholder
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knows his savings will be looked after by the Government he will lend again, and so there will be more employment for exports.
Then we are told we ought to lend abroad because we must have a reserve war chest, that we must put money abroad, whether we lose it or not, because we must have a reserve to draw on in time of war as we had in the last War, when bonds expressed in terms other than sterling, and of good value, were acceptable to the American people as dollar currency in payment for the goods we bought in America. But you cannot buy American goods if the investment paper in foreign currencies which you have in your hands now has become valueless by default. For that reason, again, I say the export credit system would allow instruments of credit to be produced which will certainly have a greater value than have the foreign bonds which were issued in the ordinary way through the issuing market.
I am glad to see that New Zealand has come into this system. It would have been better if New Zealand had borrowed what she wanted in past years through the export credit system rather than through the open market. What she has now done is a great change for the better. The export credit system will act as a check upon the dangerously easy, seductive means for borrowing which Australia and New Zealand have in the past had at their disposal. It has allowed them to overborrow; it has allowed them to obtain loans here which were originally never justified. They went to their representatives here who sent round underwriting documents and got the loans underwritten without the slightest trouble; and many, I think, have never paid for their keep. Some Australian loans, and I believe also some New Zealand loans but I am not certain about that, have never paid for their keep, and have merely been raised for the purpose of paying interest on loans raised at an earlier date. Bad finance! Bad housekeeping! I do not approve of countenancing these borrowing facilities by the issuing houses; they are not in the interests either of the borrowers or of the lenders.
We brought in an Act in 1927—the Moneylenders Act—and I will refer In Clause 5 of that Act. Young men were accustomed to go to moneylenders and

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say they wanted to have a good time and ask to borrow a sum of money. They signed a bill stating when they would pay back; when the time arrived they could not, so another bill for interest was signed, and eventually they got into trouble. They borrowed to have a better time than was justified by their earnings, they failed to repay or even to find the interest on the first loan; so they renewed the loan and gave a further obligation to meet their default of interest. The same sort of thing has occurred in some way in the case of Australia, and now we see the trouble into which New Zealand has got with her loan due for repayment. They have been in the habit of saying "We must raise the standard of living in the country." And on borrowed money. They do not see that this is not justified by what they produce. They wish to have the good time that the young man hoped to have when he signed the first bill for getting money from moneylenders. Then there came along an Act in 1927 which, under Section 5, said in effect: "You shall not do that any more." Public opinion now prevents it; it prevents the young man from ruining himself by over-borrowing in order to have a good time, and I think that the same spirit should be put into operation when the Australian or New Zealand Government or any foreign Government which wishes to borrow here comes to do so for purposes which we do not think are justified. Let us insist upon their needs being handled by the export credits scheme in future.
I am glad that this Bill extends the idea of export credit. I think it will in many cases be made to supersede the public flotation over-borrowing system of the issuing houses by underwriting loans to any creditworthy person who comes along. For then, if the loan is not taken up by the public the underwriters nurse overborrowed loans, whether they are partly justifiable or not, until they can unload them upon the permanent investor. I think this Bill will act as a potent check against over-borrowing. So far as foreign policy is concerned I support the Bill. I am glad to see it. In view of the thousands of millions of pounds that have been lost by our undiscriminating and haphazard method of granting loans to overseas borrowers in the past I welcome this
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Bill, because we have now extended and improved the method by which we can challenge and prevent easy over-borrowing and thus protect the borrower as well as the investor and make our investments abroad remunerative instead of being losses.
1.6 p.m.
LORD BARNBY: My Lords, I am sure we are grateful to the noble Lord who introduced this Bill for the trouble he took to give an exposition of the reasons for it. His speech supplemented the very clear explanation that was given in another place by the Minister for Overseas Trade who, by his own personal perambulations recently, was convinced of its necessity. He was able to give a brilliant representation of the need there is for action along the lines now proposed. In introducing this Bill in another place he emphasized that it is only in Part II where the really fundamental change is introduced as compared with the Act to the passage of which your Lordships agreed earlier in the present year. I am sure we are very grateful for the useful historical review which my noble friend who has just sat down has given us. He adds to an intimate practical knowledge, as a Minister, of the working of a Bill, that wide business experience which he is able to introduce into these matters. It must indeed be helpful to those who study the underlying reasons for this new technique that there should be interposed a review of the general political considerations which require some change of practice. I propose at this hour to confine myself as briefly as I can to the particular points which justify my intervening in this debate. I took part in the debate in this House earlier this year, and have taken a great interest in this subject since the original Committee of the other House was set up. I have tried to follow the work of that Committee some of which is envisaged in this Bill.
There are two points particularly to which I want to draw attention. The present Bill, in Clause 1, gives powers to the Board of Trade as wide as anybody could wish. It is in that respect that I wish to associate myself with the complete endorsement of the Bill that I was very glad to hear given by the noble Lord, Lord Strabolgi, on behalf of himself and his Party. The point to which I wanted particularly to draw attention

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is that the Bill seems to offer the possibility of a 100 per cent. assumption of liability by the Department as compared with 75 per cent. previously. The powers which are now given seem to cover anything that could be said to be justifiable, but since the Act which was passed early in the year came into force there seems some doubt as to the extent to which under Section 4 of that Act advances have been made which would facilitate trade over and above the provision of credits given for political reasons to other countries. It seems, therefore, that there is need under this Bill for developing the method whereby the internal credit hazard should be reduced to the smallest dimensions. That, of course, is a political question, and it is put forward because the understanding is that the advances made under this Bill to so-called friendly countries are tied to the new political policy of guarantees by this country. It therefore presumably removes the hazard.
I particularly hope that in the administration of this Bill attention will be given to the possibility of following as far as practicable the ordinary methods and channels of trade. And at this stage I would like to say that one is fully conversant with the skill and prudence of the civil servants who will be in charge of the execution of this scheme. Their practice in regard to the execution of what is essentially commercial business gives the lie to the allegation that any Government activity cannot be efficiently administered. I wish to bring into relief also the point that this is the application of the principle of collective responsibility to that field of industry which is engaged in export trade. Abnormal world conditions evoke abnormal needs. The protection of the sterling exchange is the ground on which are justified the new principles which are being followed under the Bill. Surely that justifies a very wide view being taken as to its application. Vast expenditure is at present being incurred in trying to ensure against war. Finance is dominant in our weapons, and therefore it is essential that we should protect the sterling exchange. I would point out, however, that while the sums advanced may be very large, if they are confined in the main to financing Empire raw materials married to the products of labour in this country, it does not involve a strain on
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the exchange anything like comparable to what might occur if they were foreign goods.
The prosecution of a war envisages vast unassessable liabilities. Surely it is not unreasonable to assume similar large liabilities in the attempt to preserve peace. That is the first point I wish to raise in regard to the aims of the Bill. The other point that I wish to raise is a caveat as to the distribution of the credits and the supply of goods under the credits. The noble Lord, Lord Strabolgi, gave an instance of a particular country, and suggested that there was some restlessness as to whether supply as quickly as possible was being given where it would be reasonable to assume that the productive capacity of this country was adequate in the particular materials that were indented for under the global credits granted to friendly nations under this practice. It is understood that latterly some progress has been made, but until very recently there has been a definite feeling that, as we found in the last War, new methods demanded that committees be set up to provide contact between different Government Departments so that the intention of the Government should be carried out with the least possible delay. It is because of the danger of delay in advance of this machinery being properly established that one suggests that any unnecessary delay should be avoided.
The noble Lord, Lord Strabolgi, pointed out the value of publicity with regard to the support given to friendly nations under this Bill and the discouragement of unfriendly critics. Unfriendly criticism, that the intention of the country is not serious in giving real support to friendly nations, can be most quickly demolished if the amounts given are adequate to convince our friends and discomfort our critics, and the machinery provided should be such as to bring into effect the intention as quickly as possible, because the strengthening of these friendly countries is an imperative need and the weakness of any link is the degree of strength of any chain. I want to support in every manner the intention of this Bill, but I would repeat that I hope the noble Lord in charge of the Bill will bear in mind that the normal machinery of commerce, in so far as possible, should be employed, and that in the extension of the method of Government guarantees

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there should be as far as possible an avoidance of new methods of trade.
1.20 p.m.
LORD TEMPLEMORE: My Lords, we have had three very interesting speeches, all, I am glad to say, supporting this Bill. To take first the speech of my noble friend behind me, Lord Mancroft: he did indeed give us a very interesting dissertation, in the course of which he ranged from Frederick the Great to the Moneylenders Act, 1927, and he gave us a lot of very interesting and useful matter. I am glad to hear that he is, as I expected, very much in favour of the Bill. Support from him is, I know, really worth having, because, as I think he informed the House—at any rate as he told me some little time ago—he was responsible for the first of these Acts which ever came into force in this country when he was Financial Secretary to the Treasury in another place.
LORD MANCROFT: No; I was on the Advisory Committee about 1921, and later had to operate the Act for three years when I was Minister of Overseas Trade.
LORD TEMPLEMORE: I beg the noble Lord's pardon; I misunderstood him. Anyhow, I am very much obliged for his support. The noble Lord opposite, Lord Strabolgi, was most anxious about two special questions. The first was the negotiations with Poland. Of course, I saw in the paper as well as he did this morning—I have no other information—that there were certain difficulties in the way of the loan to Poland, but I have to inform him that His Majesty's Government are, of course, most anxious to do everything in their power to give effective help to Poland by strengthening its finances. Naturally we should do so, because we have guaranteed its independence. The noble Lord will, however, appreciate—and indeed in the course of his remarks he showed me that he did appreciate—that there are limits to what we can do at any particular moment, having regard to the requirements of our own forces. The noble Lord will appreciate the difficulties of our providing very large credits for Poland to enable that country to make purchases in other countries. But these matters are fully appreciated by the Government and are under
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active discussion with the Polish delegates at the present time. I am afraid it would not be desirable to go into details, but I can assure the noble Lord that everything that can be done, having regard to the other demands upon us, will be done in this matter.
The noble Lord was also anxious about trade with the Balkans. Here I have to say that the importance of increasing our consumption of produce exported from the Balkan countries is very fully realised. I also have to point out to the noble Lord, however, that there is not in this country the measure of control over the type and quantity of goods available for popular consumption that countries with another form of government can freely apply. I thought the noble Lord showed in his speech that he appreciated that: he said what an advantage a totalitarian country such as Germany, for instance, has over us in that all its administrative departments are, so to speak, under one roof, if not under one hat. Therefore, of course, they have a great advantage; but, as the noble Lord also said, here it is a question of balancing the conflicting interests of different suppliers, and His Majesty's Government have very fully in mind the claims which Balkan countries have to our assistance in this respect. I also take note of the very important suggestion which he made, that we should not differentiate between the five Balkan countries, Rumania, Yugoslavia, Bulgaria, Greece and Turkey. I was also very pleased to hear—I have been a little doubtful myself, but I dare say the noble Lord has better information than I have; it is extremely probable—that the feeling in Yugoslavia and Bulgaria is really inclining to this country. That is very good hearing.
My noble friend Lord Barnby, in the course of his interesting speech, paid, I am glad to say, a very well-deserved tribute to the civil servants who work this Department. On all sides it is admitted, I think, that the Department is one of the best-run in the Government to-day. He rather qualified that tribute, however—at least I thought he did—by the remarks that he went on to make. He said he thought there was inclined to be danger of delay in granting credits.
LORD BARNBY: I should like to explain those words. I referred not specially to the Export Credits Department,

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but to the difficulty at the present moment of getting co-ordination between the Export Credits Department, the Department of Overseas Trade, the Board of Trade, the Army Trades Department, the Ministry of Supply and the new Committee of co-ordination between all the Departments. The point I wanted to make to the noble Lord in charge of the Bill is that there is at the present moment a very considerable delay in getting execution of orders within the capacity of this country to provide the material, with due regard to the requirements of this country and without causing disappointment and even suspicion in the minds of those in this country in charge of the interests of friendly nations whom it is the intention of this Bill to help.
LORD TEMPLEMORE: I am obliged to my noble friend; I had not quite taken
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his point. I quite understand what he means, and that shows the advantage of this House and the great advantage of having a debate such as we have had to-day. I can assure him that this debate, which will of course be reported, will be read by my right honourable friend the Minister for Overseas Trade and by other members of His Majesty's Government, and that everything will be done to obviate the delays that he says are taking place or that he fears may take place in the future. I think I have answered the questions I was asked, and that the House is now ready to come to a decision.
On Question, Bill read 2a, and committed to a Committee of the Whole House.
House adjourned at twenty-seven minutes past one o'Clock.