Lords Sitting of 28 March 1939

Preamble
The House met at a quarter past four of the clock, The LORD CHANCELLOR on the Woolsack.
MUMBLES PIER BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.

DRAFT UNEMPLOYMENT INSUR- ANCE (INCREASE OF BENEFITS AND REDUCTION IN CONTRIBU- TIONS) (AGRICULTURE) ORDER, 1939.
LORD TEMPLEMORE: My Lords, on behalf of my noble friend Lord Birkenhead, I beg to move that this Order be agreed to.
Moved, That the Draft Order, as reported from the Special Orders Committee on Wednesday last, be approved.—(Lord Templemore.)
LORD RANKEILLOUR: My Lords, I understood that there would be some little discussion or statement on this Motion. Is that not so?
LORD TEMPLEMORE: This is not the one.
LORD RANKEILLOUR: I beg your pardon.
On Question, Motion agreed to.

PREVENTION OF FRAUD (INVESTMENTS) BILL.
Order of the Day for receiving the Report of Amendments read.
LORD TEMPLEMORE: My Lords, I beg to move that this Report be now received.
Moved, That the Report of Amendments be now received.—(Lord Templemore.)
LORD MANCROFT: My Lords, I ask permission to make a correction, in order that there may be no chance of my doing an injustice to anyone connected with the managers, or trustees, of any unit trust.
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I am informed by a correspondent that, when I was speaking at the Committee stage of Clause 16 of this Bill, and after I had quoted page 27 of the Unit Trust Survey of the Economist of April, 1937, I ought also to have quoted the following words, which appear earlier, on page 17 of that same survey:
"Sub-unit holders participate in profits, after payment of manager's expenses. Instalment-purchase facilities available."
May I ask your Lordships to allow me now to add those words as applicable to my remarks of March 14; and to say that I certainly did not intend to infer that there was any impropriety on the part of my correspondent or of the trustee company in which he is interested?
On Question, Motion agreed to, and Amendments reported accordingly.
Clause 2:
Saving for certain transactions.
(2) For the purpose of determining whether or not a person has contravened any of the restrictions imposed by Section one of this Act, no account shall be taken of his having done any of the following things (whether as a principal or as an agent), that is to say,—
(b) issuing any document which, by virtue of the Companies Act, 1929, must conform to the requirements of Section thirty-five or Section three hundred and fifty-five of that Act with respect to the contents of prospectuses, or which contains the matter which, by virtue of subsection (I) of either of the said sections, it would have to contain if it were a prospectus to which that subsection applies,
or of his having, as a principal, acquired, subscribed for or underwritten securities or effected transactions with a person whose business involves the acquisition and disposal, or the holding, of securities (whether as a principal or as an agent).
LORD TEMPLEMORE LORD TEMPLEMORE had given Notice of Amendments in subsection (I)—namely, to leave out "and" at the end of paragraph (a), and to leave out paragraph (b) and insert:
"(b) issuing any prospectus to which Section thirty-five or Section three hundred and fifty-four of the Companies Act, 1929, applies,
(c) issuing any document relating to securities of a corporation incorporated in Great Britain which is not a registered company, being a document which—

(i) would, if the corporation were a registered company, be a prospectus to which Section thirty-five of the Companies Act, 1929, applies, and

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(ii) contains all the matters which, by virtue of Section three hundred and fifty-four of the said Act, it would have to contain if the corporation were a company incorporated outside Great Britain and the document were a prospectus issued by that company, and

(d) issuing any form of application for shares in, or debentures of, a corporation together with—

(i) a prospectus which complies with the requirements of Section thirty-five or Part XII of the Companies Act, 1929, or

(ii) in the case of a corporation incorporated in Great Britain which is not a registered company, a document containing all the matters mentioned in sub-paragraph (ii) of paragraph (c) of this subsection."

The noble Lord said: My Lords, the first two Amendments are in the main drafting Amendments. I can explain them if your Lordships wish, but they are drafting, in order to make the Bill clearer. I beg to move the first two Amendments.
Amendments moved—
Page 3, line 11, leave out ("and").
Page 3, line 12, leave out paragraph (b) and insert the said new paragraphs.—(Lord Templemore.)
On Question, Amendments agreed to.
Clause 8 [Information to be furnished to Board of Trade by holders of licences]:
LORD TEMPLEMORE: My Lords, the Amendments to this clause are drafting and I beg to move.
Amendments moved—
Page 10, line 12, at end insert ("in writing to the Board of Trade")
Page 10, line 13, leave out ("nationality")
Page 10, leave out from ("person") to end of line 14 and insert ("and also his nationality or the fact that he has no nationality").—(Lord Templemore.)
On question, Amendments agreed to.
Clause 9 [Publication of names of holders of principals' licences]:
LORD TEMPLEMORE: My Lords, these two Amendments are also virtually drafting Amendments. As some holders of licences may be corporations, it would seem desirable, in order to bring them so far as possible into line with individuals, to require them to state the country under the law of which they are incorporated. I beg to move.
Amendments moved—
Page 10, line 25, leave out ("nationalities")
Page 10, line 26, after ("force") insert ("and also—
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(a) in relation to any holder of a principal's licence who is not a corporation, his nationality or the fact that he has no nationality, or

(b) in relation to any holder of a principal's licence who is a corporation, the country under the law of which the corporation is incorporated").—(Lord Templemore.)

On Question, Amendments agreed to.
Clause 13:
Restriction on distribution of circulars relating to investments.
(2) The preceding subsection shall not apply—

(a) in relation to any document which—

(i) by virtue of the Companies Act, 1929, must conform to the requirements of Section thirty-five or Section three hundred and fifty-five of that Act with respect to the contents of prospectuses, or

(ii) contains the matter which, by virtue of subsection (1) of either of the said sections, it would have to contain if it were a prospectus to which that subsection applies, or

(iii) is a document to which subsection (3) of the said Section thirty-five does not apply by virtue of the proviso to that subsection, or

(b) in relation to any document the issue or publication of which is required or authorised by any Act other than this Act or by any enactment of the Parliament of Northern Ireland.

THE LORD CHANCELLOR (LORD MAUGHAM)THE LORD CHANCELLOR (LORD MAUGHAM) moved, in subsection (2), to leave out paragraph (a) and insert:

"(a) in relation to any distribution of a prospectus to which Section thirty-five or Section three hundred and fifty-four of the Companies Act, 1929, applies, or in relation to any distribution of a document relating to securities of a corporation incorporated in Great Britain which is not a registered company, being a document which—

(i) would if the corporation were a registered company, be a prospectus to which the said Section thirty-five applies, and

(ii) contains all the matters which, by virtue of the said Section three hundred and fifty-four, it would have to contain if the corporation were a company incorporated outside Great Britain and the document were a prospectus issued by that company, or

(b) in relation to any issue of a form of application for shares in, or debentures of, a corporation, together with—

(i) a prospectus which complies with the requirements of Section thirty-five or Part XII of the Companies Act, 1929, or

(ii) in the case of a corporation incorporated in Great Britain which is not a registered company, a document containing all the matters mentioned in sub-paragraph (ii) of paragraph (a) of this subsection,

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or in connection with a bona-fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures, or."

The noble and learned Lord said: My Lords, these Amendments to Clause 13 are in fact nothing but drafting Amendments, but it was thought—one of your Lordships suggested this to the House—that the existing Clause 13 was not in some respects sufficient to prevent a perfectly honest transaction from being subject to the restrictions imposed by the clause. Accordingly, it has been thought better to express in substantial detail, what are the transactions which are prohibited and those which are not prohibited by Clause 13. There is one matter which is not completely permitted under subsection (2) and that is the publication or the distribution of documents referring to underwriting, and we accordingly refer to that at the end of the first Amendment. The new clause, as printed, does permit that to be done in the ordinary way. It is simply a matter of putting the clause in a more intelligible form. I beg to move.
Amendment moved—
Page 17, line 22, leave out paragraph (a) and insert the said new paragraphs (a) and (b).—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is drafting.
Amendment moved—
Page 17, line 37, leave out ("document the issue or publication of") and insert ("any distribution of documents").—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD TEMPLEMORE: My Lords, the two next Amendments are purely drafting.
Amendments moved—
Page 17, line 38, after ("by") insert ("or under")
Page 17, line 39, after ("by") insert ("or under").—(Lord Templemore.)
On Question, Amendments agreed to.
LORD TEMPLEMORE LORD TEMPLEMORE moved, in subsection (2), at the end of paragraph (b), to insert "and shall not apply in relation to any distribution of documents which is permitted by the Board of Trade." The noble Lord said: My Lords, Lord Wardington, in the debate
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on the Committee stage of the Bill, pointed out that there was a risk that exemptions from the circularisation provisions, which are contained in subsections (2) and (3) of Clause 13, might be found not comprehensive enough to secure that legitimate business would not be hampered in the future. The object of this Amendment is to meet the possible difficulty which he mentioned, by providing that the Board of Trade may, in their discretion, free from the circularisation restrictions documents not at present excluded which it is in the interest of legitimate business to exclude.
Amendment moved—
Page 17, line 41, at end insert the said words.—(Lord Templemore.)
On Question, Amendment agreed to.
Clause 14:
Stock exchanges and associations of dealers in securities.
(3) It shall be the duty of every recognised stock exchange or recognised association of dealers in securities to furnish to the Board of Trade, so often as may be prescribed (which shall be not less often than once a year) a list showing with respect to each person who, at the date on which the list is furnished, is a member of the stock exchange or of the association, as the case may be, his name and business address and the style under which he carries on business; and as soon as may be after receiving any list furnished to them under this subsection the Board shall cause the list to be published in such manner as they think proper.
LORD TEMPLEMORE LORD TEMPLEMORE moved, in subsection (3), after "business," where that word occurs for the second time, to insert "and, if the member is a corporation, the name of each of the directors thereof." The noble Lord said: My Lords, as members of a recognised association may be limited companies and there is a possibility of rules of stock exchanges being altered so as to permit unlimited companies to be members, it is desirable that the particulars to be furnished by such stock exchanges and associations should include names of directors. The names of the directors would be included in the lists which are to be published by the Board of Trade.
Amendment moved—
Page 21, line 28, after ("business") insert ("and, if the member is a corporation, the

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name of each of the directors thereof").(Lord Templemore.)
On Question, Amendment agreed to.
Clause 16:
Trustees of unit trusts.
16.—(I) The Board of Trade may by order declare to be an authorised unit trust scheme for the purposes of this Act any unit trust scheme in relation to which the Board are satisfied that the following conditions are fulfilled, that is to say:—
(b) that the scheme is such as to secure that all property subject to any trust created in pursuance of the scheme is vested in the trustee under a deed providing, to the satisfaction of the Board, for the matters specified in the Schedule to this Act, and
THE LORD CHANCELLOR: The next is a purely drafting Amendment.
Amendment moved—
Page 24, line 24, leave out from ("that") to ("a") in line 27, and insert ("any trust created in pursuance of the scheme is expressed in").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to add to subsection (1):
"Provided that, if with respect: to any trust the Board of Trade are satisfied that, by reason of the special circumstances of i he trust, the fulfilment in relation thereto of the condition specified in paragraph (b) of this subsection is impracticable, the Board may dispense with the fulfilment of that condition in relation to that trust so far as it appears to them that they can properly do so without prejudicing the interests of the beneficiaries."
The noble and learned Lord said: My Lords, in certain unit trust schemes, the provisions of the trust deed allow the trustee to register the underlying securities of the trust in the names of companies which are wholly owned by the trustee and are under his control. This is done for convenience of working. Your Lordships will be aware, that there are banks, for instance, which hold their trust securities in the name of some company which is a separate company, but a holding company wholly controlled by the banks in question. I think the majority of the great banks follow that system. If that is the case, and there is a trustee who happens to be in that position, the provisions of the Bill as it stands could not very easily be carried out; and accordingly it is thought proper to insert a provision under which, if the Board of Trade are satisfied that
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"by reason of the special circumstances of the trust, the fulfilment in relation thereto of the condition specified in paragraph (b) of this subsection is impracticable, the Board may dispense with the fulfilment of that condition in relation to that trust so far as it appears to them that they can properly do so without prejudicing the interests of the beneficiaries."
Amendment moved—
Page 25, line 3, at end insert the said proviso.—(The Lord Chancellor.)
On Question, Amendment agreed to.
LORD RANKEILLOUR LORD RANKEILLOUR moved, after Clause 16, to insert the following new clause:
"17. The provisions of Section six of this Act with regard to appeals against refusal or revocation of licences shall apply in like manner to revocations of orders of exemption."
The noble Lord said: My Lords, this is not the same Amendment as I moved and withdrew in Committee. On that occasion I moved that there should be an appeal against both refusals—namely, refusals of orders of exemption and of revocation of them, and in exactly the same way as is provided in the Bill with regard to licences. It has, however, been put to me that the positions are different with regard to licences and orders of exemption. Anyone who complies with what will be the statutory provisions of the earlier clauses of this Bill should obtain a licence as of right, and therefore if it is refused him on what he thinks insufficient ground, it is natural that there should be an appeal. But in the case of a refusal of an order of exemption, the matter is entirely, and is intended to be, in the discretion of the Board of Trade, and the refusal of an order of exemption would not prejudice the person or body applying.
That I quite admit as to the refusal in the first instance. But it is quite another matter when you come to the revocation. If a person or body has been doing business honestly under an order of exemption and it is withdrawn from him, his business must necessarily suffer. It is no use telling him he can go back and apply for a licence. The effect will be in practice that some delay will ensue and presumably he may not get his licence for some time. There may be a considerable interval between revocation of the order and the time when he can apply, and perhaps appeal, and finally get his licence. So I do submit that there may in certain cases, though perhaps not in

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many, be a possibility of injustice which the provision of an appeal would remove.
Amendment moved—
Page 25, line 44, at end insert the said new clause.—(Lord Rankeillour.)
THE LORD CHANCELLOR: My Lords, on behalf of the Government I will say at once I am unable to agree to this provision. I hope the noble Lord will tell me if I am right in thinking that the Amendment relates solely to cases under Clause 15, where the Board of Trade may by order declare any person to be an exempted dealer for the purposes of the Act, and where, under subsection (3) of that clause, the Board of Trade, with respect to any exempted dealer, consider that the order declaring him to be an exempted dealer ought to be revoked on one of two grounds. Is it to that that the Amendment is directed?
LORD RANKEILLOUR: It would also apply, if I may say so, to Clause 16 (2).
THE LORD CHANCELLOR: May I suggest to the noble Lord that it does not really apply to that, certainly not in terms, because there is no question of an exempted dealer. The present Amendment only applies as regards revocations of orders of exemption. The only revocation I am aware of in this Bill is under Clause 15 (1). At any rate, if the noble Lord will allow me, I am only going to deal with Clause 15 (1), and if he desires to suggest an Amendment to Clause 16 I am inclined to suggest to him it would be right to do that at the last stage of this Bill. Frankly I do not think the present Amendment covers Clause 16 at all. So far as concerns Clause 15, I recognise that there is some weight in what the noble Lord said, but I want your Lordships to understand the grounds on which I am unable to accept the Amendment.
Under Clause 15 the Board of Trade are given a discretion, which they need not exercise, to declare persons to be exempted dealers for the purposes of the Bill subject to certain conditions being fulfilled so long as the order is in force. Then it defines the sort of person to whom the order of exemption may be made to apply, and your Lordships will of course understand that if a person gets an order of exemption he then is free to deal
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in securities to the extent of the order and is not bound by any other provision of the Bill unless he invites the public fraudulently to invest money, in which case he is dealt with by Clause 12. This is to be noted, because unless the conditions exist the Board of Trade cannot give exemption. The main business of the person must consist of either carrying on some business other than the business of dealing in securities—the most obvious example of that is a bank—or, secondly, dealing in securities in one or more of the ways mentioned in the next following paragraph. The next following paragraph is paragraph (b) which says:
"The greater part of any business of dealing in securities done by him in Great Britain otherwise than in one of the ways referred to in sub-paragraph (ii) of paragraph (a) of this subsection must be effected with, or through the agency of …"
people of a particular class, such as a member of a recognised stock exchange, a recognised association of dealers in securities, the Bank of England, a statutory corporation, a municipal corporation, an exempted dealer, a person acting in the capacity of manager or trustee under an authorised unit trust scheme, a person acting on behalf of these persons, or a person who is the holder of a licence under the Act.
These persons may be exempted, as I have said, at the discretion of the Board of Trade. Supposing it is found that one of two things happen. Either these conditions, which I agree are quite stringent, subject to which the order has been made, have not been fulfilled or—this is another ground—the circumstances relevant to the making of the order have materially changed since the order was made—in either of these two cases, and only in one of these two cases, the Board of Trade have power to revoke the order of exemption. The power of the Board of Trade is limited. As a matter of law, supposing the Board of Trade have acted beyond their power, and one or other of these grounds is not capable of being proved, in that case the person whose order of exemption is being cancelled is entitled to a certiorari: to apply to the Court and to make good the position, if he can, that the Board of Trade have acted beyond their powers under subsection (3). Supposing he cannot make good that allegation, and therefore the Board have acted within their power, it then seems to His Majesty's Government that there

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should be no appeal. The facts on which the Board of Trade are empowered to act are facts of which they, and they alone, can be the proper judges, and it would lead to very great difficulty if, in a case where the original order of exemption is made at the pure discretion of the Board of Trade, it is possible to say that they can only exercise their discretion to revoke that order subject to an appeal.
Moreover, this is a matter which occurs to those in charge of this measure as one of considerable importance. If there is to be an appeal against the revocation of such an order of exemption, it would be necessary to describe the more detailed requirements in regard to the original ground of the order of exemption in order to provide the criteria according to which the Court or tribunal charged with the hearing of the appeal would be able to review the decision of the Board of Trade. In other words, it would be necessary to frame rules of conduct to be observed by exempted dealers, and such rules of conduct would not necessarily be those applying to licensed dealers in securities. It is to be anticipated that if any such rules or criteria were laid down, there would be very great objections to that being done in the City on the ground that it might very seriously and unnecessarily impede the carrying on of the business of the City. Moreover, it would cut across the principle of the Bill, which is to curb undesirable activities without interfering in any way with legitimate activities. In these circumstances I feel bound on behalf of His Majesty's Government to oppose this Amendment.
LORD RANKEILLOUR: My Lords, I will not press this matter further. I quite admit that the wording of this Amendment would require some alteration if it were to cover the declared schemes under Clause 16 (2). With regard to the rest, I am free to confess that I should like to see, in print, what the noble and learned Lord has said before I attempt to answer it. I beg leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Clause 18:
Offences committed by corporations.
18. Where any offence under this Act committed by a corporation is proved to have been committed with the consent or connivance
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of, or to be attributable to any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation, shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out "or to be attributable to any neglect on the part of." The noble and learned Lord said: My Lords, this Amendment looks a very simple one, but it is one which, I confess, has given me cause for some consideration. It was pointed out, when this matter was before your Lordships at an earlier stage, that the words "or to be attributable to any neglect on the part of any director, manager, secretary or other officers of the corporation" were likely to involve hardship to a director or other officer who, for some neglect which might be due to an accident, or slip—a thing which might happen to any of us—might have imposed upon him the penalties of the clause. I promised to consider it. I confess to your Lordships that I took some advice in the matter, and I propose an Amendment under which an offence can only be committed if the neglect is gross. I had proposed to insert a definition of "gross neglect" in its proper place, but on further consideration it seemed to me that this passage with reference to neglect is only of real importance having regard to the words "with the consent or connivance of … any director, manager, secretary, or other officers of the corporation" mentioned in the clause. Accordingly, I am meeting the proposal put forward by the noble Lord, Lord Wardington, by striking out the words "or to be attributable to any neglect on the part of." I think that meets the criticism which was made during the former stage of the Bill. I beg to move.
Amendment moved—
Page 26, line 16, leave out from ("of") to ("any") in line 16.—(The Lord Chancellor.)
LORD STRABOLGI: My Lords, I do not know if any other noble Lord proposes to offer any remarks on this Amendment, but I rise to differ respectfully from the noble and learned Lord Chancellor. I do not see why in these days we should lessen in any respect the penalties for this sort of offence, and if directors, who draw their fees as members of boards or officers of companies who are remunerated for their services, neglect

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their duties, why should they escape a penalty? Your Lordships will have observed the last words of Clause 18, "punished accordingly." If it is obviously a case of inadvertence—a man may have been in ill health or something of that sort—the Court would take that into consideration, and he would be "punished accordingly." I think your Lordships should hesitate before approving of anything which will remove or weaken the responsibilities of officers and directors of corporations.
THE LORD CHANCELLOR: I have heard this point argued very often indeed both ways. It is by no means a new proposition that the noble Lord puts before your Lordships, but I am not convinced at present that he really does appreciate how far this goes if the words that I propose to omit are left in the Bill. I think your Lordships will fully agree that a director who has made some slight slip in, we will say, furnishing information for any purposes of the Bill, or rules or regulations under it, or has been guilty of some other offence which he did not in the least intend to commit, should not be liable to the same sort of penalty as persons who under Clause 17 make statements which are false to their knowledge in material particulars. There are other offences which might be committed by officials of corporations which are not within Clause 17, and of which offences the directors, managers, secretaries or other officers of the corporations might be thought to have connivance. If they did actually connive in those statements they would become liable under this clause, but if, as a matter of fact, it is only a question of inadvertent neglect or a slip which is liable to happen to anybody, I think the noble Lord, Lord Wardington, is right in saying the clause ought to be altered so as not to make such persons liable to punishment. They should not be put in the same category as persons who have acted in a wilful or reckless manner and not as a result of mere inadvertence.
At the same time it must be remembered that the directors of such corporations as we are dealing with here should be persons of the greatest integrity and position, and your Lordships will well understand that to be prosecuted for an offence under this Bill when it becomes
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an Act is a proceeding to which no really responsible person in the City of London would like to be exposed. It would be a very unpleasant thing, even though the magistrate would probably in a case of pure inadvertence let him off very lightly. I think your Lordships were rather impressed by the argument put forward by the noble Lord, Lord Wardington, and for my part I think it would be advisable to make the alteration which I suggest in this Amendment.
LORD STRABOLGI: My Lords, on a point of drafting, my noble friend Lord Addison points out that it is not clear, which "any" in line 16 is meant. I think it is the second one, but I think it should be made clear.
THE LORD CHANCELLOR: My Lords, the noble Lord is quite right. I should have mentioned, if I did not do so in reading the Amendment, that it is the second "any" which is meant.
On Question, Amendment agreed to.
Clause 21:
Laying of rules and regulations before Parliament.
21. Any rules or regulations made under this Act by the Board of Trade shall be laid before Parliament as soon as may be after they are made.
LORD TEMPLEMORE LORD TEMPLEMORE moved to insert:
"(2) If either House of Parliament, within the period of forty days beginning with the day on which any such rules or regulations as aforesaid have been laid before that House, resolves that the rules or regulations shall cease to have effect, the rules or regulations shall thereupon become void, without prejudice, however, to the validity of anything previously done thereunder or to the making of new rules or regulations.
In reckoning any such period of forty days as aforesaid no account shall be taken of any time during which Parliament is dissolved or prorogued, or during which both Houses are adjourned for more than four days."
The noble Lord said: My Lords, in Committee, my noble friend the Earl of Iddesleigh moved an Amendment to Clause 21 to provide for an adverse Resolution by either House of Parliament against rules or regulations which were laid before Parliament and his Amendment was accepted in principle, subject to drafting in the appropriate form. This Amendment implements the promise that was then given. I beg to move.
Amendment moved—
Page 26, line 31, at end insert the said new subsection.—(Lord Templemore.)
On Question, Amendment agreed to.
Clause 26 [Interpretation]:
LORD TEMPLEMORE: My Lords, the first two Amendments provide definitions of "prospectus" and "registered company" and are consequential on the Amendments to Clause 2, page 3, line 12, and Clause 13, page 17, line 22. I beg to move.
Amendments moved—
Page 28, line 30, at end insert—
("'prospectus' has the same meaning as in the Companies Act, 1929;"]
line 40, at end insert—
("'registered company' means a company formed and registered under the Companies Act, 1929, the Companies (Consolidation) Act, 1908, the Companies Act, 1892, or the Joint Stock Companies Acts as defined by Section three hundred and eighty of the Companies Act, 1929, but does not include a company registered under any of the said enactments in Northern Ireland or in Eire;").—(Lord Temple-more.)
On Question, Amendments agreed to.
LORD TEMPLEMORE: My Lords, the next two Amendments are drafting Amendments. I beg to move.
Amendments moved—
Page 30, line 25, after ("is") insert ("or may be")
Page 30, after ("vested") insert ("in accordance with the terms of the trust").—(Lord Temple-more.)
On Question, Amendments agreed to.
Schedule:

SCHEDULE.
Matters for which Trust Deeds pursuant to Unit Trust Schemes must provide.
5. For the publication of accounts relating to the trust.
6. For requiring the manager (subject to any provisions as to appeal contained in the deed) to retire from the trust if the trustee certifies that it is in the interest of the beneficiaries under the trust that he should do so.
In this Schedule the expression "units" means securities (described whether as units or otherwise) which may be created in pursuance of the unit trust scheme, and the expression "unit certificates" means certificates of the acquisition of such securities.
LORD TEMPLEMORE: My Lords, the first Amendment is a drafting Amendment. "Sale price" is more appropriate than
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"value," as advertisements and circulars refer to the price at which units are sold and not to the value. I beg to move.
Amendment moved—
Page 32, line 13, leave out ("value") and insert ("sale price").—(Lord Templemore.)
On Question, Amendment agreed to.
LORD TEMPLEMORE: My Lords, the next Amendment is also drafting. I beg to move.
Amendment moved—
Page 32, line 14, leave out ("and") and insert ("or containing").—(Lord Templemore.)
On Question, Amendment agreed to.
LORD TEMPLEMORE: My Lords, there are two other Amendments which are purely drafting. I beg to move.
Amendments moved—
Page 32, line 17, leave out ("or invitation")
Page 32, line 18, leave out ("or invitation").—(Lord Templemore.)
On Question, Amendments agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in paragraph 5, after the first "the," to insert "audit and," and at the end of paragraph 5 to insert "(including accounts of the manager in relation to the trust and statements of his remuneration in connection therewith)." The noble and learned Lord said: My Lords, these two Amendments are brought forward to deal with a point raised by the noble Viscount, Lord Buckmaster. Although they do not exactly cover the Amendment he proposed, I think they are all that can be done at the present time. We are discussing the form of the Schedule which lays down the matters for which trust deeds pursuant to unit trust schemes must provide. My noble friend pointed out quite properly that publication of acounts would not necessarily include audit. Therefore the first Amendment provides for the insertion of the word "audit." Then there is the question as to what accounts relate to the trust, and in regard to that, the Amendment suggests that the accounts will be the "accounts of the manager in relation to the trust and statements of his remuneration in connection therewith." These Amendments, I think, strengthen the matters for which the trust deed must provide and I hope they will meet the approval of the noble Viscount. I beg to move.
Amendments moved—
Page 32, line 24, after the first ("the") insert ("audit and")
Page 32, after ("trust") insert ("(including accounts of the manager in relation to the trust and statements of his remuneration in connection therewith)").—(The Lord Chancellor.)
LORD MANCROFT: My Lords, may I ask, one question, regarding this Amendment? Paragraph 5 with which we are now dealing provides for the publication of managers' accounts. Does the word "publication" mean that the accounts will be circulated to the registered holders of units, or does it mean that the holder of a unit or units has merely the right to demand and receive a copy of the published accounts?
THE LORD CHANCELLOR: My Lords, the trust deed will have to provide for the publication of these accounts, but the Schedule as framed does not say that they need be published to the public. I imagine that as matters stand it will be sufficient if they are published by circularisation to all the people who are holders of the units. If it is thought right to extend it to mean publication to the world, I think an Amendment would be required.
LORD MANCROFT: My Lords, may I have the permission of the House to speak again in order to say that if the noble and learned Lord says that publication means "shall be circulated to the registered holders of units" I am perfectly satisfied.
THE LORD CHANCELLOR: My Lords, perhaps the noble Lord will allow me to consider that. I do think it is desirable that the matter should be quite clear in the Bill and perhaps at the next stage, if it is thought necessary, I may be allowed to move an Amendment.
VISCOUNT BUCKMASTER: My Lords, I should like to thank the noble and learned Lord for the full way in which he has met the suggestions I put forward.
On Question, Amendments agreed to.
VISCOUNT BUCKMASTER VISCOUNT BUCKMASTER moved to insert the following new paragraph:
"7. Providing that no trustee of a unit scheme shall be entitled to act as manager of such scheme nor hold directly or indirectly any securities in the corporation acting as manager, nor have any beneficial interest in the corporation, other than the payment of
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the remuneration provided for by the trust deed, and for providing that no director of any corporation acting as trustee of such scheme shall be entitled to act as director of the corporation acting as manager of the scheme."
The noble Viscount said: My Lords, I venture to think that this Amendment is of some substance. It is designed to prevent a trustee acting in a dual capacity as trustee and as manager. I do not suggest that such a practice is common—I know of no case where the trustee and manager are completely the same thing—but there are cases where directors sit on the boards of each. There may be cases—I have not been able to verify these—where a trustee company has a substantial shareholding in a management company. I cannot feel that this is desirable. The Anderson Committee were express on this point. They said that in the case of unit trusts, managers and trustees should be independent of one another, and if there was any communicating interest it should be in all particulars disclosed. There must be a conflict of interest between the trustees and managers in the case of appropriation trusts where concealed profits are made of which the unit holders have no knowledge.
I would not venture in the presence of the noble and learned Lord Chancellor on any enunciation of a legal principle, but one would feel that where specific remuneration is provided in the trust deed, it is undesirable that there should be any direct or indirect association between the trustees and the managers who are making—and there is no doubt they are making in the case of an appropriation trust—a concealed profit. As an example of these profits, we have recently had the issue of units at a discount below the correct price. We have had the remuneration in one instance of paid agents for placing these units increased to 2½ per cent. If we consider what ½ per cent. means, we can see that there must be some fairly substantial volume of profit to provide those payments. It is highly undesirable that trustees should participate in such transactions.
A further point is that if you have a common directorship it is possible—I will not say probable—that the directors of the managing company will be inclined to influence the directors of the trustee company in directions favourable to the management. There is also this final

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point: that trustees are there, as I conceive it, for the protection of the public. They sign the certificates, and in some cases these certificates are deposited in blank with the management companies, who then fill them in and forward them to the trustees for signature. I suggest that it is highly undesirable that the people who prepare the certificates should be in any way interconnected with those who sign them and who should only release them against the deposit of the underlying securities. I hope your Lordships will feel that this Amendment does indeed strengthen the Bill. I beg to move.
Amendment moved—
Page 32, line 33, at end insert the said new paragraph.—(Viscount Buckmaster.)
THE LORD CHANCELLOR: My Lords, I must admit that there is some weight in the proposal which your Lordships have heard advocated by the noble Viscount. It seems to the Government, however, that the new paragraph as printed would go considerably beyond what is legitimate, and would possibly interfere with some quite honest and respectable people who are operating the management of unit trusts at the present time. The idea suggested by the Anderson Committee, that it is undesirable for the management company to be closely connected in any way with the trustee company, is one which I accept. The difficulty is exactly how to carry it out. If it is suggested that a director of the trustee corporation should not act as a director of the management company, that, if carried into effect, might not be in the interests of the unit holders at all. It is also to be observed that the Anderson Committee did not go so far as to prohibit such a connection. Moreover, it is known to the Government that in a certain number of cases the director of the trustee company is a director of the managing company, both being large and important corporations—as they would necessarily be under this Bill. No harm has yet resulted from there merely being one or two directors of the trustee corporation who are also directors of the management corporation.
On the other hand, I feel strongly that something ought to be done to prevent what the noble Lord seems to fear as a possible future danger—namely, the possibility of there being unit trusts so constituted that the trustee corporation and the management corporation share
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the same management. Accordingly, I am going to make a proposal to your Lordships of which I hope you will approve. Before doing that, however, I want to mention that there are cases where the new proposal could not operate without very considerable alteration, because most trust deeds at the present time provide that, if the manager is removed, the trustee shall act as manager until a new manager is appointed; so that there again there might be for a short time some sort of community of interests. There is a further point which the noble Lord ought to consider before he presses his Amendment. Where the trustees are banks—which, as your Lordships know, is a very common occurrence—and there is no separate trustee company, that is to say, holding company, as we are accustomed to under such an arrangement, it may frequently happen that shareholders in management companies lodge their shares with the hank as security for an advance. That would be prohibited by the terms of the Amendment as printed.
What I think can be done, and what I hope the noble Viscount will think sufficient, is this. Under Clause 16 the Board of Trade may by order declare to be an authorised unit trust scheme any scheme complying with the conditions which are laid down in paragraphs (a) to (c). It might be right and proper to insert a new paragraph (b) to the effect that a unit trust scheme shall be so constituted that the persons who are respectively the manager and the trustee will be able to operate independently of each other. I do not profess to have stated accurately the form which the clause should take, but the effect of it would be that, if that is done, the trustee company might have six directors and the management company might have ten directors, and there might be one or two directors who were directors both of the trustee company and also of the management company. The majority in each case would be independent of the existence of some common directors. My advisers tell me that if a clause to that effect were inserted, the dangers which my noble friend Viscount Buckmaster is desirous of avoiding and providing against would in all human probability not arise. I only add that it is impossible to forecast all the contingencies and possibilities inherent in the Amendment, and to be quite sure that there is no interfer

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ence with perfectly legitimate business. In an effort to prevent fraud the new paragraph which I suggest would not, I imagine, interfere in any way with any legitimate business. I may say that it is thought too late at this stage of the Bill to introduce any far-reaching Amendments, which I think would be involved in the acceptance of the noble Viscount's proposal.
VISCOUNT BUCKMASTER: My Lords, I should like to thank the noble and learned Lord for the very full explanation he has given. I would gladly, if I may, accept his proposal to insert a further subsection in Clause 15. If I may just say one thing more, it is that if it were possible so to frame the Amendment that the trustee did not hold shares in the management company, I should feel more comfortable about it. With that one remark I beg leave to withdraw my Amendment.
LORD RANKEILLOUR: My Lords, it is a little unfortunate that a matter of this complexity and importance should have come on at so very late a stage in the Bill. I presume that the noble and learned Lord will give plenty of time before the Third Reading, so that his new proposal may be carefully studied.
LORD SALTOUN: My Lords, I do not see how the proposed Amendment really affects the case of the banks.
THE LORD CHANCELLOR: That observation, I think, refers to the last proposal of the noble Lord. I quite follow it, and the point will be considered. I need not say how sorry I am that this matter should come up at the last stage. Perhaps the noble Viscount will take some responsibility for this. His Amendment, it will be seen, comes at the end of the Marshalled List. The Amendment in its present form only reached me today or yesterday.
VISCOUNT BUCKMASTER: Would the noble and learned Lord allow me to offer one word of apology, which I think is due to him and to your Lordships? I was not alive to the importance of this point until the early part of this week, and I then addressed myself to drafting a new Amendment. I also employed legal aid, but I found the task so difficult that I was unable to meet the point
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until the last moment. Perhaps the noble and learned Lord will accept my apology.
THE LORD CHANCELLOR: There is no apology due to me. I only mentioned the point, that it is not, so to speak, the fault of the Government Amendments that this Amendment is before your Lordships rather late. With regard to the time given for discussion of the proposed new Amendment which I have pledged myself to introduce on the last stage of this Bill, the difficulty is that it is very desirable that this Bill should pass its last stage at the earliest possible moment, and reach the other place. Therefore, although I will give my earliest attention to this matter, and table my Amendment as soon as possible, possibly tomorrow, it is a little difficult to give any length of time before the Third Reading. Your Lordships will appreciate that I am not quite sure when the Third Reading will conveniently be taken.
LORD TEMPLEMORE: My Lords, may I intervene? I had, without consulting my noble and learned friend, fixed to take the Third Reading to-day week, Tuesday, April 4.
THE LORD CHANCELLOR: The noble Lord, Lord Rankeillour, will not be hurt if he does not get more than a day or two.
LORD RANKEILLOUR: It rather depends upon the question when we adjourn. If we are sitting on Wednesday, that would be better.
THE LORD CHANCELLOR: I do not think the noble Lord will find any great complexity in the proposal when he reaches it, and I am very unwilling that there should be any delay in this Bill becoming law.
LORD RANKEILLOUR: May I just say this: that if it is not taken before Tuesday I think my friends who are interested in the matter will be able to concentrate their minds on it by then.
Amendment, by leave, withdrawn.

CHINA (CURRENCY STABILISATION) BILL.
House in Committee (according to Order): Bill reported without amendment.

THE INTERNATIONAL SITUATION.
LORD DAVIEShad the following Notice on the Paper: To move to resolve, That this House welcomes the assurances of the Foreign Secretary that His Majesty's Government has under consideration, in conjunction with other Powers, the desirability of assuming wider mutual obligations in order to prevent further acts of aggression in Europe. It expresses its conviction that the deterrent effect of such a policy can only be developed to the full by means of the immediate establishment of a Commission composed of the financial, economic, and military experts of the co-operating nations for the preparation of measures of mutual defence, and for the restoration to Czecho-Slovakia of her freedom and independence. Further, that this House urges His Majesty's, Government also to consider what steps can be taken to establish adequate machinery for the impartial settlement of all inter-State disputes as an essential corollary of the plan for collective security.
The noble Lord said: My Lords, I rise to move the Motion standing in my name, and in doing so I do not think I need apologise to your Lordships for moving a Motion dealing with a subject which we discussed last week. In these days events are following each other with alarming rapidity, and since we debated ancillary questions last week we have been confronted with the seizure of Memel, we have been apprised of a Treaty between Germany and Rumania, which may have very far reaching consequences, and we have had a declaration by Poland which shows that she, apparently, has not been convinced that there is anything to be done, or anything to be gained, by consultation or conference. Moreover, we have had proposals, apparently emanating from Moscow, in which a Six-Power Conference was proposed, in order to discuss how best acts of aggression could be met in Europe.
I suggest that that is a very formidable list of events which have happened during the past few days. Therefore we should like to know—at any rate I should like very much to know—from the Government, what steps they are taking, what assurances they can give to your Lordships that the policy outlined by the Foreign Secretary in his speech to us last week is going to be implemented. In that speech the Foreign Secretary said that:
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"… in all quarters there is likely immediately to be found a very much greater readiness to consider whether the acceptance of wider mutual obligations, in the cause of mutual support, is not dictated, if for no other reason than the necessity of self-defence. His Majesty's Government have not failed to draw the moral from these events, and have lost no time in placing themselves in close and practical consultation, not only with the Dominions, but with other Governments concerned…"
That declaration followed a very remarkable speech delivered by the Prime Minister a short time ago at Birmingham. I think most of us realised, after we had read that remarkable speech, that the so-called policy of appeasement was dead and that its author had himself told us of its decease. If that is so, then we understand the statement made to us last week by the Foreign Secretary in your Lordships' House.
I suggest to your Lordships that what is described as the policy of widening our mutual obligations is one which brooks no delay. We want deeds, and not merely words. Surely the time factor is of vital importance in this matter. After all, when Herr Hitler makes up his mind to do something he does pot wait. He merely presses the button and things happen. Therefore I sincerely hope that His Majesty's Government are not going to allow themselves once more to drift along without taking some active steps to try to prevent a surprise, and in advance to proclaim their intention to the world that they will take drastic steps if the freedom of any country in Europe is menaced again.
I should like to ask the noble Earl, who I understand is going to reply, why it is that the Government appear to be so often taken by surprise. We remember not so very long ago—I think about two or three years ago—there was a great controversy as to the relative strength of the German Air Force and our own, and it was not until the then Foreign Secretary, Sir John Simon, went to Berlin that it was suddenly discovered that our Air Force was not even equal to the Air Force which Germany had manufactured in the meantime. That came as a complete surprise. Then we remember that one morning we woke up and found that German troops had entered the Rhineland, and neither the British nor the French Government had the slightest idea that anything of the sort was going to

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take place. The next thing that happened was the invasion of Austria and the seizure of Vienna. At that moment Herr von Ribbentrop was, I believe, lunching, or was at any rate in the same building, with our own Ministers, who again were completely taken by surprise. Then a few days ago, and without the slightest warning, we suddenly found that the ancient City of Prague, the capital of the Czech State, had been invaded almost overnight by German Troops. Only a day or two before, one of the Ministers of His Majesty's Government had proclaimed to us that very shortly the golden age would dawn upon the world. How is that golden age to be brought about? By bringing three Dictators and two Prime Ministers together, and when they sat round a table, then everything would be all right!
What I would like to ask is whether the fact that we are surprised in this fashion is due to ignorance. I do not know, but I should like to ask the noble Earl whether we are properly served by the Intelligence Service who, I have always understood, are responsible for discovering these things and for warning those in authority before these events actually happen. I venture to suggest that something should be done to see that this department, on which we spend a considerable amount of money, are doing their job properly. If these constant surprises are not due to ignorance, are they due to what someone described the other day as that horrible disease of wishful thinking? Is it that Ministers were warned, that the Government had in fact been given information, but that they steadily refused to deduce the facts which the information ought to have given them? I think that this disease of wishful thinking is something which has attacked democracies not only in our own country but in other countries as well. It is horribly infectious. It seems to have descended from high quarters and to have had very baneful effects on the country and on public opinion.
I leave that for a moment, and I would like to go back to what has happened in regard to the Russian proposal, which the Government, I believe, have not alluded to in any speeches or replies to any Questions, but which, I gather from the newspapers, was a suggestion emanating from the Government of Russia that a
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Six-Power conference should be held. It was stated that in the opinion of our Government the holding of such a conference was regarded as premature. Well, I cannot understand why, in view of what we were told in the debate last week, and in view of what has been said in another place, such a conference should be regarded as premature. Surely if agreement in principle can be secured between this country, France and Russia, then the foundation of a six-Power agreement, or an eight- or nine- or ten-Power agreement has been laid. It seems to me that Russia is really the key to the whole position and that if our own Government wish to restore the policy of collective security it is essential that Russia should be one of the nations which adhere to such a policy. What I complain about here this afternoon is that we are always being given vague assurances that consultation will take place, or that some steps are being taken—we are not told what the steps are—to bring about an agreement to combat aggression in Europe.
What I want to know is whether we really mean business. Do the Government really mean business on this matter? Are we going to be content merely with a promise or assurance that if trouble breaks out then there will be some sort of consultation? I venture to suggest that, if this is all that is going to be done, when the time comes it will be too late and we shall find ourselves in precisely the same position as that in which we found ourselves ten days ago. There was no plan, there was no agreement as to what should be done in the event of the Czech Government being suppressed and being confronted with an ultimatum to surrender its sovereignty, to surrender its liberties, and to become a vassal State of Germany. I repeat, do we mean business? If so, I suggest that one of the first things we have to do is not only to arrive at an agreement in principle as to what we are going to do, as to what all these nations will do who are prepared to join in an alliance or pact or, as we used to call it, collective security—some noble Lords do not like the term "collective security"; call it anything you like—but the whole thing will break down unless beforehand you have secured consultation and an agreed plan between military experts, economic experts, and financial experts who have put their heads together and drafted a

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plan in advance which can be carried out when the actual emergency arises if it ever does arise. That is what we used to describe in the last War as "unity of direction."
We were forced in the last War after a great many attempts, a great deal of effort, and a great many disasters, to formulate a common policy, to establish joint Allied Commissions to work out plans for economic and financial mutual assistance, and also in the military sphere we were compelled eventually to establish a unified command in the field. That was done to win a war. I suggest that the same process has to be done now in order to prevent a war. Surely it is more important to try and prevent a catastrophe from happening than it is, when the catastrophe has taken place, to try and make the best of it and, in the case of war, to win it. After all, this is only what is said in Article 16 of the Covenant. It was not very long ago that the Prime Minister in another place said he would not alter a single Article of the Covenant, not even Article 16 As your Lordships know, Article 16 deals with financial and economic measures. It also lays down that all those nations who are willing to oppose aggression must consult together and recommend what in their opinion should be a proper and effective scheme.
I am sure some of your Lordships were very interested to read last week a very stimulating letter in The Times written by Sir Alexander Roger, who has had considerable experience in these matters. In that letter he suggested that, in view of the fact that a definite act of aggression had taken place, an economic boycott should be instituted against Germany for having brutally attacked and wantonly usurped all the authority of the Czecho-Slovak State. What he suggested, in effect, was that intercourse with Germany of every kind—financial, economic, transport, and every other intercourse—should be severed by all the countries who were prepared to support the rule of law. He called it, I think, a "sit-down strike." I prefer to call it an act of outlawry. When a nation deliberately affronts the public opinion of the whole world and is guilty of a gross act of aggression of this kind, all the other countries should say: "Very well, we are not prepared to have anything more to say to you until you restore the liberties which you have filched, until
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you disgorge the booty which you have taken from this small and weak State." That is not what some people describe as punishment. It is not punishment at all. It is merely sending a country, in the international sense, to prison until such time as it chooses to make restitution. Is Germany willing to restore the liberties and freedom of the Czechs? Is she prepared to disgorge all the money, arms, and so on that she has filched from them?
I suppose we shall be told that in asking for this restitution we are provoking Germany to make war and that there would be a risk of retaliation if the countries prepared to enter into a plan of this kind were to put it into operation. That is a risk that we should have to run, obviously, but suppose we in this country had been guilty, let us say, of sending an expedition to Denmark and forcibly taking over Denmark, and suppose as the result every other country closed down its ports and instituted a boycott against us, I do not think we should immediately go to war against all these countries, assuming the rest of Europe, or almost all the rest of Europe, was prepared to exert this pressure upon us. I admit that such action might, and possibly would, bring about a policy of retaliation. Obviously no country is going to join in any embargo of that kind unless and until there is a mutual guarantee amongst the nations who take part in these coercive measures, in exercising this economic and financial pressure, that if they are attacked all the other countries will come to their support. It seems to me that any plan of this kind necessitates and implies the preparation of military plans in advance, and that is why, in the Motion, I have suggested a Commission of experts from all these countries who will sit down, not in six months' time, but immediately, to work out these schemes.
The next question I should like to ask is this: When do we propose to call a halt to these acts of aggression? One small nation after another is being either menaced or swallowed up. The small nations are being driven like sheep into the Axis fold. What are we doing to try to stop that? I would appeal to noble Lords here who are described as realists to consider this. What has happened in Czecho-Slovakia? That country was first of all deprived of its Maginot line, and as a result of what has taken place there

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we have lost forty divisions of the best soldiers in Europe, about £30,000,000, innumerable guns, about one thousand tanks and fifteen hundred aeroplanes. They have all gone to Germany.
So far as collective security is concerned they cannot be reckoned upon any more. I have, I am afraid, on several occasions bored your Lordships by trying to plead for an International Air Force, and had there been such an air force in existence to-day those fifteen hundred aeroplanes would not have been part of Hitler's booty in Czecho-Slovakia. They would have had time to get away. I wonder, for I do not know, what increase there has been in our rearmament since last September. I venture to say that in twenty-four hours Germany acquired more than that increase on our part when she went into Czecho-Slovakia recently and took this loot of which I have spoken. I suggest that any leeway we are able to make up we are going to lose as one small nation after another is overrun. What is going to happen in two or three years' time?
I do not know, but we do know perfectly well that such small countries as Holland, Belgium, Denmark, Poland, the Baltic States and Switzerland are mobilising; we know that Poland is calling up all her reservists, that Rumania is tied up with a new trade agreement with Germany, that these small countries and Yugo-Slavia are all shivering in their shoes because they do not know when they may be the victims of aggression. What I would like to ask the noble Earl is this: Which of these countries are we going to help? Are we going to help any of them? This is what was said by one Minister of the Government on October 14, 1935, during the General Election campaign:
"If the League were to abdicate its functions every weak nation would first begin to arm,"—
they are all doing that now—
"then to seek alliance with its strongest neighbour, and before long the peace of Europe would be at the mercy of the biggest and strongest Powers in Europe.
The choice before us is whether we shall make a last effort at Geneva for peace and security or whether by a cowardly surrender we will break a promise we have made and hold ourselves up to the shame of our children and their children's children."
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Who was the Minister who said that? It was the present Prime Minister who made that speech during the last Election.
What I want to know is: Is that the view of the Government to-day? If so, are we prepared to go to the help of what are called the smaller countries in Europe? If we are, then it is high time there should be consultations between our Naval, Air and Army Staffs and the corresponding Staffs of those countries. I was horrified to read in one of the Sunday newspapers that the consultations with France, supposed to have begun eight months or even longer ago, had not been carried on very actively. Opinion up to the present, said the newspaper, is that discussions between the Staffs have so far been of very little practical value. There is a good deal more in the same strain. I should have thought, after the experiences we have gone through during the last few years, that at least there should have been some active collaboration between our military Staffs and those of our neighbours across the channel.
We know perfectly well that before the last War, thanks to Lord Haldane, thanks to Field Marshal Sir Henry Wilson and other officers, everything was ready. I have often heard Sir Henry Wilson say that it was the proudest boast of his life that when the emergency came our Expeditionary Force was ready to be moved within a few hours. I hope something of the sort is being done now, but when one reads that sort of thing in a Sunday newspaper—in a reputable Sunday newspaper—one begins to wonder whether everything is as it ought to be, and whether these talks between Staffs are really in progress. I cannot help thinking that if there was real concrete evidence that we were determined, and that in this country there was the will, to resist this aggression, the rest of Europe, with the exception of Italy and possibly two or three small Powers, would rally to our side. After all, what we want to do surely is to regain the initiative. Up to now it has always been the Dictators who have made the running while we have simply been drifting. The Axis Powers apparently carry on their affairs in the very closest collaboration. Why do we not do the same thing with France and with Russia, if she is prepared to do it—we had to do it in 1914—and with the

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smaller Powers? Are we afraid of annoying Herr Hitler? Is that the reason? One thing is certain: that unless something is done to prepare before the emergency arises we shall find ourselves in a most difficult and disastrous position.
I am afraid I have detained your Lordships too long, but there are one or two other points I should like to touch upon briefly. What is the issue? What are we prepared to fight for? The Prime Minister told us at Birmingham that, although he was a man of peace, there was one thing he was prepared to fight for, and that was liberty We shall, I imagine, all be prepared to fight, as in 1914, for the liberties of our own country and the liberties of Europe, but I suggest that there is another issue we should also be prepared to fight for, and that is for the cause of justice, because justice surely is the foundation of peace. No durable peace can ever be founded on injustice. Therefore I suggest that the real issue between us and any nation which is guilty of acts of aggression is the upholding of the rule of law and the determination to ensure that justice shall be administered. If we have no ideals, I suggest that we are in a very had case. Some of your Lordships will remember that in Mein Kampf Herr Hitler stresses the vital importance of ideals. This is what he says:
"How well Britain understood the way to appeal to the idealistic side of man. While Germany fought for daily bread Britain fought for freedom—not even for herself but for little nations."
We must remember also that it was ideals which, like cement, bound all the Allies together even in the darkest days of the War.
It was because we believed in those ideals that we were prepared to fight for them to the bitter end. I believe that this country is absolutely sound at heart, and I believe it will respond to any call in any emergency. What we want is leadership. What we lack to-day is someone who will tell the country what it is that we stand for as a nation. I remember once listening to a speech—it was towards the end of 1916, I think—made by Mr. Lloyd George. We were passing at that time through very dark and difficult circumstances. This is what he said:
"The blinds of Britain are not drawn yet, nor are they likely to be. The honour of Britain is not dead;"—
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I wonder if we can say that to-day. Let us search our hearts, and see whether we can say that to-day—
"her might is not broken; her destiny is not fulfilled; her ideals are not shattered."
Surely we have to try to get back something of that spirit and to infuse it into the hearts of our countrymen.
I think your Lordships will also agree that we want to achieve unity, and unity in two senses—unity at home and unity abroad amongst those nations who are determined to resist aggression and to uphold the rule of law. We have destroyed, or helped to destroy, the League. We have helped to break up the system of collective security. What we want to do, and what I understand the Government want to do, is to go back to that system. Therefore we want to have someone to lead us who is attached, and sincerely attached, to that principle, to that plan of carrying on international relationships. We want to get unity at home. Some people suggest that we ought to have conscription. Personally I am not against conscription. If a war came, obviously we should have to have conscription. If we can help to prevent that war by going in for conscription now, why should we not do it? After all, the whole object would be a deterrent one, to prove to the small nations that we are in earnest, and to make Herr Hitler and Signor Mussolini understand that we are in earnest. Anything we can do now to weld those small nations together, to create that sense of unity and common aim, will not only make us stronger as a country, but will also exercise a deterrent effect upon aggressors and will hearten all those countries who look to us for a lead in this matter. These small countries have been woefully disappointed. Only the other day Poland said: "I am going to rely upon my own arms and forces if I am attacked. I do not place very much reliance upon these consultations and conferences after what has happened to a neighbour of mine, Czecho-Slovakia."
There is one last quotation I would like to give your Lordships. It is from a speech made the other day by the Speaker of the Storting, Mr. Hambro. Here is what Mr. Hambro said:
"A British Foreign Minister, Sir Austen Chamberlain, did more than any other man to consolidate the political prestige of the League of Nations and to create confidence in the good will of the great Powers. His

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brother Neville Chamberlain has done more than any other to undermine that prestige and destroy that good will. His policy in the last month has dismayed the small democratic States and aroused the worst fears towards their future. Not the solution of the Czecho-Slovak question, but the manner of its solving must be described as an act of violence without its like in civilised history. England and France created Czecho-Slovakia, Benes was the pioneer of their policy; they urged him on and praised him at every opportunity—and now they sacrifice his country by selling it behind his back. It is comprehensible that during the last League Assembly in Geneva people were saying, There will be no war as long as a small State remains that the great Powers can sacrifice.'
"Now we know where we stand. My country is so small that England would not even waste the cost of an aeroplane passage on a flight to Berlin to save us. Among all the small Powers the fear is now growing that they will one day be dismembered, without being asked, if this suits the book of the great Powers. A certain progress, however, is perceptible: Poland was partitioned in the eighteenth century by its worst enemies, Czecho-Slovakia in the twentieth century by its best friends."
That is the opinion of the Speaker of the Norwegian Parliament.
I cannot help feeling that those views unfortunately are shared by a great number of the smaller countries in Europe. Therefore I suggest to your Lordships that what we want to do is to restore confidence, and in order to restore confidence I think we must have a change of leadership. After all, the present Prime Minister's personal policy has been carried out, and it has failed, as he has admitted himself. When a policy undertaken and pursued vigorously by a Prime Minister and his Cabinet comes to grief, then by the traditional rule of this country that Administration resigns or at any rate is broadened and widened by bringing in elements from other Parties. Your Lordships remember what happened in 1916, when it was felt from one end of the country to the other that Mr. Asquith had tried his best to carry out the most difficult and onerous job of prosecuting the War and was not up to the task. There was not an election, but there was a feeling—and that feeling was right—that what was wanted was a more dynamic personality; that a person of drive, a person of courage who was prepared to go all out to win the War and to provide the necessities for winning that War should be installed as Prime Minister of this country.
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I am sure the Prime Minister has done his best. I am not suggesting that he has not. I am not suggesting that he was not convinced that in leaving, in deserting, as he did, the policy of collective security for the policy of appeasement he was doing his best for the country. I do suggest, however, that once that policy has failed, the time has come when we require new leadership. Are we bankrupt in statesmanship? I do not believe we are. Or has the fiat gone out from Berlin that we have no choice in the matter, or that our choice has to be severely restricted? I cannot believe that. Therefore I suggest to your Lordships that the time has come for action. We have been warned on more than one occasion what is likely to happen, and the time has now come when whatever policy we decide upon should be carried out with the greatest possible energy. After all, the best policy carried out weakly, carried out with hesitation, carried out with so many arriêre-pensées that we do not know what it really means, is worse than an indifferent policy carried out with all the force and energy of the nation behind it.
When I look back over the last twenty years and remember all those wasted opportunities for bringing about a better state of affairs in Europe, for developing the institutions which we had in order to create some day the United States of Europe, for developing the federal principle in international relationships, I confess to great bitterness. I do not mind confessing it. After all, what did we do? Unilateral disarmament went on for years, and then the lips of our late Prime Minister—who I am sorry to see is not in his place here to-day—were so tightly sealed that he would not even tell his fellow-countrymen about the rearmament that was going on in Germany. Why? Because he was afraid of losing the next Election, That is the sort of thing that sometimes make one's blood boil. What about our comrades who made the supreme sacrifice in the terrible struggle twenty years ago? What have we done to implement the promises which were made to them before they gave up their lives in order to destroy militarism and bring about a new state of affairs in the world?
I agree that at this stage recriminations are useless. It is no use going back to the past, except to try to see where we have gone wrong and what mistakes we have made. I suggest that now we have

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arrived at the eleventh hour. Nevertheless there is one more chance if under bold and determined leadership this country can be rallied in support of the ideals, the principles, for which we all fought in the last War but which have never been realised, and if at the same time we remember the words of a great Englishman when he said "Because right is right, to follow right were wisdom, in the scorn of consequence." I beg to move.
Moved to resolve, That this House welcomes the assurances of the Foreign Secretary that His Majesty's Government has under consideration, in conjunction with other Powers, the desirability of assuming wider mutual obligations in order to prevent further acts of aggression in Europe. It expresses its conviction that the deterrent effect of sac's a policy can only be developed to the full by means of the immediate establishment of a Commission composed of the financial, economic, and military experts of the co-operating nations for the preparation of measures of mutual defence, and for the restoration to Czecho-Slovakia of her freedom and independence. Further, that this House urges His Majesty's Government also to consider what steps can be taken to establish adequate machinery for the impartial settlement of all inter-State disputes as an essential corollary of the plan for collective security.—(Lord Davies.)
LORD HASTINGS: My Lords, it is only ten days ago that your Lordships participated in a debate upon foreign affairs, and there seems every possibility that not many more days will pass before another debate upon the same subject is staged in this House. It therefore might appear to be perhaps undesirable that this debate should have occurred at all. But, inasmuch as the noble Lord, Lord Davies, put down a Motion upon the Paper which was provocative in the extreme, I felt that the noble Lord's bellicosity might possibly be to some extent tempered by the consideration of a few other reasons.
Lord Davies, in the course of his speech, ranged over a very considerable field, but the themes underlying it were those of the League of Nations—in other words, collective security and moral obligation. I would not have the House think that I discount moral obligation. Moral obligation is only a crude translation of Noblesse oblige, a motto which has been the standard of your Lordships for many centuries. But whereas it is
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perfectly in order that the noble Lord, and even so humble an individual as myself, should both preach and practise moral obligation, it is not for those who carry the grave responsibility of controlling the affairs of this country to be animated by any such aspirations. On the contrary, it is their duty to do only that which is best for Britain. The standard which I and many who think like me are thankful to realise is at last the standard set up by the Prime Minister and by the Foreign Secretary, is what is best to be done for the country for which we are responsible.
What were the consequences of pursuing this shibboleth of moral obligation? Did not the right honourable gentleman who preceded my noble friend in the Foreign Office succeed in throwing Italy into the arms of Germany by the pursuit of that particular form of moral obligation? Did not he thereby enormously complicate for his successor at the Foreign Office the international situation? Did not he in large measure create the complications which now confront us in this country? Would the noble Lord encourage the further pursuit of that particular form of obligation, so as to estrange other countries, and make the position for Great Britain even more difficult than it now is?
I would like to say a word, if I may, in that connection, in respect of Russia. Last Monday week I was shocked almost into unconsciousness by hearing the most reverend Primate ask "What of Russia?" and be it borne in mind that the most reverend Primate's context was that of an alliance, or at least close cooperation with certain countries in Eastern Europe. I did believe, and I still believe, that the one great force which must eventually triumph is the force of Christianity. How could the most reverend Primate, or any of your Lordships, accommodate that belief with the co-operation of this most Christian country with that most godless one? But, putting aside fundamental questions of that character, which strike at the very root of moral obligation, what would result from a close cooperation with Russia, such as the noble Lord, Lord Davies, would desire? Is it not the prime interest of this country to regain her friendship with Italy? Is it not to the prime interest of this country to create a bond of friendship with the new Spain? Are not these two matters

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of vastly greater importance to the wellbeing of this country than any will-o'-the-wisp co-operation with Russia? And if Russia were called into this conference, or allowed to initiate it, as the noble Lord desires, what hope have we in future of safeguarding British interests in the Mediterranean? Surely the standard and the principle should be that of what serves Britain's interests best, and while I repeat that questions of moral obligation should not be disregarded by those who hold comparatively irresponsible positions, they are impossible for those who have to steer this country through the difficult times through which we are now passing and which lie ahead.
The noble Lord, Lord Davies, referred also at some considerable length to the advantages of collective security. I do not know who would be collectively secured by endeavouring to create alliances and arranging for co-operations in Eastern Europe. No, the noble Lord makes wild and, if I may say so without offence, weird proposals for restoring to Czecho-Slovakia her independence, and for entering into wider mutual obligations in parts of the world which we cannot reach and where our forces would be wholly ineffective, and apparently in pursuit of certain principles he wishes our Prime Minister and our Foreign Secretary to commit this country to obligations which would land us in inevitable disaster.
There are other facts perhaps not so clearly thought of by the noble Lord as those to which he devoted his speech. Bellicosity creates alarm in this country. We have already created by Parliamentary inquisition, and by Press indiscretion, and by other means, a condition of affairs which is grossly unfair to the hardworking population of our island, which is interfering sadly with the progress of trade, and which in the long run will have the prosaic effect of making less money available for the Exchequer. Surely we might have done with that kind of talk. Lord Davies knows perfectly well that he is not proposing to lead a battalion—shall we say of angels?—across the air to attack impossible places in Central Europe. Why should he prompt others to suppose that that kind of expedition and adventure is possible or desirable?
For myself, I am thankful to think that in the hands of the present Prime Minister
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and of my noble friend the Foreign Secretary we are safe in knowing that the best interests of Britain will be served, that we shall not be led into commitments of the kind that the noble Lord desires, and, without being in the least degree pacifist or unwilling to meet much obligations as the situation compels us to meet, I believe we should set aside the madness of the League of Nations, which has led us into the position where we now are. I have said all that I wish to say. I would not have spoken had it not been for the provocative speech of the noble Lord, Lord Davies, and I can only be thankful that he is not able to lead those who now control the affairs of this country into the dangerous paths which he would wish them to tread.
LORD BARNBY: My Lords, since the debate which took place at the beginning of last week there has been little fundamental change in the position of Europe. There are many of your Lordships who feel that in the circumstances it would have been much better that affairs of foreign policy should not have been raised again so soon in this House. Perhaps it would be right to regard this debate as merely a continuance of the debate initiated last week, but because of the provocative Resolution moved by the noble Lord, and the interpretation of it which has been given by the noble Lord who has just sat down, it is inevitable that some members of this House would wish to speak on this subject. Anyone who addresses himself to questions of foreign policy at this time speaks under a sense of serious responsibility, and with the consciousness that no word should be said that would embarrass the delicate negotiations which, in the knowledge of every one of your Lordships, are taking place at the present moment.
The speech of the noble Lord, Lord Davies, covered a very wide field. It offered ample material for the noble Earl who is to reply for the Government—the whole range of collective security, unity of direction and various other phrases which have meant so much or so little in the past, but overriding all there was his indictment of the Prime Minister's policy of appeasement. In earlier days in another place I found myself frequently in accord with the noble Lord, indeed we combined forces on many occasions in different projects. But in this case I find

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myself in entire disagreement with him on the main point at issue. He made the observation that what we want is action, not words. It would seem relevant therefore to remark that action at home is the best evidence of what this country can do in foreign policy. It is for that reason that I admired a letter to The Times from the noble Marquess, Lord Lothian, in December, 1937, I think, in which he courageously recommended obligatory service—not necessarily military service, but obligatory service, the subordination of the individual to the requirements of this State. He followed that up with a very clear letter on the same subject last week, and I think there must be few who read two letters in The Times yesterday who could have felt that there remain serious grounds for delay by His Majesty's Government in imposing some form of obligatory service and impressing the Chancelleries of Europe.
I do not want to approach this subject from an alarmist point of view, nor do I suggest that it is a moment for complacency. There is the long-range policy and the short-range policy. The short-range policy is occupying the active, continuous and intense attention of the Government. The long-range policy is a policy in regard to which speakers today can be helpful to the Government. I am one of those who think that the trade policy of this Government is the policy that is going to have the greatest effect in the councils of the world. After all, ultimately the cost of all expenditure on preparedness and armaments is going to be borne by trade. It is trade through which this country through many generations built up its wealth, to be the foundation of our position at the present moment. There is a spate of new trade agreements, which seem to be announced every day, and one feels that the great need is for intense application of the thought of the Government to these matters of trade policy. Economic preparedness internally must be complementary to military policy. That in turn is closely allied to the weight which this foreign policy will carry in the world.
There are many who think that bilateral trade agreements are the most profitable and promising method of dealing with the commercial position. There are many who feel that there should be greater drive towards bilateral trade equation
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rather than dependence on the triangular and multi-angular balance of trade. Anyhow, export trade being one of our main needs, there seem to be real grounds why it should be examined more intensely by His Majesty's Government. There are many who think that the export drive can only come about by the application of subsidies. That is a controversial question. I mention it because it has been suggested that we are going to meet attacks on our trade by the application of the policy of others in the prosecution of our own. If that be a right policy it is not out of reason to suggest it should be met by a sales tax to provide the funds out of which it can be done. Whatever may be the method, the important thing is to export a greater volume of the results of British labour, which will pay for those imports we need, to provide the means of meeting the vast burden of expenditure needed to support our strength in the world.
Looking over the whole field, one's thoughts turn first to Italy and Poland, both large countries with extensive territory and large populations. The situation with regard to Italy naturally involves questions which affect others more than ourselves, and it would not be delicate to make any observations on that at this moment. In the case of Poland the situation is different, and the mover of the Resolution dealt at some length with that. For that reason I will confine myself for a minute or two to that problem. I am among those who think that closer collaboration with Poland, both in trade and in diplomacy, has been for many years past a matter of vital importance to this country. For twenty years I have tried to develop closer relations between Poland and this country. Before the War I was able to realise, by frequent visits to that country, that the three sections—Congress Poland, Galicia and Poznania which, thrown together, now form the territory of the present Republic of Poland—once fused, would give a powerful country. Since then I have travelled thousands of miles throughout the length and breadth of Poland on many visits, and have tried to familiarise myself with what is the internal life of the country. In another place, when we pressed that this country should appoint a financial adviser to Poland, Sir Hilton Young, now a member of your Lordships'

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House, was appointed, and he did much to establish good relations between the two countries.
When one is actually in a country one is better informed than those who only go to a country and do business there. Personally I have had intimate contact with Poland. I have shown consistent confidence in Poland, and for that reason I speak with some warmth on the subject to-day. Because of that I have been a target for much criticism from those who had less confidence than myself, and it has been discouraging to see how, both at Westminster and in the City, there has been a complete lack of realisation of the importance of welding together the interests of these two countries. The internal economy of Poland is complementary to our own, and both on this ground and on the ground of diplomacy there is every reason why we should act together. Emphasis on this in the past has been frowned at because it tended to the encirclement of Germany, but surely the gloves are off and there is no need to-day to understate our own interest.
I would remind your Lordships that Napoleon said that Poland was the keystone of the European arch. What was true 120 years ago is equally true to-day. With the eclipse of Vienna, Warsaw takes its place. It becomes the focal point in the great territory which, stretching from the Baltic to the Black Sea, forms a wedge between the Axis States and Russia. The visit of Mr. Hudson, the Secretary to the Overseas Trade Department, is opportune, and will, I am sure, he fruitful. We may have confidence that these discussions of a commercial character will help the diplomatic position, and we can rejoice at the outspoken criticism of that Minister and his realism as to the requirements of British trade. I would remind your Lordships that the economy of, Poland, like the economy of Australia, is complementary to the economy of this country. It is a country of primary production. It exports products of a character that we need and imports capital goods which we desire to send out with a British labour content. Poland's purchasing power until now has been low. Its development upwards can be only in the ordinary course of evolution, but there is a great market with which we need to trade. To-day more than at any other time we wish to see a
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strong and prosperous Poland. It is for that reason that one hopes that the noble Earl, replying for the Government, will be able to give us assurance that this consideration is very prominent in the mind of His Majesty's Government.
The noble Viscount the Secretary of State for Foreign Affairs, in speaking in this House on the occasion of the debate last week, turned for a moment to the question of the fate of refugees from Central Europe. If a debate takes place in this House I feel it is right there should be voiced the intense sympathy of your Lordships with these unfortunate people and the wish that whatever can be done should be done to help them. The repugnant treatment which has been, and is daily being, meted out to them evokes our sympathy, and we urge His Majesty's Government that they should make every possible effort to facilitate their rapid egress from what is now German territory, and, if thought right, the entry into this country of those to whom it is agreed such privileges should be extended.
The noble Lord who introduced the Motion referred to a letter in The Times by Sir Alexander Roger, urging an economic boycott of Germany. Boycotts, and economic boycotts above all, are matters of extreme danger, and I cannot allow a suggestion of that kind to pass in this House without protesting against the danger and impropriety of it. In any case, from a practical point of view, what is the good of trying to prevent direct trade with Germany?—because I need not remind your Lordships that trade can be triangular and multilateral and cannot be prevented.
In conclusion, I would say that if in the wisdom of those who guide us conscious development of trade in Central and South-Eastern Europe is neither prudent nor possible, then again, on the long-range policy, the aim of His Majesty's Government, in order to give confidence throughout the world in its power, should be to consider the position of the Empire as a whole. Trade within the Empire, to be developed, requires a redistribution of population, and there one calls to life and focuses one's attention on the responsibilities of the Dominions. In their charge are these matters, and it is earnestly that one hopes that those responsible for the government of His Majesty's Dominions will realise that the moment has raised much higher than ever

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before the responsibility which they share in giving a gesture to the world that the vast territories which they control will be assisted and developed—and that requires population. That is the long-range policy. Surely in these days, when one sees these vast sums being expended on defence by the Dominions, one realises that increasing population is the best armament and defence.
LORD PHILLIMORE: My Lords, as the noble Lord who moved this Motion so happily and so pertinently said, time is a factor in all this business, and I do not propose to keep your Lordships for more than a few minutes, but I do welcome the opportunity of advancing certain considerations which hitherto up till to-night have not, I think, had sufficient weight attached to them. All that I say will, I hope, be said with the restraint which the noble Lord, Lord Barnby, recommended and displayed. I think it is appropriate to say now that it is necessary for us to take a long-term view of this great struggle which is going on in Europe. After all, it originated mainly out of the Great War; partially, probably out of the development of modern science; at any rate it originated in a great excitement of men's minds accompanied by vast integrations of men and subsequent disintegration. There has been no movement like it in recent history until you go back to the French Revolution, and the French Revolution worked itself out all through the first threequarters of the nineteenth century, and may be said to have been still working itself out when Rome was finally occupied in 1870.
I regret—I regret it as the father of children, I regret it for my nation—that I can see no early end to this turmoil in Europe. It is therefore necessary, it is essential, that we take a long view, and if we are going to take a long view we must do it in the consciousness of a good cause. In a long struggle nothing really matters to anything like the same extent as the value of the cause and the principle for which you are fighting. In that I am sure we are all at one, and any speech which has been made which did not emphasize that would be, I am sure, rejected by your Lordships on reconsideration. If you look at the recent history of Europe, and particularly its warlike history, you notice that the wars that have been going on since our Great
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War finished have not in the main been territorial wars, they have been civil wars, they have been wars between conflicting ideals, conflicting systems and ideas of government. There are now, to any observer of Europe, two planes in which Europe must be viewed. One plane may be described as territorial, but the other plane, and by far the most important cross-section, is the ideological one, and the two planes do not agree. In numerous respects they do not agree. There are very few countries in Europe who have not more or less been through a civil war since 1918, and that denotes a great conflict of policy and of opinion, of principle, of religion, and of all the things we think most sacred.
The noble Lord who moved the Motion spoke a good deal of the League of Nations. He again, I noticed, begins to recommend that policy of universality which broke down so signally when the League of Nations was active in our affairs. Why did it break down? Because there was no unity of purpose, no unity of principle, although there might have been universality of membership. We need ourselves in our own country that unity of ideal before we are fit to fight. It is the greatest mistake in the world to say that when Mr. Chamberlain went to Munich he failed. He had the greatest success that any man has made during the last generation or more. Why do I say that? Because he appealed to all that was best in Europe, because he appealed to the policy of appeasement. Nobody who went to Italy shortly after the visit of the Prime Minister and the Foreign Secretary recently, could fail to grasp the radiant joy with which the Italians greeted the Chamberlain policy of appeasement and the Chamberlain policy of appealing to the best that is in all peoples. How can we appeal to the best in all the nations of the earth, and how can we therefore build up a strong alliance on any footing other than on the policy of appealing to our principles and sticking to them?
I have no desire to see Russia outlawed. I have never spoken in this House or elsewhere in favour of leaving Russia as an outlaw in Europe, but if we are going to pin our faith to that large country with its teeming population we must hear in mind that its ideology is entirely contrary to that of many other friends whom we may have or may acquire. You

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cannot at the same time appeal to the best in the peoples of Europe and say you are working hand in glove with a nation which has treated its own populace as Russia has treated its populace. That is impossible, that would be fatal. On those lines we should inevitably finish up in disaster. There is only one hope for us, and that is to go on founding our case on principle and gathering to ourselves the best in every nation whether the rulers of that nation be or be not friendly to us.
LORD CATTO: My Lords, it may be that some of my noble friends would think that I would be more an authority were the subject of this debate finance or India, but perhaps I may claim a better understanding of the subject than might be generally supposed of one who in post-War years has been so closely associated with India. For before I even went to that country I had had great experience of the countries of South-Eastern Europe and Russia; indeed I lived in the latter country for some six years and I speak the language. The Prime Minister's Birmingham speech was the speech of his life. It expressed the sentiments of our people, it assailed Teutonic power politics, and it carried a conviction that has rallied to the democratic countries the moral support of the whole world. But, great as that, speech was, it gave no clear lead as to the remedy for the evils of which he spoke. Last week the noble Viscount the Foreign Secretary made a speech in this House in which, if I understood him rightly, he seemed to be contemplating some form of what has come to be called collective security. Now that may be a remedy, indeed it may be the remedy, but it is a matter that in all its implications requires the most thoughtful consideration. Otherwise it may become collective insecurity.
We must not forget that it was a pre-War form of collective security between France and Russia that precipitated France's entry and our entry into the Great War, and in circumstances, may I remind your Lordships, not unlike recent events in Czacho-Slovakia, for the quarrel was aggression by Austria and Germany on a small Slav State—Serbia. But although that was the spark that started the conflagration, it was not the real cause of the War. The real cause was the age-long rivalry of Teuton and Slav in Eastern and South-Eastern Europe, and
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in my judgment that is something in which we should not again become involved. Each is strong enough to hold the other, and that is the only practical solution of the problem. I would not like any word of mine to increase the difficulties of the noble Viscount the Foreign Secretary, and the noble Earl who is to reply to this Motion, in the very delicate task they have before them, but perhaps it would not be inappropriate to remind them of this age-long clash of Teuton and Slav of which I have spoken, for if rumour is correct collective security, as it is now visualised, may include Russia and perhaps Poland. If that is so, I would remind them of what Stalin said about Western Democracies only the other day. It is too long to quote, but I have it here if the noble Earl wishes to see it.
I do not want to say any hard things about Russia. It is a great country, and the Russian people are generous and hospitable, as I can testify from the years when I lived amongst them. Their form of government is their own affair, but we cannot and we should not, in considering these problems, disguise from ourselves that it is a Government that is far from being a democracy, and that their leaders would, if they could, tear down every vestige of that democracy which we look upon as our birthright and destroy that liberty of the individual which is so dear to each one of us. I venture to hope, therefore, that the noble Viscount the Foreign Secretary will weigh carefully—and if I know anything of the Foreign Secretary and his caution I am sure that he will weigh carefully—all the factors before committing this country to adventures in the political maelstrom of Teuton and Slav in Eastern and South-Eastern Europe. I have faith in the strength and unity of the Western Democracies to defend their own ideals, and I go further and I say that I can see no good, but perhaps a great harm, in trying to surround Germany by a ring of potential enemies, driving her to desperation and re-creating the very conditions which brought about the Great War.
Time passes and I will not detain your Lordships more than a few moments. Is the basis of collective security to include the defence of Rumania and of Hungary and of Poland? The first two have already given pretty clear evidence that they want none of it. It is too dangerous

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for them. They realise that they must live in peace with their powerful neighbour, and that their economic existence, and indeed their political existence, depends upon it. And so far as Poland is concerned, let us take heed that we do not bring about a situation whereby history might repeat itself and that country again become, as it has been in the past, the battleground of Teuton and Slav—and, no doubt, as always in the past, suffer dismemberment by both. I have listened to-night to the speeches of noble Lords and I have not found in any of them any constructive suggestion to help the Government in these difficult times. They have given nothing but criticism. Therefore may I, in conclusion, say that it seems to me that what should be done is to concentrate on what is practical and what can be immediately effected, and without delay bring about a general understanding of the large and small nations of Western Europe the geographical position of which is such that they could act quickly together and effectively in defence of their democratic ideals and territorial integrity.
LORD SEMPILL: My Lords, will you permit me, having just returned from Rumania, to make a few observations relative to the situation which might develop in the manner so deplored by the noble Lord who moved this Motion? I was very much struck whilst in Rumania with the splendid, not to say dynamic work, which is being carried out there by the British Council, and your Lordships will naturally be interested to know of the great part played in that by a member of your Lordships' House, the noble Lord, Lord Lloyd. The work of the British Council in Rumania has been invaluable to the interests of that country and our own. I suggest that not only should that work be intensified, but that the departure of an economic mission which has already been agreed upon by His Majesty's Government should be speeded up. I suggest that such a mission should not merely explore the situation, as all the essential information relative to the position in Rumania is available in London to-day, but should state clearly the amount of money—and that a substantial sum—that will be made available, and should proceed to the making of inter-trading arrangements between Rumania and this country. That, I suggest, would lead more effectively than anything else—
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it is already in part being dope—to the development of a situation of great benefit to Rumania, and lead to the pacification of Europe more effectively, if I may say so, than the situation as outlined by the noble Lord the mover of this Motion.
THE PARLIAMENTARY UNDER-SECRETARY OF STATE FOR FOREIGN AFFAIRS (THE EARL OF PLYMOUTH): My Lords, my first duty must be to express to your Lordships, on behalf of my noble friend the Secretary of State, his regret for his absence this afternoon. He is sorry that the shortness of the notice of this Motion and the pressure of work, which I am sure you will all realise bears very heavily upon him at the present moment, made it impossible for him to arrange to be in his place this afternoon. The noble Lord who initiated this debate has taken up a passage in my noble friend's speech in your Lordships' House on March 20, and has suggested to us certain steps which in his view should follow upon it. I feel certain that the majority of your Lordships will hardly expect me to elaborate that speech of March 20, more especially as in a statement made in another place on March 23 my right honourable friend the Prime Minister gave such indications as were possible of the steps which, in the view of His Majesty's Government, are appropriate in the circumstances, and the object to which they are directed.
Furthermore, in another place this very afternoon my right honourable friend the Prime Minister was asked whether he had any further statement to make upon the general European situation, and his reply was to the effect that he could inform the House that His Majesty's Government were actively continuing their consultations with other Governments upon issues arising from recent events. But he pointed out that during the progress of these consultations the House would appreciate that it was essential that their confidential character should be respected, and he therefore asked the House not to press him to make a statement which could not in any case be complete until the Government were in possession of the final views of the other Governments concerned. I hope, therefore, that you will understand that it is not possible for me to add anything, in regard to the present situation and the consultations which are going on at the moment, to what has

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already been said both by the Prime Minister and by my noble friend the Secretary of State.
But at the same time I want to take the opportunity of stating quite categorically that I am quite unable to accept most of the propositions to which the noble Lord, Lord Davies, gave expression. They seem to me to be based almost entirely upon false premises and on over-optimistic hopes. They were, furthermore, in my view extravagant beyond measure in their sweeping generalisations, which I maintain were quite incapable of proof by himself or anybody else. In addition to that it is clearly not possible—nor indeed do I think it would be right for me to attempt—to answer a number of what I can describe mildly as the naively embarrassing questions which he put to me. Indeed, I do not think I should be using extravagant language if I said that it would lead to mischievous results if I attempted to do so. On the other hand, I wish to pay tribute to the restrained language which was used by other speakers, and to add that I certainly found that most of their remarks were, in contrast, extremely useful.
In the position of responsibility in which I speak this afternoon I have to use very careful and cautious language, as your Lordships will readily understand. Indeed, I think it behoves everybody, at a time of great tension such as we have seen and are still passing through, that they should use language which is not calculated or designed in any way to aggravate an already difficult situation. I therefore now turn to the last two paragraphs of this Motion, about which I can say a few words. These, with an important exception, relate to machinery and procedure rather than to substance of policy. It has already been made clear that His Majesty's Government have initiated consultations with certain countries to meet a situation in which independent States are subjected to such pressure under the threat of force as to be obliged to yield up their independence; and further to oppose attempts, if they should be made, to put such a procedure into operation. His Majesty's Government have not proposed a conference of States for this purpose, because they preferred at the present time to conduct consultations
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through the ordinary diplomatic channels.
The noble Lord seems to contemplate not merely a conference but, in addition to that, a permanent body of experts to draw up a detailed financial, economic and military plan. In fact, he dilated on that point. All I can say in answer is that if States were willing to enter into a detailed combination for the purposes indicated, some such machinery might be found to be necessary: indeed, its establishment might follow almost naturally from such a combination. But I must make it clear that it seems quite evident to me that the creation of that machinery now would not necessarily provide the driving force which is so essential in the present situation. The noble Lord then passes, by implication, from defence to attack. He is not only thinking of steps to meet further aggression, if it should be attempted, but also active measures to restore the position of Czecho-Slovakia as it was after the Munich Agreement. It is clear that such a restoration could be effected only by force of arms, and I want to say that neither His Majesty's Government nor the States with whom they are in consultation are harbouring any such designs. I should like to make it perfectly clear that the object of the exchange of views which His Majesty's Government are conducting now is purely defensive in intention and character and has no aggressive purpose whatsoever.
In conjunction with this plan for resistance to aggression, the noble Lord suggests the establishment of machinery for the impartial settlement of inter-State disputes. That is in his Motion, though as a matter of fact he said very little about it during his speech. I should only like to say that we know that as a favourite idea of the noble Lord's, which used to take shape in his proposal for the constitution of what is known as an equity tribunal. I might say that the theory of that proposal is an unexceptionable one, but I think it will be agreed that its practical application in the atmosphere of the present time is obviously not practical politics. At the present time powerful States have even discarded the method of friendly negotiation for the settlement of disputes, and have resorted to the direct or indirect application of force. It is surely, therefore,

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not even remotely probable that they would refer their grievances to impartial adjudication; nor, I am afraid, would it he feasible in a period of tension to create a body which would be regarded as impartial or which would have the authority to ensure respect for its decisions. As your Lordships know, the League of Nations endeavoured to provide machinery for conciliation, arbitration and judicial settlement, but unfortunately its purpose was not fulfilled. Full use may not have been made of it, but it was the will to work the machinery, and not the machinery itself, which was deficient.
I want to add that His Majesty's Government, for their part, have always been ready to discuss, in all sincerity and with all good will, any international question calling for settlement. They remain convinced that there is no question arising between States which could not be settled, if that good will exists, by friendly and peaceful negotiations. But they are not prepared, my Lords, to negotiate under the threat of force, nor do they see any object in setting up fresh machinery for the settlement of international disputes so long as the world lies under the menace of forcible action and so long as the general desire to make use of that machinery is conspicuous by its absence. The establishment of such machinery has no necessary connection with consultations having as their object resistance to further aggression. His Majesty's Government are not at the moment concerned with theory, or with the elaboration of paper plans, on which I would say that most of the noble Lord's speech this afternoon was based. On the other hand, His Majesty's Government are concerned, and very definitely concerned, to deal in a practical manner with the concrete issues affecting the independent existence of European States, which have been abruptly and forcibly raised by the events of the last few weeks.
I would like to conclude by thanking other noble Lords who have contributed to this debate for what they have said. I would like to assure Lord Barnby and Lord Sempill, both of whom referred to trade matters, that we are fully conscious of the importance of that subject, and I think the journey which the Secretary of the Department for Overseas Trade is now taking to Poland and the Baltic States, and other States in North-Eastern Europe, is evidence of the fact that we do attach
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the very greatest importance to that subject. I was very glad to hear what Lord Sempill said about the work of the British Council in Rumania, and I can assure him that attention will be paid to what he has said on that subject. I would only say of other noble Lords' speeches that they seemed to me completely to demolish the whole of the noble Lord's argument, and therefore it is not necessary for me to say anything more at the present moment.
LORD DAVIES: My Lords, I do not propose to follow the noble Earl in his remarks at this late hour, but there are one or two points to which I would like to reply, if I have the time. Surely the noble Earl can imagine a state of affairs where things cannot be settled amicably round a table by the process of negotiation and discussion. In a perfect world that might suffice, but unfortunately, as the noble Earl knows, when discussion and negotiation break down, then one of two things must happen. Either the dispute must be submitted to a disinterested body, who can deliver an impartial judgment, or you must allow the disputants to go to war. That is the alternative, and that has been the bane of the League of Nations—that our representative has said that we must settle these things round a table, and that there is no necessity to set up other machinery which, when discussion and negotiation break down, is able to bring about a just and equitable settlement.
If those other countries which the noble Earl mentioned are prepared, despite the existing state of tension in Europe, to cooperate in resisting aggression, surely it would be a step in the right direction and an example to them if we expressed our willingness to submit ourselves to the rule of law by urging the creation of machinery of this kind for the settlement of disputes. Until we, as a country, have made that gesture to the world at large, I do not see how we can expect other countries to submit themselves, or to join us in creating those essential institutions which are necessary to support the rule of law.
May I, in answer to the noble Lords, Lord Barnby and Lord Sempill, say that it seems to me that in these days the flag follows trade? In other days it used to be the other way about, and it was always said that trade

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followed the flag. Therefore I sincerely trust that the Government will do what Lord Sempill and Lord Barnby ask—namely, do their best to arrive at mutually satisfactory economic and trade agreements with both Rumania and Poland. I think Lord Phillimore is quite right when he says that it is the cause that matters. I think that he would probably agree that in order to secure what he describes as unity it is essential that other nations should realise that they can secure some measure of international justice.
Lord Hastings told us that we should not worry about what he described as our moral obligations. I do not know whether he drew any distinction between "moral" and "trade" obligations. I should have thought that they were one and the same, and when he told us not to worry about our moral obligations, then I suppose he meant that we were not to worry about our trade obligations, and that is why we have on occasions completely and entirely disregarded our obligations under the Covenant of the League of Nations. When he tells us that we are not to worry about our moral obligations, I would point out to him that that is precisely the line taken by Herr Hitler and other Dictators. Treaties mean nothing to them at all. In twenty-four hours a treaty no longer exists. Does Lord Hastings suggest that we should emulate the example of the Dictators and scrap every treaty when it does not suit us to carry it out?
He also told us that he disliked Russia, and that he hoped Russia would not exert any influence upon our policy. Then he began to talk about Italy. It is rather a curious fact, I think, that during the last week Italy has sent out several missions to Russia in order to secure a trade agreement with that country. Therefore, according to the noble Lord, it is wrong for us to have anything to do with Russia, but it is quite right for Italy, and probably other countries, to continue to trade with her. May I remind the noble Lord that in 1914, when this country detested the Tsarist régime in Russia, that did not prevent us from securing and welcoming the assistance which Russia was prepared to give us and France at that time. It is perfectly true that none of us, I imagine, has any great affection for the system of government which at present exists in
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Russia. That is also perfectly true of other countries. Why should we draw a distinction? Why should we be influenced by any particular form of government which happens to exist in another country?
Therefore I must still appeal to the noble Earl, and the Government, in view of what the Foreign Secretary told us last week, when he gave us his assurance that at least the question of our incurring further mutual obligations was to be explored, not to go back on what he and the Prime Minister said, and not to turn their backs once more upon a policy which we thought they had substituted for what was called appeasement. After all, there used to be in this country what was described as continuity of foreign policy. The noble Earl knows perfectly well that all his predecessors in the Foreign Office have said, ever since the Covenant was signed, that the League was the keystone of our foreign policy. The late Sir Austen Chamberlain said so, and all his successors have said so. Why not, therefore, go back to that policy and endeavour to implement it by providing the means which we hope will prevent aggression in Europe? I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

BUSINESS OF THE HOUSE.
THE FIRST LORD OF THE ADMIRALTY (EARL STANHOPE): My Lords, I suggest that the House should meet tomorrow at half-past three, and that we should then move the suspension of Standing Order No. XXI with the object of altering the order of business. The proposal that I put before your Lordships is that we should then take the Second Reading of the Consolidated Fund Bill and pass it through all its stages, and also the Third Reading of the China (Currency Stabilisation) Bill. When those have been completed, the Royal Commission will sit at 3·45 to give the Royal Assent. We shall then pass on to take the Motion of the noble Lord, Lord Addison, dealing with unemployment. I think that would be for the convenience of your Lordships' proceedings, and I understand that it will also fit in with the arrangements in another place.
House adjourned at twenty-seven minutes before eight o'clock.