Lords Sitting of 12 October 1939

Preamble
The House met at three of the clock, The LORD CHANCELLOR on the Woolsack.
EXECUTION OF TRUSTS (EMERGENCY PROVISIONS) BILL. [H.L.]
Returned from the Commons, agreed to.

BUSINESS OF THE HOUSE.
THE EARL OF LUCAN: My Lords, on behalf of my noble friend the Leader of the House, I beg to move the Motion standing in his name: That Standing Order No. XXXIX be considered in order to its being suspended for this day's sitting.
Moved, That Standing Order No. XXXIX be considered in order to its being suspended for this day's sitting.—(The Earl of Lucan.)
On Question, Motion agreed to, and ordered accordingly.

FINANCE (No. 2) BILL.
Order of the Day for the Second Reading read.
3.1 p.m.
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR DOMINION AFFAIRS (THE DUKE OF DEVONSHIRE): My Lords, I have had entrusted to me the somewhat unpalatable task of presenting to your Lordships the Finance (No. 2) Bill. Your Lordships will readily appreciate that it is possible to hold two opinions on matters of this kind: an official opinion and a private opinion. This afternoon I am expressing an official opinion; I fear that my private opinion would be unfitted for Billingsgate Market, let alone for the chaste seclusion of your Lordships' House. At the end of July my noble friend Lord Templemore moved in this House the Second Reading of the first Finance Bill, and he then stated that His Majesty's Government were providing for expenditure in the current year of the order of £1,400,000,000. He
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pointed out that, because of the scale and pace at which the country was pressing forward—with what wisdom events have proved—with its programme of preparations against war, expenditure on Defence had mounted to a total of £730,000,000; and he observed that, in spite of the increased taxation which the April Budget of my right honourable friend the Chancellor of the Exchequer imposed, the yield from revenue was calculated to be £942,000,000, leaving something like £480,000,000 to be borrowed. By the time Parliament rose at the beginning of August a total expenditure of £1,453,000,000 had been authorised; and expenditure for Defence purposes accounted for £749,000,000 of the total, of which £502,000,000 was to be met by borrowing. I mention these figures for the sake of precision; but, as they related to a situation in which it was estimated that the country would keep out of war until March 31, 1940, they have now little more than an historical interest.
The events of the last days of August and the beginning of September are fresh in all our minds. On September 1 Parliament granted a Vote of Credit for £500,000,000 for additional war expenditure. At this stage of the war nobody can be expected to foretell with any precision its effects on the nation's resources as a whole, or on the first Budget position in particular. It remains to be seen whether the first Vote of Credit will suffice to cover the total war expenditure during the rest of this financial year, 1939–40. But it was at once apparent to my right honourable friend the Chancellor of the Exchequer that the outbreak of war necessitated a revision of the earlier Budget proposals. As he explained in another place in introducing the War Budget on September 27, it was reckoned that on the revenue side the yield of existing taxation might be expected to drop by £54,000,000 to some £888,000,000, while on the expenditure side it was evident that the revised total, with £500,000,000 added to £1,453,000,000, could not be much less than the gigantic sum of £2,000,000,000. Even allowing for savings on certain peace-time services, it will be apparent to your Lordships that the gap between the revised revenue total and the revised expenditure total is so huge that new taxation has become inevitable.

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On the last occasion when the noble Lord moved the Second Reading of a Finance Bill in this House, and explained proposals the effect of which was to raise an additional £24,000,000 from revenue, he drew from the noble Lord, Lord Strabolgi, the injunction with regard to the whole problem of finance that as much money as possible should be raised out of revenue and as little as possible borrowed. I hope therefore that the noble Lord at least will find no difficulty in supporting the present proposals—
LORD STRABOLGI: As long as you spend the money properly.
THE DUKE OF DEVONSHIRE: —proposals, by which the Chancellor of the Exchequer seeks to bring in from increased taxation £107,000,000 this year and £226,500,000 next year, by way of taxes which are, of course, to come on top of the high rate of taxation which the country was already bearing. I cannot expect this House as a whole to relish these proposals in themselves; but as my right honourable friend the Chancellor of the Exchequer reminded another place in his Budget speech, it is a fact which we have to face that except in so far as war is financed either out of the proceeds of taxation or from the proceeds of loans which come from the genuine savings of the nation, it can only be financed by methods or out of sources which are essentially inflationary. That, I think all your Lordships will agree, is a course which we must strive by all means in our power to avoid. Moreover, there is the further justification of additional taxation now—apart from the amount of money it brings in—that it is an instrument by which resources can be diverted from private and non-essential expenditure into the public purse, and civilian demand be deflected from channels which do not assist the successful waging of the war.
Taxation, accordingly, is to be increased by the Finance (No. 2) Bill which I will very briefly now explain to the House. Part I of this Bill is concerned with indirect taxation. Clause 1 and the First Schedule increase the duty on beer by 1d. a pint with an estimated gain to the revenue of £11,000,000 in 1939–40 and £27,000,000 in a full year. The effect of Clause 2 and the Second Schedule is to
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raise from spirits £2,000,000 in 1939–40 and £3,500,000 in a full year. The increased duties on wines will produce £1,000,000 this year and in a full year about £2,000,000. By Clause 5 and the Fourth Schedule the basic rate of duty on tobacco is increased by a further 2s. per lb., or 1½d. per oz., with a resulting gain to revenue estimated at £8,000,000 this year and £16,000,000 in a full year. Lastly, by Clause 6 and the Fifth Schedule the sugar duties are increased by the equivalent of 1d. per lb. on the fully refined product, with corresponding increases elsewhere. The yield is put at £8,500,000 this year and £18,000,000 in a full year. The total additional yield of this group of Customs and Excise taxes is estimated to be some £30,500,000 this year, and some £66,500,000 in a full year.
Part II of the Bill relates to the Income Tax, and here my right honourable friend's proposals are designed to secure increasing contributions from direct taxation all along the line. It is contemplated—subject, as my right honourable friend pointed out in his Budget speech, to any necessary reconsideration when the time comes—that the standard rate of Income Tax in a full year shall be 7s. 6d. in the £. Clause 7 of the Bill applies this rate for the last three-quarters of the current year, so that, taking into consideration the rate of 5s. 6d. operative in the first quarter, the standard rate for the whole of the current year will be 7s. In order to mitigate the effect of the rise in the standard rate in a case where an individual has suffered a substantial reduction in his earned income on account of the war, there is an important provision in Clause 11 of the Bill. Under that clause an individual who can show that his earned income this year has fallen through circumstances connected with the war by 20 per cent. or more below the figure on which he is assessed for this year may claim such relief as will reduce his bill for standard rate tax to what it would have been if the assessment had been made on the actual earned income of the current year. In any case where this relief is claimed, the Inland Revenue will have the right to compare the assessment for last year with the actual earned income of last year and to revise the liability, if necessary.
The proposals which are included in the Bill relating to reductions in the various

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Income Tax allowances and reliefs will, with one exception, not come into force until the next Income Tax year, 1940–41. The one exception is the reduced rate relief, hitherto £135 at is. 8d., which will be £135 at 2s. 4d.—that is. one-third of 7s.—for this year. Next year the charge will be at 3s. 9d.—one-half of 7s. 6d.—but the zone in which the rate will operate is to be increased from the first £135 of taxable income to the first £165. The other reliefs affected next year are the earned income relief, which will be reduced from one-fifth, with a maximum of £300, to one-sixth, with a maximum of £250, the marriage allowance, at present £180, which will become £170, and the children allowance, which will be reduced from its present level of £60 for each child to £50.
With regard to Income Tax, my attention has been called to one point about which there has been some uneasiness. It relates to the case of those persons, not normally resident in England, who may come to England for the purpose of joining the armed forces of the Crown, and the question of whether they will be liable to English Income Tax, Surtax and Death Duties in the event of their being domiciled in England as the result of war service. I have been able to get in touch with my right honourable friend on this subject, and he authorises me to state that persons who join the forces from overseas and become resident in the United Kingdom by reason of their service will not be charged to Income Tax on income that would not have been taxable if they had not become resident. Their service pay out of British funds will, of course, be subject to tax. As respects Death Duties, I am advised that the position of such persons will not be affected by their joining the forces. That matter has been raised to me, and I hope that that assurance, which the Chancellor has authorised me to give, will prove satisfactory. The new Surtax scale which applies to the Surtax year 1938–39 payable on January 1, 1940, appears in Clause 8. The scale begins at 1s. 3d. in the £ and rises at the other end to 9s. 6d. on the slices of income over £30,000.
Part III of the Bill relates to the new Excess Profits Tax. It has been described very fully in another place, and I do not propose to do more than give an outline of it here. The tax will
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be chargeable, as from April 1, 1939, at the rate of 60 per cent. on the excess over a defined pre-war standard of the current profits of all trades and businesses. The general scheme of the tax is similar to that of the Armament Profits Duty, which made its appearance in the first Finance Act earlier in the year. The Armament Profits Duty applied only to armament concerns, but as those concerns are included with all other trades and businesses within the scope of the new tax, the Armament Profits Duty is no longer required and will be repealed.
The profits standard which forms the datum line for the purpose of measuring the growth of profit is precisely the same as that adopted for the purposes of Armament Profits Duty. In the ordinary case of the long established concern, the standard will, at the taxpayer's option, be either the profits of the calendar year 1935, or the profits of the calendar year 1936, or the average profits of the calendar years 1935 and 1937, or the average profits of the calendar years 1936 and 1937. In the exceptional case where a particular concern may have had bad trading results in the years by reference to which the profits standard is to be fixed, it will be able to appeal to the Board of Referees for a higher standard. Where additional capital is now employed in the business as compared with the years by reference to which the profits standard is fixed, an addition will be made to the standard in respect of the increase in capital—namely, 8 per cent. in the case of companies and 10 per cent. in the case of individuals and firms. The profits standard for new businesses formed since July 1, 1936, will be taken as a percentage of the capital employed in the business, the percentages being the same as those obtaining in the case of the ordinary concern in respect of an increase in capital. Clause 19 of the Bill deals with the relation between Excess Profits Tax and National Defence Contribution, and the effect of it is that a concern is not to be liable to both these taxes, but only to whichever of them is the higher.
I have detailed the main provisions of the Bill. My right honourable friend's intention has been to produce a scheme of taxation which will call for contributions for war expenditure from citizens of every kind, and possessing every

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degree of fortune. I cannot say that I am myself, nor that I hope that your Lordships will be, deeply enamoured of the Bill. It has been criticised, and I am bound to say rightly criticised, on the ground that it will dislocate many businesses which are at present making substantial contributions to the revenue, and that the yield of the new taxes will be disproportionate to their impact on the economic life of the nation. In that connection I would venture to put three considerations before your Lordships.
The first is that the war will impose, as it goes on—indeed in many cases has already imposed—heavy burdens, and perhaps even cruel sufferings, upon many sections of the population. It is of vital importance that the sacrifice should, as far as possible, be equally spread. Even under this very heavy War Budget, with its crushing incidence upon the higher rates of income—because, as your Lordships realise to an extent which is not generally realised, the Surtax is not charged in many cases on income actually received, but upon a figure which is fixed according to more or less arbitrary rules—the higher ranks of the Super-tax payers will not have their lives disorganised to the same extent as the war has already disorganised the lives of very many people whose families have been evacuated, whose businesses have been shattered, and whose employment has been lost. But it does go—or at least in my belief, it goes—as far as possible, without destroying the very foundations on which the revenue rests, to ensure that the burden of sacrifice is equally spread.
Another consideration which I put before your Lordships is that, vast and ultimately decisive in its effect upon the issues of the war as Great Britain's contribution in the realm of sea and air power will be, in the early stages, at all events, the brunt of the effort on land must be borne by our Allies the French. It will take far less time than in the last war for us to assume a larger share of the task of defending the frontiers of civilisation in the West, but until we can assume that larger share the tremendous effort which we are making in the field of finance is an earnest of our resolution to stand side by side with our Allies who are fighting in the field to-day.
The third consideration is that it is desirable to show quite unmistakably to
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the world at large, which is somewhat confused about this war—which, after all, is in many ways unlike previous wars—and to our enemies in particular, the spirit of grim determination in which we are entering the struggle and our resolve to use in its prosecution our gigantic financial resources to the full. In very many ways we occupy to-day—the fortieth day of the war—a far stronger relative position than we occupied on the fortieth day of the war of 1914–18. It is not my function to make a review of the war situation. Your Lordships are fully capable of doing that for yourselves. Suffice it to say that in almost every respect we are better off, and in some ways immeasurably better off, than we were then. Our Armies, and those of our Allies, are unbroken in the field and behind immensely strong fortified positions. I need not go through the catalogue of advantages, but in the field we are surveying this afternoon—the field of finance—it may make it easier for us to shoulder this grim burden to realise that in the realm of finance our position, as compared with that of our opponents, is immeasurably stronger than it was in 1914.
I now turn to a matter which is of prime importance in relation to the great programme of expenditure on which the Government are engaged. The question of economy and avoidance of waste in Government expenditure has been very much in the mind of the Government in connection with the current Budget. My right honourable friend, replying at the end of the Budget debate in another place, dealt at some length with the question of economy. He emphasized the importance of financial control within the spending Departments, and told the House that the finance branches of these Departments had recently been strengthened to enable them to maintain their control over their greatly increased expenditure. In the new Departments strong finance branches are being provided, and special inquiries are being instituted in which experienced business men and Treasury officials will take part. Such an inquiry has already commenced in the Ministry of Information, and the Minister of Home Security is taking immediate steps to secure a review of the war establishments of local authorities in the light of the experience already gained.

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The Chancellor of the Exchequer added a warning that it was in the public interest that such inquiries should not impede the rapid and efficient execution of the tasks with which the Departments are specially charged. It may well be that in the transition from peace to war economy we have in certain cases over-elaborated our administrative machinery. The Chancellor of the Exchequer has given the House of Commons a promise that complaints of extravagance will receive examination, but he explained that the alleged over-organisation and unnecessary expenditure, against which a good deal of criticism has been directed, was really due to the fact that there has not, So far, been an aerial attack upon the country. If such an attack had been made, the arrangements which have been made would have been more fully appreciated than they have been, but that is, of course, no reason why the system should not be reexamined in the light of events. My right honourable friend is confident that in some directions, at all events, an improvement has been made. The Government are fully aware of the need to investigate thoroughly the position, and every effort will be made to reduce unnecessary expenditure, whether by the War Departments or in the normal administration of the country.
I may for one moment cease to be a Government spokesman and express my own personal opinion, that there has been a great waste of money in local and to a smaller extent in national expenditure. How ever that may be, I have my right honourable friend's assurance that he is making every effort to make sure that the national resources are husbanded and that waste, where it can be detected, shall be brought to an end. It is a formidable task to control expenditure, for war is essentially a Socialistic business. Indeed, war might fairly be described as the supreme expression of Socialism and, in my view, waste and muddle are inseparable from Socialism. But your Lordships may rest assured that, so far as lies in the power of the Government, waste, where it is occurring, will be checked and fresh expenditure will be most carefully watched. I beg to move that the Bill be read a second time.
Moved, That the Bill be now read 2a.—(The Duke of Devonshire.)
3.30 p.m.
LORD STRABOLGI: My Lords, I am sure we all regret the personal bereavement which has deprived us of the services of the noble Lord, Lord Temple-more, who usually has the melancholy task of introducing the Budget, but he certainly has found an able substitute in the noble Duke, if he will allow me to say so. I only regret that in certain passages of his speech he was not speaking from this side of the House, and could have spoken with greater freedom than he has allowed himself as a Minister of the Crown. My noble friend Lord Snell has asked me to make our contribution. The noble Duke reminded your Lordships that the Party for whom I speak has advocated the policy of paying as we go as far as we can do so in this war, and therefore we have not in another place assailed the majority of the taxes for that reason. He was quite right, too, when he also fastened that policy on myself. But he must not run away with the idea that the Labour Party approve of taxes as taxes. If we are given our own way one day there will be no direct taxes at all in the country and we will earn our national income by a well-designed and well-organised system of collective industry.
Having said that, I want to raise one question of doubt as to the wisdom of the very heavy burden being enforced so suddenly. I think it is arguable that it might have been better to have postponed the heaviest of the direct taxation until the country's war effort had had time to take up the slack of unemployment. Through lack of proper planning we are not yet utilising anything like our full resources of man power for war production. With the inevitable dislocation of industry on the outbreak of war and now this sudden heavy increase, especially of the Income Tax, those two things have combined to cause a great deal of unemployment. The only real effort made by the Government to provide employment for the people so far as I can make out has been in the Ministry of Information. If the Lord Privy Seal, Sir Samuel Hoare, had been allowed to continue and we had not put, if he will allow me to say so, a hard-headed Scottish nobleman in charge who has performed wonders already, I think in cutting down (and I congratulate him on doing so)—if Sir Samuel Hoare had been given his head at the Ministry

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he would, in time, have solved the problem of unemployment. That is the only possible planning for the purpose that I can find; yet this very heavy taxation is suddenly put upon the country and I think it is questionable whether we could not have postponed it till some of the unemployment had been reduced. Indeed, if my noble friend Lord Ponsonby had been Prime Minister, and if Lord Arnold had been Chancellor of the Exchequer—an excellent peace-time choice—one might have suspected that this Budget was a subtle attempt to make the war unpopular and stimulate a demand for surrender at discretion. Now, as things are, the least we can expect, as the noble Duke has admitted and indeed very strongly emphasized, is that the money should be economically expended and everything possible done to stop waste and extravagance.
I find myself in complete agreement with what he said, not for the first time in both Houses, when he stated that some of the criticisms of waste had been a little unreasonable and he mentioned particularly the case of civil defence. With great respect I would like to second him there. If we had had heavy air raids at the beginning of this war, as we all expected, these young men who are now jeered at, these young men who gave up their leisure and prepared themselves to become efficient air raid wardens, would have been the heroes of the day and the night—as they may yet become. From what I have seen of the efforts of the local authorities up and down the country, with certain exceptions, they have done really splendid work of preparation, their A.R.P. preparations being well advanced. Of course this costs money, and we may still need them. These young men and women who have given up their leisure and spent long nights, after working in the day to earn their livelihood, deserve something better than exaggerated complaints made about them.
I mentioned just now the need for economic planning and if I may I will voice a very serious complaint of the Labour Party with respect to it which I think is very appropriate to this discussion. We have stressed the need for an Economic General Staff; which does not now
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exist. We have asked in another place for a Minister specially charged with economic affairs in the War Cabinet and the answer has been that the War Cabinet is already too big. That answer came from the Prime Minister. There are certain members of the War Cabinet—I do not refer to any of your Lordships present—whom we would be very glad to see out of the War Cabinet to make room for a Minister who would devote himself to the economic problems which this war has raised. But perhaps even better than that we want whole-time economic experts, not to take decisions but to prepare the case for the War Cabinet, to assist the taking of decisions upon the great economic problems now before the country. It is no use forming, as has been announced by the Prime Minister in another place, as a kind of substitute for an Economic Planning Committee, the heads of the Ministries concerned with economics, like the Board of Trade, the Ministry of Labour and so on, sitting as a Committee. It is no use calling these permanent heads together as a Committee. They are all busy executives who want to be allowed to get on with their work. If you want people who are to think ahead and make plans to deal with the problems of the future you must put that as a duty upon men who have not day to day activities to attend to; and of that organization for economic planning there is a complete lack.
I wrote a letter to my noble friend Lord Stamp to say that I intended to refer to his appointment and I have had a very friendly reply, saying that he cannot be here and making certain explanations. The appointment of Lord Stamp for part-time job as Economic Adviser does not satisfy us, and that is no reflection on the great abilities and the great services in the past that the noble Lord, Lord Stamp, has rendered. He is not to have a separate staff. He is to rely on the existing civil servants at the disposal of the Cabinet; and the appointment does not mollify us for the absence of this Economic General Staff that we demand and which of course should have Labour representation upon it. If the Labour movement in the country—organised Labour and trade unions and political Party—is to play its part in this great struggle, as it desires to do, it demands that its voice should

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be heard; and the contribution that it might bring should be utilised. If an Economic General Staff were set up, as we are convinced that it will have to be set up, we contend that it certainly should have a Labour representative upon it. But I repeat that this Economic General Staff should be for study and not for taking executive decisions.
May I give an example of the sort of problem they ought to be dealing with now and which, as far as I know, no-one is dealing with? Is it to be our general policy to let prices rise while at the same time checking profiteering, or do we propose to stabilise prices, wages and so on as, for example, we did in the case of rents, coal, etcetera, in the last war? We have to do the one or the other. These are very important considerations that will have to be faced. Which are you going to do, and who is thinking about it? Not the people who have to meet at 11.30 every morning as the War Cabinet and survey the whole field of operations, not the heads of busy Departments, but people with the requisite knowledge who can give their whole time to the problem and at the same time watch the whole development of the economic war and the effect of the war on our own economics. At the present moment we are not only blockading Germany but to a certain extent, owing to the lack of what I have suggested, we are blockading ourselves. At the beginning of this war I had the privilege of speaking on certain emergency War Bills brought in by the Government and I said that that would happen. I got certain assurances which have not been carried out, although that, no doubt, is not the fault of the noble Duke who spoke for the Government. We are blockading ourselves to some extent and that cannot be allowed to go on.
Furthermore, the Economic General Staff should work with the spending Departments, and try to help them and co-ordinate their efforts. They must not be a general public nuisance, I agree, but they should get information from the spending Departments and prevent overlapping and clashing of interests. This sort of organisation we think is very necessary, particularly with the scattering of the Government Departments in different parts of the country. We had an echo of that in the debate yesterday
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on the commandeering of hotels. The spending Departments of various Ministries are scattered about the country and so there is all the more need to see what they are up to. But mere co-ordination is no substitute for planning and thinking ahead.
We also see the danger of the Fighting Services, represented by four Ministers in the War Cabinet, taking too much material and skilled labour to the detriment of our export trade, thus weakening the exchange value of sterling. A strong sterling position in the years ahead, if the war lasts a long time, may be as important as strong fighting forces. I think something of that kind fell from the noble Duke in his very able and interesting speech. The Labour and co-operative movements should have a say in the economic planning. At present the so-called controls are in the hands of employers of labour or the servants of employers of labour, if your Lordships understand what I mean by that. They represent the capitalist side of industry. The noble Lord, Lord Stamp, is himself a big employer of labour as head of one of the principal railways. The Labour movement wants its share of decision and to make its contribution to this great effort, and not to leave the matter entirely in the hands of the employing classes. At the present moment you have the following Ministries all concerned with the economics of this war: the Ministry of Food, the Ministry of Supply, the three Fighting Services, the Ministry of Home Defence, the Treasury, of course, the Foreign Office, the Board of Trade, the Ministry of Agriculture, the Ministry of Labour, and I suppose a little later there will be the Ministry of Shipping. All these are concerned in the maintenance of our economic strength, or in waging economic warfare on our enemies, or in the mobilisation of the tremendous effort which the people of this country are determined to make to bring about victory in this war. There is no body at the top with the time or, to a certain extent, the ability to consider the grave problems that are created by the present situation. Our demand is that some such body should be created as soon as possible, because otherwise the proceeds of this tremendous taxation may be wasted.
3.44 p.m.
VISCOUNT SAMUEL: My Lords, the first part of the noble Duke's lucid speech was an exposition of the Budget proposals, and in the second part he made a strong plea for control of expenditure and prevention of waste, and gave assurances that the Government were taking steps in that direction. The first part of his speech was the strongest and most cogent argument in support of the second part. The vastness of the expenditure, the crushing weight of the taxation, are pleas indeed for a careful control of the expenditure necessary for the war and the avoidance of any form of extravagance. For my own part, on each occasion when these matters have come before your Lordships' House and I have had the privilege of addressing you, I have urged that control of expenditure ought not to be disregarded or undervalued in the presence of the enormous flow of expenditure which necessarily is involved by a great war. When the Ministry of Supply was set up, I urged, and other members of your Lordships' House urged, that this control side should be most carefully watched. When the expenditure on the great Defence programme was begun a couple of years ago, the same point was urged and the Government gave assurances that no waste would be allowed and no undue profits would be permitted to be earned by the armaments firms.
Those assurances—I regret to have to say it—have not been fulfilled. Still the Government, in my view, are not taking the measures necessary to guard the public interest. I was able to quote on a previous occasion instances of the enormous profits which had in fact been reaped by many of the armament firms. The Government finally found it necessary to propose to Parliament and to carry through a special Armament Profits Duty in order to recoup to the Treasury the profits which had accrued and which the Government beforehand said could not have been obtained under the arrangements they had adopted. Now, faced by the present Budget, public opinion is alert on this matter and the many instances of obvious waste which have come close to the attention of the masses of the people have brought this subject into the forefront and the Government are taking action—in many respects belated action. Two days ago the Minister for Air, in a statement made in another place, said that he
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had recently appointed Sir Harold Howitt, the well-known chartered accountant, to be a member of the Air Council to help, so he said, on the financial side. "Recently appointed!" I wonder how many millions of the taxpayers' money has been involved in that word "recently." If such a measure is necessary now to strengthen the financial side of the Air Council, why was it not taken when the enormous expansion of the Air Force was begun a year or two years ago?
The necessary steps in every direction are still not being taken. In spite of the vastness of the expenditure and the weight of taxation, the one effective measure which ought to be taken now is being obdurately resisted and rejected by the Government just as a few years ago they refused the establishment of a Ministry of Supply in spite of the most cogent arguments. It is essential that there should be outside inquiry into the expenditure of the Departments and not merely inquiry by Treasury officials. Treasury control in time of war is quite inadequate. The representations of financial officers are brushed aside by the heads of the Services. It always has been so in wartime, and I cannot doubt that the danger exists to-day. There is need for bringing in some body of greater authority than any Government Department, and under our Constitution that can only be found in the House of Commons. During the last war—at a late date, it is true, not until July, 1917—the House of Commons did take action and established a Select Committee on Expenditure of which I had the honour to be Chairman during its sessions for more than a year. It is for that reason that I venture to address your Lordships on this subject on this occasion. It was a large Committee of twenty-six, and it sat continuously through the Parliamentary Recess.
I should explain in the first place what that Committee was not. It was a Committee which did not presume to deal with matters of policy. That was specifically excluded from its reference. Questions of policy must only be dealt with by the Government of the day with the approval of Parliament as a whole. It was a Committee which was always on its guard against taking any action which would hinder the war effort or delay any

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necessary measures. Then, as now, we all realised that the supreme object was to win the war, and financial considerations, we recognised then, as we must all recognise now, must take second place. Second place, yes, but not be ignored altogether; for wasteful finance is a squandering of our resources for the war, in addition to which it makes the taxpayers discontented if they have reason to think that the immense sacrifices which every one of them is making are being unduly enlarged or protracted because there is not adequate control over the way in which the money is spent. We did not, of course, seek to control the placing of contracts beforehand. I must express my disagreement with my noble friend opposite, Lord Mancroft, who yesterday urged that there should be established at once a Committee of both Houses which should function before expenditure is embarked upon and act in advance.
LORD MANCROFT: If the noble Viscount will permit me to intervene, while I agree with nearly everything the noble Viscount has said, it does not put this aside, that this Economy Committee should not be deprived of the right, not of preventing expenditure, but of referring back something which is questionable, which can be reviewed by the Cabinet, where expenditure would be incurred which the Committee would not think reasonable or advisable.
VISCOUNT SAMUEL: I am quoting my noble friend's words of yesterday, that a Committee of both Houses "should be appointed at once, which should function before expenditure is embarked upon and act in advance." If the noble Lord does not hold that view, I need not dispute with him.
LORD MANCROFT: I do hold that view.
VISCOUNT SAMUEL: Because it is obvious, I think, that it is quite impracticable for any Parliamentary Committee to review all contracts of the various Service Departments, or of the Air Raid Precautions Department or those in any other category, before they are placed. Such a step would create a bottle-neck and cause intolerable delay and confusion and would prove to be quite impracticable. But that was not the function of that Committee during
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the last war. A similar Committee, I would urge, ought now to be demanded by public opinion. We divided ourselves into a number of sub-committees, one of which dealt with the War Office, a second with the Admiralty and Ministry of Shipping, a third with the Ministry of Munitions, a fourth with food and agriculture and blockade and other similar Departments, a fifth with the Office of Works, National Service, Ministry of Labour, the Post Office and other Departments, and a sixth with the organisation of the Treasury. We visited those various Departments.
The War Office sub-committee, of which I had the privilege of being Chairman, went to General Headquarters in France and held long conferences with the Quartermaster-General and with various of the soldiers in control. We examined carefully the methods of control within all the Departments. The sub-committees contained many practical men of wide experience and our belief was (and I think it was confirmed by opinion at the time) that we did save the taxpayer very considerable sums of money. We could not prevent waste beforehand in all cases, obviously, but we were able to detect cases in which waste had occurred and to prevent repetition and to improve the methods of control. That was a useful service. We published several reports, but, as many of the matters were of a secret character, our efforts were devoted rather to private representations to the Departments and officials concerned than to drawing public attention to errors and waste. We also appointed two special committees in accordance with the terms of our reference, one of which sought to reform the whole system of departmental accounts so as to ensure a better Parliamentary control, to establish a system of cost accounting rather than the ordinary system of Treasury accounting. Treasury accounting had its origin and continues largely in order to ensure that money is spent on the purposes for which it is voted, but cost accounting is necessary in order to secure that value is received for the money that is spent. I need not go into that because it is carrying us too far into detail. Secondly we proposed various measures for improving and strengthening the control of the House of Commons itself over expenditure.

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These are matters which I draw to the attention of your Lordships' House, although they are not directly within the functions of this chamber, because it is necessary that public opinion should be aroused on this matter in view of the definite refusal of the present Government to take similar action to-day. I trust that members of your Lordships' House will, where the opportunity offers, strengthen the demand that is being made for a similar body to exercise similar functions. Because that demand has hitherto been rejected, I must say that I view with scepticism the assurances that were given to-day by the noble Duke, although I have no doubt that they were most sincerely meant. If the Government were to take action of this kind, one would have greater belief that they are really ready to safeguard, in the manner that the times require, the interests of the public purse.
As for the Bill itself, I do not propose to trouble your Lordships with any observations on it except with respect to one specific point which arises indeed only indirectly and when we view the measure as a whole. The war effort of the country is not only, of course, military, but must also be economic, and the question of the prices of commodities plays a very large part in maintaining the efficiency of the nation for winning a victory. If prices rise too high it obviously lessens our available resources, in addition to which the rise of prices increases the cost of living, causes discontent among the masses of the people, leads to a legitimate demand for higher wages, which in turn, of course, leads to higher costs of production and therefore to higher prices again—what is called the vicious spiral. The specific point to which I wish to refer was raised by the noble Lord, the Secretary of the Board of Agriculture, Lord Denham, who in a most interesting speech a few days ago, on September 28, described to the House the great effort that was being made by the vital industry of agriculture to sustain and help the part that the country is playing in the war. These were his words:
"I want to assure your Lordships that my right honourable friend the Minister and the Ministry both realise how vital is the importance to the farmer of getting his raw material as cheaply as possible"
This Bill continues a number of taxes
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which in point of fact prevent the farmer from getting his raw materials as cheaply as possible and are, in fact, intended to keep high the prices of feeding stuffs and manures which are necessary to agriculture.
For example, oats in grain, when imported, are charged a duty of 3s. per cwt.; barley, 3s. 6d. a cwt. or 20 per cent. whichever is the greater; soya bean cake and oil, 20 per cent.; ground nut oil, 15 per cent.; linseed oil, £5 per ton or 15 per cent., whichever is the greater; superphosphate of lime, 10s. per ton or 20 per cent., whichever is the greater. I will not go through the whole list. There are other items; agricultural machinery, 15 per cent.; agricultural tractors, 15 per cent. or preferential 10 per cent. All these duties, which may or may not be necessary in peace time, ought surely to be suspended in war time. If it is vital to the farmer—and it is—that he should be enabled now to get his raw materials as cheaply as possible, how can we defend the imposition of taxes the very purpose of which is to prevent these materials being sold as cheaply as possible? Farmers continually concentrate their minds upon securing good prices for what they sell, but seldom pause to think about securing low prices for what they buy. But it is just as necessary that they should reduce the expenses of their businesses as it is that they should increase the receipts of their businesses. So I would urge to-day upon the Ministry of Agriculture and the Government in general—for of course it affects the whole nation and the whole Government—that these matters should be reviewed, that all duties which tend to raise prices of necessary raw materials should be suspended for the time being, subject to review at a proper time when the war is over.
As I say, I do not propose to speak on the Budget itself. I would only in a word say that I am inclined to agree with my noble friend Lord Strabolgi, who has just spoken, that it would have been better if the very heavy increase in the Income Tax had not been imposed at one stroke. There are arguments on both sides, and it is perhaps somewhat doubtful on which side the balance lies. For my own part, however, I am one of those who think that it was an error of judgment to impose at the outset an increase of 2S. in the Income Tax, and that the

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disadvantages outweigh the advantages; that 1s. should have been imposed in this Budget and the balance of the revenue obtained by other methods. If the war proves to be a long one, I think that that will later on be the general judgment. We shall all approve, I am sure, of the Excess Profits Tax. The fortunes that were accumulated in the previous war were a scandal and a disgrace, and I feel sure that the nation will not tolerate a repetition of them. The Excess Profits Tax and all other measures of that kind, such as steeply graduated taxation, are not a substitute, of course, for economy or a reason for tolerating waste, and my chief plea to your Lordships to-day is to urge safeguards against those evils.
4.3 p.m.
LORD MELCHETT: My Lords, this afternoon in addressing your Lordships' House I feel disposed to crave your indulgence, because it is somewhat more than two years since I have been prevented by illness from taking part in the debates here, and to do so is a somewhat unusual experience for me after so long a lapse. I feel, however, more than justified in taking part in the debate this afternoon because we have before us what is without doubt the biggest piece of war legislation which has so far been presented to the country, and it raises a number of important and interesting points which certainly should not go by without being discussed in this House.
I rise, not to criticise the Government and the Chancellor of the Exchequer for this Budget, but on the contrary to praise them. I think that the Chancellor in particular is very much to be congratulated on the bold and constructive way in which he has handled the financial problem with which he has been faced. I disagree with both the previous speakers that it was wrong to go ahead at once with large increases of taxation. On the contrary, I believe this was the vital moment and the psychological moment at which to do it. When the blood is warm, at the beginning of war and before all the early stages of war-weariness have come upon the nation, it can stand a shock of this kind very much better than if the pressure is gradually applied over a long period. What has been done will not only encourage our Allies and inspire confidence in neutral countries; it will also come as a very
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considerable shock to our opponents. I believe that to increase taxation largely at this stage and to avoid the case of the last war, in which we borrowed far more heavily in the first year and then increased taxation slowly, was right and proper and based upon the experience which we gained on the last occasion.
Certain other criticisms were raised by the noble Lords who preceded me. Both of them carried us over a wide area of discussion, not all of it wholly directed to the Budget. Both of them, as is so likely to happen nowadays, proposed the setting-up of new committees. Such experience as I have been able to gather in the first month of this war would lead me to give directly the contrary advice to the Government. I should strongly advise against setting up any further committees at the present moment. There are already far too many, and every new committee set up, however excellent the intention with which it is created, will be bound to cause delay. The check of war profiteering, the broad survey of the economic effort of the country, are both admirable objectives; no one could quarrel with them; but I should certainly not at this stage set up two new committees to interfere with the ardent work of government in the present prosecution of the war. Every committee you set up means someone else to be consulted before a decision is given. What one requires in war-time is decisions. Some of them may turn out to be wrong ones. They may also turn out to be wrong even if they are put to a committee before they are taken; but the great thing is to have decisions taken and have them taken promptly.
Another point upon which I think the Chancellor is to be congratulated in dealing with this Budget is that he has, while going for the Surtax payers in perhaps rather an extreme fashion, at the same time taken another step which is somewhat inclined to be overlooked. The Surtax payer is always rather the spectacular figure of Budgets. People are attracted by large figures and are inclined to concentrate upon them; but as a matter of fact the present Budget provides for a very considerable broadening of the basis of existing taxation. The man with the income in the neighbourhood of £500 a year, the married man with two children—his taxation has been

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increased from £8 a year to, I think I am correct in saying, £20 a year—a very substantial increase. That is an increase over a very wide area, which will bring a very large revenue to the country. One can see in such a step the fact that remissions to the small taxpayer in past years of peace time have in their own way provided a great war reserve of finance upon which the Chancellor of the Exchequer has on this occasion very widely drawn. That broadening of the basis of taxation could only be justified by a substantial increase in the taxation of the higher levels of income.
If I might offer any consolation at all to those of your Lordships—and there must be many—who have large obligations not easily set aside, considerable establishments in the country which have to be maintained in some shape or form, I should like, if I might, to refer to a personal experience of mine some years ago in the unfortunate and doomed City of Warsaw. I had the pleasure of lunching with a noble family, and in discussing the life of the country my host said to me "Of course we don't keep anything very valuable in my country houses. One, you see, is situated near the German border and one is situated near the Russian border, and over the course of many centuries our family have found that they are sacked every fifty years." On this occasion, tragically enough, I suppose they have both been sacked in less than twenty-five years. That is an experience which does not come to us, thank God, in this country, and if we are called upon to make large contributions in money to prevent such a disaster, any contribution we might make is so much less than the worst that might befall, that I think we may bear it cheerfully and well.
I now come to just a short review of the broad aspects of the finance of the country as shown in this Budget. Taking round figures for the sake of easy calculation, we can say that we are faced with a Budget of about £2,000,000,000, about one half of which will be raised by taxation, and one half of which will be raised by borrowing. That is the situation in which we have placed ourselves immediately instead, as has been suggested from the other side of the House, of dragging the proportions on
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much more to borrowing and much less to taxation in the early period of the war, as was done on the last occasion. If one looks forward for a period of years—and I am one of those who do not expect the war to terminate rapidly—if one looks forward to a period of three or four years and to a Budget of that order, we shall increase the National Debt of this country by £2,000,000,000, £3,000,000,000 or £4,000,000,000, and the service of that can be very easily provided for by a proportion of the new taxation this year. The present increases give us £226,000,000, and an addition of £3,000,000,000 to the National Debt at 3½ per cent. means only £105,000,000 a year. Therefore one can say that the burdens which we have to face, though large, are not entirely beyond the compass of our means, and I am encouraged by these considerations to believe that we need not fear so steep a rate of increase in future years.
But what will be vital in this matter will be the rate at which the Chancellor of the Exchequer provides for his borrowing in the future. And it is in regard to that that I would like to make a suggestion which I think merits serious consideration at a time like the present. I do not think it will be to the advantage of any one, either the investor, or the Government, or the country in general, if these borrowings are made in the usual form of what might be called finding the level of the market at a competitive rate of interest. I think if the rate of interest is regulated to a reasonable level the finance will be forthcoming, and it will be more important to maintain the total capital structure, the total level of Government loans in this country, rather than to cause them to fluctuate by finding a market rate which is bound to be an increasing rate.
With that in view, I must say there is one financial step which I do hope the Government will take, and that is in connection with the bank rate. It was raised to 4 per cent. quite unnecessarily, it was reduced almost immediately to 3 per cent., and I believe it should be further reduced to 2 per cent, or 2½ per cent, at the earliest opportunity. But that is bound to have a big bearing on the matter which I have raised, the matter of raising the very large sums which we shall have to borrow, and which are in no way beyond

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our means at a reasonable rate of interest—reasonable to the investor, and reasonable to the taxpayer who has to pay the interest on them. I think that is a point of very grave importance to the country.
There is only one further point I would like to deal with. The noble Lord opposite said something about armament profits—always a very delicate subject—and I think myself, from what I have seen of this matter, that most of the firms in this country are anxious to avoid being classed as profiteers. I have found in industry a very different spirit from that which existed during the last war. People are anxious to make their contribution, are anxious not to take undue advantage of the country's crisis and the present emergency. But that should not be confused with the economic fact that in certain circumstances prices must rise from purely economic reasons. There are two ways of rationing. One is by sheer rationing and the other is by alterations of prices, but such a rise in price does not necessarily mean profiteering. It may be that all the profit out of that rise in price goes to the Treasury, or that arrangements will be made later on for that profit to go to them. But I think the country can rely on industry playing its part and doing everything it can to avoid taking undue benefit from the country's need.
4.16 p.m.
THE DUKE OF DEVONSHIRE: My Lords, the debate has not been of great length, but I think it has been of very considerable value. I can assure noble Lords who have spoken that every point which they have raised will be most carefully considered. The noble Lord opposite, Lord Strabolgi, raised the question of the wisdom of these heavy immediate rises in taxation. I can only inform the House that my right honourable friend was actuated by two motives in deciding on these heavy immediate rises. One was the immense gap which exists now between expenditure and revenue, which is unlike the position in the last war, where our war effort began, as it were, gradually. At present our armament expenditure is already on a vast scale and the expenditure has leapt up far more rapidly than it did in 1914. The second motive was the necessity for restricting from the outset unnecessary civilian expenditure in directions which do not help the immediate prosecution of the war.
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We have had some very interesting suggestions from the noble Lord opposite and from the noble Viscount, Lord Samuel, on the subject of an Economic General Staff and the planning of the economic effort of the nation generally, and I am sure those representations will receive most careful attention. Whether the method of a Committee which has been suggested is the best method of securing that the economic effort of the country is most wisely applied, it is hardly for me to say, but I can assure the noble Lords who have spoken that the Government have got this matter under very careful review. What is required is, it seems to me, not so much a new Department, which would cause delay and inevitably cut across other Departments, but an organisation to ensure that nothing is overlooked as between Departments. It is already the business of some existing Department to supervise each particular aspect of the nation's economic activity. What is important is that nothing should be overlooked, and that there are no inconsistencies between the policies being pursued by the different Departments. As I think the noble Lord, Lord Strabolgi, said, exports may be of vital importance in order to maintain our purchasing power abroad of essential war materials, and it is important that even the needs of the Services should not be allowed to interfere with what may be an absolute essential. The Government are endeavouring to ensure that economic effort shall be properly co-ordinated and that the supervising of these various aspects of the economic policy of the country shall be efficiently carried out.
The noble Viscount, Lord Samuel, raised the question of the duties on agricultural feeding stuffs and the raw materials of agriculture. I can assure him that those duties are, and will be, under careful review. I would remind the House that these duties were not imposed out of spite against the farmer, or with any idea of making his task more difficult. They were imposed for the specific purpose of protecting the home and Empire markets, and at this time, when our foreign currency requirements may prove to be crucial, I should be reluctant to hold out any immediate hope that, for instance, American agricultural machinery is likely to receive any substantial remission of

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taxation. I can assure noble Lords that the question of the cost of feeding stuffs is, and will be, kept under constant review. I have now dealt with most of the points raised, and may I say in conclusion how glad I am to see my noble friend behind me (Lord Melchett) back in the House, and how greatly I appreciate his commendation of the Budget I have had the honour to place before the House?
On Question, Bill read 2a: Committee negatived.
Then, Standing Order No. XXXIX having been suspended, Bill read 3a, and passed.

THE WAR: GOVERNMENT'S REPLY TO HERR HITLER.
4.22 p.m.
LORD SNELL: My Lords, I beg to ask His Majesty's Government whether they have any statement to make on the international situation.
THE LORD PRESIDENT OF THE COUNCIL (EARL STANHOPE): My Lords, although the statement on this occasion deals solely with foreign affairs, my noble friend the Foreign Secretary has asked me to read it as Leader of the House on behalf of His Majesty's Government. He has also a personal reason in that he is suffering from a bad throat and is glad to be relieved from having to read a somewhat lengthy document. This is the statement the Prime Minister is making this afternoon in another place:
"Last week in speaking of the announcement about the Russo-German pact I observed that it contained a suggestion that some peace proposals were likely to be put forward, and I said that if such proved to be the case we should examine them in consultation with the Governments of the Dominions and of the French Republic in the light of certain relevant considerations. Since then the German Chancellor has made his speech, and the consultations I referred to have taken place. I must now state the position of His Majesty's Government. Before, however, I inform the House of the results of our examination of the speech, I must ask honourable members to recall for a few moments the background against which his proposals appear.
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"At the end of August His Majesty's Government were actively engaged in correspondence with the German Government on the subject of Poland. It was evident that the situation was dangerous, but we believed that it should be possible to arrive at a peaceful solution if passions were not deliberately stimulated, and we felt quite certain that the German Government could if they desired influence their friends in Danzig in such a way as to bring about a relaxation of tension and so create conditions favourable to calm and sober negotiation. It will be remembered that in the course of this correspondence the German Chancellor expressed his wish for improved relations between our two countries as soon as the Polish question was settled, to which His Majesty's Government replied that they fully shared the wish, but that everything turned on the nature and method of settlement with Poland. We pointed out that a forcible solution would inevitably involve the fulfilment of our obligations to Poland, and we begged the German Chancellor to enter into direct discussions with the Polish Government, in which the latter Government had already expressed its willingness to take part.
"As everyone knows, these efforts on the part of His Majesty's Government to avoid war and the use of force were in vain. In August last the President of the United States made an appeal to Herr Hitler to settle his differences with Poland by pacific means in order to prevent war breaking out in Europe. At about the same time the King of the Belgians, the Queen of the Netherlands, His Holiness the Pope, and Signor Mussolini all tendered their good offices, but equally in vain. It is evident now that Herr Hitler was determined to make war on Poland, and, whatever sincerity there may have been in his wish to come to an understanding with Great Britain, it was not strong enough to induce him to postpone an attack upon his neighbour. On September 1 Herr Hitler violated the Polish frontier and invaded Poland, beating down by force of arms and machinery the resistance of the Polish nation and Army. As attested by neutral observers, Polish towns and villages were bombed and shelled into ruins, and civilians were slaughtered wholesale, in contravention, at any rate in the later stages, of all the undertakings of which Herr Hitler now

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speaks with pride as though he had fulfilled them. It is after this wanton act of aggression, which has cost so many Polish and German lives, sacrificed to satisfy his own insistence on the use of force, that the German Chancellor now puts forward his proposals.
"If there existed any expectation that in these proposals would be included some attempt to make amends for this grievous crime against humanity, following so soon upon the violation of the rights of the Czecho-Slovak nation, it has been doomed to disappointment. The Polish State and its leaders are covered with abuse. What the fate of that part of Poland which Herr Hitler describes as the German sphere of interest is to be does not clearly emerge from his speech, but it is evident that he regards it as a matter for the consideration of Germany alone, to be settled solely in accordance with German interests. The final shaping of this territory and the question of the restoration of a Polish State are, in Herr Hitler's view, problems which cannot be settled by war in the west but exclusively by Russia on the one side and Germany on the other. We must take it, then, that the proposals which the German Chancellor puts forward for the establishment of what he calls the certainty of European security' are to be based on recognition of his conquests and his right to do what he pleases with the conquered. It would be impossible for Great Britain to accept any such basis without forfeiting her honour and abandoning her claim that international disputes should be settled by discussion and not by force.
"The passages in the speech designed to give fresh assurances to Herr Hitler's neighbours I pass over, since they will know what value should be attached to them by reference to the similar assurances he has given in the past. It would be easy to quote sentences from his speeches in 1935, 1936 and 1938 stating in the most definite terms his determination not to annex Austria or conclude an Anschluss with her, not to fall upon Czecho-Slovakia, and not to make any further territorial claims in Europe after the Sudetenland question had been settled in September, 1938. Nor can we pass over Herr Hitler's radical departure from the long professed principles of his policy and creed, as instanced by the inclusion in the German Reich of many millions of
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Poles and Czechs, despite his repeated professions to the contrary, and by the pact with the Soviet Union concluded after his repeated and violent denunciations of Bolshevism. This repeated disregard of his word, and these sudden reversals of policy, bring me to the fundamental difficulty in dealing with the wider proposals in the German Chancellor's speech. The plain truth is that, after our past experience, it is no longer possible to rely upon the unsupported word of the present German Government.
"It is no part of our policy to exclude from her rightful place in Europe a Germany which will live in amity and confidence with other nations. On the contrary, we believe that no effective remedy can be found for the world's ills that does not take account of the just claims and needs of all countries, and whenever the time may come to draw the lines of a new peace settlement, His Majesty's Government would feel that the future would hold little hope unless such a settlement could be reached through the method of negotiation and agreement. It was not therefore with any vindictive purpose that we embarked on war, but simply in defence of freedom. It is not alone the freedom of the small nations that is at stake: there is also in jeopardy the peaceful existence of Great Britain, the Dominions, India, the rest of the British Empire, France, and indeed of all freedom-loving countries. Whatever may be the issue of the present struggle, and in whatever way it may be brought to a conclusion, the world will not be the same world that we have known before. Looking to the future we can see that deep changes will inevitably leave their mark on every field of men's thought and action, and if humanity is to guide aright the new forces that will be in operation all nations will have their part to play.
"His Majesty's Government know all too well that in modern war between great Powers victor and vanquished must alike suffer cruel loss. But surrender to wrong-doing would spell the extinction of all hope, and the annihilation of all those values of life which have through centuries been at once the mark and the inspiration of human progress. We seek no material advantage for ourselves; we desire nothing from the German people which should offend their self respect. We are not aiming only at victory, but rather looking beyond it to the laying

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of a foundation of a better international system which will mean that war is not to be the inevitable lot of every succeeding generation.
"I am certain that all the peoples of Europe, including the people of Germany, long for peace, a peace which will enable them to live their lives without fear, and to devote their energies and their gifts to the development of their culture, the pursuit of their ideals and the improvement of their material prosperity. The peace which we are determined to secure, however, must be a real and settled peace, not an uneasy truce interrupted by constant alarms and repeated threats. What stands in the way of such a peace? It is the German Government, and the German Government alone, for it is they who by repeated acts of aggression have robbed all Europe of tranquillity and implanted in the hearts of all their neighbours an ever-present sense of insecurity and fear.
"I am glad to think that there is complete agreement between the views of His Majesty's Government and those of the French Government. Honourable members will have read the speech which was broadcast by M. Daladier last Tuesday. We have,' he said, taken up arms against aggression; we shall not lay them down until we have sure guarantees of security—a security which cannot be called in question every six months.' Advantage has also been taken of the presence of the Polish Foreign Minister—whom we have been glad to welcome to this country—to consult with the Polish Government and I am happy to say that we have found entire identity of view to exist between us.
"I would sum up the attitude of His Majesty's Government as follows: Herr Hitler rejected all suggestions for peace until he had overwhelmed Poland, as he had previously overthrown Czecho-Slovakia. Peace conditions cannot be acceptable which begin by condoning aggression. The proposals in the German Chancellor's speech are vague and uncertain and contain no suggestion for righting the wrongs done to Czecho-Slovakia and to Poland. Even if Herr Hitler's proposals were more closely defined and contained suggestions to right these wrongs, it would still be necessary to ask by what practical means the German Government intend to convince the world that aggression will cease
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and that pledges will be kept. Past experience has shown that no reliance can be placed upon the promises of the present German Government. Accordingly, acts—not words alone—must be forthcoming before we, the British peoples, and France, our gallant and trusted Ally, would be justified in ceasing to wage war to the utmost of our strength. Only when world confidence is restored will it be possible to find—as we would wish to do with the aid of all who show good will—solutions of those questions which disturb the world, which stand in the way of disarmament, retard the restoration of trade and prevent the improvement of the well-being of the peoples.
"There is thus a primary condition to be satisfied. Only the German Government can fulfil it. If they will not, there can as yet be no new or better world order of the kind for which all nations yearn. The issue is therefore plain, Either the German Government must give convincing proof of the sincerity of their desire for peace by definite acts and by the provision of effective guarantees of their intention to fulfil their undertakings or we must persevere in our duty to the end. It is for Germany to make her choice."
4.38 p.m.
LORD SNELL: My Lords, in moving the Motion for Papers which stands on the Order Paper in my name, I desire first of all to say that the statement that we have just heard is exceptionally important precisely because it deals with the prospect of peace rather than of war. Certain peace proposals have been mentioned. They have not been officially received, but have been the subject of a declaration under conditions which those who address public meetings are well able to understand. Those conditions do not provide the best setting for an orator who was stimulated by the ordered claque who have to agree with what he said. Nor was Herr Hitler the man to refrain from offering the olive branch in one hand and noisy threats in the other. I doubt if the Angel of Peace was ever wooed in more strident or offensive terms.
How does it happen that these proposals of peace have been made? What has caused, in the man who up to September 3 spurned peace, the sudden desire to obtain it? I fear it cannot have

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been any change of heart, because repentence is rarely revealed in threats. I fear that it cannot have been remorse for the thousands of corpses that Herr Hitler might have seen in the streets of Warsaw, for remorse never either glorifies wrong done nor insults the victims of the error. What then is the reason for this change of face? Is it possible that second thoughts are more prudent than the first, and that the handwriting on the wall has been read? Take the question of the peace conference to which reference has been made. Herr Hitler now pleads for what he loudly and rudely rejected. It was offered him, it was pressed upon him, by Princes, by Parliaments, by Presidents, by peoples and by the Leaders of political Parties. He had an opportunity to serve humanity which saints might have welcomed. There is nothing that Germany is entitled to—peace, freedom, prosperity, equality—that she could not have had by peaceful negotiation. Herr Hitler preferred the more congenial role of butchery and of force. The pages of history are red with the records of such mistaken men, and the evil that they do unhappily lives after them.
But if we are to look at these peace proposals we must go behind the man to the German people. They in the end are responsible, and with them we can deal if they give us the opportunity to do so. If they want peace, and will guarantee that such a peace will be kept, let them say so. They know that as the result of recent events in their country the name of Germany to-day is a hissing in the mouths of men, and they know also—none better—that the Allies are fighting for their freedom as well as for the freedom of Europe, that we are in fact doing for them what they might have been expected to do for themselves. They further know—again none better—that Hitler began this series of errors by sacrificing the soul of Germany itself. He now pleads for the right of the German people to live. No one ever denied that, least of all this country. We all of us have done our best to try to assure the German people that we wanted them to have an honoured place in the world. The German people have the right to live, so they have. But had not the Czech people a right to live, had not the Austrian people a right to live, had not the Polish people a right to live? I want
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to ask further had not the German trade union leaders, the German Socialists and Liberal statesmen a right to live and to work in their own country? Had not General von Schleicher and General von Fritsch a right to live? I should like to know who made this man the judge of who should live and who should die in the world. If, however, he does not speak for the German people, let them speak for themselves and then we shall know where we are.
I desire to be very brief, but one or two words I must say about the reply that the Government have made that we have just heard. We are at some disadvantage in having to speak without consideration, and one must try to avoid doing harm rather than good. The first thing I note in it is that the occasion has not been taken to say whether His Majesty's Government propose to take any further steps in regard to the difficulties that exist between the Indian Government and the Indian peoples. I hope that the noble Marquess will take an early opportunity of giving us some further information on that point. Dealing with the points in the statement that has just been made, they seem to me to be capable of being boiled down to three or four, or perhaps five points. One is that Hitler proposes that there should be peace based on the recognition of his conquests, and to that His Majesty's Government cannot agree. Secondly, that it is no longer possible to rely upon the unsupported word of the present German Government. Thirdly, that not only Poland and Czecho-Slovakia are involved in this, but that the peaceful existence of Great Britain, the British Empire, France and all free countries, is also involved, and that a real peace must not be an uneasy truce; that if peace is desired there is a prelude to it. There must be acts as well as words; and they must give an effective guarantee of their intention to fulfil their undertakings.
Those seem to me to be the main points in the statement, and I am not disputing any of them or criticising any of them; but I can only hope all the issues have been weighed with great care and all the consequences foreseen and estimated. A vast responsibility must always rest upon a Government that refuses to look at any sort of peace proposal that may be made. I should wish personally to have a somewhat closer definition of

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peace aims. The Prime Minister recently said: "I trust I may live to see the day when Hitlerism has been destroyed." What precisely does that mean? What is Hitlerism? Is it a series of ideas or specific acts? I believe that what we are entitled to ask for is not the overthrow of any system of ideas because we may not like them, but that we are entitled to ask for the establishment in Germany of a Government with which we can safely deal. We are not conducting a religious war against other men's opinions. We are conducting a war against organised secular lawlessness, and I cannot help thinking that I like M. Daladier's definition a little better:
"We have taken up arms against aggression and we shall not lay them down until we have certain guarantees of security, a security which cannot be called into question every six months."
That seems to me to be a better description of what I conceive to be our war aims.
We are seeking to establish a world order under which small nations will feel themselves as secure as the great nations feel themselves, a world in which Germany, as well as ourselves, can live contentedly and harmoniously in peace and in freedom. That way of honourable readjustment and development is open to Germany now if she is willing to take it. But she cannot now, and she never will, secure German domination through the practice of the principles of Neitzsche and brutality and aggression. Finally, I would like to see a peace offensive on our own account, which is not indicated in this statement. I think we should take an early opportunity to launch upon the world a constructive idea, the outlines of a plan for an equitable world order. Then, if we have to wage this war to the bitter end, we shall do so fortified by the knowledge that we have offered to a perplexed and grieving world a more excellent way. I beg to move.
4.52 p.m.
THE MARQUESS OF CREWE: My Lords, the statement made by His Majesty's Government deals exclusively with the situation as it stands after the speech made by the German Chancellor. I desire to make a few observations on that, but I should like to preface them by saying that I do not think we ought to expect
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that any points taken by speakers subsequent to the statement in the House need necessarily demand an immediate answer from the Front Bench opposite. We have been told, and we have heard with regret, that the noble Viscount, the Foreign Secretary, has a certain physical disability which makes him unable to speak at great length. But, apart from that, a carefully prepared statement of this kind, prepared indeed in concert with His Majesty's Dominions, who are as much interested as we are, cannot well be added to or developed by later speeches.
With that preliminary remark, I would say a word about Herr Hitler's speech. That speech dealt in the first instance with the past, not in the accurate form employed in the statement of the Government and not going quite so far back into the history there set out. But he devoted part of it to a singular picture of the supposed ambition of the Polish Government which seemed to him to justify the invasion of that country. The Polish Government, he stated, not merely desired to retain the ancient Polish provinces which, according to him, had been so disgracefully snatched from Germany and Austria and Russia by the Paris Treaties, but they also contemplated the seizure of Silesia, East Prussia and Pomerania. I should have thought that was a little stiff, even for the gaping audience who hung on the German Chancellor's words. If that were really the terror of the German Government, one might almost equally expect the French Government to pass sleepless nights fearing that gallant little Belgium have had in mind the seizure of the Northern Departments of France down to the River Somme.
Next Herr Hitler dealt with the present, on one point—namely, the new relations between Germany and Russia. There is one sentence on that which I think deserves careful examination. He said that National Socialist Germany is National Socialist Germany and Soviet Russia is Soviet Russia, implying, of course, thereby, that each country would work out its policy and its prospects in its own way without any question of interference from the other. Well, I wonder. I recall a conversation with Herr von Hoesch, the late Ambassador here, who was an old friend of mine, and a man from whom any statement of fact could be absolutely

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relied upon. It was after the break up of the Weimar Republic and the advent of the National Socialists, saving, as was supposed, Germany from an invasion of Communism. I remember saying to the Ambassador that some of us here doubted the reality of that extreme menace, as it was described, and thought that the announcement had been the cloak for a mere seizure of power. I was assured that that was mat so and that, on the contrary, the German working men had been so greatly attracted by the Bolshevist creed that there was considerable risk of its extending to Germany. If that were so, it seems unlikely that the faith can altogether have perished from the German working class. It does seem possible that the anxiety which is shown by the German Government to create a bogus Polish State, which would be in no way independent—because we are told that it is to have no possibility of intrigue; that is to say, no relations with any kind of foreign Government—springs from a feeling that the creation of a Poland of that kind might from the National-Socialist point of view be of as great convenience as interposing a neutral buffer between themselves and the territory administered by the Russian Government.
As regards the future, Lord Snell mentioned the supposed olive branch which is being offered. I remember that somewhere Cardinal Newman, when it was mentioned that an olive branch had been proffered, described it as "an olive branch shot out of a catapult." I only hope that we may not have to consider this olive branch as being dropped from a bombing plane. It is supposed to include the calling of a peace conference. It is a bad start for any such conference when one party has to say to the other: "We do not feel that we can believe a word you say, and we are conscious that if you make a promise you will only keep it as long as it suits you." But even supposing a conference could be held in those rather depressing circumstances, as has already been stated both in the statement and in Lord Snell's speech, it is absolutely impossible for us to start with a clean slate, as the German Chancellor asks us to do—that is to say, with an admission of his past action regarding both Czecho-Slovakia and Poland. That belief of his is founded on his conviction that France and we have no concern whatever with what happens in Eastern
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Europe; and that we altogether refuse to admit. In that cast it seems only possible to say that at this moment there is nothing whatever to confer about—without, of course, in any sense closing the door to future conversations or conferences which may take place on a different platform and with a different set of admissions to begin with.
How can we put the case to the German Government? It seems useless to raise questions of rights and wrongs, of justices and injustices, and of the claims of small nations. That in the eyes of the German Government is merely the jargon of the League of Nations and is of no interest to them. But I think we can say to the German Government: "Can you possibly imagine that two countries like France and ourselves, each with a thousand years of history behind us, can be prepared to sink at once into the position of second- or third-class Powers sitting and watching you redrawing a map of Europe and carving up countries in the way that suits you best?" That is at any rate a proposition which it may be assumed the German Government would understand. In the meantime I am sure that we all regard with interest and some amusement the fact that my right honourable friend the First Lord of the Admiralty is evidently regarded by the German Chancellor as the principal villain of the piece. I yield to nobody in my admiration, not only of Mr. Churchill's energy and determination, but also of his marked administrative capacity and his wonderful power of expression, whether he is dealing with his personal affairs or with public affairs, of which we have had several instances lately. But I think to regard him as a purely dæmonie figure driving a row of passive colleagues and a reluctant country in an unnecessary war is to paint the picture somewhat too vividly.
I—and I should think many of your Lordships would say the same—fully appreciate the great qualities of the German people, setting aside this Aryan nonsense, which is the laughing stock of ethnologists all over the world. But we realise that they are a tough race and, though we may regard them now as being woefully misled, we do not expect them easily to give in. Well, if the choice, in the closing words of the statement, is left to Germany, if they do not chose to walk

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on the path of peace, there is nothing for it but, to borrow from well known words of the late Lord Goschen: Englishmen will have to make their wills and do their duty. At any rate, they can remember that England has never been beaten in a long war or a great war. Now it is not only England, it is Great Britain and the Dominions who, it must be remembered, would never take the part that they are taking unless they were convinced that they were joining in a just cause. And, that being so, not having lost a war before, we shall not lose this one.
5.14 p.m.
THE EARL OF DARNLEY: My Lords, one cannot but agree with what has been said about our aims and ideals and the fine way it has been expressed to-day. But, all the same, I think there is something omitted. We must all sincerely ask ourselves one great question, however we may hate what has been done, and however violently we require to redress it: Have we got a method now which can do what we want and, if not, is not a new method, and one promising success, absolutely vital for us and for all Europe? It should not be necessary to go again into a subject which has been spoken of so many times, and that is the complete failure of war throughout history to redress grievances. It has been proved absolutely that it always does more harm than good. If we are trying to achieve a good aim with a bad method, is it not perhaps necessary to give it up and find another method which is more suitable to our fine aims and ideals, and really has some chance of being successful?
Now there is only one other method, and that is to concentrate on building instead of destroying—building an international position where neither wars nor treaties between victors and vanquished, nor disagreements, can ever cause such a position again. Common sense and cause and effect tell us that aggressions and wars must have vindictive origins. We do not deny this. Therefore, is it not our duty to start on this new basis and build a tolerant, sympathetic amity which is able to protect human beings from similar crises for many generations? It may be a vague suggestion, but it is a high ideal, and it must be possible.
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Now how can it be started? Perhaps it has been. There has been very much abuse of Herr Hitler's speech. In boastful words he has roughly said: "I have abolished the Treaty of Versailles by force, and I am now ready for peace." And he has gone on to make proposals for a satisfactory solution according to his ideas. But there are two points which should be noticed. First, that his actions, however bad, were dictated by a patriotic desire to rescue his country from an unfair treaty, which condemns war. And the second is that he has shown some desire to reconstitute European affairs on a constructive basis, though not necessarily on one of which we approve. All the bitterness and rancour that we and his victims may feel cannot deny the truth of those two parts of his speech.
The question at issue to-day is surely not whether we should refuse or accept now what has been proposed, but, if we do honestly aspire to building rather than destruction, whether we should add another step forward to the one that he has made, in order to build up a ladder which may possibly lead to a peace conference. This step could be in many forms. It could be in the form of counterproposals, or a request for elucidation of the nebulous terms offered, perhaps via direct approach. Or it could affirm that anything that showed an assurance of guaranteed peace would be considered in a spirit which was in accordance with our professed desire for a lasting peace. This would be something positive, progressive and constructive, and this is the vital thing that I think has been omitted from the statement made by the noble Earl, the Leader of the House, to-day.
There is a universal dread hanging over everybody's head, the dread of what is called a "bad peace." Why? If a peace conference did assemble, it would be attended by many, or perhaps all, of the great nations, and their guarantees would be available. It would be open to all suggestions and all proposals by every party, which could be accepted or refused as desired. Contact would restore confidence and lessen tension, and would almost certainly give the greatest chance of restoration to Poland. A "bad peace" would be resented as much by neutrals as by belligerents, just as all would be equally benefited by a good and lasting peace. Well-chosen negotiators could

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surely make a "bad peace" an unnecessary bogy. So that on that score a step towards an ultimate conference could surely be confidently taken. It seems to me that the important thing is this. This step would be more in the nature of an offering, not only to our Allies, but to all the neutrals and the whole of Europe, and judging perhaps from the trend of events to-day, it is a very necessary one. It would show a real willingness to assist every country to prosperity, and a farsighted disdain of resented words and deeds in favour of progress, which would be of high moral worth, and which history would record in terms of the highest praise.
There is undoubtedly at this moment a chance to decide the destiny of the world. It must be one of two things—either build or destroy. We have that fateful choice in front of us. If it is decided to build, we must keep our eyes unfalteringly on this object and abandon completely all feelings of hatred and revenge in the cause of the common good. These negative feelings are not worth the life of the meanest human being. It is always stated that countries are solidly behind their Governments in war. Would it not be more accurate to say that though they all share their Government's idea on their enemies' words and deeds, they do not necessarily think that the only remedy is war? The average person thinks that the world is mad and hopes that someone may come forward and settle matters without death and destruction, which, from their beliefs and ideals, they feel should be avoided. I believe it is our duty to the peoples of Europe to do everything possible now to advance the constructive idea of a just and good peace, and that they would never cease to be grateful that such an opportunity had been given them for using their wonderful patriotism and their wonderful unselfishness for the rebuilding instead of the destruction of the world.
5.22 p.m.
LORD NOEL-BUXTON: My Lords, I wish His Majesty's Government had given us the opportunity of a Secret Session in which the statement could be more fully discussed, but we must assume that the Government see good reasons for preferring publicity, and we must take advantage of the generous invitation of the Foreign Secretary to write to him if
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we are not feeling that our opinions are suitably expressed in public. It seems to me there was great value in the debate in another place last week. Publicity certainly had a great importance then. It helped to furnish the Government with what seemed to me the prime essential of a free hand to select the policy that they think best and on which they alone are the perfect authority. It showed the Government that there is support for a full consideration of any opportunity that, in their judgment, may exist for peace. Mr. Lloyd George appeared to have wide backing for his views, and that is very valuable, because a section of the Press would like to rush the Government into a refusal to discuss peace on any terms. I am very glad His Majesty's Government decline to be hurried. The speech of Herr Hitler certainly provokes opposition. It lays down conditions which we must reject. He asks for direct negotiation with him, and that we must all feel is very unattractive to us. But possibly it is up to us to propose a different plan, to urge on him the plan of a conference, and that of course would have to be based on conditions from which we could not depart and which, on the face of it, would be different from the conditions Herr Hitler has laid down.
The supreme aim to have in view, your Lordships would all agree, is the durability of any peace that may be made. I was glad to hear the noble Earl, Lord Stanhope, use the expression, "a real and settled peace." Is there, in the present situation, any possible basis for a discussion which might lead to a real and settled peace? Only His Majesty's Government can judge. It is a question of balancing risks. There is no absolute security in any human plan whatever. The proposals of Herr Hitler sound to us repugnant, and incline us to say, "No," but possibly the points in favour of rejecting discussion may be outweighed by points on the other side. As I say, only the Government can judge; but some points are very clear, and may well be debated in your Lordships' House.
One point of great importance seems to be that Herr Hitler himself proposed that disarmament should be discussed—a very great factor, some of us might think the only concrete factor, apart from declarations and words which have no value. Acts, not words, as Lord Stanhope

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said, are the requisite. Then, perhaps of prime importance, a new situation is created by the action of Russia. Mr. Lloyd George was perfectly correct in saying that the situation is radically changed by that fact. We should not now be negotiating with the German Government and Herr Hitler, but with a combination of Hitler and Stalin, and in that combination, we must see clearly, Herr Hitler is a subordinate factor. The First Lord of the Admiralty in his broadcast the other night seemed to agree with that. German aggression in the Baltic, the Balkans, and the Black Sea is already barred, it seems certain. Russia's game is worth watching very closely as a great new factor. It is undoubtedly the extension of Bolshevisation to the utmost limit. The danger which we saw a month ago is taking a new form. It may be possible that a real Poland would result from a conference if it could be brought about on our terms. The integral restoration of the late Polish State would necessitate the defeat of Russia as well as the defeat of Germany, and we should hardly wish to restore to Poland the Ukrainians and the White Russians, who had no desire to be governed by Poland. But a real Poland might result from a conference.
I hope the Government see in the situation a possible opportunity to learn, no doubt through neutral channels—which we must assume have been employed if the approach of Germany is a real approach at all—what negotiations are possible. It may well be that terms might result, offering more probability of secure peace than would result from a long war. We might get, for instance, a European collaboration in which Germany would be included. Indeed it is a striking thing that Herr Hitler talks of collaboration, which up to now has appeared to be his bugbear. Disarmament, which would involve very strict supervision by an International Commission, if it came to be part of an agreed settlement, would be perhaps the most solid security that could be devised. Perhaps there might result the establishment of a genuine Bohemia as well as a genuine Poland; perhaps both of them part of an East European Federation. The maximum of security obtainable might result from such a conference. It is not impossible, I hope, that with skilful
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diplomacy it might result in a European system following the lines that the Foreign Secretary sketched in his great speech at Chatham House at the end of June, in which he stressed, as he has often done, that such European collaboration is indeed our chief aim.
5.30 p.m.
LORD ARNOLD: My Lords, the speeches to-day have been brief and my own speech will conform to that principle, if principle it be. Most of the speeches do not seem to point to peace, and the war seems likely to go on and on until Hitler and Hitlerism are overthrown. I think it may be assumed that nobody in this country holds a brief for Hitler. I think we may start from there. Yes, but when we are told that we must go on until Hitler and Hitlerism have been overthrown, we cannot forget that just the same thing was said twenty-five years ago about the Kaiser and Prussianism. We were then told that it was necessary to go on until the Kaiser had been overthrown, and until Prussian militarism had been crushed, that it was no good stopping before that had been done, that there could be no secure peace—we were told that until we were utterly sick of it—until those aims had been accomplished. Some of us pointed out then that you could not in fact really crush Prussian militarism or any other militarism by militarism. Of course we were looked upon as semi-imbeciles, but as a matter of fact we were perfectly right, as time has shown.
I ask, is the same policy going to be repeated in this war? With the lessons of the last war clear before us it seems almost incredible that we should follow the same disastrous path, leading to the same tragic results. It is now perfectly clear that the peace of 1919 was not a real peace, but was only the beginning, in effect, of another war. We can all see that now, and it seems only too probable that the next peace, the peace at the end of this war, will be no real peace but will be really the beginning of another war. I would like to put this to the noble Viscount on the Government Bench. The Government do not tell us what will happen, or what the position will be when Hitler has been overthrown. Am I not right when I say that they give the ordinary man in the street to understand that when Hitler has been overthrown everything will be all right? Surely, that is a most

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dangerous illusion. When Hitler is overthrown he will not be succeeded by a nice, good, manageable Government which will do just what the British Government want. Certainly not. And even if he were succeeded by such a Government there is no guarantee whatever that it will last, not the slightest guarantee that it will not itself be very soon overthrown. But in all human probability, when Hitler is overthrown, Germany will go Communist, and the Hitler régime will be succeeded by a Communist Government.
Now this new German Government will at once make a definite alliance with Russia, and we shall at the end of this war, as I have indicated, be in sight of the next war. That will be a war by the Democracies to defeat Communism in Europe, if they can. All that is now being said about the evils of Hitlerism will then be said equally strongly about the evils of Communism, and about the vital necessity of overthrowing the Communist Governments if Europe is going to have any peace. And where will Poland be then? What will then be the position of Poland? How are we going to restore Poland, for which we gave a pledge? Is Russia going to be driven out of Poland? because if so that, of course, means war with Russia. Here I would just like to comment upon some words which the noble Earl, Lord Stanhope, used in his statement. If I got them right, he said that the German Government, and the German Government alone, stands in the way of a settled Europe, or words to that effect. What about Russia and her aggression, which does not yet seem to have come to an end? Is Russia to be left out of account in looking to the future of Europe? How can His Majesty's Government categorically say all will be well if the present German Government is overthrown? To say that is opposed to all the probabilities. In fact, if we were consistent in our policy—and I would like to put this to my noble friend Lord Davies, who I believe is to speak—if the League of Nations supporters were consistent and had their way, we should have been at war with Russia now because of her aggression against Poland.
I want to say one further word about Poland, and it is this. When we are told that we must go on at any cost in order, for one thing, to help Poland, I would
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remind your Lordships that for 123 years—that is from 1795 to 1918—British Governments acquiesced in the extinction of Poland as an independent separate State. That is a matter of history, and it is a little difficult to reconcile it with our new-found love for Poland. Then, apart from Poland, there are the baffling, age-long problems of Central and Eastern Europe. These were in existence long before Hitler came into power. Are they going to be settled? Is everything going to be satisfactorily arranged in regard to these problems when Hitler is overthrown? No, the simple truth is that when Hitler is overthrown you are not at the end of your troubles; you are really only at the beginning of a lot of new troubles. You will not have solved the old ones, and you will have brought into existence a lot of new ones. Europe will be seething with problems. That will be the position, and we shall have new dictators, new Hitlers, new Stalins, new Mussolinis, leading on in due course to, another war in another twenty years or less.
I have quoted before in your Lordships' House the words of the noble Earl, Lord Baldwin, in which he said that the second European war—the war in which we are now engaged—was likely to end in complete barbarous anarchy from one end of Europe to the other. That may be an exaggeration, though the noble Earl, Lord Baldwin, is not a Hyde Park orator. He weighs his words and that is what he says. Let us hope it is an exaggeration. But it is quite certain that the price which will have to be paid for overthrowing Hitler and Hitlerism will be far too heavy even if it is going to lead to peace in the end. But when it is certain that it will lead to a state of things in Europe so terrible that the mind recoils from contemplating it, those who, reject any terms of peace now are taking upon themselves an immeasurable responsibility. I am not saying for a moment that Herr Hitler's speech was a satisfactory one. I am not saying that it had not in it a great many thoroughly bad passages. But I think that we ought to concentrate on that which is in the proposals which might, as has been said by other noble Lords or has been hinted at by them, with the aid and co-operation of neutrals, be a starting point for discussion and negotiation. If that

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could be done you would not be negotiating with Hitler alone.
The simple truth is we are faced with a choice of evils, whichever way we go or whichever way we look. Supporters of the policy of carrying on the war to an end think that their policy, if it is followed, will have good results. I do not think that is true. We are faced with a choice of evils, but there is at any rate some possibility that Hitler's speech might, in conjunction as I say with neutrals, be made the basis of negotiation which would lead to fruitful results. On the other hand, there is no possibility that the policy of going on and on until Germany is crushed can lead to good results. We are told again and again that we are not fighting the German people, that we are fighting Hitler, and we invite the German people by leaflets to throw over Hitler and become partners in a new Europe. Unfortunately we did that last time. That is what was said last time. The German people were asked to overthrow the Kaiser and were promised all kinds of things if they did so. They did overthrow the Kaiser and they got Versailles. They have not forgotten that. The German people's memories are not so short as those of some of the writers of some of the leaflets.
The cost of this policy of going on and on to the bitter end, of fighting to a finish, ought to be counted again and again, not only because of what we shall suffer in this country but because of what others will suffer, particularly the neutrals. Nobody knows what may happen to them, to Holland, Belgium, Switzerland, the Baltic States. They may be invaded and devastated. It is all very well saying we will restore them, but we cannot restore them. Nothing can restore the lives of millions of men, women and children killed or maimed or wounded, and nothing can make good the material loss. The material loss is inconceivable. There is far too much wishful thinking in these days. People say what they want to think without facing the facts. They live in a world of make-believe because that is the easiest thing to do. I think it is better to face the facts and face the price which will have to be paid for this policy of fighting to a finish.
What is the price, and what will you get for it? The Government say they
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are preparing for a three years war. It may not last three years, it may last only two years—conceivably only one year—but it may last five years. Nobody knows. But whether it lasts two years, or three years or five years, it will mean, it must mean, inconceivable slaughter and suffering and material loss. And we have been told again and again, not by Hyde Park orators but by men as highly placed as any men can be in this country, that it will mean the end of civilisation as we have known it. What is the price we shall have to pay, and what shall we get for it at the end? There is every prospect that at the end you will see Europe in ruins. Not even my noble friend Lord Davies, in his most optimistic forecast, I imagine, would suppose that on a Europe in ruins you can build up peace and good will and a reign of law. Anybody who thinks that is not an optimist: he is leaving out of account all reasonable probabilities of what the situation will be like. My last word is this. I think it is as certain as anything can be in human affairs that the peace which will be got at the end of a long war will be a much worse peace than the peace which could be got now.
5.46 p.m.
LORD DAVIES: My Lords, I have no intention of following the noble Lord who has just sat down, because the time at my disposal is brief. I should like, in the first place, to congratulate the Government upon the statement which they have made to your Lordships this afternoon, because so far as it goes I imagine most of your Lordships will find yourselves in agreement with what the noble Earl has told us. I imagine that the statement which was made to us from the Government Bench was the first instalment of the Government's reply to the speech which Herr Hitler delivered last week. In that speech he told us quite definitely that he proposes to extinguish Polish liberty, Polish independence and Polish nationality. He also told us that he proposes the economic subjugation of South-Eastern Europe, so that the countries in that part of the world may look forward to becoming the economic vassals of Germany. Then he demanded, although he said that he was not prepared to use force, the transfer of Colonial territories to Nazi rule, and he finished up, as he always does, with some vague declaration about disarmament.

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In view of that speech I cannot conceive that His Majesty's Government or the French Government could give any other reply than the one we have heard this afternoon, but I would like to join the noble Lord, Lord Snell, in suggesting that in the second instalment which we hope will be forthcoming of the reply to the proposals made by Herr Hitler, the Government will pursue a peace offensive and will put forward more positive and more constructive proposals for carrying out the policy which they have already proclaimed. What are the war aims which up to now have been proclaimed by the spokesmen of the Government? Very briefly, they are, first of all, the restitution of Polish liberty and independence, and I think in reply to a request from the Czecho-Slovakian Government the Prime Minister did give a promise that the independence and liberty of Czech o-Slovakia would not be lost sight of at the conclusion of this war. In view of the splendid efforts which are now being made by Dr. Benes and his friends to raise a Czech Legion to help us in the struggle, I think that is the very least that can be said. The second aim, as we understand from the Foreign Secretary, is that international disputes shall not in future be settled by recourse to violence but by recourse to some peaceful procedure which I think he defined as negotiation, although I am sure he did not intend to limit the peaceful procedure merely to a process of negotiation. The third aim, we have been told, is to prevent these ever-recurring crises and threats of war to which we, in common with other countries, have been subjected during the last few years.
The first of these, the restoration of the liberties of these countries, is Article 10 of the Covenant, the maintenance of territorial integrity; the second is Article 19, the provision for the peaceful revision of treaties and the settlement of international disputes; and the last, the prevention of this horrible anarchy which exists in Europe and in the world to-day, is the Covenant in its entirety. Therefore, if that is so, and if we have, as the noble Earl told us, no ambitions and we cherish no desire for any territorial aggrandisement, and we have no idea of endeavouring to secure economic advantages at the expense of Germany, this war, in effect, is a League war. It is being waged to assert the rule of law and therefore, in
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effect, France and ourselves are acting the role of international policemen. It seems to me that the tragedy of this business is that out of 23 European Members there are only two Members of the League who have gone to the assistance of Poland in order to assert the rule of law and to maintain the provisions of the Covenant to which they had all subscribed their signatures.
I am not going to go into the reasons why the other countries have not come to our assistance, or have not come to the assistance of Poland, and have not observed the responsibilities and the obligations which they entered into when they signed the Covenant. There are, of course, a great many reasons and I have no doubt a number of excuses can be found. But at the same time the fact remains that we are fighting the battles of the small countries; we are fighting the battle of the small powers, and if (which God forbid) we should be defeated in this war, then all these small countries in Europe will be mopped up one by one and they will become vassals of the Reich, just as Czecho-Slovakia and Poland have been dealt with.
Therefore I think the question, to which I am sure His Majesty's Government are alive and which they have been discussing, is how are these war aims, which they have already declared, to be achieved? I submit to your Lordships that slogans and general principles, however idealistic, and whatever good intentions we may have, by themselves are really not enough. They will not suffice. What we want to know, what the country wants to know, and what millions of people all over the world want to know, is how these principles, these good intentions, are going to be translated into practical politics, and how we propose to achieve these idealistic declarations which have already been made. I would venture to suggest that it is our duty to try as far as possible in our humble capacities as private members of this House to make whatever suggestions we can. Both with regard to the restitution of the liberties of Poland and of Czecho-Slovakia, I think the noble Lord, Lord Noel-Buxton, suggested that there might have to be some variations of the boundaries of these countries when their liberties and their independence are restored. What I venture to

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suggest is that that is a duty and a responsibility which might be undertaken by a tribunal nominated by the President of the United States. He, after all, is about the only impartial ruler now left in the world, and if he would undertake to nominate such a tribunal, that might possibly be one way of delimiting the frontiers of the restored Poland and Czecho-Slovakia.
The second problem, of course, is the general problem of restoring law and order in Europe and bringing to an end the anarchical conditions under which we live. The noble Lord, Lord Arnold, said that all these difficulties and troubles with which we are now faced arose out of the fact that we had fought and won the last war. I venture to suggest that that is not the reason at all. We won the war, but unfortunately we lost the peace, and it is the events which have happened during the last twenty years since the conclusion of the war which have brought us to the unfortunate position in which we find ourselves to-day. I venture to suggest that the only durable solution of our difficulties is to adopt the proposals which were made by a great Englishman, William Penn, in the seventeenth century, when he suggested that the only solution was the constitution of what he called a European States Parliament or Diet. That proposal was resuscitated, the noble Lord opposite will remember, some years ago, when M. Briand suggested what he described as a United States of Europe. Therefore I venture to put forward this afternoon, as one of our war aims, some organisation—I do not suggest what its precise power should be—which should be created and which would carry out what William Penn suggested about 250 years ago and what M. Briand suggested about fifteen years ago and what many other publicists and statesmen have suggested during that time.
With regard to the membership of such a Confederation, surely the first proposition to lay down is that all States who are prepared to renounce war as an instrument of policy—that is to say, to carry out the provisions of the Kellogg pact—should be eligible for membership of such a Confederation. As to its powers, would it not be possible, through the medium of an assembly or of a Parliament or whatever you like to call it,
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that all disputes should be settled and that this body should be assisted by an equity tribunal? Secondly, that this body should be asked to concert measures for economic co-operation. Thirdly, that they should be asked to supervise the administration of non-self-governing Colonial territories. I cannot help feeling that the noble Viscount opposite will sympathise with this proposal, because in the speech which he delivered at Chatham House he said:
"Can we not look forward to a time when there may be agreement on common methods and aims of Colonial development, which may ensure not only that the universally acknowledged purpose of Colonial administration will be to help their inhabitants steadily to raise their level of life, but also that Colonial territories may make a growing contribution to the world's resources?"
The fourth function of such a Confederation would, I suggest, be to control a common defensive force.
Then as to the guarantees—because obviously it is not much use entering into any arrangement of this sort unless there are guarantees—the noble Lord, Lord Noel-Buxton, suggested that disarmament was one of these guarantees. But I do not think that that would be a very effective guarantee without the transfer of certain categories of weapons to this defensive force. There is a very interesting passage in Herr Hitler's speech last week in which he recognised the distinction between what he called "modern" weapons and other weapons. He went on to say:
"This requires not only a final sanctioning of the status of Europe, but also the reduction of armaments to a reasonable and economically tolerable extent. It is also necessary to define clearly the applicability and the use of certain modern weapons capable of striking at any time into the heart of any nation and so causing a lasting feeling of insecurity."
He recognises a very important principle—namely, the differentiation of weapons. Of course, what we suggest, and what I have ventured to suggest to your Lordships on other occasions in the past, is that these "modern" weapons should be handed over by the National Governments to the custody of a federal authority. When that is done, then I think we may hope that these weapons will, if used at all, at any rate only be used to the smallest extent and for the least destructive purposes for which it is possible to use them. We hear a great deal

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about the laws of war. Of course we know perfectly well that these laws are only kept so long as it suits the convenience of the belligerents to do so, and the only way in which you can get an effective law of war is to change the character of these weapons until they can only be used for police purposes.
I have very nearly finished, if the noble and learned Viscount on the Woolsack will bear patiently with me for one moment. There are four reasons why I venture to suggest that the Government should give us a clearer and more comprehensive statement of their war aims now and not wait indefinitely. First of all, as the war goes on there will be increasing bitterness, and passion will be aroused, and it will be very difficult for anybody to think sanely at all. That, of course, happened during the last war. The second reason is that we ought to endeavour to do everything we can to maintain the morale of our home front, and I am not at all sure that that morale is as high now as it was three or four weeks ago. Another reason is that we want to influence neutral opinion, especially in America. The fourth reason is that we want to assure the German people that we are not out to impose a new Versailles upon them; that we are not out to dismember their country; but that we are willing that Germany should honourably take its place on a basis of equality with all the other countries in Europe. Therefore I would venture again to plead with the Government to elaborate the aims which they have expounded to us this afternoon in a logical way and endeavour to express the principles which they have enunciated in terms concrete and practical institutions.
6.7 p.m.
THE SECRETARY OF STATE FOR FOREIGN AFFAIRS (VISCOUNT HALIFAX): My Lords, perhaps I might say just a word or two before the debate closes. My words will only be very brief. I have heard every speech which has been made in the course of this debate and I have listened with great attention to everything that has been said. I hope that I am entitled to claim, from the way in which the statement was received by the noble Lord opposite and the noble Marquess who speaks from the Liberal Benches, and by my noble friends behind me, that the overwhelming
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feeling of the House was not one of sympathy with the view expressed, if he will allow me to say so, with more sincerity than judgment, by my noble friend Lord Arnold opposite. I have taken note of the various suggestions that have been made in the course of this debate, and I think that when your Lordships are able to give careful study to the statement that was read by the noble Earl the Leader of the House, you will find perhaps that a good many of the points that are in your mind are covered, either explicitly or implicitly, in that statement.
I would ask you to take it from me that those which are not covered were, I think, without exception, all in the mind of His Majesty's Government when they were preparing that statement. They were considered with the utmost care and, I need not add, with almost a dominant sense of the responsibility and the gravity of the responsibility under which those who had to take the decision on the form of the statement lay. But, having considered them, they decided that for convincing reasons, of whatever kind it might be, those points that were omitted should not be included. For the rest I do not think that your Lordships would expect me—and indeed the noble Marquess was good enough to make a reference to this in his speech—nor indeed that it would be right for me, to endeavour to extemporise in regard to a statement every word of which was most carefully weighed and to which I should be very unwilling to add words that were not equally carefully considered.
LORD SNELL: My Lords, I beg to thank the noble Viscount for the statement he has made and, with the permission of the House, to withdraw the Motion.
Motion for Papers, by leave, withdrawn.

BUSINESS OF THE HOUSE.
EARL STANHOPE: My Lords, perhaps before the Royal Commission it might be of advantage if I told your Lordships the business we propose for next week. There is a Motion on the Paper for next Tuesday—which is the first day, apart from judicial business, on which there is anything for the House to do—in the name of Lord Swaythling on the subject of the retention of the milk recording scheme for

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farmers, and I understand that the noble Lord, Lord Newton, has also put a Motion on the Paper. I propose that we should meet at half past three on that day. The House will meet on Wednesday for the usual weekly statement, and if there is no other business on the Paper I propose that we meet at a quarter to four. In the event of there being business of importance to transact before the statement the House will meet earlier. As there is no business at present on the Paper for Thursday it may not be necessary for the House to meet on that day. Therefore I suggest that we meet at half past three on Tuesday, and a quarter to four on Wednesday, unless anything additional to the Government statement appears to be necessary on that day.
House adjourned during pleasure.
House resumed.

ROYAL COMMISSION.
The Royal Assent was given to the following Bills:

Finance (No. 2),

Solicitors (Disciplinary Committee),

Education (Emergency),

Education (Emergency) (Scotland),

Courts (Emergency Powers) (Scotland),

Execution of Trusts (Emergency Provisions).

House adjourned at twenty-four minutes past six o'clock.