HL Deb 17 January 1940 vol 115 cc317-72

VISCOUNT CECIL OF CHELWOOD rose to ask His Majesty's Government whether they could make any statement as to the progress of economic warfare; and to move for Papers. The noble Viscount said: My Lords, I hope your Lordships will agree with me that the subject which we are to discuss this evening is certainty amongst the most important subjects which the war has raised. Yesterday my noble friend who leads the House warned us all against the folly of attempting to predict what is going to happen in this war. I entirety agree with him. The war has entirely falsified all predictions of what it was going to be like, and therefore one would be very foolish to attempt any further predictions. Indeed, as a mere onlooker, I find it very difficult—this is not intended as a criticism—to be quite sure of what we are actually aiming at on land and, still more, what the Germans are aiming at. I dare say that is quite simple enough to those who have full information, but to me, with no information at all, it is a little perplexing. On the sea, of course, it is simple enough. There is no doubt at all what we are up to there, and what we have accomplished is quite understandable and exceedingly satisfactory; but with regard to the rest, most of it is a little obscure.

When we come to the economic side, the position becomes clearer. There is no doubt what our object is, economically. We are anxious to deprive the enemy of his power to fight as far as we can do so by economic means. We wish to withhold from him all the weapons and equipment which he has not got and to make it difficult for him to increase these weapons and equipment from his own resources. No doubt that is not the whole of our business from an economic point of view. There is quite a large and extensive part of our effort which ought to be made, not so much to deprive the enemy of strength as to maintain and increase our own economic position so far as that can be done. That is an entirety different matter, and I am not, myself, going to attempt to deal with that side of the question. I understand there are some of your Lordships who will probably desire to say something about that, and I am sure we shall listen to them with the greatest attention because it is a very important matter. All I want to say about it is that it is essential that as far as possible—I know it is not possible altogether—our operations in order to maintain and improve our commercial position should be kept separate from, and not treated as part of, what may be called roughly our blockade operations.

I say that for this reason—digging out from some of my own past experience of the subject—that while in the end neutral Powers will be ready to recognise that in the exercise of belligerent rights intended to attack and diminish the force of our enemies, we are, broadly speaking—apart from technicalities—within our rights, if that exercise does cause, and must cause, inconvenience to neutral Powers, they at any rate, if they approve, as I think all of them do approve, of the general thesis we are seeking to maintain, ought not to be too careful to insist against us that we are doing things which are not convenient to them. But if there were to grow up any kind of suspicion that we were using our belligerent rights in order to build up our commercial position as opposed to our rivals, whether neutral rivals or any other, then a very difficult position might arise. I shall not enlarge on that; it is evidently a very delicate subject. I do not speak without, at any rate, some past authority on the subject, for I remember very well the controversies that arose on just that point, and I only hope that, whatever we do to increase our economic effort in that direction, we shall be very careful to make a complete separation between what may be regarded as blockade operations and what may be regarded as strictly commercial operations. I make only that one caveat, and I am not going to deal further with that aspect of the question.

As to the more strictly blockade side, I see it stated that the right reverend Prelate (the Lord Bishop of Birmingham) is going to move the Upper House of Convocation to say that our blockade should not touch imports of food into Germany. I mention that only because it is a point of view that is taken, I know, in certain quarters of this country. It seems to be argued that if we took that course we should avoid doing an injury to the non-combatant portions of the German Empire, and we should not in any way diminish the pressure we are putting on the combatant portion. If that is the view, I cannot help thinking that those who hold it have forgotten Napoleon's celebrated dictum that an army moves upon its stomach. That is quite true. The efficiency of an army depends quite as much on its supply of food and other things of that kind as it does upon the supply of guns, rifles, bombs, and all the rest of it. Therefore I should entirely disagree with those who think we ought not to stop food if that is an effective form of pressure on Germany. Of course there is a conceivable position—I do not know whether it exists or not—when it may be said that the Germans have internally all the food resources they require, that therefore any which they import are only in the nature of superfluities, and that there is no advantage in keeping out of Germany superfluities. I do not in the least know whether that is true. It certainly was not true in the last war, and I do not know whether it is more true in this war. That is a matter on which the Government no doubt have information, and are directing their policy in accordance with that information.

But with the general proposition I think there is something to be said from that point of view. Our business is to deprive Germany of her power of offensive warfare. Merely to keep luxuries out of Germany does not help us at all, and indeed it may be the other way. There was an interesting letter in yesterday's Times from the Secretary of the London Chamber of Commerce who pressed that point of view very strongly. I am not quite sure but I rather think his illustration referred to things like perfumery and cosmetics. He said, why keep those out of Germany? Germany, if she imports those things, has to pay for them, and if she pays for them she will have less money to pay for what is really essential for her armaments. I think there is a good deal of force in that argument, though I am not in a position to say whether perfumery and cosmetics represent a sufficiently important item of the importation into Germany to make it worth while to trouble about them. But there are things which I hope the Government will consider in that connection.

There are, for instance, tobacco, and even coffee. I do not want to dogmatise about it, because I am quite aware that very different opinions are held as to the importance of keeping coffee, for instance, out of Germany, but I conceive that it might be well worth our while to allow Germans to import things of that kind, which cannot by any possibility be of any value to them for actual fighting, so that they may not have money to spend on imports which would be of greater value to them. It is obviously true that the more Germans spend on what is unessential the less they will have to spend on what is essential. Indeed, the proposition that we must diminish as far as we can the amount of money—I put it crudely—the amount of purchasing power that the Germans have, is clearly of the greatest importance, and that, it seems to me, is without doubt the great defence that we make for preventing the export of German goods. That is, I think, a very, very important matter. I know the Government do not disagree with me about that, but I venture to add my voice for what it is worth in pressing the great importance of that matter of cutting off German exports.

We certainly tried to do it in the war of 1914; indeed before I was connected with the blockade a great deal of it had already been done by my exceedingly able and energetic friend, Mr. Leverton Harris, who had already succeeded in cutting off the greater part of German exports before I interfered at all, and I warmly approved. It is, however, much more important now, if I may say so, even than it was then, because we have this great question mark, which is Russia, which is a possible source of supply to Germany. We cannot interfere with it physically because of the geographical position of Russia and Germany. All we can do, if we can do it, is to lessen as far as we can the power of Germany to pay for imports from Russia, and the more we can do that the better in that respect our position will be. Our position is not as good as it was in the last war in this respect. There was no equivalent possible source of supply open to Germany, at any rate, in the earlier stages of the war; while in other ways our position is much better. Germany had in that war very large foreign investments and foreign credits available to her in South America and elsewhere, which we tried to deal with in all sorts of ways which certainly did not lack ingenuity, but I am afraid those efforts did lack a good deal of success. It is an extraordinarily difficult thing to deal with. We made great efforts about it. But now those resources of Germany are, according to all accounts, much less, and therefore she depends more exclusively upon what she can sell than she did in the Great War. Therefore anything we can do to stop her is of great importance

I know that against this the Government will have to contend with certain neutral objections. Obviously the neutrals wish to make as much money out of this traffic as they can, and naturally enough—I say naturally, but I am not quite sure I really think so—they are very much adverse to anything which interferes with their trade. Yet I cannot help thinking that it would help us if they can only be convinced—and I cannot think it would be difficult to convince them—that interference with German exports is merely a form of interference with German imports, that, to put it crudely, for every German export the Germans will have more money to spend on such things as oil or supplies from Russia. Take that merely as a crude instance. It is quite evident, therefore, if we can stop a particular export we may easily be said to be stopping a gun or an aeroplane directed against our troops and against our safety. Therefore I should think that it ought not to be difficult to make that quite clear to the neutrals, and I have no doubt the Government are doing so.

There is one observation which I venture to make by the way; it has not much relevance, I am afraid, but I make it for what it is worth. If we had started this war, as may well be imagined, as a war carried on in obedience to our obligations under the Covenant of the League of Nations, we should have had a complete and perfect answer to any neutral objection because, under the provisions of that Covenant, we are certainly entitled to cut off all possible connections between the offending country and the outside. And indeed I should myself be disposed to remind neutrals of that, since they are all Members of the League, and to suggest to them that they ought not only not to object but ought to do everything they can to assist us in carrying out the obligations by which they are as much bound as we are.

That is all I desire to say on the general policy of the blockade. I want to add just a few words on the actual organisation. I personally regret that the Government decided against the plan that was in operation in the last war of keeping the main direction of this in the hands of the Foreign Office. I know it sounds absurd to say that the Foreign Office should have anything to do with the blockade, and in the case of an ordinary blockade, an historical blockade, where you have a row of ships round a port and things of that kind, the Foreign Office, of course, would have nothing whatever to do with it; but in this case I am sure the noble Lord who is to reply for the Government will agree that the real difficulty and anxiety as to blockade operations of the Government are entirely due to the question of what will be the effect on foreign countries. At all events, nine-tenths of my efforts when I was in charge were directed either to explaining to neutrals and others that what we were doing was perfectly justifiable, or suggesting that at any rate they ought not to object. All that work, very important work in some ways and sometimes difficult work, is purely Foreign Office work, and in point of fact it was done in the last war entirely by the Foreign Office.

I know that the very able Minister of Economic Warfare has been given very considerable assistance from the Foreign Office in carrying out his duties. All the same, if you have to deal with an angry foreign envoy, I think you will deal with him much more easily in the Foreign Office than anywhere else. The whole atmosphere of the place is there to help. If you desire any information it is at your hand at the moment. If you desire any assistance—and I received immense assistance from the late Sir Eyre Crowe, a perfect mine of information on these subjects—you merely have to go into the next room and there it is. I cannot help feeling that it would have been a better plan to have adhered to that system. I do not wish to be thought to make the slightest criticism of the Minister of Economic Warfare—I have no kind of reason for doing so, and it is the last thing I should desire to do—but I think he ought to be in the Cabinet. He ought to have the authority of a Cabinet Minister. It is perhaps the most vital part of our war work. I do not know what is the whole view of the war that is held by the Government, but looking at it from the outside I should say one of the best cards we have to play, if I may put it so crudely, is economic warfare. Therefore, surely the man who is in charge of that ought to have all the authority of a Cabinet Minister.

I am ashamed continually to refer to my own experience, but it is the only experience that exists on the subject and therefore I venture to remind the House of it. When I first joined the Government I was made Under-Secretary for Foreign Affairs, having no idea whatever that I should have anything to do with the blockade, but I found that I had a good deal to do with it. I had the immense advantage of having next door the Secretary of State, who was always prepared to back up practically whatever I thought necessary. Even so, after a few months the Secretary of State himself went to the Cabinet and said: "It is impossible to go on like this. Here are Government Departments who have equal authority with the Under-Secretary, and we cannot go on." There were perpetual discussions—I will not say fighting—going on from that circumstance, and it was at his request that I was put into the Cabinet after he had tried to get other people who were not prepared to undertake it. I was given charge as Cabinet Minister and a little later there was created the Ministry of Blockade. Whether I did the work well or badly I do not know, but I am sure it was a good form of organisation. It enabled me to represent directly to the Cabinet anything I wanted to do, and I had, in addition, another Cabinet Minister, the Foreign Secretary himself, who was kept fully informed of everything that was being done and who was always ready to assist in every way possible.

I do not say that what was right in 1914 must be right in 1940—that would be silly—but I do say that it is of real importance to give to the Minister in charge of the blockade, great authority so that he can overrule objections and difficulties that arise in other departments of Government. I hope very much that the Government will be kind enough to reconsider the position and see what can be done to improve it. I am not going to refer to the great deal of discussion that has taken place outside as to the necessity for having the whole economic position under one Minister. To be perfectly frank, I am not quite sure that I agree with that, because of the difficulty that promotion of our economic interests may to some extent be in conflict with our far more urgent duty to cut off, to the fullest possible extent, the commercial powers of our adversary; but I do say that whether you are to put it all under one hand or not, the blockade portion at least ought to be in charge of a Minister with the fullest possible authority.

There are many details which, if I went into them, would keep your Lordships for an unnecessarily long time, but among the questions about which I hope the Minister will give us some information are the operations of navicerts, certificates of origin, and the extent to which we have in operation committees in neutral countries similar to those which we had in the last war, the Netherland Overseas Trust and the Swiss Committee, whose exact title I forget, but we called it the S.S.S.—SociétéSuisse de Surveillance, I think it was, though I cannot be sure. Very likely something better has been invented now, and if so, I should like to know what has been put in their place.

I should like also to know, so far as information can be given without indiscretion, exactly what is the position with regard to the rationing of neutral countries. As the technicalities of this may not be familiar to your Lordships, perhaps I may say in a sentence what I mean by rationing. You desire to prevent goods going directly into Germany; that is simple. You desire to prevent goods going through a neutral country for transhipment to Germany; that is simple. But if goods are sold to a neutral country, and it is thought that they are going to be resold to Germany, then you have a much more difficult pro- position. Except for some very fortunate decisions made at the time of the American Civil War, we should have been in considerable difficulty with neutrals over that position. Ultimately what we did, and I believe with great success, was to take peace statistics and say: "We find that you, Aquitania, have been in the habit of importing so many million tons of such and such an article. We now find that you are importing double that amount and we conclude that the extra amount goes to Germany. Therefore, we shall in future treat anything in excess of your normal importation as probably German importation." That was the broad principle we laid down. It is evident that there are difficulties and complications connected with it. For instance, there may be feeding stuffs going undoubtedly to neutral cattle. If those feeding stuffs enable the neutral cattle to supply more milk or more meat to Germany, are those feeding stuffs really importations into Germany? However, we were not bothered too much about technical details. We laid down that broad general principle and we operated it without any serious difficulty.

That is all I desire to say. I hope the Government will give us whatever information they can on all these points, and with my last word I will add one other caution. There must be, of course, difficulties with neutrals. I believe that as long as the neutrals are sure that we are using our power strictly for what I may call belligerent purposes, and as long as they can be assured that each neutral is being treated fairly with respect to other neutrals, the difficulties will not be very great. But if you are going to make favourites among the neutrals, then I think you will find yourselves in grave difficulties. I beg to move.

4.1 p.m.


My Lords, I think all your Lordships will be grateful to my noble friend, not only for introducing a debate on this very important question but also for making a speech which could only have been made by one who could draw on the long experience of a singularly successful discharge of the difficult office of Minister of Blockade. If the blockade is succeeding, as I have no doubt it is succeeding, to-day, those who now follow in his footsteps would be the first to acknowledge how much they owe to the pioneer in the successful work which he did in that difficult office. I want to deal with a rather different aspect of these big trade questions. Like most of your Lordships, I do not like making speeches in wartime. I have not made one in this House since the war started, and, though I will not dictate to others, the rule I would make for myself is that I ought not to speak unless I feel that I can offer constructive advice which may be of some definite value. I have, I think, read almost everything that has been written in letters and articles on the economic organisation of our war effort. I have had the opportunity of many discussions with men engaged in trade and industry who have been good enough to give me their views and to ask me for mine. I have also some not inconsiderable experience of administration in these matters, a long while ago as head of the Department of Overseas Trade and for three terms of office as President of the Board of Trade. I have attended more conferences, international and Imperial, than I can quite remember, and certainly shall not trouble to specify them. I also have the memory of seeing, at first hand, in an inferior capacity to that of my noble friend, as the permanent head of a Department where I was a civil servant too, if only a temporary one, the working of the machine of government and the War Cabinet in the later stages of the War. It is drawing on that experience that I venture to offer certain observations and suggestions to the House to-day.

We are all agreed on what is needed in the sense of our broad objectives. It is in one sense twofold and in another sense complementary. The first is the most effective effort which can be made by all the armed forces—sea, land and air. At the same time—and it is the necessary complement of that military effort—we need the maximum export trade which this country can do consistently with the essential military effort. It must obviously be so, because only that export trade can supply the exchange with which to pay for the necessary imports—that exchange which is perhaps the most important of all the munitions of war. All that is very obvious, and it is axiomatic that effective strategy in war must embrace both arms and trade. But, my Lords—I am not sure that this is so axiomatic, though it is certainly equally true—trade strategy must be as broadly conceived and as decisively executed as military strategy. In the direction and conduct of war two things above all are necessary. The first is firm decisions based on full and accurate knowledge—so far as knowledge can be accurate in war—taken as rapidly as possible and definitely adhered to once they are taken. Second is the balancing of risks and the taking of risks. It is impossible to be insured one hundred per cent. at every point, and an effective trade offensive must involve the taking of some risks. But those risks are tremendously worth while, particularly at the present time; and indeed those risks must be taken if we are to get that which is essential to the conduct of war: an adequate export trade to pay for our imports during what may well be a long war.

We are probably in agreement everywhere on the broad aim and object; but I would ask your Lordships to observe how different are the organisations which we are applying in the military field and in the economic field. In the military field military strategy and organisation have moved towards the creation of a combined General Staff. You have the Services working together day in day out, pooling their experiences, securing or trying to secure complete co-ordination. You have the Chiefs of Staffs Committee working harmoniously and effectively, and you have, and have had for the last two years, a Minister specially appointed for the coordination of defence, appointed for the sole object of ensuring that the three Services work together as one, that there is concerted, combined policy which embraces the experience of all, and effective co-ordination in action. All this was, I am glad to say, due not a little to the efforts of my noble friend Lord Hankey, who I understand is to reply to this debate. All this happily was created and working long before the war started. I remember making a speech in this House reviewing the whole history of the Committee of Imperial Defence and submitting to your Lordships the wisdom of establishing a Ministry for the Co-ordination of Defence as the logical and, what was much more important, the practical outcome of Lord Balfour's original conception of the C.I.D. Everybody in this House—military members like my noble and gallant friend Lord Cork and my noble and gallant friends Lord Trenchard and Lord Milne, and the noble Marquess, Lord Salisbury, also, With all his long experience of the Committee of Imperial Defence—all endorsed that as a wise, and indeed an essential, step, and no one has ever regretted that that step was taken.

And let me observe this. The creation of a Minister for the Co-ordination of Defence in no sense cuts across or interferes with the executive functions or the responsibilities of the Service Ministers. That is a wrong conception, and the argument which I want to advance to the House to-day I trust will not be met by any suggestion that when you ask for a Minister of Co-ordination, whether it be in defence or in economics, you want to appoint a Minister to do somebody else's job. That is not in the least what is in the minds of those who believe in co-ordination. It has not happened in the case of the Minister for the Co-ordination of Defence. He does not usurp the functions of other Ministers. He does not overlap; his object is to ensure co-operation and effective action. He is not in the least a fifth wheel to the coach, he is the necessary fourth wheel which makes that coach run smoothly. I need not argue that at all in your Lordships' House or anywhere else on the defence side; there is nobody who challenges that today. Nobody would wish for one moment to displace the organisation under which the Minister for the Coordination of Defence works with the three Service Ministries.

But can we say with the same assurance that this co-ordination exists on the trade side, which is hardly less important, or that the organisation which does exist on the trade side is well designed to ensure that the trade aspect, the trade interest, gets its full weight and its full share? Observe how in war organisation to-day, while the General Staffs of the Services draw even closer together and work in daily contact with the Minister for the Co-ordination of Defence, the moment war starts our trade organisation splits up—necessarily splits up. The Board of Trade, which has hitherto conducted a large number of operations under a single Minister splits these up; its brood leaves its wing. You have the Board of Trade itself, with plenty of work to do, and you have the Ministry of Economic Warfare. I was much interested in what the noble Viscount said as to where that responsibility should be located, but I do not follow him in his unrivalled experience of that. But at any rate it was a most important Department that was created.

Then you have the Ministry of Shipping, whose business it is not only to import goods which are necessary, but to export goods as well, without the export of which those imports cannot be paid for. You have the Mines Department, with its control over all coal and all petroleum products. You have the Department of Overseas Trade, no less important in war—perhaps even more important in war time, when the State may in many cases net only have to foster export but possibly to organise it, to control it, to direct it. You have the Ministry of Food, with its great claims on shipping, with all its ramifications through trade and industry. You have—not unimportant—the trade activities of the Colonial Office or of the Colonies, with their valuable exports—more valuable, more needed perhaps, in war than at any other time. And then you have, side by side with those, the Ministry of Supply, with very able men, practical men, in charge of its sections, but cutting across every other section of this great field of trade activity.

Now all that is necessary. It is perfectly right that those Departments should be split up. It has been found in practice that that is wise. But I do ask your Lordships to contrast the centrifugal trend by which all these trade Departments split asunder with the centripetal force which brings the Service Departments close together, under the guidance of the Minister for the Co-ordination of Defence. I know there are committees; and of course there must be committees. Nor do I underrate the value of the part-time or three-quarter time service of the noble Lord, Lord Stamp, to whom most of us in office have turned for advice at one time or another. But can anybody say that there is, or can be, co-ordination or means of quick decisive action on the trade side comparable with the organisation of the Services working under the Minister for the Co-ordination of Defence? Again, under a system where no one Minister is responsible for co-ordination of trade activities in the sense that the Minister for the Co-ordination of Defence is responsible for co-ordination within the Services, must not the trade side tend to suffer, not only in the co-ordination which is very necessary if each Department is to do its work to the best advantage, but also in having its case adequately presented in the Cabinet?

I submit that the Chancellor of the Exchequer and the Treasury are not an adequate substitute for a special Minister charged with the co-ordination of our economic activities. I do not say that for one moment because I think that the Treasury outlook is limited or negative. I do not in the least accept that view. Some of the boldest and the most imaginative of our public servants have been trained in the Treasury stable, and I think that the general public are often rather prone to underrate the initiative—and daring, indeed—of civil servants. Sometimes, of course, you may have a Minister who is disinclined to take decisions. Some of your Lordships may remember an unpublished fragment of the late Mr. F. S. Oliver purporting to give scenes from Ministerial life in which a passage occurred which, if I remember aright, went something like this: "'A decision!' groaned X. 'It might have been worse,' answered Y; 'a decision not to do a thing is always better than a decision to do a thing.'" If you get that kind of attitude—I am not suggesting for a moment that you have it to-day—it not only governs but infects a Department. I say this as a tribute to the Civil Service, that where inaction takes place it is just as likely to be the fault of the Minister as of the officers of the Department.

My reason for objecting to the vesting of these trade responsibilities in the Chancellor of the Exchequer and the Treasury does not, however, lie in anything innate in Treasury temperament. I think that the objection is much more objective than that. In ordinary times the Treasury is pretty nearly a full-time job, and in war the volume of work and the responsibilities of that office are enormously increased. There is not only the provision of finance on a huge scale, and all that that work involves through the whole field of finance and exchange, but there is what is sometimes called—insufficiently called, I think—the watchdog function of the Treasury. In addition to raising these vast sums, the Chancellor and the Treasury must be not only the critic but also the constructive partner of all the Departments which are spending the vast sums which the Chancellor raises. Surely that double task of getting and spending is enough work for any man however versatile and however able. To saddle him with all the work of trade co-ordination seems to me to be asking something beyond the mind of a superman and beyond the physical capacity of a robot.

There is another objection. All this system—perhaps I may be forgiven if I almost call it lack of system—throws more on the Prime Minister. It must. It throws more on the one man who ought to be clear of detailed work, the one man who, above all others, ought to have time to think out the great problems and how to deal with them. You do not want to throw more detailed work on to the Prime Minister, and I cannot believe that the present system does not tend to throw more on to the Prime Minister than any one man in that position ought to have thrown on his shoulders.

Let me give another reason. Again I base it on experience; and I think that those in this House who have held Cabinet office will endorse this. In the best of Cabinets a Minister must consider his own claims, and in war they loom even larger than usual. Naturally and rightly, a Minister wishes to be insured in his own Department; he sees the danger of a risk which is taken at his expense. Let me take a case that must constantly come before the Cabinet, a case where the Cabinet has to balance trade demands, the satisfaction of which will provide necessary foreign exchange, against actual or possible Service and Defence demands. Obviously there are many Service requirements which must have absolute and complete priority, but there are the marginal cases, the cases where some risk must be taken if the trade is to be done at all. Is a Cabinet with four Service Ministers—three Service Ministers and the Minister for the Co-ordination of Defence—and with no Trade Minister, really constituted in the best way to assess those claims as between the Service demands and the trade demands? It is no reflection on personalities in the Cabinet; I am directing myself entirely to what is the most effective machinery of Government, and I speak on this from a fairly long experience. I cannot believe that that is the wisest way in which to get these competing claims assessed, although everyone concerned is anxious to do the right thing.

Now let me take another consideration—time. The time factor is enormously important in taking decisions. It is just as important in taking important trade decisions as it is in taking important military decisions. You may be able to do the trade if you can take a decision. Many of your Lordships have far more experience of trade than I have, but I do know that the successful deals I have done have been those it has been possible to settle at the moment across the table. You must, however, have certainty in order to be able to do that. In business, people are taking not inconsiderable risks in the uncertainty of war. It is easy money, no doubt, if you are contracting for the Government, but it is not such easy money when you are contracting outside, when you are uncertain whether you will get the materials you want and uncertain of the price at which you will get your materials, although you have to quote a firm price and if possible a firm date when you are taking a big order. Time and certainty are very important.

I have often felt even in time of peace—and I am sure that former colleagues will share this feeling—that when in charge of a heavy Department it was increasingly difficult to cover the whole field of Cabinet activities. You had an enormous amount of work in your own Department. Subjects came up, you could not cover everything, and you had to take a certain amount on trust. Fortunately, there were colleagues whom one was very ready to trust. That, however, is even more true in war, where the War Cabinet is in constant session, but at the same time the departmental duties are more urgent and more complex. Yet so much time and so much thought must be given to these questions of trade strategy to appraise all the considerations, to frame the policy rightly as a whole, and to present it fairly for the final consideration of Cabinet colleagues. At the same time the decisions must be taken rapidly; and these decisions must be informed decisions or they will be wrong. If I have presented at all a true picture of the problem—and I do not think I have put anything unfairly or overstressed any consideration—is not there here a strong case for a Minister without departmental duties who would be to all the economic Departments what the Minister for the Co-ordination of Defence is to the Service Departments, a Minister who would not usurp the functions of any Department but who would appreciate the problems of all, who, with them, would frame policy as a whole, seeing all the wood, not just one line of trees, and ensuring, in the words of the old military maxim, that everyone had a sufficient knowledge of the general idea to carry out his particular operation?

In conclusion, may I support what I have said based on my experience as a Minister with my experience in the last war? It happened that towards the end of the war I became the Joint Permanent Secretary of a large Ministry, and I was also made—I do not know why—Chairman of a Priority Committee which comprised the Services, the Ministry of Munitions, and various other Departments. That Ministry and that Committee dealt with all questions of man-power. Manpower was a commodity which we sadly misused in the early days of the last war. It was the commodity which, in the closing stages, was most in demand and most difficult to apportion, just as some materials are to-day. When the Departments could not agree, we went to Lord Milner. That was before he was Secretary for War, when he was Minister without Portfolio in the War Cabinet, with no Department, with great administrative experience, and with infinite and wise patience. He had the time, he knew our problems, and, what was so important, he saw them as part of a whole. He heard us, he gave decisions which in nine cases out of ten were accepted because they were wise, informed decisions given by a Minister without a Department, with great experience and plenty of time. If necessary, a case went to the Cabinet, but it went to the Cabinet with what, I suppose, in these latter days we should call a rapporteur who was impartial but most thoroughly informed, and the Cabinet were able to give a full and considered decision.

I would beg the Government to consider whether here is not a lesson to be drawn from the past, whether there is not a lesson to be drawn from our present experience in these trade matters, a lesson to be drawn from the counterpart of the very system we have instituted in the Service Departments and which nobody wants to change. If that principle is right on the Service side, surely it is not wrong on the economic side. If these lessons were applied I believe the machinery of Government would work more smoothly and more rapidly and—this is the sole aim of all of us—the conduct of the war would be still more effective.

4.36 p.m.


My Lords, I feel great diffidence in following the noble Viscount who has just sat down and the noble Viscount behind me (Lord Cecil of Chelwood) because they have both filled great offices of State and are men of very great experience in this subject, and also because, if he will allow me to say so, the noble Viscount, Lord Swinton, has made the best speech he has yet made in this House. I have heard him on many occasions in another place, and I believe this is the best speech he has ever made in Parliament. The war has had that effect on him, at any rate, if he will allow me to put it that way. It has clarified his mind, it has stricken off his Party shackles, it has removed his prejudices, and has made him well worth listening to. I hope what he said about his inhibition against speaking in wartime will not deprive us of other speeches from him in future. The difficulty, of course, in taking part in this debate—here I quite agree with what fell from the noble Viscount, Lord Swinton, earlier—is that one has to be very careful of what one says because the only uncensored contemporary publication to-day is the OFFICIAL REPORT of Parliament. At the same time if we feel that matters can be improved or that useful suggestions can be made to the Government, it is our duty to do so.

Speaking on this occasion for the Opposition, it is the special duty of the Opposition, as things are in the present war, while supporting our cause in the war, to do our best to see that the Government are playing their part in winning it. May I say right away that what the noble Viscount, Lord Swinton, has suggested has been advocated now by the Labour Party, with much less force and eloquence of course, for some months. I entirely agree, with great diffidence, with his diagnosis of the present trouble. Things are not quite so perfect as they might be, and the noble Lord, Lord Hankey, who will wind up for the Government, would, I suppose, admit there is room for improvement. I agree with the diagnosis. The noble Viscount has indicated to a great extent the remedy I have had the honour of putting forward on behalf of the Labour Party before. We consider that we ought to get back to something like the War Cabinet of the last war, with a small number of Ministers without any departmental duties at all, who would call in as required—I understand this is what was done; my noble friend Lord Cecil will correct me if I am wrong—the Foreign Secretary or Defence Ministers when their subjects are under discussion. What we suggest is that there should be a small number of suitable Ministers without Portfolio or departmental responsibility, and then we should have one Minister for all economic questions, as indeed the noble Viscount has suggested, not so much a co-ordinator as a Minister responsible for the whole economic effort in this war, which includes exports, the obtaining of imports, and economic warfare, which was dealt with so fully by Lord Cecil. That is our idea of the sort of machinery required for running the war.

We are aware that the present War Cabinet is fortunate in having amongst its numbers two noble Lords whom I see opposite, who are practically without Portfolio—the Minister for the Co-ordination of Defence (Lord Chatfield), whose duties are well defined and well known, and the noble Lord, Lord Hankey, who will reply in this debate. There is apparently a lack of any Minister directly responsible for all the economic problems and their solution. I do not know whether the noble Lord, Lord Hankey, who is to reply, will explain that he has this particular responsibility. I do not know if it would be proper for him to enlighten your Lordships as to who really does supervise our economic efforts and the problems arising therefrom. Let me say at once, if I may be permitted to do so, that if it is the case that he is responsible, I would be very happy indeed. I have watched the career of the noble Lord, Lord Hankey, from the time when he was an officer of the very gallant Royal Marines, which is one reason why I have always had so much sympathy for him and admiration of his subsequent career. I have been hearing his name in one capacity or another, always with admiration, always with approval, ever since the beginning of the last war. I do not suppose anyone knows more about these matters than the noble Lord.

If we could be assured that some Minister in the Cabinet could clear away the troubles, one of which I am going to explain to the noble Lord, I should be satisfied. But before I come to that, might I make one further observation on the speech of Lord Swinton? He spoke of the difficulties of the export trade. We have just had a change of War Minister, referred to by my noble friend Lord Snell yesterday. I do hope there is going to be a change of policy with regard to the War Office retaining key men who are urgently required, especially for the export trade. At the present time there are far too many men who, owing to their great patriotism, volunteered for the forces, or who were Territorials—I am not referring to men called up under the Military Service Acts—who are urgently required particularly for the export trades, and who are being retained on comparatively unimportant duties in the Army. There is great difficulty in getting these men released. If a Government Department will support the application for the release of a key man, say for instance the Ministry of Supply or the Ministry of Mines, there is a chance of getting such a man out of the Army. I am glad Lord Cobham is present. He has been most helpful in these matters whenever he has been approached.

But if a man is needed for the export trade and if his firm or employer has to go to the Department of Overseas Trade or the Board of Trade, what do they know about him? It may be the case of a firm carrying on its business without Government help at all, carrying on an export trade under all the present wartime difficulties, and needing extra men with knowledge of this trade who at present are in the Army. How are they to get them out? The military authorities naturally hold on to all the men they can. That is a case where the broad policy should be continually under review. No one knew how this war was going to develop and no one knows how it will develop in the future. There may be an overwhelming demand for fighting soldiers in the near future. We do not know, but the policy has to be kept under continual review and—this is where I respectfully agree with the noble Lord—all the time we have got to keep this balance in mind, and remember that we have to keep our exports up and increase them for the vital purposes of war needs.

May I also make one comment on the remarks of the noble Viscount who introduced this Motion? He suggested that the Minister of Economic Warfare should be a member of the Cabinet. Does he mean by that the general Cabinet or the War Cabinet?


There is only one now.


There is only one. All he suggests is that he must be a member of the War Cabinet. That clears that up.


No, the War Cabinet would be quite separate if you had that system. Now it would be a different matter.


He must be a member of the War Cabinet, as things are to-day, surely.


No, under the system that was in force right through 1915, 1916, 1917 and 1918, or at any rate 1916, 1917 and 1918, you had a War Cabinet which was a separate very small body, consisting I think of about five members, Ministers without Portfolio for the most part. I rather think the Chancellor of the Exchequer was a member of it, but except for him they were all without Portfolio, if you include the Prime Minister as one. Then, in addition to that, there was rather a nebulous body which was called the Cabinet and consisted of from twenty to thirty people. It was of that body, as the Minister of Blockade, that I was a member. I was not a member of the War Cabinet.


I am not really quite clear about what the noble Viscount has said. Did the noble Viscount mean that he was a member of the War Cabinet, or a member of what he calls this nebulous outer Cabinet which did not in fact meet?


It met I think about three times. I was individually a member of the outside Cabinet, but, as my noble friend will probably remember, whenever the Foreign Secretary was away I used to discharge his duties and then sit, not as a member of the War Cabinet but as a kind of part of the War Cabinet, for the Foreign Secretary was not technically a member of the War Cabinet. But that was a different matter.


Apparently there is now no Cabinet of outsiders at all; there is only the War Cabinet, if I understand the position aright. For example, the noble Viscount on the Woolsack, the Lord Chancellor, holding a position of tremendous eminence, which he occupies with such dignity and effect, is not a member of the Cabinet at all.


That is exactly the position as it was in the last war.


The position is the same as in the last war?




In the last war there was a powerful body known as the Secretariat. The noble Viscount, Lord Cecil, was a leading member of that Secretariat, or, as they call it in America, "Brains Trust." Does that exist now?




There is no Secretariat now?


No, not in that sense.


This is really aside from the main trend of the discussion introduced by my noble friend Lord Cecil. But it has a bearing on this matter, not a very important one, if I may respectfully say so, and I prefer the solution of Lord Swinton. I do not think it is of any use having this Minister of Economic Warfare in the Cabinet. You want one Minister right in the inner circle who is responsible for all the economic problems that arise from every aspect of the war and of the national life. That is the policy that I venture to put before your Lordships.


May I ask a question to clear up one point which is not clear? Is it not a fact that in the last war the outer Cabinet never met at all, that therefore none of the Departmental Ministers ever took any part in the War Cabinet?


Perhaps I had better inform your Lordships what the position was. There was a War Cabinet. It was a small body which varied from a minimum of five members at one time to a maximum of seven members at another time. Then, outside that, there was really no Cabinet. I think there were three occasions—I confirm the memory of the noble Viscount, Lord Cecil, on that—on which the whole body of Ministers at the head of Departments met on questions which were usually internal questions with a strong political bearing, if I remember rightly, and they met to consider them just the same as the old Cabinet used to do. But although the War Cabinet met as a War Cabinet there were summoned to the meetings Ministers who were outside, who were not members, according to the nature of the business. If the business concerned the Minister of a particular Department, either in the first degree or in the second degree, that Minister was invited to attend for the discussion of that particular item on the agenda paper ad hoc.


May I interrupt for a moment? Whether the noble Viscount has really given us the actual facts or not, is it not the case that there were special Committees of Ministers set up outside the War Cabinet, for instance, one connected with home affairs and another over which Lord Carson presided for a time, which dealt with economic issues in the last two years of the war, which met quite regularly?


I do not quite like the system of giving my reply in driblets, so to speak, but as a matter of fact that was the case. There was no Minister who dealt exclusively with economic affairs. It is quite true that Lord Milner did deal with a great many economic questions, as the noble Viscount, Lord Swinton, has said, but I could also give numbers of questions, if time permitted, of an economic character with which Lord Curzon dealt in the course of the two years of the existence of the War Cabinet. Questions were constantly referred ad hoc to particular Ministers to deal with. Sometimes they conducted their inquiries through committees or alternatively Ministers were just summoned by ones or twos as was thought most convenient for getting the business done expeditiously and efficiently.


May I leave what happened in the past and come to the immediate problems of the present time, because I think the noble Lord, Lord Hankey, will be the first to admit that our economic situation to-day is different from what it was in his time, 1914–18, and in some ways is more difficult. The problems and difficulties are of a different order to those which assailed us then. This is one of the difficulties of the export trade of the present time. The sort of exports we wish most to encourage are those which take the greatest amount of labour and skill. They bring in most foreign exchange. One example is locomotives, another is motor cars, another is electrical machinery of all kinds, turbo-generators, transformers, dynamos and so on. These things take about a year to build—not the motor cars of course, but the high grade very valuable electrical machinery. Moreover, they take a good deal of expensive raw material, high grade steel, copper and so on. At present the manufacturer who knows that a contract will take a year to execute cannot get prices quoted for steel for more than three months ahead. He has great difficulty therefore in quoting firm to his foreign customer. In the year's interval before the contract is completed, all sorts of things may have gone up—wages, freights, the price of steel and so on. If he hesitates to quote, other countries will get the business. The noble Lord, Lord Hankey, will be aware that in the markets which Germany can reach she still competes seriously.

The noble Viscount, Lord Cecil, asked why we should cut off coffee from Germany. Is the noble Viscount aware that Germany has been selling coffee and tea to Hungary, although the German people never see or taste them? The German Government want foreign exchange and so are very glad to sell tea and coffee to Hungary. That is by the way. Competition from Germany in the markets she can reach is serious and in the markets she cannot reach there is competition from America, Japan, Italy, Switzerland and other countries. What I say is not to be taken as a contradiction of what the noble Viscount said, but I do say that in the case of the exporting merchant the Government must consider whether it would not be wise to give him some help to overcome the disadvantages, of which I have mentioned one or two. If the exporting merchant hesitates to quote, one of these rivals may come in. If on the other hand he does quote and cannot make his deliveries for one reason or another, he loses good will in the future and our economic position in that market is undermined.

The constructive suggestion which I have heard argued by gentlemen of very great experience in the export trade, and which I venture to put before the noble Lord for consideration, is as follows. In the case of the highly finished complicated valuable articles I have spoken about, would it be possible for the Government to say: "If you will quote firm and freight or the pries of steel or other components of the article goes against you in the meantime, we will make good the loss"? I would also put forward the counter suggestion that if on the other hand there is a fall in those prices, in that case the Government should have some drawback as compensation for what in effect is an insurance against loss. Something of that sort I think is needed in many markets which are very valuable for our export trade, and I put that forward without apology to the noble Lord who will answer on behalf of the Government.

The next matter that I wish very briefly to deal with is the question of preemption. This has been, I am sorry to say, slow in getting under way, especially, I believe, in certain of the Balkan countries. Even now we are not buying what we could and should buy in such countries as Yugoslavia and Rumania, and we are allowing the Germans to make heavy purchases there. Bulgaria is another country where we should be buying much more heavily. Bulgaria has just made a very wide trade agreement with Russia. The noble Viscount spoke of the danger of goods going from Russia to Germany, but if they go from Bulgaria to Russia and then to Germany we are no better off. The noble Viscount, Lord Cecil, says that to prevent Germany from obtaining goods essential for the war from Russia we should stop Germany having the means to pay for them. There is another way, and that is to buy them ourselves. I hope no noble Lord present will become incensed with me for suggesting that we should buy goods from Russia. I hope that the noble Earl, Lord Glasgow, for example, will allow me to make my case without too much objection to what I say.

We have to fight this war with our brains. It is very natural of course to feel passionate about matters which annoy us, and indignation is a great driving force, but in the long run brains, and not prejudices, will win the war. Those responsible for a great empire cannot allow prejudices to sway policies too often or too long. In the case of goods from Russia which are vital and which would otherwise go to Germany I hope we shall step in and buy them. Some noble Lords may say Russia has nothing to sell to Germany, but my information is that Russia has certain surpluses of which I will mention only three—timber, iron ore and manganese ore. Those are things we need, because of lack of foresight before the war. The Government were begged to store such articles, but did not gamer nearly enough reserves before the war. But I do not want to go into that, and the point is now that we can buy from Russia iron ore, timber and manganese which otherwise would go to Germany. It is not so difficult, because the iron mines in Russia are mostly in the South of Russia, in the Ukraine, and their whole economy is built on exporting through Odessa or Nikolai by sea. There are other mines in the Caucasus, and I think Nikolai is their port. At any rate it is far easier for us to lift the Russian iron and manganese from Odessa or Nikolai by sea than it is for the Russians to send it by overland route to Germany. Therefore we can afford to pay a better price than Germany could, and we could give the Russians good exchange, or such goods as rubber, which they need, whereas the Germans can only give them a very expensive rubber substitute—buna, it is called: very excellent and very expensive. The noble Viscount spoke of the Russian oil. I do not know how much surplus they have, but whatever they have I do hope we are buying it.


We do not know anything about it.


I am speaking of the policy, and I am sure the noble Viscount will agree with me there, that we should buy it rather than that it should go to Germany. After all, we have goods to give Russia in exchange which she needs, and it should not be impossible to secure that these goods do not afterwards go to Germany. This whole question of pre-emption is not only a difficult one—I am quite aware of that—but it is also a matter on which none of us would expect the noble Lord to speak in detail. I am able to do so because I am not in the Government's confidence, and the information I have is really open to anyone who cares to look for it. I am not giving away any secrets.

May I just speak on one other matter of general policy? Whatever the composition of the Cabinet—I shall read the OFFICIAL REPORT very carefully tomorrow, and from the explanation of the noble Lord I am sure I shall find out what exactly the machinery of Government is; I have not quite grasped it at present—we are not satisfied that it is working well. We are not satisfied with the working or the policy of the present Cabinet. We support the war, but we are not altogether happy about the way in which they are conducting the economic side of the war—I do not speak of the naval and military side at all. What makes us particularly uneasy is the slowness of the Government in mobilising our resources. Let me put it to your Lordships in this way. Apart from exports altogether—and there is general agreement about the importance of fostering the export trade—all the things which are essential for the maintenance of civil life in wartime are also important. They are only less important than armaments. Everything required for the well-being and sustenance of the civil population is important.

We have a vast body of unemployed workpeople in the country to-day—it is still 1,300,000. I make no apology for repeating this; I wish the noble Lord would keep that figure, brought up to date, stuck over his bed and look at it every morning when he gets up and every evening when he goes to bed. That is an awful thing, that after four months of war we should still have this vast army of unemployed workpeople. Why are they not being organised to make goods for stock or for store, goods to keep, which will be required in any case? There will be a tremendous shortage otherwise later on; after the war there will be a great shortage, and hungry open markets ready to absorb all surplus goods. It would be far better to do that than have these people idle. Complaints are still made about Government interference with private business in this country. There has to be in wartime, and there will have to be, I am afraid, a good deal more interference, and also assistance, along the sort of lines I have been suggesting to your Lordships. In Germany, on the other hand, they have just appointed an economic dictator to end the interference of private business with the plans of the Government. That is the contrast; that is with what we have to contest. Here we have a peace-time economy unwillingly and haltingly carried over direct into a war system; in Germany a war economy fully attuned to the overriding national purpose already. They, of course, were doing this before the war. I can make apologies for the slowness of our effort: after all, the Germans knew the war was coming, they were preparing it beforehand and dragooning all their people into this war machine. But we are at war now, and we cannot afford to delay, as Lord Swinton said, too long in bringing our resources into the economy of war. We have to-day great superiority in economic resources over Germany. That is one of our assets in this war, but we must not allow it to waste away, or one of the superiorities on which we rely for victory will have disappeared.

It is for these reasons that my Party have been studying these matters and have come to the inescapable conclusion that, while the naval part of the economic warfare, the blockade, and a great deal of the other measures taken are admirable viewed as a whole, our economic planning is not sufficient for the problems we have to face, and we are not satisfied that the economic side of the war is being properly carried on and organised, or that enough vigour and energy are being put into it. I am sorry to have to say these things; they are not personal criticisms at all, and I am voicing, I know, not only the views of my own Party but also the views of a great many business men, independent observers and economists in the country. There is agreement that our effort has not progressed enough and that we still have a great deal of leeway to make up.

5.8 p.m.


My Lords, I have not risen to make a speech but only, in a few words, an interpolation which I intended to make when the noble Lord was speaking on Russia. I should like to say that I entirely agree with his suggestion with regard to pre-emption in places like Yugoslavia, Bulgaria and so on, and I hope that the Government will consider that proposal. But, much as I agree with him in that suggestion, I entirely disagree with him in his suggestion that we should trade with Russia. The noble Lord suggested as a reason why we should do this that we could give Russia better money, better exchange than Germany could afford to give, and that if we did so she would send her goods to us in preference to Germany. So far so good, but he omitted this point, in my opinion a very important one: that if we give better exchange, good money, to Russia in order to buy her goods from her, we are giving her good money in order to enable her to continue against Finland one of the worst aggressive acts that have ever been perpetrated in history. I believe that there would be very strong feeling in this country against taking any action which would help Russia to enlarge that act of aggression in which she is engaged to-day. My view is that we had better let Russia and Germany stew in their own juice. Russia has not got those resources which many people think she has. She has proved, within the last few weeks, what she is really worth internally, and I suggest to the Government that they take no action along those lines. Certainly, if they do, it will be action which will be very much disapproved of by the country as a whole.

5.10 p.m.


My Lords, I would wish, with the indulgence of the House, to associate myself with what was said by the noble Viscount, Lord Swinton, in appreciation of the action of the noble Viscount, Lord Cecil, in raising this debate. The course of the debate will have brought into relief how appropriate it is at this time because, since Parliament rose for the Christmas Recess, when this question was already much in the air, there has been a series of letters and articles in the Press which will have been widely read, and the subject has been brought into great prominence. I fully associate myself with the opening remarks of the noble Lord, Lord Strabolgi, as to the delicacy of this matter and as to the need of reserve in speech. It is true that this question of the co-ordination of economic effort justifies the weight that is given to it by a debate in this House. The many angles of the subject have been brought out in the important speeches we have had to-day. It was introduced by the noble Viscount, Lord Cecil, who speaks with great authority and experience, and the speech of the noble Viscount, Lord Swinton, with his long experience as a member of the Cabinet and as President of the Board of Trade, was a valuable contribution.

There were some apologies by the noble Lord, Lord Strabolgi, for advancing his views. May I humbly ask the indulgence of the House for a similar reason after the important speeches we have already had? The noble Viscount, Lord Swinton, and I, after our war service, entered Parliament at the same time. He chose a political career and I chose an industrial career. To-day we find ourselves speaking one after the other on a question which undoubtedly is going to have a grave influence on the course of this war. And this question of exports is one which is very keenly interesting the country. The noble Viscount, Lord Cecil, drew a clear distinction between die commercial and the blockade aspect of the question. I propose to address your Lordships entirely on the commercial side. The burden of many speeches to-day has been to bring into relief the need of co-ordination of economic effort, and the necessity of having one individual in the supreme Cabinet who will co-ordinate these functions. That has been strongly urged by organised industry. Your Lordships will have noticed that the Federation of British Industries, in a deputation to the Prime Minister, urged this very thing. The Prime Minister, in his wisdom and doubtless for reasons which seemed sound to him, rejected the appeal, but conceded that an advisory panel would be established which would, in his opinion, achieve the same results.

There is a good precedent for this in the industrial panel which was established last year, and which admittedly contributed very much towards the co-ordination of our preparations for the war which has since broken out. Possibly that precedent will yield good results in this case. It may well be that the appointment of Sir Andrew Duncan to the office of President of the Board of Trade foreshadows some more aggressive prosecution of this policy. As one who had the privilege of sitting under his presidency for two terms of office on the Central Electricity Board, and who remembers well the association with him in the last war and since, I express the pleasure I feel at his appointment to that office, knowing as I do the great qualities and the wide experience which he brings to the service of the country in that Department of State. He is ably assisted in this effort to push exports by Mr. Hudson, the Minister for Overseas Trade, who has been so active in this matter for some time. The fact that the noble Lord, Lord Hankey, is replying to this debate to-day suggests that perhaps co-ordination of effort in this direction is going to receive further favour in the Cabinet. In any case, we are pleased that he is replying to-day and bringing to bear his wide knowledge and great experience on this matter in the War Cabinet.

A very important question is, What about the consumer in this country? If we export more goods it must be at the expense of the domestic consumer. It may well be that the timely and clear warnings of the Prime Minister will have sufficed to satisfy the consumer as to what may be expected of him and as to the sacrifices he may be expected to make. But what of the manufacturer? I doubt whether it is sufficiently realised in the country what exactly is needed of the manufacturer. I fully realise—if one may presume to contribute a practical idea on this matter—that there is a wide distinction between what may be called the consumer trades and the durable goods trades, and obviously the conditions in those two different trades will vary considerably. But let us for a moment think what is the position of the manufacturer who wishes to do more than he is doing at the present moment, or at least who recognises that he is doing less than he ought to do. First of all, there is the question of undelivered contracts. He has a large order book. He is fully occupied for many months ahead on orders for civilian consumption together with such portion of the war work as he is doing. There is no clear indication of what should be the position in regard to un- fulfilled contracts. One man may plead frustration, and another may not. That undoubtedly is a difficulty.

Then there is the question of lack of co-ordination between the different Departments through which he has to apply. He may lack experience of oversea markets, and he realises that he has a whole new set of problems to deal with if he turns to export trade. He is thus faced with the difficulty as to whether he, inexperienced as he is in foreign trade, should attempt to do that foreign trade direct in a market which he does not know. Is it to be done by him through merchants? In many of the controlled industries there has been an attempt to freeze out the merchant. It is an inconsistency of policy. Again, there is the fact that he makes larger profits in the home trade. Is he to sacrifice those? In many industries the raw material is controlled but the finished material is not controlled; the sky is the limit to prices and profits. That is surely unjust. The situation is exactly the same with regard to the absence of requisitioning of output. One unit in an industry may be doing a very large part of its work for Government; another with similar equipment and similar facilities may be doing very little. The latter may be asked: "Why are not you doing more? Why are you so unpatriotic?" The answer, whether rightly or not, will surely be: "I have a good order book; I have good connections, and I am making good profits in the home trade. I have my shareholders to consider. Why should I make the sacrifice whilst others are not making equal sacrifices?" There is only one way to do it: you may oppress as much as you like if you oppress all equally. Requisitioning based upon equality is the only basis of approach.

Those are the problems which may be said to confront the willing industrialist who wishes to increase the exports of the country. There have been suggestions that semi-public trading organisations might be set up ad hoc for this. I raise this point because of the credit aspect of this matter. If you go to a manufacturer now and tell him to increase his exports he has to find customers. Where is he to turn? Perhaps he must turn to markets where his products have not habitually been used, because he is being urged to displace goods formerly supplied by Germany. It may be suggested that he should go to Scandinavia; it may be suggested that he should go to Holland; it may be suggested that he should go to Denmark. He has his shareholders to consider; what about the credit risk? Again it is a question of policy: do we want to see merchandise pumped into countries contiguous to Germany where there remains the hazard of German occupation? Those are problems which confront the manufacturer or the industrialist who wishes to export to Europe. I admit that there are distant markets, in South America and elsewhere, which may be entirely good. Hard currency countries are doubtless those to which we wish to export. Admittedly, however, there is still the novelty that uncommercial practices are being urged. In this case it is urged that we must sell cheap and buy dear—two-way traffic—to replace or to kill trade which is normally done with Germany. That involves a large expenditure of money. I am not entirely in agreement with my noble friend opposite as regards buying from Russia. I admire the courage of his suggestion of an inexhaustible purse when he proposed that we should try to buy Russia cold.


With regard to the goods that I suggested—iron ore, manganese and timber—the noble Lord knows as well as anyone that we need them here also for our war effort.


I do not disagree on that. I should like to interpose a word, if I may, to say that I welcome the fact that at the head of the Ministry of Economic Warfare we have a relatively young Minister. I am among those who think that we want young men at the head of executive Departments, because the effort required under war conditions is so great. I speak with some recollection of the last war, and I ask for the indulgence of the House when I say that I was amongst those who were called Controllers in the last war. I realise that we controlled nothing, because we were controlled in turn by the Treasury and the Ministry of Supply, however much we tried to control the people in the industries which we were supposed to control. The point that I wish to make on this question of economic policy, with regard to buying dear and selling cheap, is this. If we had spent £50,000,000 or £100,000,000 since the beginning of the war in doing that, would we in practice, if it was to the detriment of Germany, have done anything very different from expending the same amount of money in firing off munitions at the enemy? Clearly no one would be brought to book in Parliament on account of the amount of money spent on munitions fired at the enemy. It was stated in America that in the last war it took five tons of metal to kill every German. To spend the money on merchandise in the way suggested seems to be equally logical, though it is seldom brought into proper perspective.

To refer to a topic touched upon by the noble Viscount, Lord Cecil, your Lordships will have read the many letters which have been appearing in the Press lately on the subject of tobacco. I notice that the last letter by Mr. Boothby has not been replied to by my noble friend Lord Dulverton. What I said about oppression is of relevance here; doubtless no one tobacco company should be asked to do anything individually unless all other tobacco companies are going to be asked to do the same. The only way is to make it obligatory all round. It requires courage on the part of the Government to insist on a larger bulk of offal in wheat, to insist on standard brands of soap, and to insist on cigarettes inescapably having a content of so much European tobacco. It requires courageous decision on the part of the Government. I understand that as far as Turkey is concerned the matter is already adjusted but there is also the problem of Bulgaria and Greece—whether we should be any worse off by exchanging, say, coal for tobacco on a bilateral trade equation. That is something which it seems very necessary to consider. In all these matters one realises that the Ministry of Shipping is, after all, the ultimate arbiter, save for the Treasury, because in many industries it is possible to bring plenty of raw material here and there is not the difficulty of deciding priority for Government supply or for civilian or export industry, if the Ministry of Shipping can bring sufficient raw material here. I understand that there again it is a question of valuta. The Treasury say, "We cannot spare valuta to charter neutral tonnage," and so there is insufficient tonnage for bringing raw materials to this country.

I was going to refer to the question of the unemployed, but I shall reserve myself on that after the picturesque suggestion with regard to Lord Hankey which was made by my noble friend Lord Strabolgi. The need is evidently to centralise the purchases of the three fighting Services and the purchasing Departments. In many industries purchases for the Departments are not necessarily co-ordinated, because there still remains individual purchase by the Admiralty, the Air Force and the War Office. You do not have questions of priorities for civilian work and questions of rationing dealt with by the authority that deals with the questions of supply, whether it is in the production of the stuff or whether in regard to the supply of skilled labour. There are still overlapping and insufficient co-ordination. I venture to make the suggestion that if more use could be made in many of these controls of civil servants or men with Civil Service training in administrative positions, as against the executive positions at the top, there would be a greater efficiency in the carrying out of the policy decided by the commercial men at the top.

The real thing required is direction of policy. These inescapable conflicts of demands for the fighting Services and for export can only be decided by the Cabinet itself. There are problems such as the retardation of production and reserve supplies which may well involve an impairment in the prudence of provision which, again, must be Cabinet responsibility. We have made good progress in inter-Allied purchase collaboration. I personally welcome the appointment of M. Jean Monnet, whom I have had the honour of knowing for a long time and who, from his intimate knowledge of English and American outlook, bids fair to be a great success in the international field. The satisfactory tendency of export figures is not enough. The country looks for more action on export. I am going to terminate by reading an extract from a letter by Sir Alexander Roger, which may already have reached the eyes of some of your Lordships: Let us use our commercial fighting powers to the full. We must cut off Germany's trade, outbid her in markets where she buys, and undercut her in markets where she sells, and we must spend to do so, just as we spend on armaments.…Every day that an unimaginative peace-time outlook endures in our economic Departments may well add months to the duration of the war. That is the lead we hope to get from the noble Lord, Lord Hankey. What is the position of exports? Is the dignity of their production equal to that of munitions? If so the valuta may be of equal importance with shells.

5.33 p.m.


My Lords, I shall delay your Lordships for a few minutes only with some brief observations on lines parallel to those adopted by the noble Viscount who moved this Motion. That is not to say that I am going to venture to disagree with the major proposition which the noble Viscount, Lord Swinton, made in his advocacy of a Minister in the real or War Cabinet who would co-ordinate the economic effort of this country. That argument appeals to my reason, but I am in no better position than any of your Lordships to judge of that matter. I am going to speak on the matters dealt with by the noble Viscount, Lord Cecil, because, rightly or wrongly, I think I am in a better position than some of your Lordships and for this reason. The noble Viscount during the last war occupied a most distinguished position as Minister for Blockade. Whether he was in or out of the Cabinet and, if so, what Cabinet, seems to be a matter of doubt and controversy, but he occupied the position and fulfilled it, from my own observation, with remarkable success. I occupied a minor position in a cognate Department—the Department for Foreign Trade—which worked alongside the noble Viscount. Whether it was under him or under the Foreign Secretary I never determined; it had a Controller of its own. But, at all events, there I was as legal adviser—I am glad to say, looking back, in an unpaid capacity, engaged by the distinguished public servant he mentioned, Sir Eyre Crowe, who formed that Department.

It is impossible and unnecessary that I should talk about the details of this war, for the reason that I know very little about it. Nobody does who is outside the Government. In the second place, it is very inexpedient to talk about the matter if we do know, and we should all be tolerant of the noble Lord who will reply for the Government if he is compelled to observe reticence about details. I want to say something about two or three principles. The first is as to the organisation of the Department, who should administer it. I am not sure I entirely agree with the noble Viscount that it ought to be the Foreign Office, if he meant the Foreign Office only. That it should have a strong mixture of Foreign Office knowledge, I fully agree, but I should be sorry to see the Navy dissociated from such a Department, because the Navy is more strict and severe than the Foreign Office in these matters. I should be sorry to see business or even the Law dissociated. The Foreign Trade Department was an amalgam of these various elements, and that that always meant there was a strong Foreign Office element, I fully agree. Perhaps your Lordships will think, with regard to the noble Viscount and myself, that like all people who are approaching, at any rate, middle age, each is tempted to view his own work with undue favour and to be laudator temporis acti. Your Lordships will excuse us if we severally adopt that view.

I should be glad to learn from the noble Lord who replies that certain principles are being adopted in our economic warfare. By "economic warfare" in this connection I mean mainly the stopping of the enemy's trade; I am not talking about our own export trade. The first principle I conceive to be necessary is strictness. I would have said "ruthlessness," but that word has had an unfortunate connotation of barbarism and inhumanity of which this country would never be guilty. But strictness is another thing, and, to put it colloquially, you must not mind treading on people's corns, whether they be neutrals or traders in your own country. In the Department of which I am speaking a great many of the squeals came from our own nationals who wanted to trade as; if there were no war at all. I hope His Majesty's Government will be essentially strict in these matters, and will be entirely actuated by their heads without any particular regard to their hearts or any other people's hearts, because we are engaged in a life-and-death struggle. I agree with the noble Viscount, Lord Cecil, that it will be acquiesced in by neutrals if the administration of that law of strictness is equal and just. That means you must proceed, by regulation and not merely by temporising expedients.

That is the reason why rationing of neutrals was a principle which was intelligible and understood. An illustration as to the method of rationing is very applicable, mutatis mutandis, to the present time. Our ally then was Russia. One of the nations who were diffident, because of their sympathies with the enemy and their trade interests, was Sweden. Sweden, under an arrangement which, if I mistake not, was called the transit arrangement, got no more imports than, ton per ton, was allowed to go through to Russia. That was an intelligible and workable system. The centre of gravity may have shifted from these Scandinavian countries to the East and to the Mediterranean, and that obviously raises matters of extreme delicacy; but I cannot help thinking that, mutatis mutandis, an arrangement like that is not an arrangement which could be neglected in our present arrangements for economic warfare.

The last principle but one I wish to mention is this. The noble Viscount referred to certificates of origin. I understand there are now documents called navicerts, which I have not seen and am not conversant with, but I conceive navicerts may be very important for the enforcement of the blockade governing the entrance of goods into Germany. But about certificates of origin, which the noble Viscount mentioned, I do know something, because a Committee, consisting of an eminent Admiral, an eminent commercial man and myself as Chairman, invented and evolved them in two sittings, and that eminent public servant I have mentioned passed them with this simple minute: "This report seems right; let it be adopted." Those certificates of origin were conjoined with and worked with certificates of ownership, I think they were called. To avoid intolerable delay to shipowners and neutrals involved, I conceive that you must deal with this matter of prescribing exports from Germany through the exercise and use of some such certificates of ownership and origin as that. I should like to be informed by the noble Lord whether that principle is being adopted to-day.

The last matter I want to mention is this. In those days of the Department of Foreign Trade there was a financial blockade. The noble Viscount may think it was all run through the Ministry of Blockade, but, speaking from my memory, I think it was controlled by Sir Adam Block, the Chairman of the Ottoman Bank, assisted by a staff from the big banks. It seems to me that this principle must be important to-day though no doubt different obligations arise in this from those in the last war. But the financial blockade must be important, and I hope, and should like to be assured, that in doing that work the Department of Economic Warfare, or whatever it is called in the future, whether there is a co-ordinating Minister or not, will not fail to make use of the same expert skill and knowledge, which were perfectly marvellous, as was shown by Sir Adam Block and his assistant's drawn from the great banks of this country. Great as is one's respect for civil servants nobody without experience of these matters can deal with them as those experts dealt with them. In the very shortest space of time I have ventured to refer to certain principles, and I make the simple request that I should be glad to know that those principles or the essence of them is being observed in the prosecution of this economic warfare.

5.43 p.m.


My Lords, it is a privilege to me to reply to the Motion of the noble Viscount on the opposite Benches, whom I know from close personal association in the last war to be absolutely a pastmaster of the subject which he has raised to-day, as indeed anybody who listened to his speech was able to judge. I am sure that all the noble Lords present will agree that he has rendered a service in raising this topic and introducing a debate so full of interesting suggestions. I agree with him that no more important question could be raised at the present time, for it concerns a weapon which has often proved a decisive factor in our past wars. I once heard a distinguished foreign statesman compare the defences of nations with those of the animal world. "One animal," he said in effect, "has claws, another teeth or tusks, a third sheer bulk, a fourth cunning," and so on. In the world of nations Britain's natural weapon is her Navy, to which she has now added wings as an indispensable adjunct. Indeed, the sea power of the Allies, exercised by the British Navy with the support of the highly efficient French Fleet, enables the Allies, firstly, to draw military and economic strength from overseas, which they are doing to a very great extent, and secondly, to close the seas to our enemies and to apply economic pressure. It is with this second product of sea power that we are concerned to-day.

Now as a preliminary observation, and it is one that has been made I am glad to say by some of those who have spoken already, I would ask the House to remember that economic warfare, like naval, military or aerial warfare, has its strategy and its tactics. Moreover, it may vitally affect military strategy—an aspect on which the Ministry of Economic Warfare is frequently consulted by the military authorities. If our economic plans are betrayed to the enemy, or for the matter of that to speculators, they may be frustrated. Moreover, I think in any public statement at the present time, we ought to be careful to avoid saying anything which would expose neutrals to pressure or retaliation by our implacable enemy. All this enjoins a good deal of discretion in any official pronouncement.

The direction of the economic weapon lies in the hands of the Ministry of Economic Warfare, working in the closest relations with other Government Departments, such as the Foreign Office, the Admiralty, the Treasury, the Board of Trade, the Ministry of Snipping, and purchasing Departments such as the Ministries of Supply and of Food. The Ministry of Economic Warfare was brought into existence on the outbreak of war. Unless my recollection is wrong the noble Viscount gave us the benefit of his experience in the lay-out of the Department. Although few of the key men in the Ministry had been selected beforehand the bulk of the personnel had to be collected after September 3. Like warships going into commission, new Departments require a few weeks to shake down and to work together before they attain full efficiency. This process was rapid in the case of the Ministry of Economic Warfare, as I have had personal opportunities to judge. The Minister of Economic Warfare took advantage of the recent visit of the Ministers from the Dominions and India to discuss economic warfare with them and to concert co-operation. He has always been active in building up co-operation with our Allies. He has exchanged visits with M. Georges Pernod, the French Ministre de Blocus, and there is a permanent French Mission of Economic Warfare in London which shares in all our activities. An Executive Committee of Economic Warfare forms part of the system of Anglo-French co-operation drawn up by the Prime Minister of the two countries, so that the machinery is pretty complete.

Another introductory observation is that, in applying economic pressure, the situation is not the same as it was in the last war. In some respects it is better from our point of view, in other respects worse. In the early part of the last war for various reasons we were very slow in bringing the full pressure of economic warfare to bear, as the noble Viscount reminded us. We had to feel our way in the face of great difficulties until the adoption by the enemy of an unrestricted submarine campaign forced us in reply to build up a great system of economic, warfare. Now the enemy has repeated this frightful mistake, regardless of what he suffered as a result last time, beginning on the first day of the war, and once again we have replied by putting on economic pressure. But this time, in the light of experience, much earlier and more drastically than was possible in the first stages of the last war.

Another difference is that in the last war Germany's frontiers were closed by belligerents in the east and south. This time these frontiers are open. Yet another new factor is the vast preparations which Germany has made in the economic as well as in the military sphere. It may be, however, that the privations to which the German people have been subjected in order to build up stocks and so forth may in the long run prove to have weakened her for a long struggle. The German people have sacrificed their butter for guns. The day may come when they lack guns as well as butter if our policy succeeds.

What is that policy? It is to concentrate in the first instance on essential products in which Germany is believed to be deficient and for which there are no adequate substitutes. A list of such goods has been drawn up as scientifically as possible and the Ministry of Economic Warfare are trying to stop their supply to the enemy. I say deliberately "in the first instance" because I do not want to give the impression that in carrying out that immediate policy we overlook supplies of which Germany is liable to run short as the war continues.

I now come to the methods of economic warfare. The supplies on which Germany's war effort to a considerable extent depends may be drawn either from countries overseas or from adjacent neutral countries. In the former case our weapons are the naval patrols and contraband control. In the latter are included trade agreements, purchase of supplies and, since recently, the interruption of German exports.

I will examine some of these methods and I will first take up the question of contraband control. Our ability to impose contraband control depends of course upon our supremacy at sea. The control bases were established at the outset of war at convenient ports in home waters and abroad, including the Mediterranean, and have been since added to. When a vessel is searched a copy of the ship's manifest is transmitted with the comments of the contraband control officer to the Ministry of Economic Warfare by the most rapid possible means. Full investigation takes place at the Ministry on such matters as the ostensible destination, whether the goods are contraband, the status of the consignors and consignees and other matters. Careful attention is given to the statistical position of the importing country in respect of the commodity in question and the efficiency of the control which is exercised over its exports. A summary of this information is submitted to the Contraband Control Committee. That Committee meets daily under the control of my noble friend Viscount Finlay and consists of representatives not only of the Ministry of Economic Warfare but of other Ministries and Departments concerned, including, I would point out, the French Mission in London. After a preliminary survey the Committee may come to the conclusion that the cargo should be released, or alternatively that it should be seized, in which case particulars are forwarded to the Procurator-General. He in turn may decide after further consideration that the cargo should be released or he may take the case to the Prize Court.

Alternatively, the Contraband Control Committee before proceeding further may require fuller information. In other cases they might decide to release the cargo subject to suitable guarantees that it forms part of the normal requirements for the domestic consumption of the country in question and would not be re-exported to Germany. Cargoes directly consigned to Germany would of course be seized by the Prize Court, and for this reason direct consignments are rare. German orders are normally placed through neutral agents in adjacent countries and the Prize Court requires definite evidence that goods seized are destined for Germany. It will be realised, of course, that this procedure was liable to involve delay, especially at the outset of war. The Minister of Economic Warfare has, however, done much to reduce those delays which are so vexatious to neutral nations. I would emphasize, however, that those difficulties will be reduced to the extent to which neutrals take advantage of the facilities provided for them. One of those facilities is the despatch from the country of shipment of advance copies of manifests of cargoes which can be received and considered before the arrival of ships in this country.

Another very helpful method is that of navicerts. In the case of war discoveries, there is nearly always a dispute as to who was the inventor. Your Lordships may remember how, after describing the devilish engines of the Satanic hosts, Milton continues: The invention all admired and, each, how he To be the inventor missed; so easy it seemed Once found, which yet unfound most would have thought Impossible:… Whether the noble Viscount has actually claimed to be the inventor of the navicert, I do not know.


No. The inventor was the American Consul-General in London.


At any rate I do know that the noble Viscount was responsible, ministerially, for introducing it and that is the vital stage of a war invention. It was extraordinarily effective. To quote the official history of seaborne trade: It gradually became a regular principle for all proposed shipments to be submitted in advance to the trade department of the British Embassy in Washington, who obtained by cable the opinion of the Contraband Committee as to whether the shipment was likely to lead to difficulties.… The navicert system, as it was called from the code word employed, became in fact one of the chief instruments for the prevention of enemy trade, and during the course of the war it was extended to the United States exports to Holland and in a modified form to many shipments from South America and Spain. At the present time over 500 applications for navicerts are being received every day in the Ministry and their examination is a formidable task. The system is at present available for exports from the United States of America, the Argentine Republic, Brazil and Uruguay to nineteen neutral countries in Europe, and its extension is under consideration.

Before leaving contraband I will deal briefly with the suggestion of the noble Viscount, Lord Cecil, that there is no advantage in cutting off any imports except those which will be useful for war purposes. I have some doubt about this myself, and I rather incline to the view that success is achieved by the cumulative effect of long-continued pressure in many forms. I would remind your Lordships of the distinction between absolute contraband, conditional contraband and non-contraband. Conditional contraband depends on whether it is for the military or the civil needs of the belligerent countries, but in the circumstances of totalitarian war the distinction really ceases to have any real basis and all conditional contraband is now seized as being destined to meet the war requirements of the enemy. Coffee, for example, as being a foodstuff, is seized as contraband and its seizure is almost certainly playing a part in the creation of discontent in Germany. Tobacco is non-contraband. To seize tobacco would, I admit, also contribute to provoke discontent, but so far we have let it through as being of less importance than foodstuffs. In fact, however, Germany's purchasing power abroad is so reduced and has to be so carefully husbanded that she is tending more and more to restrict her imports to commodities of direct value to her in the prosecution of the war.

I come now to war trade agreements. The trade of neutral countries adjacent to Germany is often dealt with by a war trade agreement. Such an agreement concluded by negotiation with a neutral country constitutes no breach of that country's neutrality and implies no abandonment of our belligerent rights, though behind it the contraband control is always in operation as a sanction. The agreements may take various forms, but in general they are based on the principle of strict control of exports to enemy countries and the limitation of export of home products, at least to normal peacetime levels. We have concluded, or are conducting, negotiations with fourteen Governments. These include an agreement with Sweden, the conclusion of negotiations with Belgium and Iceland, and the active conduct of negotiations with Norway, Denmark and Holland. The Committees in the countries with which we conclude agreements are usually part of the plan. I would also mention the Anglo-Italian Commission which has been set up in Rome, and which is empowered to discuss all trading questions arising out of the war.

I was particularly asked by more than one noble Lord to say a word about rationing. That would come conveniently here, I think. Rationing is really the basis of trade agreements but sometimes it cannot be negotiated by such agreements, and when there is known to be a serious leakage to the enemy it may have to be imposed unilaterally. So drastic a step, however, would not be taken without convincing evidence that the nation in question is assisting the enemy by its attitude. We have not yet had to go so far as that in this war, but if we are forced to do so the ration would be calculated as leniently as possible. We should remain open to conviction, ready at any time to increase the quota on the cause being frankly explained. While I yield not even to Lord Roche in my appreciation of the importance of firmness and strictness, I should like to make it clear that we have no desire to impose restrictions on the domestic consumption of the neutral countries. We feel the greatest sympathy with the difficulties with which they are faced, and provided they will give us effective guarantees against the re-export to Germany of the commodities they import, we shall do all we can to facilitate the supplies which they need for their own people. I would also at this point like to reassure the noble Viscount, Lord Cecil, and other noble Lords—if indeed assurances are really needed—that we will not use our belligerent rights or measures of economic warfare to benefit the United Kingdom's trade at the expense of neutrals.

I pass now to this difficult question of pre-purchase of supplies from neutral countries, the object of which, of course, is to divert supplies from Germany. One difficulty is that for years Germany has been cultivating these markets and endeavouring, partly by exports of manufactured goods and partly by political threats, to obtain the lion's share of their natural produce. We have, therefore, to build up a new economic line of trade which will enable these countries to become less dependent on their trade with Germany and yet to safeguard their economies. Very substantial purchases have in fact already been made, including barter transactions. We are now in a position to supply these countries with many classes of goods which Germany cannot supply, and arrangements are being made with a view to organising exports of the kinds which these countries need in exchange for the commodities which we need from them. In reply to Lord Strabolgi, I will say that this applies also to the Balkans. Before the attack on Finland a barter deal was concluded and carried out by which we received Russian timber in exchange for rubber and tin, but there are obvious difficulties in pursuing such purchases in present circumstances.


Was that purchase completed?


To the best of my knowledge it was completed, but I am answering without the book. Let me now come to enemy exports. I cordially welcome the powerful case which the noble Viscount, Lord Cecil, made about the importance of stopping enemy exports. The Government's decision was announced on November 21. A short period of grace was allowed to neutrals to adjust their arrangements, and this gave time for the development of the administrative machinery required to carry out the decision. In London this matter is controlled by an Enemy Exports Committee under the Chairmanship of Lord Justice du Parcq, with a membership and a procedure corresponding to those of the Contraband Control Committee. Abroad, in important centres of most of the neutral countries of Europe, expanded Consular staffs are examining numbers of applications for certificates of origin—probably those very certificates with the invention of which Lord Roche was associated—and issuing certificates. In the background is the efficient sanction of the Contraband Control.

I think we can claim that we have already accomplished a great deal. The overseas export trade from Germany is now a mere trickle of the normal, and the effectiveness of our reprisal measures is to be seen in the general cutting-off of orders placed in Germany by neutral countries. The deterrent effect of these measures is already reported to be very great, but it will be necessary to check evasion by Germans who seek to export under cover of neutral firms. It is obviously more difficult to stop German exports to contiguous neutral countries, and the stoppage of overseas trade helps Germany of course to supply these markets. The possibilities depend on keeping German industry so short of raw materials that they have difficulty in manufacturing; and already there is evidence both of inability to supply some goods and of deterioration in quality of other goods emanating from Germany. I hope and believe, therefore, that, as in the last war, this measure is going to produce valuable results. To complete the picture of our methods of economic warfare I ought to mention that every effort is being made to prevent as far as possible the effective use by Germany of her existing financial assets to obtain the supplies she needs abroad. All legitimate means also are used to prevent their increase by borrowing or otherwise. I can also assure your Lordships that every step has been taken to ensure that our own financial resources should not unwittingly and indirectly be used for the benefit of the enemy.

I am now going to try, in my inexperience, to deal briefly with some of the points raised in the debate. The noble Viscount, Lord Cecil, raised two points affecting the personal position of the Minister of Economic Warfare, first, that he should be housed at the Foreign Office and, second, that he should have Cabinet rank. I do not think anybody could dispute that it would be a great advantage if the Ministry of Economic Warfare were housed either in, or next door to, the Foreign Office, as it was in the last war. Incidentally, this would bring the Department nearer to the Board of Trade and the Admiralty, with whom their work is of course closely associated. I am afraid, however, that inexorable conditions of accommodation have rendered that impossible.

The issue of Cabinet rank raises the question as to the numbers of the War Cabinet, which the noble Viscount said, quite rightly, is a question for the Prime Minister. Here the Government are exposed to cross-fire from those on the one hand who say that the present number is too large—actually, it is two members larger than the War Cabinet of 1917–18 at its maximum; the maximum was seven and we are nine—and on the other, from those who want particular Ministers added. As one who has worked with a great many Cabinets, perhaps I might be permitted to give my own view that the test of efficiency really is not numbers at all, but whether the Cabinet work together as a team. As a matter of fact, my honourable friend Mr. Cross's position is exactly similar to that occupied by the noble Viscount after the establishment of the War Cabinet in December, 1916, that is to say, in respect of the receipt of documents and attendance at the War Cabinet, and so forth. I have been into the matter with the former records. I do not think there is any difference at all.

Now we come to the large question raised by my noble friend Lord Swinton. After making the statement asked for in the Motion before the House as to the progress of economic warfare on its offensive side, I find it rather difficult, without trespassing longer than I like on your Lordships' patience, to deal with this large question of Government organisation. Subject to Parliament, the last word on economic as on other matters of Government policy rests with the War Cabinet, and when economic questions are under consideration, as I indicated earlier, the Ministers at the head of the Departments concerned are always invited to be present and to take full part in the discussion.

Your Lordships will be aware that, in order to strengthen the very close co-operation that already exists between corresponding sections of the Government Departments concerned in economic questions, there is a Ministerial Committee on Economic Policy under the Chairmanship of the Chancellor of the Exchequer, which has attached to it a Standing Committee on Economic Policy with the noble Lord, Lord Stamp, as President. The main task of this organisation is to keep under constant review the whole field of our economic war effort in order to propose to the Minister or Ministers concerned ways of filling gaps that may be found to exist, or remedies for inconsistencies that may be discovered. Now the critics of the present machinery generally suggest, first, that the control of economic policy is too wide and important a subject to lie in the hands of a Minister already charged with departmental functions, and, secondly, that the Chancellor of the Exchequer as the head of one of the economic Departments is therefore an interested party. For these and other reasons, which he developed, Lord Swinton suggested that there should be appointed a special Minister of the War Cabinet as Minister for Economic Co-ordination, or whatever the title might be, without departmental responsibilities, to co-ordinate the whole economic war effort.

The critics, usually say that this Minister should have the power of decision, subject, one assumes, to the supreme authority of the War Cabinet, on any matter of economic policy. Now the first observation I would make is that the appointment of such a Minister would not in the least obviate the necessity of the co-ordination machinery—the much abused committees and so forth—which already exists. Without such co-ordination machinery no single Minister could possibly resolve the difficulties which are liable to arise between the Departments.


I hesitate to interrupt the noble Lord, but I am sure he would not wish to misunderstand or misrepresent me. I was not quarrelling at all with the need of committees. Of course there have to be committees, on which these Ministers sit. What I did suggest was that there ought to be a Minister who has no great departmental responsibilities, like the Minister in charge of the Treasury, and who would be able to devote all his time that was not spent actually in the Cabinet to working with the Ministers and working with these committees.


Perhaps I was dealing with the question a little more widely, and with outside criticisms.


I beg pardon, I thought the noble Lord was answering me.


I was answering the noble Viscount and outside criticisms as well as best I could. Well, next I observe that it is only the Minister in charge of the day-to-day work of the Department who can administer policy. Delay, division of responsibility, overlapping and confusion will surely result if Departments, instead of looking to their own Minister and to their official counterpart in related Departments, come to rely on recourse to higher authority whenever there are difficult problems to adjust. I would further remind your Lordships that the Treasury, through its historical role in controlling expenditure, is the Department which has the greatest degree of contact with, and knowledge of, other Departments and their working. It is therefore the natural co-ordinating Department for Economic Affairs. Further, there can be very few proposals put forward, especially in time of war, by a Department concerned with economic policy which do not directly affect the Treasury, either from the Budget point of view or from that of foreign exchange. And the two great economic dangers of war are inflation and the exhaustion of our foreign exchange resources. These are essentially questions for the Treasury. It follows that a Minister of Economic Policy, if given power to decide economic questions, would often be deciding matters for which the Chancellor of the Exchequer bears the main responsibility to his colleagues, to the House of Commons, and to the country. The almost certain result must be that the Chancellor of the Exchequer would be perpetually appealing to the War Cabinet against his colleague, unless, indeed, the Treasury were in effect to abdicate.


May I intervene? The Chancellor of the Exchequer does not control the rate of expenditure of metallic effort. One is valuta and the other is metallic, in the form of ammunition once it is produced. It is production, but not expenditure.


The two are intimately linked up. I think that it is impossible to imagine that under any such system economic policy would be better co-ordinated than it is at present, or that the decisions would have that firmness and rapidity which my noble friend demands. I agree, of course, with all that my noble friend Viscount Swinton has said about the co-ordination of de- fence and the work of the Minister for the Co-ordination of Defence, but I very much doubt whether the same system is applicable to the economic sphere. The Minister for the Co-ordination of Defence is concerned mainly with questions of strategy and of priority. His task is rather a technical one, and finance as a rule does not enter into it at the stage when he is doing his co-ordination; that comes in later, when it is translated into estimates which the Departments put forward to the Treasury. The Minister of Economic Co-ordination, on the other hand, would, as I have just shown, be concerned in finance at every stage, and Treasury considerations would be a predominant factor. Moreover, the economic matters with which he would be dealing would be found to be continually overlapping into other branches of Government activity outside the economic field; for instance, into foreign policy or relations with the Dominions, who are very much concerned in many economic questions which arise, or India or the Colonies, or shipping where the interests of the Services are at least as great as those of the economic departments. That is true of economic warfare also. In a word, the boundaries of the economic aspect of war activity are far less clearly defined and self-contained than those of the Services.

That brings me to the question of exports, and of our own exports and our own industry, which was raised by Lord Strabolgi and others. I cannot undertake to deal with it very comprehensively at this late hour, but Parliament is, of course, the right place in which to ventilate such matters, and I can assure your Lordships that I will try to see that the various suggestions are brought to the right quarter. That applies more particularly to the questions of steel and of the manufacture of locomotives, electrical generators and so on, regarding which Lord Strabolgi made a suggestion. I think it is better, however, to judge of the success of the machinery by a broad review of the facts. In September, United Kingdom exports fell to £23.1 million as compared with £39.8 million in September, 1938. That was a very large fall, a fall of £16,000,000. By November they had risen to £37.4 million, which was only £5,000,000 below the figure for November, 1938. I regret that the December figures are not yet published, but I am glad to say that they will make an even better showing and will justify placing an encouraging interpretation upon the rise in November.

In this connection, I dare say that some of your Lordships will have noticed the remarkable figures of record British motor exports published by the Society of Motor Manufacturers in yesterday's Press. British motor factories exported 300 vehicles on each working day during the third month of the war. This was an increase of 26 per cent, over November, 1938. Exports of cars to Uruguay increased by 536 per cent., and those to Argentina by 172 per cent., and there were other very large increases.


That, I think, must be the effect of the destruction of the "Graf Spee."


I am not sure about that, because there were large increases to the Dominions as well. The New Zealand Government, for instance, has announced that that Dominion's purchases of motor vehicles will now be made from the United Kingdom only.


It put our prestige up.


Exports, of course, are an enormously important subject, but I really cannot undertake here and now to establish a list of priorities of importance as between exports, the defence of the country against air attack, and the many other forms of warfare with which they can be compared. I am convinced that in these matters success lies in the determination of traders and manufacturers themselves to see that the export trade is promoted to the full, and in the Government continuing to do its utmost to assist the traders and to remove the difficulties. I believe that this is more likely to be achieved by continuing on the existing lines than by the drastic remedies that have been proposed. I prefer the system which I have already explained, which was in operation in the last war and is still in operation to-day, under which particular questions of an economic nature or which often overlap from economic affairs into other affairs are referred to particular Cabinet Minis- ters to deal with, either with ad hoc committees or in such other way as is found best.

That brings me to the last part of what I have to say, and that is about results. It is early days to speak of results, but German is certainly feeling the pinch. The conditions of life there are strained. Rationing is very extensive; it extends to such items as clothing and soap. Berlin is short of coal. In saying this—and I could say a great deal more of the same kind—I do not want to underrate the formidable task that lies before us. In a speech in the House of Commons on March 27, 1917, the noble Viscount (then Lord Robert) Cecil said: I believe that the war can only be won on the battlefield, but I think that what can be done by the blockade is to give some small assistance to those who are fighting our battles. Those words were spoken before the noble Viscount had brought to fruition the plans which as Minister of Blockade he was to make so effective; but in the light of that experience I think he might possibly agree that his words were rather an understatement.

I myself would contend that economic pressure is a major offensive operation of war. A complete shutting off of some commodity vitally needed by Germany may prove the equivalent of a first-class victory on sea, land or air. Successfully developed, economic pressure should enable us to deprive our enemies of an important part of their natural sources of supply, to drive them in on themselves, and to superimpose on the inevitable exhaustion of a major war the terrible strain of having to seek fresh supplies through unaccustomed and uneconomical channels. This knowledge must haunt them with a gnawing anxiety as to the future. This is proved by the tremendous efforts they are making and the hardships imposed on the German people to escape the consequences of the Allied blockade. But they cannot escape the thought of a possible failure of some raw material such as iron ore or copper or other indispensable metals, or oil products, or the failure of crops in future years as fertilisers, draught animals, or labour run short. This inescapable nightmare cannot fail, as time goes on, to tell on the national morale of the German people. As General Ludendorff says in his memoirs: Discontent with the conditions at home which were directly caused by the blockade was permitted to expend its force internally, increase the effect of the blockade and disintegrate our national life"— an observation which is repeated in different terms in all the German memoirs of the Great War that I have read. As in the last war, when the day of military defeat arrives, this economic weapon may well prove decisive.

6.32 p.m.


My Lords, I have to thank my noble friend for his very full and exceedingly interesting speech. As far as I am personally concerned I really have no quarrel with him at all. On the general policy of the blockade, of course, I hope I may say we are completely agreed. There is no difference at all between us. The actual method must vary according to the circumstances of the international situation, but I have no criticism to make upon it. As to the question of the organisation, with which my noble friend Lord Swinton dealt, and with which I dealt to some extent from a slightly different point of view, I am not quite convinced. I still think it would be better if the Minister of Economic Warfare was in the Foreign Office. I do not think the difficulty of place is quite so great as my noble friend makes out. He will remember that in the last war the great mass of the Department of Blockade was not in the Foreign Office; it was in the lake in St. James's Park, which had been drained.


I did say "in or near."


It was fairly near, but the point was that it did give the Minister of Blockade a position of much greater authority and facility in dealing with international affairs than he could possibly have, however able he may be, if he has not the advantage of being in the Foreign Office. When my noble friend says his position is exactly the same as mine was in 1916, he overlooks this essential difference, that I then had the important reinforcement to call upon of the Secretary of State for Foreign Affairs, and that made the whole difference. As to the point raised by my noble friend I shall not attempt to argue it. He argued it admirably, and I should have nothing to add to what he said.

I confess, listening to the debate, I am impelled to doubt whether, broadly speaking, the organisation of Mr. Lloyd George was not better than the organisation at present in force. Fundamentally and essentially, apart from details, his conception was a very small body of Ministers who would be for the most part, if not entirely, free from departmental duties, and who could thereby be turned on to deal with any difficulty that arose, with the whole authority of the War Cabinet behind them. I am inclined to think that that was a better system than the kind of hybrid arrangement now in force, but that is a matter which would have to be dealt with at greater length than I can deal with it now. As to the general result of the blockade, I have no means of telling how much has been done so far. I always took the view in the late war that the blockade by itself would never win. We had a most careful examination—I have no doubt it still goes on—as to what was going on in Germany, and although we were quite satisfied that the blockade produced a great effect, I felt that by itself it could never win unless, as ultimately did take place, a great military disaster struck Germany. Then she had not the internal force to react against it, and the war was won. I do not want to underrate the work that' was done by the blockade. It is in my view an essential part of our war machinery, but it will never be enough by itself. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.

House adjourned at twenty-four minutes before seven o'clock.

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