Sitting of 13 February 1935

Preamble
The House met at a quarter before four of the clock, The LORD CHANCELLOR on the Woolsack.

RAILWAY SHAREHOLDERS.
LORD MONKSWELL LORD MONKSWELL had the following Notice on the Paper:—To draw attention to the grievances of shareholders in British railways and to the obstacles which hinder them from taking organised action to remove these grievances; to ask His Majesty's Government whether they will take steps to facilitate organised action on the part of the railway shareholders so as to put the railway shareholders in as favourable a position to enforce their demands as is now occupied by the railway servants' trade unions; and to move for Papers.
The noble Lord said: My Lords, it is unnecessary for me to trouble your Lordships with detailed figures with regard to the financial position of the railway shareholders and the railway servants, and the reaction upon the public finances and national industry which the present arrangements exercise. The broad facts are known to everyone. They are approximately as follows. Up to about 1910 the railway servants were paid what their work was worth in the open market. Rates and fares were on the high side but were not high enough seriously to hamper trade and industry, and the shareholders received a moderate return on their investments. After 1910 economic wages for the railway servants were gradually superseded by political wages. At the end of the War no trace of economic wage-rates was left. Taking hugely increased Government subsidies into consideration, since about 1917 the railway servants have received wages and subsidies with a purchasing power, measured in commodities and services, between two and three times as great per man as they received before 1910. Hours of work have been much reduced in the same period, so that, in spite of the somewhat improved methods that have been introduced, each man does about the same amount of work as he did before. That is to say, his services to the public have changed little and he receives from two to three times as much for them as he used to receive. The loss is divided be-

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tween industry, which is bled at every turn by excessive transport charges, and the railway shareholders, many of whom have ceased to receive any interest at all upon their holdings. The excessive wages of railway servants are certainly one of the major causes of unemployment.
There are in this country somewhere about the same number of railway shareholders as of railway servants. One party is treated as prey to suffer plunder and extortion; into the pockets of the other is constantly poured a heavily swollen stream of public money which it has not lifted a finger to earn. Obviously the reason for this state of things is that the railway servants are organised in trade unions which are prepared to take drastic action to extract the uttermost farthing from the shareholders and users of the railways, while the railway shareholders have for all practical purposes no organisation at all. At the present time things are so arranged as to raise the most formidable and unfair obstacles when any body of shareholders attempts to take action.
The railway servants are organised and represented by trade union officials, who I do not suppose would themselves pretend that they give a thought to the solvency of the country. Apart from the political objects of trade unions, which I need not now discuss, the object of these people is to raise wages and diminish hours of labour, without any regard for what may be the result of their proceedings. I have no desire to suggest that trade union officials do not sincerely believe that they are acting in the best interests of the members of their own organisations, but their ideas are so crude and so limited that their very sincerity and honesty make them a public danger. They evidently have no conception of the conditions necessary for maintaining civilisation, which I suppose are, roughly, Os follows: Civilisation is based upon a plentiful production of goods and services due to co-operation and to the use of machinery of all kinds. This machinery is constantly wearing out or being superseded by something better and, if civilisation is to continue, must constantly be renewed. Regularly, therefore, every day, every month and every year, enough money must be saved to pay for this renewal. There are two possible ways of doing this. It can be done by allowing thrifty people to save, or it can be done
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by forcing people under penalty to produce more than they require to keep themselves alive and to hand over the surplus to the State—in other words, by slavery.
Our present system of paying the whole of the working classes more than they earn and covering the loss by confiscating the capital of the thrifty and spending it as income, must necessarily come to an end when there is no more capital left to be seized, and cannot possibly become a permanent arrangement. All this can hardly be called economies. It is in the nature of simple arithmetic, but to the trade unions it is so much Greek. If the working classes were in the habit of saving and investing their money, there would be rather more to be said for artificial scales of wages. It might then with a certain amount of plausibility be represented as a transference of wealth from one set of people to another. But there is no pretence that this is the case. The whole idea of the trade unions is to get the money and encourage their members to spend it unreproductively, to urge them to raise their standard of living by spending their increased and unearned wages in ways that do nothing to facilitate the production of material wealth in the future. So far as I can make out, the whole of the working classes of this country, say nine-tenths of the population, in spite of the fact that for at least twenty years they have received wages and subsidies hugely swollen by political pressure, have saved so little that they possess at the present time only about one-tenth of the national wealth. As nearly as I can calculate, this means that they have saved well under 1 per cent. of their wages, and in wages, of course, I include subsidies. I am not putting forward these figures in blame of the working classes. I wish neither to praise nor to blame, but to get at the facts as they bear upon the Motion which I have ventured to bring before your Lordships.
I come now to the shareholders. They are supposed to be represented by the boards of directors. I need not ask your Lordships to listen to an examination of the functions of British railway directors. I pass straight on to the railway officials and leave out the directors altogether. It is impossible to attribute to the directors any serious influence.

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With the rarest exceptions they have neither the time, the knowledge nor the opportunity to exercise influence. For all practical purposes the control of the railways is in the hands of the railway officials. The railways belong to the shareholders and are administered by the railway officials who are the shareholders' paid servants. To guard the interests of the shareholders is just as much the primary duty of the railway officials as that of the trade union leaders is to guard the interests of the railway servants. Just as capital and labour are indispensable for bringing into existence and working the railways, so should the shareholders and the railway servants have equal rights in claiming their shares of the earnings. If railway officials were as diligent in the service of their employers as trade union leaders are in the service of the men, this arrangement should produce a very satisfactory balance; but, unfortunately, an indispensable preliminary is that both sides should be equally well organised. The railway shareholders should have exactly the same facilities for striking on their own account, and for breaking strikes of the railway servants, as the trade unions have of ordering strikes and forcing unwilling men to strike in sympathy. If shareholders were properly organised they could do this. As it is they can do nothing because they are not organised at all.
The railway officials, like most other people, desire first and foremost a quiet life for themselves. It would be a perfectly simple matter for them to organise the shareholders at least as strongly as the railway servants are organised; but it would need trouble, energy and, I am afraid I must add, a sense of duty to their employers which is conspicuously absent in the great body of railway officials. The bright exceptions, which I am glad to recognise undoubtedly exist, are too few to exert any serious influence. Till the railway shareholders are strongly organised and prepared, if necessary, to produce at short notice large bodies of able-bodied men and women ready in an emergency to run a skeleton service, there is no chance that their grievances will receive consideration. The railway officials, far from helping them, appear to be ready to go all lengths to prevent the railway shareholders from getting organised, and this obstruction is powerfully assisted by the law as it stands. I
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happen to know a good deal about this, as, some years ago, I did my best to help a movement for organising the shareholders of the Southern Railway. If any one desires to organise the railway shareholders to take action at a general meeting he has first of all to give very long notice—three months I think it is. The secretary, that is to say, the railway officials' mouthpiece, is not hound to furnish up-to-date lists of shareholders, nor the amount of stock which each shareholder possesses. The distribution of any circular addressed to the shareholders by people desiring to oppose the board has to be paid for entirely by the people sending it out, whereas the board can send out their circulars at the company's expense. All proxies are counted by the secretary, that is to say, by the railway officials themselves, and the opposition are not allowed to have a representative present during the counting or to check the results in any way.
The railway officials in fact can do exactly what they please without being accountable to any one, and I can assure your Lordships that the railway officials use their powers to the full. The result is that, so long as these rules remain as they are, the difficulties in the way of any body of shareholders who wish to overrule the railway officials are insuperable. The railway officials, perceiving that the railway servants have a powerful organisation and that the railway shareholders have practically no organisation at all, have not hesitated to throw in their lot with the strong, and to treat the weak with contempt and neglect. The railway shareholders in fact have not the ghost of a chance of justice till they set to work to help themselves. Their real enemies are the railway officials, and the shareholders are most unfairly hampered by obsolete and absurd rules, which apparently have the sanction of law, in any attempt which they may make to defeat their enemies.
I would suggest that legislation on some such lines as these would meet the situation: any body of, say, not less than 100 shareholders in one of the four big railways holding between them capital to a certain specified amount, say, £1,000,000 in ordinary shares, should be given the following Rowers: (1) They should be entitled to

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receive all information known to the secretary as to the names and addresses of all shareholders in the company and the amount of their holdings; (2) they should be given all the rights now enjoyed by the board to issue circulars to the shareholders at the company's expense; (3) they should be given the right to appoint representatives to check the results of all voting by proxy. I beg to move.
LORD TEMPLEMORE: My Lords, the noble Lord was good enough to write to the Department for which I have the honour to answer in your Lordships' House, setting forth the proposals which he meant to bring up to-day, for which I am grateful to him. I do not think it would be relevant to this Motion, I think your Lordships will agree, for me either to go into the question of the wages and hours of railway servants, or to defend trade union officials, which is probably better left to noble Lords opposite, or to go into the very interesting economics with which he entertained your Lordships' House during the' first two or three minutes of his speech. But to start with, I hope that the noble Lord will appreciate that His Majesty's Government cannot accept general statements which he has just made of the kind impugning, as they appear to do, the conduct of the boards of directors and of the officials of the railway companies. If he has in his mind ally specific grievance or instances of steps which have been taken by the directors and the officials to prevent railway shareholders from taking action to remove any grievances which they consider that they have, his proper course would appear to be to bring the facts of that particular case before the Government, seeing that railway companies are statutory companies and derive their authority from Parliament. At the same time, I should like to emphasise that as far as the staff are concerned, the establishment of a sense of identity of interest between the railway undertaking as a whole and its employees is not necessarily undesirable: in fact, to my mind and to the mind of His Majesty's Government, it is an eminently desirable state of things. It can certainly not in my opinion be maintained that the railway officials invariably side with the employees against the shareholders. If that were so,
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elaborate arrangements, such as those made for conciliation machinery in matters of wages and so forth, would never have come into existence.
The noble Lord asks in his Notice whether His Majesty's Government will take steps to facilitate organised action on the part of the railway shareholders so as to put the railway shareholders in as favourable a position to enforce their demands as is now occupied by the railway servants' trade unions. In the absence of details as to what these particular demands may be, it is rather difficult to deal with the suggestion, but if the suggestion is that the demand of a minority in regard to policy or administration is to prevail over the demand of a majority of the shareholders, it is most clearly quite unacceptable, while if the suggestion relates to facilities for the organisation of shareholders for the purpose of giving expression to their opinions, it is difficult to see what justification there could be for the shareholders of railway companies being placed in a privileged position as compared with the shareholders in a company registered under the Companies Acts with regard to the affairs of such a company.
I understand that the noble Lord contemplates that there are three directions in which extended powers should be conferred on railway shareholders. First of all, that railway shareholders should be given the right to know the names and addresses of all shareholders in the company and the amounts of their holdings. I should like to remind the noble Lord—he is very well up in these matters, but it is a matter that he may have overlooked—that Section 10 of the Companies Clauses (Consolidation) Act, 1845, which is applicable, speaking generally, to all railway companies, provides that a register of shareholders called the Shareholders' Address Book shall be provided, and that every shareholder may peruse the register gratis and may further require a copy or part thereof at the rate of sixpence per one hundred words. The right conferred in this section goes at least as far as that conferred on shareholders in companies registered under the Companies Acts by Section 98 of the Companies Act, 1929; and it may be noted that by the Great Western Railway (Additional Powers) Act, 1924, and other Railway Acts of that year, a card index or other approved

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index may be substituted for the address book and the charge for copies suitably adjusted. It is admitted that shareholders in railway companies do not have the right to inspect (except as regards consolidated stock) a list of the share holdings which, in the case of an ordinary company, is available to the public on demand of a small fee. It should be borne in mind that the value of a list of share or stock-holdings is discounted by the fact that the names may be those of nominees and not of the actual beneficial owners.
The noble Lord's second suggestion is that shareholders should be given all the rights now enjoyed by the board of directors to issue circulars to the shareholders at the company's expense. There is no provision in the Companies Act, 1929, giving the shareholders the right to issue circulars at a company's expense. It is hardly necessary to give in detail the obvious objections to such a provision. No company could prosper in which any section of shareholders, not responsible as are the directors to the shareholders as a whole, were able at their own will to incur expenditure. There is, of course, no provision in the law to prevent circulars being sent out by shareholders to other shareholders at their own expense; and it is interesting in this connection to note that under Regulation 47 (2) of the London Transport Regulations it is provided that in the event of an application by the shareholders to the High Court for the appointment of a Receiver, the applicants
"may send by prepaid envelope (to be addressed and posted by the appropriate registrar, if they so require, on payment by them of the reasonable costs thereby incurred by the registrar) to the holders of each or any class of stock, a statement of the grounds on which such application has been made, with or without a form of proxy."
The noble Lord's third suggestion is that shareholders should be given the right to appoint representatives to check the results of all voting by proxy. This appears to His Majesty's Government to cast an unjustifiable doubt on the good faith of railway officials and directors. The powers suggested do not exist under the Companies Act, 1929, in the case of ordinary companies, and it is conceivable that such a power could be used by a small minority of dissentient shareholders
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gravely to hamper the business of the meeting. If shareholders are dissatisfied they can, by attending the general meeting, or by appointing proxies, at any rate voice their opinions in such a way that the directorate is bound to take notice of them. I have, I think, dealt as far as I am able with the noble Lord's suggestions. I am afraid I have no Papers which I could lay, but in conclusion I would like to say that His Majesty's Government do not consider that railway shareholders suffer under any disability, in comparison with shareholders in other companies, and they are not prepared to adopt the suggestions which the noble Lord has made.
LORD DARYNGTON: My Lords, I do not wish to touch on the general question, but I would like to say one word with regard to what the noble Lord said in reference to the fact that shareholders have no one at their backs. I happen to know of the British Railway Stockholders Union. I recognise that it has not the strength of a trade union, but it is an important body, and is really supported by important people. In this House, for instance, I may mention Lord Gladstone, Lord Jessel and Lord Exeter, who are on the council. If shareholders really wish to assert their rights they have opportunity of joining a union of that kind.
LORD MONKSWELL: My Lords, I am obliged to the noble Lord, Lord Templemore, for the trouble he has taken in giving an official answer to my Question. I can really regard it as nothing more than the ordinary smoke screen of officialdom. The Government apparently find it convenient to shut their eyes to the most ordinary facts, and simply give us the official attitude. Of course, everybody knows perfectly well that things are as I have stated, but I will not attempt to argue with the noble Lord. All of your Lordships must be aware that the official view is really untenable. For instance, there is the question of minority shareholders. The noble Lord asks: How can you give a minority of shareholders any of these rights? The fact is that the railways now are entirely run by a minority, for it is the officials and the board, who put up a smoke screen, and they can send out to all their friends, who are big shareholders, proxy

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forms at the company's expense, and anyone who wishes to take action against them has to send out circulars at his own expense. It is a perfectly impossible position. I did not expect any other answer from the Ministry, and I really brought this Motion forward more in the hope that it might ventilate the subject. With regard to what Lord Daryngton said, I know all about the British Railway Stockholders Union, and in fact I was talking to the secretary about it yesterday, but as I then told him I do not regard that union as at present capable of exercising any influence at all. I hope it may be different in the future.
LORD DARYNGTON: May I say that Mr. Whitelaw; the Chairman of the North Eastern Railway, addressing his shareholders, mentioned the union as of importance?
LORD MONKSWELL: I was shown a copy of what he said, but while parts of Mr. Whitelaw's speech were satisfactory, there were other parts which I did not think satisfactory at all. I do not, however, wish to detain your Lordships, and in the circumstances I am prepared to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

EXPORT CREDIT FACILITIES.
LORD STRABOLGI LORD STRABOLGI had given Notice that he would ask His Majesty's Government what steps are being taken to stimulate the export trade particularly with regard to better credit facilities and guarantees for British manufacturers selling their goods abroad; what credit facilities and guarantees are provided by other Governments for the assistance of their nationals; and move for Papers. The noble Lord said: My Lords, the Question which I have on the Paper deals with an unsheltered industry, the British export trade, which has to compete in the markets of the world with the merchants and exporters of all other countries. The object of the Question I will explain very briefly to your Lordships. Since the present Government came into office, with many brave words about restoring the balance of trade, and all that they were going to do for British exports, we have held our own with other countries, but exports have only increased
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slowly, and we still have a heavy balance of trade against us. I believe that last year, when the full figures are out, will show a deterioration in the total balance of trade, in spite of the fact that exports increased last year by 13 per cent. I took those figures from the Report of the Manchester Chamber of Commerce, yesterday. Obviously we are all wishful to help British trade further. The situation is rather complicated by the fact that foreign lending is, generally speaking, prohibited, and I would like to ask the noble Lord who will reply for the Department whether there is any intention of removing the ban on foreign loans. Before the War we invested every year about £200,000,000, but that left the country not in the form of money but mainly in goods, and it was gradually paid off in the form of imports, thus becoming an invisible export. Nearly all that foreign lending has been prohibited. Another curious fact of the situation, indeed an alarming fact, is a statement recently made by the President of the Board of Trade, Mr. Runciman, who made the astounding assertion that in his opinion the absorbing capacity of the home market was reaching a limit. I think his words were: "The saturation point is being reached." I may say at once—and I am sure I speak for my noble friends on this side of the House—that I do not believe that that statement is justified at all. The trouble with the home market is that the consuming power of the people is kept artificially low by the "cuts" imposed by the present Government, and by the whole policy of reducing wages and forcing down the standard of living.
But I take the Government's own statement of the position. They pretend that there is a limit to the absorbing power of the home market for some time ahead, and they confess that they wish therefore to help the export trade. I venture to suggest to His Majesty's Government that they should do certain things to help the export trade, and particularly with regard to the improvement of the credit facilities for British manufacturers selling their goods abroad to certain markets, in order that they might be insured. The Department of Overseas Trade has, of course, the present machinery at its disposal. It has been very largely used, having been established many years ago, but the rates are very high, as I shall

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endeavour to show. For example, let me take the Russian market. My remarks are not only directed to the Russian market, but that is a very good example, because I suppose the Russian market is the greatest potential market for engineering products in the world. First of all with regard to the position of trade between this country and Russia. Last year we bought from Russia £17,200,000 worth of goods and we sold to Russia in the same period £3,600,000 worth in round figures. That shows a very adverse balance of trade for this country. Since the beginning of this year the position has improved, because the Russian Government has taken to buying large quantities of steel goods—engineering products, railway material and so on—for cash, and at the end of January it placed orders for £1,500,000 worth of engineering goods and it paid cash on the nail for them. That was very satisfactory at the time, but obviously that is not going to continue if other countries offer better facilities.
The way the credit facilities committee work is this. The Export Credits Insurance Committee shoulder the risk of 75 per cent. of the value of the orders—supplies to Russia, Bulgaria or any other country which comes within the scope of the system—and for that they charge a guarantee fee of 7 per cent. On top of that the manufacturer, having obtained the credit, with a lot of red tape and filling up of forms, and the inevitable delays and troubles, which are outside his ordinary line of business, can then discount the guarantee, for which he is charged another 3 or 3½ per cent. That means that for the 75 per cent. guarantee of the goods he sells he has to pay a total rate of 10 or 10½ per cent. The manufacturers in practice reckon, in fixing their prices, that the balance of 25 per cent. of which they have to shoulder the risk themselves, has also to carry a discount rate of 10 or 10½ per cent. In view of the low money rates in the City of London, and, in view of the high credit standing of the Russian Government, which has not defaulted on any of its bills in any country—that has been admitted in official answers by the spokesmen of His Majesty's Government—that is a very high rate indeed.
I ask in my Question whether the noble Lord who will reply will be good enough to give us information as to what other
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manufacturing countries are doing. My own information, which I believe is correct, is that the Italians grant credits to their merchants and manufacturers for the Russian market at 1½ per cent. on a three-year basis; whereas the utmost limit allowed to our manufacturers under the present system is eighteen months. It is, I believe, impossible for manufacturers sending goods to Russia, or indeed to Bulgaria, or the Balkans, or Turkey, to obtain more than eighteen months' credit, or rather a guarantee for more than eighteen months' credit; whereas the Italians give twice as long at a rate of only 1½ per cent. The German Government is at present negotiating a very large loan, to be expended in Germany on engineering products and other German manufactures for the Russian market. This loan is practically an export credit of 200,000,000 marks, according to the statements that have appeared in the newspapers. Take that approximately in sterling as £16,000,000. It is proposed to guarantee the credit given by German engineering firms and so on up to a period of 5½ years, and the discount rate is to be 2 per cent. above the Reichsbank rate, with a maximum of 6 per cent. If this is correct, the Germans are going to provide this very large guarantee for their own manufacturers for 5½ years at a maximum of 6 per cent, interest, as compared to our 10 or 10½ per cent. with a limit of eighteen months.
I take the Russian market because of its tremendous potentialities, but the same thing applies to other countries, where I think we should encourage activity for our manufacturers at the present time. Turkey, for example, is making a great economic recovery, and Turkey needs great quantities of capital goods, such as we can supply, for harbours, railway materials, electrical equipment and so on. The same thing applies to the Balkans. I think it would be to the interest of everyone if a finance corporation, a semi-official body, could be established in the City of London to make easier and more favourable the credit guarantees to British manufacturers dealing with those countries. The sort of body I suggest would be formed of men of the highest business standing and integrity. The finance would obviously be substantial, and it would be provided by the financial houses in the City who

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specialise in that kind of thing. There should be a Government guarantee. The money could be quickly raised. It only needs one word from the Treasury to the Governor of the Bank of England, and from the Governor of the Bank to the great merchant bankers in the City that this corporation would be in the interest of British export trade, and the thing would be done.
We have immense idle sums of money for which there is no profitable outlet at the present time. It is lying idle, and the money rate is still low, in spite of the recent set-back in gilt-edged values. Such a corporation would have certain great advantages for British manufacturers. It would mean that, when a British manufacturer has sold, for example, railway material, machinery or electric turbines to the Russian Government or the Turkish Government, the corporation would make itself responsible for ensuring the payment of the price of the manufactured goods, and a great deal of delay and trouble would be avoided, both to purchasers and sellers of our products. And the rate could profitably be a good deal less.
May I put this question to the noble Lord: Has the Overseas Trade Department through the working of the Export Credits Committee so far made a profit? My information is that it has—it has actually made a profit over the series of years since the Act was passed. If so, that was never the intention. They were supposed to guarantee British manufacturers against the inevitable risks of trade in certain markets in the confusion following the Great War, which confusion still remains in many parts of the world, and it was not intended they should make any profits for the Treasury. We have a great chance, particularly now with regard to Russia, of reverting once more to that market, because of the deadlock which has been reached at Washington between the American Government and the Russian Government over the old question of the pre-War Tsarist debts. That has meant that the Americans will give no Government assistance to their own manufacturers in exporting to the Russian market, and it places off the map one of our most formidable competitors in higher grade engineering products. Therefore, we have a very good opportunity, if we can provide better
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credit facilities for our own manufacturers.
We have improved our exports in the last three years, not, I venture to say, because of the virtues of the present Government, but because we went off the gold standard; but I suggest most seriously to your Lordships that that advantage may be fleeting. It may be only a temporary advantage. The other countries which have gone off the gold standard, particularly the Japanese, have also gone ahead very fast in their export trade, but that again may be fleeting. Already in Japan there are signs that the advantages of the depreciated yen are becoming less favourable for Japanese manufactures. The same thing may happen here, and I would draw the attention of your Lordships to the speeches made by the leaders of the great banks recently, particularly the speech made by Mr. Beckett, Chairman of the Westminster Bank, in which he referred to the slowness of our export trade to revive and the danger of the adverse balance of trade becoming more adverse still, with serious results. I hope these questions, with these explanations, will receive attention.
I am not putting forward what I suggest our Party remedy would be. This is not the time nor the occasion to put that forward. I am trying to help our manufacturers in a very difficult situation at the present time, with a Government in office that wishes only to manœuvre and act within the confines of the present capitalist system. I accept that, and I suggest that His Majesty's Government can still do more within the confines of the capitalist system to help our manufacturers in the very difficult situation in which they find themselves in the world's markets. I have made two suggestions—first, that there should be cheaper credits, and secondly, that there should be this financial corporation for the special purpose of helping British export trade—and I have made the additional suggestion that the time has come when we should loosen the prohibition on foreign lendings. For these reasons I beg to ask the Question that stands in my name.
LORD TEMPLEMORE: My Lords, the noble Lord opposite was good enough to write to my noble friend Lord Lucan and tell him that the principal matters with which he would deal to-day would be the

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question of special terms for British merchants in the Russian market and also the question of the embargo on foreign lending and its bearing on the export trade. I should like to deal with the question of foreign loans first. The Government's policy in this matter of foreign loans has to take into account a number of factors, including the need of capital for home development, the effect of foreign lending on our balance of payment, the position of the exchanges, and the relation between foreign lending and the encouragement of our export trade. The embargo on foreign loans has been relaxed from time to time so far as circumstances permitted, and the present position, as stated by my right honourable friend the Chancellor of the Exchequer on July 19 last year, is that the Chancellor is ready to consider particular cases, especially those falling under the following heads:—(1) Sterling issues by a country within the sterling bloc where the loan is required to increase the sterling assets of that country and so to minimise fluctuations of the exchanges; and (2) sterling issues on behalf of any borrower where the proceeds are calculated mainly to provide direct benefit to British industry.
It may be mentioned that under the second head loans have been permitted which, while not involving immediate expenditure on British goods for export, have had as their object the removal of undertakings from foreign control in the expectation that they would thereby increase their freedom to compete in foreign markets. Thus the present policy aims at securing the maximum advantages from foreign lending for British trade while, at the same time, avoiding financial operations which, without producing direct benefit to our trade, would throw an undue strain on the exchanges, and thus cause undesirable and disturbing fluctuations in the relation between sterling and foreign currencies. It is sometimes suggested that the complete removal of the embargo would give a further stimulus to our export trade, but as my right honourable friend pointed out in the statement to which I have referred in July of last year, "the actual amount of foreign lending at the present time would in no circumstances be great, and it is easy to form exaggerated views of the effect of the embargo." Where, however, a foreign borrower has sufficient credit here and desires to put forward a
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scheme not only acceptable to the prospective lenders, but also mainly directed to taking industrial goods from this country, then such a scheme can be favourably considered. In fact, a considerable number of such schemes, including proposals by British companies for developing an enterprise in a foreign country, have been allowed by the Treasury within recent months.
I now turn to what I may call the second part of the noble Lord's Notice regarding the Export Credits Guarantee Department, particularly with regard to Russia, because as I knew he was going to insist especially on Russia. I have taken pains to find out about this Department's trading with that country. May I say first that since the Export Credits Guarantee Department was created nine years ago goods to the value of £60,000,000 have been exported under its guarantee. These goods are the products of practically every industry, and they have been sent to practically every market. During the current financial year there has been a substantial increase in every sphere of the Department's activities over the previous year. I mention these facts only because there has been a certain amount of doubt and a good deal of discussion about the guarantees provided by the Department for facilitating exports to Russia, and the work done by this Department in encouraging exports to other markets tends to be overlooked, although it is certainly no less important.
Before dealing with the question of Russia I should like to remind your Lordships of one or two facts in connection with the export credits guarantee scheme. First of all, I should like to say what it is not, and secondly what it is. First of all, it is not a scheme for the relief of unemployment by encouraging what I may call abnormal trade, but it is a scheme of insurance against the risks of normal business conducted on normal credit terms. The guarantees are given on the recommendation of an Advisory Committee of business men whom the Export Credits Guarantee Department is required by Statute to consult. It is this Committee which fixes the terms and conditions on which guarantees are given for trade with Russia as for trade with other countries. Trade with Russia was brought within the scope of the export credits guarantee scheme towards the end of 1929. Since that date guaran-

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tees have been given covering nearly £22,000,000 worth of United Kingdom goods exported to Russia, and those guarantees produced a very marked expansion in the volume of our exports to Russia during the years 1930, 1931 and 1932. In 1933 there was, I know, a falling off, and I think that was largely due, as the noble Lord will remember, to the unfortunate arrest and the trial of British engineers in Russia during the spring of that year, and partly due to the reduction in the total volume of Russian imports from all countries. During 1933 and 1934 the Russian Government have greatly reduced the amount of their purchases abroad, particularly in manufactured goods, with which alone the Export Credits Department is concerned, but, according to Soviet statistics, for the first nine months of 1934 imports into Russia from this country exceeded imports from any other country.
A good deal has been said—and the noble Lord mentioned it just now—about the rates charged by the Department for guaranteeing Russian bills and about the period of credit covered by the Department's guarantees. The charges and the length of credit are fixed by the Advisory Committee in exactly the same way as for trade with all alter countries—that is to say, the Committee have regard to financial and commercial considerations. It is expressly provided in the Anglo-Soviet Temporary Commercial Agreement of the 16th February last year, as it was in the previous Agreement, that export credit facilities for trade with Russia would be available on that basis, and on that basis alone. The noble Lord was quite right, I think, in what he said just now, that other countries, notably Germany and Italy, which he mentioned, have charged less for guaranteeing Russian credits. Those differences are, however, offset very largely by the higher rates of interest which Russia has to pay in those markets over and above the premium for guarantees; but even though that were not the case, I am afraid that the Export Credits Guarantee Department's Advisory Committee would not recommend, and I do not think that Parliament would agree, that in this country guarantees for trade with Russia should be given on more favourable terms than guarantees for trade with other countries.
LORD STRABOLGI: May I ask the noble Lord, is that because of the different credit standing of the Russian Government or because we do not wish to favour them against other countries?
LORD TEMPLEMORE: I think entirely because we do not wish to favour them as against other countries. We treat all countries alike.
LORD STRABOLGI: This is an important point. Does that mean that the speed of the fleet is the speed of the slowest ship? If some Baltic countries require a high discount rate is that to be the rate for the whole world?
LORD TEMPLEMORE: I do not think that is so. I think the sole reason is that we wish to treat all countries alike.
LORD MARLEY: Countries which are not alike are to be treated alike.
LORD TEMPLEMORE: I now pass to the next point which was mentioned by the noble Lord, that is the guarantees which are offered by other countries for trade with Russia. The noble Lord mentioned two countries, Germany and Italy, and I happen to have details of those two countries here. The guarantees provided by the German and Italian Governments for trade with Russia fall outside the scope of their export credit facilities for other countries. In the case of both Germany and Italy, trade with Russia has during recent years been governed by special agreements of quite a different character from the Anglo-Soviet Commercial Agreement. Both the German and Italian Governments have undertaken during the periods covered by the agreements to guarantee Russian bills up to a specified maximum amount for stipulated periods of credit and for stipulated charges both of interest and premium. The terms of payment specified in the last published agreement between Germany and Russia varied between a maximum of sixteen months from the date of delivery of the goods to a maximum of twenty-five months from delivery, but it was provided that in the case of particularly large orders longer periods of credit might be fixed.
No information is published by the German Government as to the amount of guarantees actually given for trade with Russia, but statistics show that their exports to Russia have fallen off to a

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very remarkable degree, the figures being as follows: 1931, 762,000,000 Reichsmarks; 1932, 626,000,000 Reichsmarks; 1933, 282,000,000 Reichsmarks; for the first nine months of 1934, 49,000,000 Reichsmarks. The cost of the German Government's guarantee, which covers only 60 per cent. of the selling price, is understood to be 2 per cent. per annum, in addition to which the Russians have undertaken to pay interest at 2 per cent. above the Reichsbank rate, so that the total cost of premium and interest in Germany comes to about 8 per cent. per annum. There may be also certain commissions, but on this point I have no definite information.
Now I come to Italian trade with Russia. That is also governed by an agreement signed in 1933, which has been extended to the 31st December, 1934, and is now, I understand, to remain in force pending the conclusion of the commercial negotiations now proceeding between the Italian and Soviet Governments. Under that agreement the Italian Government undertook to guarantee 75 per cent. of the purchase price of Italian goods up to a total of 200,000,000 lire, or about £3,500,000. The terms of payment are set out in a schedule and vary according to the nature of the goods from a maximum of twenty-seven months to a maximum of nine months. Special terms may be arranged for complete plants for certain industries. The premium payable for these guarantees is also specified and varies from 1 per cent. to 1.4 per cent. Notwithstanding these arrangements, Italian exports to Russia have also declined—from 275,000,000 lire in 931 to 93,000,000 lire for the first nine months of 1934, and I may say that both in the German and the Italian Press there is evident dissatisfaction with the results of trading with Russia.
I should like to quote the following extract from an article in the Frankfurter Zeitung of the 27th of last month:
"That the Russians try a policy of withholding purchases which they have practised during the last few years and is now systematically used to depress prices and obtain more favourable credit conditions, is the experience which all countries who have sought to participate in Russian business have had."
That is the opinion apparently held by a section of the people in Germany. In this country we have quite a different
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form of commercial agreement with Russia, which provides for a progressive improvement in the ratio between the proceeds of Russian exports to this country and the amount which Russia spends in this country. The first year of that agreement has just been completed, but it is perhaps rather too soon to judge of its results, especially as figures are not yet available. The conclusion of the Government is that the conduct of our credit arrangement with Russia is in very good hands. The more favourable terms which I admit the German and Italian Governments have offered the Russian Government have not, as the figures show, enabled those countries to maintain their flow of orders from Russia, much less to increase them. If the Russian Government in dealing with this country prefers to pay cash for its goods I am sure His Majesty's Government would have no objection.
The noble Lord asked me a specific question as to whether the Export Credits Guarantee Department made a profit. It is a fact that the operations of the Department have cost the taxpayer nothing. The annual volume of trading accounts contains each year the commercial accounts of the Export Credits Guarantee Department. These commercial accounts show that up to March 31, 1933, the Department, after meeting all claims and paying all administrative expenses, had a surplus of over £1,000,000. I cannot anticipate the publication, shortly due, of accounts for the year ended March 31, 1934, but when they appear your Lordships will be able to see for yourselves the results of a further year's working. It has been freely said—and the noble Lord either said or implied it just now—that it is not the business of the Department to make a profit. The Department does not aim at making profits but at helping the trade of the country, and I would draw the attention of any of your Lordships who may be sufficiently interested to turn up the commercial accounts to which I have referred, to the fact that on March 31, 1933, the Department had contingent liabilities for some £8,000,000 outstanding. That figure represented the maximum amount of the Department's liability on its guarantees at that date, and whilst the Advisory Committee have no reason to anticipate any abnormal claims upon the Department under those

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guarantees, I think your Lordships will agree that it is only right that the Department should have amassed some surplus from which it could meet any claims which might result from the guarantees outstanding.
In an earlier part of his speech the noble Lord asked me if I had any information about a German loan to Russia. I think he stated that there was going to be a loan.
LORD STRABOLGI: A credit loan.
LORD TEMPLEMORE: I have a certain amount of information, and as far as I am aware this report is not correct. At least we do not know anything about such a loan. There is some reason, however, for believing that Germany proposes to guarantee fresh credits for Russia to the extent of 200,000,000 marks. She has in the past guaranteed very large credits in connection with her exports to Russia. Indeed, they were so large that at one time Russia was commonly supposed to owe more money to Germany than to all her other creditors put together. I understand, however, that during the last eighteen months German credits to Russia have been on a very much smaller scale and that Russia's indebtedness has consequently been decreased to a very much smaller figure. In those circumstances it would not be altogether surprising if fresh credits were now forthcoming, but it remains to be seen on what terms they will be given. On that point I am afraid I have no information. I think I have dealt with all the points and all the questions which the noble Lord asked so far as I am able. I am sure the Government ace very grateful to the noble Lord for his very helpful tone. As regards the formation of a finance corporation, that is a very large question on which I cannot venture to give an opinion. I can only say that this suggestion and others will be passed to the proper quarter for what use His Majesty's Government like to make of them. I have no Papers to lay, and perhaps the noble Lord, having raised the subject in the very interesting way he has done, will see his way to withdraw his Motion for Papers.
LORD STRABOLGI: My Lords, I do not press my Motion for Papers, especially in view of the very full information which the noble Lord has been good
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enough to give your Lordships' House and the very complete picture he has given of the situation. May I, however, venture to deal with two points before I withdraw my Motion? With regard to foreign lendings, I understood the noble Lord to reiterate what the Chancellor of the Exchequer said a little time ago, that that is affected by the need of keeping capital here for home development. I understand, however, that the Government set their face against capital expenditure on home development, unless they have had their minds altered by the programme brought out by the right, honourable gentleman Mr. Lloyd George, the so-called "New Deal." I do not know, but the last I heard—if the report is true—is that the Chancellor of the Exchequer still is determined that there shall be no capital expenditure in the house market for the relief of unemployment. Therefore I cannot see why there should be such severe restriction on foreign lendings.
As to the foreign exchange position, I would beg your Lordships to agree with me that if we cannot improve our export trade, and if our adverse balance continues to get worse, the foreign exchanges will automatically go against us. In that I have the agreement of the noble Marquess, Lord Reading, who has tremendous experience of this difficult question of foreign exchange. We seem to be, therefore, between two grave difficulties. We refuse to allow foreign lendings which would help the export trade admittedly, and at the same time by not helping our export trade we risk our foreign exchange position. However, these are very large questions and I can only hope that the Government's solution will be satisfactory and helpful to the country.
With regard to the Russian market, I was rather astonished to hear what the noble Lord said about treating all countries alike. Their conditions and situation are not all alike, as my noble friend Lord Marley interjected. I apologise to the noble Lord for pressing him on that point, but it is very important. Countries are not all alike in this matter. A British manufacturer selling his goods to a merchant, however credit worthy, in—where shall we say?—Bulgaria, is incurring obviously a greater risk than a British manufacturer selling his goods to a Government, as in the case

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of Russia, or to the All-Russia Co-Operatives, which is practically a Government Department. There can be no comparison of the risk. If we can help the export trade in engineering material to Russia by giving more favourable credit terms—as indeed the Italians and Germans are doings—surely we can do it without standing on some punctilio that we might give offence to merchants in Greece or Turkey by charging rather higher discount rates to guarantee manufacturers trading with them. I hope this matter will be reconsidered.
May I inform the noble Lord that one of the greatest experts on Russia was that very great man the late Dr. Nansen, who had explored practically the whole of Siberia himself and had great knowledge of that vast country. He told me here in London that in his opinion the natural resources—minerals, food-producing resources and timber—of Siberia only were as great as the natural resources of the United States and Canada put together. The opening out of that country has only begun. They need immense quantities of machinery of all kinds, railway rolling stock and so on. If by giving better credits we can help the special areas where unemployment is worst surely it is worth doing without standing on any kind of punctilio. I am much obliged to the noble Lord—he is, if
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I may be allowed to say so, a most able spokesman of the Department—but of course it is the Cabinet who decide these things, and I hope that my remarks have been listened to by the two eminent members of that august body sitting on the Front Bench opposite. I beg leave to withdraw.
Motion for Papers, by leave, withdrawn.

GOLDERS GREEN (JEWISH) BURIAL GROUND BILL. [H.L.]
  HALIFAX EXTENSION BILL. [H.L.]
  Reports from His Majesty's Attorney-General received and ordered to lie on the Table.

  REGISTRATION AND REGULATION OF OSTEOPATHS BILL. [H.L.]
  Select Committee to meet on Monday, the 4th of March next, at eleven o'clock: The evidence taken before the Select Committee from time to time to be printed, but no copies to be delivered out except to members of the Committee and to such other persons as the Committee shall think fit, until further order.
  House adjourned at ten minutes past five o'clock.