Sitting of 17 January 1940

Preamble
The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.
PRIVATE BUSINESS.
  ABERDEEN CORPORATION (ADMINISTRATION FINANCE ETC.) ORDER CONFIRMATION BILL,
  Read the Third time, and passed.
ORAL ANSWERS TO QUESTIONS.

  FAR EAST (SITUATION).
  Mr. Manderasked the Prime Minister whether he has any statement to make with reference to the position in the Far East?
  The Prime Minister (Mr. Chamberlain): Military operations have latterly been in progress in South China, and Nanning, an important centre of communication in Kwangsi province, was captured by the Japanese forces on 24th November. Air raids carried out by the Japanese have damaged the railway to Yunnanfu, traffic on which is now in consequence suspended.
  On 18th December the Japanese Vice-Minister for Foreign Affairs informed His Majesty's Ambassador at Tokyo that it had been decided to lift the existing ban on navigation on the Yangtze from Nanking downwards subject to certain restrictions necessary for the maintenance of peace and order, and military operations; it was hoped to apply similar measures to the Pearl River. His Majesty's Government welcome this decision as a step towards the restoration of equal trading opportunities for all in the Yangtze basin.
  As regards the situation in Tientsin there are no new developments to record.
  Mr. Mander: Is the Government in any way committed to support the proposed
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  new Chinese Government under the auspices of Mr. Wang?
  The Prime Minister: No, Sir.

  LEAGUE OF NATIONS (BRUCE COMMITTEE'S REPORT).
  Mr. Manderasked the Prime Minister what action has been taken by the Assembly of the League of Nations with reference to the proposals of the Bruce Committee, that a central committee for economic and social questions should be set up, to which should be entrusted the direction and supervision of the work of the League committees dealing with economic and social activities?
  The Prime Minister: At its meeting on the 14th December the Assembly of the League of Nations adopted the recommendations of the Bruce Report and approved the appointment of an Organising Committee consisting of the representatives of 10 countries, including the United Kingdom, to form the nucleus and to determine the composition of the Central Committee proposed in the report.

  GUARANTEES AGAINST AGGRESSION.
  Mr. Edeasked the Prime Minister whether he will give the names of anv States who have, since 3oth September, 1938, asked Great Britain to guarantee them against aggression and have been refused?
  The Prime Minister: None, Sir.
  Mr. Edeasked the Prime Minister which States have been given guarantees by this country of assistance against aggression; in which cases is the aggressor defined; and in which cases is the guarantee against aggression by any other State?
  The Prime Minister: As the reply to the hon. Member's question is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.
  Following is the reply:
  The obligations of His Majesty's Government in the United Kingdom in this respect relate to the following countries and derive from the following instruments, all of which have been pub-

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  lished, and to the terms of which I would refer the hon. Member.
  France.—The Treaty of Locarno of 16th October, 1925 (Cmd. 2764/1926), reaffirmed in the arrangements drawn up in London on 19th March, 1936 (Cmd. 5134 /1936). The attitude of His Majesty's Government towards France was further defined in my statement to the House on 6th February, 1939.
  Belgium.—The Treaty of Locarno of.16th October, 1925 (Cmd. 2764/1926), reaffirmed in the arrangements drawn up in London on 19th March, 1936 (Cmd. 5134/1936), and the Anglo-French Declaration to Belgium of 24th April, 1937 (Cmd. 5437/1937).
  Portugal.—The various Anglo-Portuguese Treaties and Agreements, a comprehensive list of which will be found in the answer given to the hon. Member for Bassetlaw (Mr. Bellenger) on 13th April, 1938.
  Iraq.—The Anglo-Iraqi Treaty of Alliance of 3oth June, 1930 (Cmd. 3797/1931).
  Egypt.—The Anglo-Egyptian Treaty of Alliance of 26th August, 1936 (Cmd. 360/1936).
  Greece and Rumania.—My statement in the House on 13th April, 1939.
  Poland.—The Anglo-Polish Agreement of Mutual Assistance of 25th August, 1939 (Cmd. 6101/1939), and the answer given to the hon. Member for the Combined English Universities (Mr. Harvey) on 19th October, 1939.
  Turkey.—The Treaty of Mutual Assistance between the United Kingdom, France and Turkey of 19th October, 1939 (Cmd. 6123 of 1939).

  ROYAL NAVY (BASES, IRELAND).
  Mr. Lambertasked the First Lord of the Admiralty whether the Royal Navy has used or will use any parts of the South and West Coast of Ireland as bases to counter the submarine menace to convoyed shipping?
  The Parliamentary Secretary to the Admiralty (Mr. Shakespeare): The Navy has no base on the South or West Coast of Ireland.
  Mr. Lambert: May I ask my hon. Friend whether supplies conveyed in
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  British ships convoyed by the British Navy are landed in Ireland?
  Mr. Shakespeare: No, Sir.

  PALESTINE (ETHIOPIAN CHURCH, JERUSALEM).
  Mr. Hannahasked the Secretary of State for the Colonies whether he can give the House any information about the present position of the convent and other property of the Ethiopian Church in Jerusalem?
  The Secretary of State for the Colonies (Mr. Malcolm MacDonald): Several claims and counter-claims in these matters are now under adjudication in the courts in Palestine. The issue is, briefly, whether the Ethiopian convent and church property in Palestine was the property of the former Ethiopian State or of private individuals or trusts.

  TRANSPORT.

    RAILWAY SERVICE, BUCKINGHAMSHIRE.
    Mr. Goldieasked the Minister of Transport whether, in view of the great inconvenience caused to the travelling public by the suspension of the London and North Eastern Railway service from Marylebone to intermediate stations on the Aylesbury line, he will take steps to restore such services at the earliest possible date?
    The Minister of Transport (Captain Wallace): This line is served both from Baker Street and Marylebone. The service from Baker Street is approximately the same as pre-war. It has not yet been found possible to restore the full pre-war service operating from Marylebone, but as from the 1st January this year eight additional trains each way have been introduced, and I think that the combined service now available is reasonably adequate for the intermediate stations. If, however, my hon. and learned Friend has any particular station in mind and will let me have details I will gladly have further inquiries made.

    RAILWAY COMPANIES (NEGOTIATIONS).
    Mr. Lipsonasked the Minister of Transport whether he can now state if an agreement has been arrived at with the railway companies; and, if so, on what terms?
    Captain Wallace: The negotiations with the railway companies involve a number of highly complicated questions, and I am not yet in a position to state that agreement has been reached.
    Mr. Lipson: May I ask my right hon. and gallant Friend why it is that negotiations this time are taking so long, seeing that in the last war agreements were arrived at within two months; and in view of the hardships caused to a great many people by the delay in coming to a decision, can he give a definite date by which a decision will be announced?
    Captain Wallace: The reason why negotiations have been longer is that I think we are proceeding on a more sensible basis. The hon. Member must remember that the agreement made in the last war left the British taxpayers with a bill of £60,000,000.
    Mr. Lipson: Does not my right hon. and gallant Friend agree that negotiating on a sensible basis ought to produce results more quickly?
    Captain Wallace: I do not agree that it necessarily does. As to the question about hardships to people concerned, I do not know of any case of hardship which has arisen as a result of these negotiations not being completed.
    Mr. De la bère: Is Lord Stamp in charge of these negotiations?
    Sir Henry Morris-Jones: Is it not the case that these negotiations were going on for 18 months previous to the war, and in view of the distress which has been caused to widows and orphans and other people, arising from the withholding of dividends by the railway companies, cannot my right hon. and gallant Friend take steps to expedite a decision?
    Captain Wallace: These statements about distress caused to widows and orphans have no foundation whatever. I know no reason why the Great Western Railway Company should postpone payment of dividends on their pre-ordinary stocks.
    Mr. Charles Brown: Does not the Minister think it would be better to nationalise the railways straight away?

    COAL TRANSPORT, SOUTH WALES.
    Mr. James Griffithsasked the Minister of Transport whether he is aware
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    that recently a number of wagons of coal were brought from Ellestown, in Leicestershire, to Llanelly, South Wales, for the use of a Government service; and whether he will consult with the Department concerned to make arrangements to draw their supplies of coal from the near-by coal mines, and thus avoid the cost and waste involved in conveying coal from the Midlands to South Wales?
    Captain Wallace: Yes, Sir. I have, with the assistance of my hon. Friend the Secretary for Mines, investigated the circumstances of this case, which did not involve wasteful use of trucks, since large numbers have to be returned empty from the Midlands to South Wales. I agree, however, that in present conditions economy in the use of transport demands that supplies of fuel should be drawn from the nearest suitable and available source.
    Mr. Griffiths: Do I understand that the right hon. and gallant Gentleman does not regard it as a waste to bring coal from Leicestershire to Llanelly in South Wales?
    Captain Wallace: In this case it was not a waste as the trucks had to go back in any case.

    RAILWAY WAGONS DEMURRAGE.
    Mr. J. Griffithsasked the Minister of Transport whether he can make a statement on the working of the new scale of demurrage on wagons; if he is aware of complaints in some areas of hardships caused by the lack of facilities to stack coal at railway sidings; and whether he is taking any steps to deal with those difficulties?
    Captain Wallace: The Order authorising the railway companies to make increased demurrage charges did not come into operation until the 15th December last and its full effect has not therefore been felt, but I am informed that since the new charges came into force there has been a substantial improvement in the wagon position. Where wagons have been detained beyond the free periods now allowed, accounts for the charges at the increased rates are being rendered, but the railway companies fully realise that the charges must be applied with reasonable consideration for the difficulties of traders. Representations made by traders regarding the application of the charges in particular cases will receive the special

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    attention of the railway companies in the light of the assurance which I gave the House on 6th December that the Order would be administered with due regard to any genuine difficulties in giving strict compliance. The railway companies are anxious to ensure that the action taken will be on uniform and equitable lines. As regards the second part of the Question, I have had certain representations alleging shortage of stacking accommodation at railway sidings in one or two areas, and these are being investigated.
    Mr. Burke: Is the Minister aware that throughout the industrial North there is absolutely no accommodation for stacking coal and that it is quite impossible, with the short working hours, lack of petrol and other things, for dealers to get the wagons out of the way in the 48 hours at present allowed?
    Captain Wallace: I have already given an assurance that if it is impossible for the dealers to comply with the Order that fact will be taken into account.
    Mr. Burke: If I send the right hon. and gallant Gentleman particulars from Lancashire, will he deal with the matter?
    Captain Wallace: I will not say that I will deal with it in the sense of necessarily accepting all that the hon. Member says, but I will certainly look into the matter.
    Mr. Georģe Griffiths: Does the Minister think that the nearest way of getting an empty wagon from London to Yorkshire is through Lancashire?
    Captain Wallace: I did not say that the wagons had to go from London to Yorkshire.
    Mr. Griffiths: But I am asking if the Minister thinks that is the nearest way?
    Captain Wallace: Perhaps the hon. Member will put a Question down and I will tell him.

    MILLING INDUSTRY (CHEMICALLY-TREATED FLOUR).
    Mr. De la bèreasked the Minister of Health whether, since the Army Contracts Purchasing Department prohibits the use of chemically-treated white flour for the troops, he will consider affording the same protection to the general public?
    The Parliamentary Secretary to the Ministry of Health (Miss Horsbrugh): My right hon. Friend is not satisfied on the evidence available to him that a general prohibition would be justified.
    Mr. De la Bère: May I ask my hon. Friend whether she will take some steps to have this matter gone into further, and will she tell us how long the milling combines are to be allowed to be a reproach and a disgrace to this country?
    Miss Horsbruģh: Yes, Sir, I am sure that my right hon. Friend will bear this matter in mind; and if the hon. Member thinks the situation is unsatisfactory, perhaps he will urge all those who hold the same opinion as he does to demand bread made of such flour, and in that case, no doubt, the trade would supply it.

    ENEMY ALIENS.
    Mr. Manderasked the Secretary of State for the Home Department whether he is able to state the present position with regard to the work of the tribunals dealing with aliens; the number which have been placed in the three different categories, and the number where appeals are still pending?
    The Under-Secretary of State for the Home Department (Mr. Peake): Nearly all the tribunals have completed their work and over 70,000 cases, out of a total of 74,000 registered Germans and Austrians, have been examined. Internment orders have been made in 528 cases, and in some 8,000 cases the tribunals have decided not to grant exemption from the special restrictions applicable to enemy aliens. Large numbers of those interned and of those subjected to the special restrictions have made representations to the Home Office. As regards those interned each case is being considered, and cases of doubt are being referred to the advisory committee; but it is not at present possible to say how many cases will be so referred. As regards those subjected to the special restrictions, a scheme for a further review of such cases is being worked out, and my right hon. Friend hopes to make a statement in the near future.
    Mr. Mander: How many cases of appeal or representation are now pending in either category?
    Mr. Peake: In regard to internment, the number is, I think, something over 300 at the present time.
    Mr. Anstruther-Gray: In view of the fact that the enemy appear to know a great deal about what is going on in this country, is my hon. Friend satisfied that these tribunals have not been too lenient?
    Mr. Peake: I think that my right hon. Friend is, on the whole, well satisfied with the work which these tribunals have been carrying out.
    Mr. Leach: Would the Minister agree that an appeal which has been in for 3½ months to the Appeals Tribunal and has not yet been considered is a little overdue; and would he be willing to look into such a case from Bradford if I gave it to him?
    Mr. Peake: I shall certainly be pleased to look into any individual case.

    WORKMEN'S COMPENSATION.
    Mr. T. Smithasked the Home Secretary whether any decision has yet been reached to amend the Workmen's Compensation Act?
    Mr. Peake: As has been previously indicated, the question of legislation affecting the major problems of workmen's compensation must await the report of the Royal Commission, which is proceeding with its inquiry.
    Mr. Smith: Can the Minister assure the House that we are likely to have some interim report from this Royal Commission in the immediate future, and that he agrees about the extreme urgency of the matter?
    Mr. Peake: I cannot give any assurance about the production of an interim report at an early date, but my right hon. Friend has, as was announced by the Chancellor of the Exchequer at the end of November last, urged the Royal Commission to proceed with its work. The Royal Commission is doing so, and has held two meetings in the recent past.
    Mr. T. Williams: Although we recognise that the Royal Commission will deal with major problems, has the Home Office any idea that something is likely to be done to satisfy conditions during the war
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    respecting an immediate increase in compensation?
    Mr. Peake: We regard rates of benefit as one of the major problems. We shall, however, keep a careful watch on the position as it is affected by any rise which may take place in the cost of living.
    Mr. Attlee: In view of the urgency of this matter and of the tenour of the Minister's reply, I beg to give notice that we shall take an early opportunity of raising a Debate on the matter.

    FOOD SUPPLIES (POTATOES).
    Mr. Butcherasked the Chancellor of the Duchy of Lancaster whether minimum prices have yet been fixed for potatoes?
    The Chancellor of the Duchy of Lancaster (Mr. W. S. Morrison): An Order fixing minimum growers' prices, both for ware and seed potatoes, is in preparation, and will, I hope, be issued shortly.
    Mr. Butcherasked the Chancellor of the Duchy of Lancaster what steps are being taken to ensure that surplus potatoes are conserved for feeding-stuffs or for other purposes?
    Mr. Morrison: Factory facilities for manufacturing potato meal from surplus potatoes are already in existence. The question of augmenting these facilities in connection with the 1940 potato crop is at present under examination.
    Mr. Wilfrid Roberts: Has the Minister in mind that potatoes from certain areas shall be distributed equally all over the country?
    Mr. Morrison: Yes, Sir.
    Mr. Graham White: Will Irish potatoes be included in all these arrangements?
    Mr. Morrison: Northern Irish potatoes, but not those from Eire.

    GOVERNMENT CONTRACTS (LABOUR SUPPLY).
    Mr. Goldieasked the Minister of Supply whether he is aware of the large influx of Irish labour in Warrington and neighbourhood in connection with work on Government contracts; and whether,

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    with a view to the prevention of unemployment, he will take steps to ensure that preference is given to local labour?
    The Parliamentary Secretary to the Ministry of Supply (Colonel Llewellin): My right hon. Friend is aware of the position referred to by my hon. and learned Friend. When building operations were commenced in connection with the erection of a new Government factory near Warrington, a number of men previously employed by the contractor on work in other parts of the country came to the Warrington district and were engaged direct by the contractor. Among these were a number of Irish nationals, but information is not available as to the proportion of such men to the total number employed on the contract. I am able to assure my hon. and learned Friend, however, that the number of migrants from Eire engaged by the contractor through the Employment Exchange, as distinct from Irishmen who transferred direct to the contractor's employment, is only five.
    With regard to the second part of the Question, I am informed by my right hon. Friend the Minister of Labour that it is the practice when vacancies are notified to the Employment Exchanges, for first consideration to be given to local applicants, and afterwards, so far as practicable, to suitably qualified persons from areas of heavy unemployment in this country. Arrangements have been made to ensure that, so far as possible, engagements of labour on the work in question are made through the Employment Exchange machinery, and to this end an office of the local Employment Exchange has been opened on the site, through which some 1,000 vacancies have been filled.
    Mr. Goldie: Does my hon. and gallant Friend regard it as desirable that Irish labour should be employed on work of this character, and can he assure the House that the ordinary trade union rates of pay are being paid to these Irishmen?
    Colonel Llewellin: With regard to the first part of that question, by opening an Employment Exchange on the site and by filling vacancies with local people as far as possible and, if that is not possible, from the heavily unemployed areas in this country, we are, I think, ensuring that nationals of this country are given preference. In regard to the second part, as
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    that is a distinct question I ask my hon. and learned Friend to put it on the Paper.
    Mr. Logan: Does the Minister think that the large influx of five is detrimental to the work that is going on?
    Colonel Llewellin: No, Sir, and I did not say so.
    Mr. Logan: In the hon. and gallant Gentleman's reply he said that five Irishmen were engaged; does he think that that is detrimental?
    Colonel Llewellin: I said that five were engaged, but I did not say that, in my opinion, that was undermining the labour position in this country.
    Mr. Tinker: In view of the fact that there is a lot of dissatisfaction in connection with this matter and that I am getting complaints from my constituency of Leigh, which is on the border, would the Minister cause further inquiries to be made in order to ease the situation?
    Colonel Llewellin: I do not think further inquiries are necessary. By the setting up of the Employment Exchange and by taking labour from the locality first, and secondly from areas with heavy unemployment, we are doing what the hon. Member desires.
    Mr. Poole: Is not the hon. and gallant Gentleman aware that the reason why employers show preference for this type of labour is that it is prepared to work unlimited hours without insisting on the proper overtime rates of pay?
    Mr. Lipson: Is not the situation caused by contracts not being given to local contractors? If that practice were more generally adopted would there be any complaints of this kind?

    WAR WORK (SUBSTITUTE LABOUR).
    Miss Rathboneasked the Minister of Supply whether, in order to avoid the waste of time which occurred in the last war before substitute labour could be trained for employment in skilled processes, he will arrange, in consultation with the Ministry of Labour, or through firms contracting for the Government, for the training of women in skilled processes for which their labour may be required at later stages in the war?
    Colonel Llewellin: Discussions are taking place between representatives of the employers and workpeople on certain aspects in regard to the employment of women in industry, and the hon. Member may be asured that both the Government and the industry will give full attention to the provision of any training facilities that may prove to be necessary.
    Miss Rathbone: Is the Minister aware that not only substitute women's labour but the substitute labour of men is affected; and is he really satisfied that it is safe to put off the training of workers in highly skilled processes until there is an actual shortage of labour in those processes?
    Colonel Llewellin: I realise that this applies to men and to women, but it is necessary in any system of training of this sort to carry both employers and representatives of the workpeople along with the Government in any action which is taken.

    ROYAL ORDNANCE FACTORY, EUXTON.
    Mr. Gordon Macdonaldasked the Minister of Supply the number of persons over 50 years of age that have been found employment at the Royal Ordnance Factory at Euxton, Chorley, Lancashire, since 3rd September, 1939?
    Colonel Llewellin: Although in time of war it would not be in the public interest to give such figures as would indicate the total number of persons employed at a particular ordnance factory, the answer to the hon. Member's Question is that between 3rd September and 31st December, 1939, the number of employes taken into Ministry of Supply employment at the Royal Ordnance Factory at Chorley at ages over 50 was 563.
    Mr. Macdonald: Is the hon. and gallant Gentleman aware that in this area there are thousands of able-bodied men over 50 who are unemployed because of the closing of mines, and will he reconsider the position, do away with the age limit and make fitness the only test?
    Colonel Llewellin: I took it that the 563 were not subject to an age limit of 50. We have taken in 563 fit men over 50
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    who, we thought, were capable of performing our work.
    Mr. Macdonald: Is it true that the age has been raised from 50 to 52 and that that is the reason why these men have been taken in; and will the hon. and gallant Gentleman consider removing any age limit and making fitness the only test?
    Colonel Llewellin: I will certainly look into that matter.

    4½ PER CENT. CONVERSION LOAN (GOVERNMENT PROPOSALS).
    Mr. Pethick-Lawrence(by Private Notice) asked the Chancellor of the Exchequer whether he has any statement to make about the 4 per cent. Conversion Loan, 1940–1944?
    The Chancellor of the Exchequer (Sir John Simon): Yes, Sir. The Li?, per cent. Conversion Loan, 1940–44, which was originally issued in 1924 and of which about £350,000,000 is outstanding, has consistently stood above par since 1932. It is repayable on 1st July, 1944, but carries an option to the Government to repay it on 1st July, 1940, or on any subsequent interest date, subject to three months' notice. The rate of interest carried by the loan is high and I propose to take the earliest opportunity to repay it. Formal notice of the repayment of the loan on the 1st July next is accordingly being given in the "London Gazette" to-night. Holders are being offered, as an alternative to being repaid in cash, the conversion of their holdings on the 1st July into a new loan—a short-term Conversion Loan at a substantially lower rate. This new loan, carrying interest at 2 per cent. per annum, will be repaid at par on the 1st July, 1945, but the Treasury reserve the right to redeem it at par, in whole or in part, on or after the 1st July, 1943. Holders of the 4½ per cent. loan who accept this offer of conversion will receive £100 of the new loan for every £100 of the 4½ per cent. loan converted. Particulars of the offer are being posted to registered and inscribed holders of the 4½ per cent. loan to-night and will appear in the Press to-morrow.
    Holders of the 4½ per cent. loan who desire repayment in cash on

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    1st July, 1940, will be required to make application to that effect by the 8th February, 194o; but I trust that all holders, realising the appreciable saving in interest charges that would result from the conversion of the loan, and the pressing need at the present time not only for such savings but for reducing the amount to be reborrowed in order to provide for repayment, will give the conversion offer their favourable consideration. A large proportion of the 4½ per cent. loan is held by banks and other financial institutions; to them and, I hope, to many other holders, the currency of the new loan should make a special appeal and I am confident that they will convert their holdings to the fullest possible extent. As regards the small investor who holds 4½ per cent. Conversion Loan and who has not yet taken up his full quota of National Savings Certificates and Defence Bonds, there can be no objection if he prefers to take out his money for that purpose. But I trust that no holder will opt for repayment except for the purpose of relending the money to the Government.
    I have one further point to mention in connection with this operation. Following the course adopted on the occasion of earlier conversions, it is proposed to regard any holder who has not applied either for repayment or for conversion by the 8th February, 1940, as having accepted the offer to convert his holding. Parliament accorded us these powers in connection with the conversion of the War Loan of 1932 and they are more necessary in the conditions of to-day. The provision I have just mentioned will be embodied in rules which the Treasury are making to-day under the National Loans Act, 1939. Some doubts, however, have been expressed whether such a provision is effectively covered by those powers, and I propose to-morrow to ask leave of the House to introduce a short Bill to remove such doubts and, as a matter of urgency, to pass it through al its stages to-morrow also. A White Paper explaining the necessity for the Bill and also its purport will be available in the Vote Office this evening.
    Mr. Thorne: What are the Chancellor's intentions with regard to the people who do not accept this conversion? Will it be made compulsory?
    Sir J. Simon: The existing holders of the loan, as the hon. Gentleman appreciates, at present have the right to receive, when the loan is repaid, £100 for each £100 of the stock which they hold. This is an arrangement by which they have the opportunity—and I think very large numbers of them will take advantage of it—to take instead the new issue, which is at 2 per cent.
    Mr. Thorne: Could the right hon. Gentleman tell us what is the anticipated saving?
    Sir J. Simon: Something between £8,000,000 and £9,000,000 a year in interest would be saved if everyone converted.
    Mr. Thorne: Could not you carry it a few stages further and save a few more millions?

BUSINESS OF THE HOUSE.
Mr. Attlee: Would the Prime Minister tell us the business of the House for tomorrow?
The Prime Minister: The first business for consideration to-morrow will be the National Loans Bill referred to by my right hon. Friend the Chancellor of the Exchequer in the statement which he has just made. We shall then take the Second Reading of the India and Burma (Miscellaneous Amendments) Bill [Lords]; Committee stage of the necessary money resolution and of the Gas and Steam Vehicles Bill. The question of Service Dependants' Allowances will be debated on the motion for the Adjournment.

BILL PRESENTED.
  CZECHO-SLOVAKIA (FINANCIAL CLAIMS AND REFUGEES) BILL,
  "to provide for the disposal of the balances of certain banking accounts representing sums lent or given by His Majesty's Government in the United Kingdom to the Government of the Czecho-Slovak Republic," presented by the Chancellor of the Exchequer; supported by Sir John Anderson, Captain Crookshank and Mr. Butler; to be read a Second time To-morrow, and to be printed. [Bill 10.]

SELECTION (CHAIRMEN'S PANEL) (PARLIAMENT ACT, 1911)
Colonel Gretton reported from the Committee of Selection; That, in pursuance of Section 1, Sub-section (3), of the Parliament Act, 1911 they had appointed Sir Robert Young and Sir Cyril Entwistle from the Chairmen's Panel, with whom Mr. Speaker shall consult, if practicable, before giving his certificate to a Money Bill.
Report to lie upon the Table.

SELECTION (STANDING ORDERS COMMITTEE) (PANEL).
Colonel Gretton reported from the Committee of Selection; That they had selected the following Eight Members to be the Panel appointed to serve on the Select Committee on Standing Orders under Standing Order 98: Lieut-Colonel Acland-Troyte, Mr. Frankel, Sir Francis Fremantle, Major Leighton, Mr. Mander, Sir Frank Sanderson, Sir Annesley Somerville, and Mr. Tinker.
Report to lie upon the Table.

SELECTION (COMMITTEE ON UN-OPPOSED BILLS) (PANEL).
Colonel Gretton reported from the Committee of Selection; That they had selected the following Twelve Members to be the Panel appointed to serve on the Committee on Unopposed Bills under Standing Order ill: Mr. Boulton, Mr. Broad, Captain Crawford Browne, Major Sir George Davies, Sir Geoffrey Ellis, Sir Francis Fremantle, Sir George Hume, Mr. Lee, Mr. Logan, Col. Sir Charles Mac-
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Andrew, Mr. Moreing, and Sir Harold Webbe.
Report to lie upon the Table.

SELECTION (PRIVATE LEGISLATION PROCEDURE (SCOTLAND) ACT, 1936) (PANEL).
Colonel Gretton reported from the Committee of Selection; That, in pursuance of the provisions of the Private Legislation Procedure (Scotland) Act, 1936, they had selected the following Twenty Members to form the Parliamentary Panel of Members of this House to act as Commissioners: Mr. Buchanan, Mr. Cassells, Mr. Chapman, Sir Samuel Chapman, Mr. Erskine Hill, Sir Henry Fildes, Sir Edmund Findlay, Mr. Graham, Mr. Thomas Henderson, Sir John Graham Kerr, Mr. Maclay, Mr. Maclean, Lt.-Col. Sir Thomas Moore, Major NevenSpence, Lord William Scott, Captain Shaw, Sir Robert Smith, Mr. Henderson Stewart, Sir John Train and Mr. Young.
Report to lie upon the Table.

SELECTION (STANDING COMMITTEES).
Colonel Gretton reported from the Committee of Selection; That they had agreed to the following Resolution, which they had directed him to report to the House:—
That, after a Bill has been under consideration in Standing Committee, no application for changes in the composition of that Committee in respect of that Bill shall be entertained by the Committee of Selection.
Report to lie upon the Table.

GAS AND STEAM VEHICLES (EXCISE DUTIES) BILL.
Order for Second Reading read.
3.16 p.m.
The Parliamentary Secretary to the Ministry of Transport (Mr. Bernays): I beg to move, "That the Bill be now read a Second time."
The House will recall that last month a concession was proposed in respect of the taxation of gas-propelled vehicles, and a Ways and Means Resolution giving effect to it received the approval of this House. It was necessary to adopt this procedure in order that this concession might operate from 1st January, at the beginning of the motor vehicles licensing year, but that resolution will lapse after 20 parliamentary days unless the confirming Bill receives a Second Reading from this House. The Government are, therefore, asking the House to-day to give the Second Reading to this Bill in order that that concession in respect of taxation may be given permanent effect and, following on the statement which I was able to make in the Debate on the Ways and Means Resolution, I do not think the House will want me again to go over the details of this concession. It is designed to carry out the pledge of my hon. Friend the Secretary for Mines that no increase of taxation should result from the production of, or the conversion to, gas-propelled vehicles.
The Bill, in effect, provides for the removal of the burden of extra taxation which might otherwise result in respect of the weight of gas plant or container on any goods vehicles, which as the House knows are taxed on unladen weight and not on horse-power, or of the provision of a trailer to carry the plant or containers. This Bill deals only with goods vehicles, since passenger vehicles are taxed either on their seating capacity or their horse-power and are not subject to a trailer duty. It is anticipated that this Bill will ensure that conversion from petrol to gas propulsion will not result for the owner in any increase of the burden of his licence duty. I hope the House, which unanimously agreed to the Ways and Means Resolution, will be
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willing in the same way to express unanimity in regard to this Bill.
3.21 p.m.
Mr. Georģe Hall: I can assure the hon. Member who has moved the Second Reading of this Bill that we shall offer no opposition to its passage, as my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) stated when we discussed the Financial Resolution. We think that such a Measure is long overdue, and it is a sad fact that it needed the stimulus of a war to force the Government to consider this question of only one alternative fuel. There is no doubt that the ease with which oil fuels have been obtainable and the efficiency of their distribution have lulled this nation into a false sense of security. Anything which will assist in the provision of alternative fuel, for road or sea transport, is welcomed by those of us who come from the mining districts of this country.
This Bill does give a valuable concession for gas-propelled vehicles and will materially assist in their use, but the value of the concession must not be exaggerated. It does mean that the weight of the plant necessary for the production of the gas will be exempt from any duty. For years the Government have been pressed to make such a concession, but they would not give way. I remember that three years ago I and certain Members from the other side of the House waited upon the then Minister of Transport and begged him to make a similar concession, but he refused. But that has not prevented many enterprising people and companies from following up this question of the gas-producer vehicles. We have seen certain progress made in connection with it. We thank the Secretary for Mines and that excellent committee which was appointed to consider the question of designs, not only for the production of those designs but for persuading the Minister of Transport to agree and the Chancellor of the Exchequer to make the concession which this Bill contains.
For some reason or other, this nation has always been behind Continental countries in dealing with this question of alternative fuels. Even in the case of producer-gas, France, Germany and Italy have long ago not only reduced taxation but have made the use of such vehicles compulsory in many cases. France has done much to throw off this yoke of using

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petrol only, and Germany, in order to meet her needs, has done a very large amount of similar work; so has Italy. It has taken the war to wake us up in this matter. I take it that the design referred to by the Secretary for Mines some six weeks ago is now available for manufacturers who can produce it, that both the design suitable for the trailer and the design suitable for the chassis—for there must be two sorts of design—are available for any suitable manufacturer who can manufacture these things. No estimate has been given as to the possible cost of the design, and that must play a large part in the extended use of these gas-propelled vehicles.
Also, I wish the Parliamentary Secretary to the Ministry of Transport had given some estimate of the possible saving in fuel costs through the use of gas-producer vehicles instead of petrol-driven vehicles. It is a question not only of the scarcity of petrol but also of the increasing price of petrol. I remember the tremendous increase which took place in petrol prices during the last war—and not only during the war. In 1920 the cost of petrol increased to no less than 4s. 3d. a gallon; and the taxation levied upon petrol at that time was less than it is now. I have seen certain estimates of the possible saving. A reference was made in a South Wales paper quite recently to a local authority which took a petrol-driven vehicle from South Wales into the Midlands, and the cost in petrol alone for the journey amounted to something like 22S. But when the vehicle had been converted into a producer-gas vehicle the cost of bringing it back to South Wales was not more than 3s. That is an indication of the economy which can be achieved.
I do not propose to take up much of the time of the House, but I should like to mention one or two limitations which this producer-gas possesses. As the Parliamentary Secretary knows, it requires comparatively simple engine modification. I have no doubt that this is one of the factors which will put these producer-gas vehicles very much into the limelight. The re-conversion of a vehicle back from producer-gas to petrol consumption will be equally simple. But there is one other side to the picture. It must be remembered that the fuels
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suitable to produce this gas are very limited. It is just a question of anthracite and low-temperature-carbonisation coal. I would ask that the Fuel Research Board should continue their research in order to ascertain whether there is not a wider range of fuels suitable. Otherwise, we may have a number of these producer-gas vehicles without having the necessary amount of suitable fuel.
The producer-gas vehicle does not by any means exhaust the field of alternative fuels, and I would like the Government to press for a greater use of steam vehicles. I do this because of the simplicity of the steam vehicle engine, its reliability and its flexibility, and because a very wide range of coals is suitable for the purpose. Perhaps I have just an ulterior motive in this matter because some hundreds of miners in my division have been thrown out of employment as a result of the steam lorry being driven from the road. The steam lorry of to-day is very different from the steam lorry in use during the last war. Many of the objections that were made against it ten years ago have now disappeared. It makes very little noise and there is a minimum amount of smoke. It is not as bulky as many of the vehicles which now appear upon the roads. I beg of the Minister of Transport and the Secretary for Mines, in dealing with this question of alternative fuels, to keep in mind the return of the old steam lorry.
As I have said, we welcome this Bill, for it marks a change in the negative attitude adopted by the Government in the past when we have asked that something should be done to assist tie use of alternative fuels. My hon. Friends and I, and representatives of the mining industry, have for many years pressed the Government to proceed with energy not only with the research into the use of alternative fuels, but to take action in regard to them as well. We have always been met with formidable obstacles but we have always been convinced that there has been a clear case for the full utilisation of oil substitutes based upon our own natural resources of coal, and this Bill is a start. We welcome it and trust that ere long the Secretary for Mines will himself stand up at that Box and expound a very much larger scheme of fuel alternatives, and possibly inform the House and the country that it is the intention not

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only to deal with producer-gas, but with oil extraction from coal as well.
3.33 P.m.
Mr. Ellis Smith: I want to begin by making an appeal to the Prime Minister and those who advise him to reconsider their decision to take the Committee stage of this Bill to-morrow. The Bill is a very important: one, and it will make an important contribution to the economy of the nation, if it is altered in certain ways. Some of us can produce evidence to show that it is most important from the national point of view that the Committee stage of the Bill ought not to be taken to-morrow, so as to give time for facts to be produced in this House to assist those who are responsible for the introduction of this Measure. We wish to attempt to show the need for a drastic change in regard to the Bill. As my hon. Friend the Member for Aberdare (Mr. George Hall) said, a number of us on this side of the House have taken a great interest in this question, and I regret to say that it has taken four months of war to show the need for such a Bill. Since 1936 I have put down question after question on this problem, all of which have been deliberately designed to stimulate interest in the need for the adoption of alternative methods of motor power. I think that this Bill is more important than many people realise, and I welcome its introduction because it is a small step in the right direction, but, considering the serious situation in which we are placed, I do not think that the step is great enough. Therefore I want to produce evidence and make some observations in order that between now and the Committee stage the Minister of Transport and the Secretary for Mines and their officials can reconsider the Bill.
In order that the House can consider the Bill in its correct perspective I wish to give an indication of what has been taking place in other countries. I would very much like to give indications of why we are in this position, but I do not want to be hypercritical this afternoon or responsible for raising any controversial issue. I want to make an objective contribution in order that we may get the best possible benefit out of this Bill. In France, in 1938, there were 10,000 vehicles being run upon producer-gas; in Germany, in 1937, there were 1,207; in Italy, 1,5oo; and in Russia, in 1938,
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15,000; while in Britain, in 1939, there were only 30 vehicles being run upon producer-gas. That is an indication of the leeway that we have to make up if we are to get the best out of this Bill.
As I have said, this Bill could be made a great contribution to the economy of this nation, but I want to point out some of the defects of the Bill and to indicate the changes that will be necessary if we are to keep up with other countries in regard to development. The consumption of liquid fuel in this country could he considerably reduced if this Bill were based upon right lines. I would be the very first to admit the necessity for the maximum economy in the consumption of petrol, and if we admit that fact, it clearly shows the need for alternative methods of motive power. If this Bill were on the right lines, the whole of the imports into this country could be considerably educed. It would help the Chancellor, of the Exchequer and others in regard to the foreign exchange, which could then be used to facilitate the importation of food, munitions and raw material. We would also be able to reduce the number of convoys bringing petrol to this country, and the Naval and Air units engaged in this service could be used for other purposes. If the Bill were on the lines that the scientists of this country demand, it would mean a great expansion of our coal trade and of home-produced fuel. It would assist in the balance of trade.
The Bill opens up great possibilities. It is a small step forward, but, having regard to the very serious situation in which we find ourselves, it will not deal adequately with the problem. I would emphasise that we shall not get the best results from the Bill unless more energetic action is taken by the Minister of Transport and the Secretary for Mines than they have taken up to the present. I know of no more important question, and the Minister of Transport should take early steps in order to broadcast what ought to be done in connection with proposals of this kind. Let me give an indication. By an approximate capital expenditure on a commercial vehicle or bus of £95, plus £5 for fitting, £100 in all, it would be possible to convert such a vehicle. There would no longer be any need to be concerned about petrol, and it would be possible to reduce running costs by approximately two-thirds. Trade

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union officials have recently made statements before the Institute of Mechanical Engineers and the Institute of Transport stating that they are very seriously concerned about the Minister of Transport's lack of policy. This is supported by commercial firms and organisations throughout this country and by all hon. Members on both sides of the House who realise what is taking place with regard to transport in industrial centres.
In France, Germany, and Italy this type of motive power has been encouraged by reduced taxation, and in other ways, and I want to ask the Minister and the Secretary for Mines, who have both a great deal of responsibility in this matter, whether they are satisfied with this Bill as it is being proposed at the present time. The House is entitled to an answer. If not, will they reconsider their decision to take the Committee stage on this Bill to-morrow in order that the evidence that is going to be produced can be considered and suitable Amendments proposed, so that the industrial people of this country can have justice done to their claims? Here is the position, briefly: We have two big transport concerns; one on this side of the road and one on the other. The transport concern on this side of the road decides from patriotic motives, and also from having taken a long view of the situation, to convert from the use of petrol to producer-gas. That decision will mean their being involved in a capital expenditure per vehicle of approximately £95. But as a result of that expenditure they will be rendering great benefit to the nation by swinging over from the consumption of petrol to producer-gas. The firm on this side of the road pays no heed to the appeal by the Minister of Transport to economise in petrol, and it is not fair that a position of that kind should be allowed. If firms arc prepared to swing over from the consumption of petrol to producer-gas and embark on such capital expenditure, they should be encouraged.
Therefore, I say that this Bill is not going far enough. It is another indication of the need for Amendments to be introduced on the Committee stage in order to get the best out of it. In my view, greater concessions ought to be in the Bill, and I want to suggest two or three Amendments before we reach the
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Committee stage. Clause 1, Sub-section (2), only makes allowances for the weight of the extra equipment, and I want to ask the Minister to consider whether he cannot do more to encourage those who are prepared to use home-produced fuel. Cannot he introduce an Amendment in order to make each vehicle that is converted tax free for 12 months or two years?
The Minister of Transport (Captain Wallace): Will the hon. Gentleman forgive me? I do not know whether he has quite appreciated the fact that this Bill is founded upon a Ways and Means Resolution and that it is impossible for it to go outside the terms of that Resolution.
Mr. Smith: I thank the Minister for pointing that out, but, of course, that is one of the difficulties of the position in which we find ourselves.
Mr. James Griffiths: Do we gather from the Minister that if there was a disposition to grant a greater concession, such as suggested by my hon. Friend, we are precluded on the Second Reading of a Bill from putting forward a suggestion of that kind?
Mr. Speaker: I do not think it is out of order to suggest a reduction.
Mr. Smith: I do not claim to understand procedure to the extent of being able to debate these fine Parliamentary technicalities, but I understood that it was in order on the Second Reading of a Bill to make proposals of such a kind, based on the principles contained in the Bill. I see on both sides of the House hon. Members who are connected with the industry in various ways and who have been tolerant enough to listen to the evidence that I have tried to produce. I know that an important statement is going to be made about the problem of economic warfare, but this is one aspect of economic warfare, and I attach much importance to it. Unless the Government and Members on both sides take more drastic action with regard to this matter, it is no use making an appeal to the people where we come from, and those whom we represent, in regard to wages and other considerations, unless there is to be more ruthless organisation of the resources of this country than at the present time. But I want to keep within

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the limits of the Bill, and I want to tell the Minister that if he does not move on the lines that we are indicating, he will find himself in a considerable amount of trouble in the next 12 months.
As a result of putting Questions on the Order Paper I have had a number of letters from various people. I have made it my duty to meet these people in order thoroughly to understand the position. If what I have suggested is not in order, I hope that the Ways and Means Resolution will be withdrawn, so that the House will be able to consider the proposals that I have indicated. I hope also that the Minister will consider the insertion of a new Clause which would give confidence to commercial firms which are prepared to swing over from petrol to home-produced fuel. If a firm resolves to go from petrol and use producer-gas, it will be involved in an expenditure of some thousands of pounds, and such a firm is entitled to some consideration. It should have some confidence as to the future. I suggest that there ought to be a Clause to the effect that the Bill shall continue in operation for at least two years after the termination of the war.
Then I also want the Minister to consider the suggestion that between blackout times, that is, from morning until evening, in the case of motors using trailers the speed limit should be taken off. I know a number of companies which are going to use trailers, and that will mean that they will be subject to a speed limit of 20 miles an hour. That is most unfair to the people who are prepared to swing over from petrol to producer-gas. Since 1935 the taxation of vehicles using producer-gas has been halved in Germany, and from 1936 to 1939 a State subsidy of 500 marks was given in that country to every converted vehicle. In France there have been substantial concessions. In June, 1938, there was a decree that 10 per cent. of the vehicles belonging to any firm owning more than 10 vehicles must he operated on home-produced fuel, and in Italy all passenger vehicles have to be operated on home-produced fuel and the State bears two-thirds of the cost of conversion. I hope the Minister will consider what has been clone in other countries.
I am asking that more energetic action should he taken on this matter because it is vital to national economy and to the
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winning of the war. I feel compelled to say that the Ministry of Transport is not functioning at present as energetically as it should. In the industrial centres we still have appallingly long queues of people. The position is as bad now as when we raised the matter some months ago, and when hon. Members opposite said that we did right to raise the issue. I am not blaming the Minister of Transport or the Secretary for Mines when they demand that there should be the maximum economy in the use of petrol. I was in the Tank Corps during the war, and I know how tanks simply eat petrol. It is most essential, therefore, that we should economise, and I am prepared to back up the Ministry in every possible way in that direction. But having said that, I do not think we are being fair to transport companies. One important transport company writes:
"For the past few weeks we have been allowed only one-third of the fuel we require. We are afraid that the position is becoming hopeless. We have a depot full of goods awaiting transport."
Another company writes:
"Since writing to you, the fuel position has got much worse, and we are wondering what is going to happen to us. We are going into the matter of fuel for lorries, but at present it is not possible to obtain alternative fuel."
That is only typical of what is happening in industrial centres. I am convinced that the Minister of Transport and his officials are out of touch with the conditions in industrial centres, or they would not take the complacent view they do in regard to this question. Our convoy system on the seas is working efficiently, greatly to the credit of the Admiralty. It is working more efficiently than many people think, and when we consider that we have only been at war for four months and that our convoy system is working so efficiently, it is greatly to the credit of the Admiralty and all those who are connected with it. But it means a loss of at least 25 per cent. in efficiency, plus a loss through lower speed in the discharge of cargoes. It only shows the need for utilising the tonnage available to the best advantage, for a cargo saved means a ship available for other purposes. About 2,500,000 tons per year of imported oil could be replaced if the Minister of Transport and the Secretary for Mines were more determined and energetic in the proposals behind this Bill.

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We demand a complete mobilisation of the transport system of this country and that it should be run on home-produced fuel. There is going to be a great strain on the transport system in the next 12 months. Why have we not used our canals to a much greater extent? The answer given by the Secretary for Mines yesterday to a Question by the hon. Member for Ince (Mr. G. Macdonald) was to the effect that one of the most important factors in regard to short time in the mining industry was the difficulty of transport. What I am saying is that producer-gas engines could be easily placed upon the roads. Hon. Members who come from industrial centres know that the canals were built in the industrial revolution.
Mr. Speaker: I hardly think that this has much to do with the Bill.
Mr. Smith: What I am saying is that there are thousands of miners in this country on short time unnecessarily, and that home-produced fuel and producer-gas mechanism could be easily placed on the boats using the canals. The boats on the canals are not being used because the Minister of Transport is not making proper use of the proposals in this Bill. I ask that this Bill should be drastically altered in order that we can get the best out of the canal system of the country and in order that we can utilise the economic resources of the country to the best advantage in the prosecution of the war.
Mr. Speaker: The Bill deals with a particular kind of road transport, and we cannot raise the question of canals.
Mr. Smith: With great respect for your Ruling, Sir, I will not continue on that line. If the Minister was pursuing this matter of road transport in the energetic way in which the armed Forces of the Crown are pursuing their undertakings, we should be in a better position in regard to the transport system. There will be a great strain upon the railways, and if bombing to any great extent takes place, the Ministry of Transport will have a serious responsibility for the situation. Up to the present we have been immune from bombing in this country, but if bombing takes place on important railway arteries, it will mean that we shall want road transport immediately, and it is therefore most
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important that our road transport should be organised as efficiently as possible. I therefore ask for the Financial Resolution to be withdrawn and for the Committee stage to be postponed in order that the Minister of Transport and the Secretary for Mines may reconsider the matter and deal with it in the way that the country demands.
4.2 p.m.
Mr. Hiģģs: I seldom find myself so completely in agreement as I do on the present occasion with the hon. Member for Stoke (Mr. E. Smith), whom I congratulate on the greater portion of his speech. I have taken a considerable interest in this problem of gas fuel and producer-fuel for vehicles, and since I have been in the House of Commons I have spoken on the subject four or five times, I have written to Ministers at least six or seven times, and I have asked numerous questions. I have always had very polite replies from the Ministers, but I cannot claim to have influenced the introduction of this Bill. I suppose the Ministers have many similar requests, but when the present Minister of Transport came into office I asked him a question, in Committee, on this problem, and he was not then familiar with it, because he immediately referred to one of the officials, and I could see, by the replies that the official gave him, that the official mind was opposed to this Bill. I feel convinced that that has been the reason for this type of legislation not having been introduced earlier. When the present Prime Minister was Chancellor of the Exchequer, he was approached by the Chairman of the Birmingham Gas Department to institute legislation in order to permit the kind of vehicles with which this Bill deals to be run on advantageous lines. Unfortunately, the Prime Minister did not see the necessity for it at that time. Electric vehicles have had this concession for a considerable period, and there is quite a number of electric vehicles on the road, but they are not nearly so beneficial and useful for transport as gas-propelled vehicles would be. I have not so much hope in the use of steam. It has been tried many times and in many countries, and I do not think its future is great.
To turn to the Bill, there are two types of vehicles dealt with. There is the vehicle that carries containers in which the gas is compressed—generally coal

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gas—and there is the vehicle with a plant for producing gas, carried on a trailer. With regard to the container type, the Birmingham Gas Department has been doing experimental work on this type of vehicle for the last 10 years, and I am under the impression that that department has had considerable influence on this Bill being introduced into the House of Commons. There are some gas departments in the country that are defeatists and are opposed to this type of vehicle, which I consider has. a considerable future. We want the nation on top with regard to developments of this character. We well remember how the use of the red flag retarded the progress of road transport, and I consider that the legislation and the taxation that have been applied to heavy vehicles of this description have been responsible for retarding the progress and development of the gas-propelled vehicle.
To get the maximum effect from the Bill, the gas must not be rationed for this purpose and the gas must not be taxed for this purpose. I understand that when vehicles propelled by producer-gas are to be put on the roads, the ration of petrol is going to be reduced for any undertaker who uses these gas-propelled vehicles. If that is done, it will be very detrimental to the process, and I think the ration of petrol should remain what it is and that the gas-propelled vehicles should be allowed in addition. I do not claim that this type of vehicle will oust or substitute the petrol-driven vehicle, but it will be additional haulage if the Government encourage it by still giving the ration of petrol to which hauliers are already entitled. Vehicles with compressed gas have the gas compressed at something in the order of 3,000 lbs. per square inch, and I understand that one of the difficulties in the immediate future is that of obtaining cylinders to withstand that pressure. It may be one particular problem that will prevent compressed gas being used, but then we have the alternative form of the producer-gas, in which that problem does not arise. As the hon. Member for Stoke has said, these vehicles can be converted at a cost of £80 or £90 for a 20 horse-power car, and the total operating costs are then something less than with petrol at is. 6d. a gallon. There is a slight loss of engine power, but special engines have been developed by an important Midland firm for a 14
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horse-power car that will do 140 miles on one charge of compressed gas, and the extra cost is about £70.
The hon. Member for Stoke gave figures with regard to what other nations are doing, and I can confirm practically every figure that he gave, but I have a little additional information here with regard to Germany. I have a cutting out of a local paper of 29th December last, as follows:
"A new decree will be issued early in January requiring that all motor lorries shall be adapted for the use of gas fuel and not petrol. This transformation must be completed by the end of 1940. It is estimated that as early as the end of January 40,000 lorries will have been changed over to the use of gas. The change-over in the case of private cars is to be the subject of a special decree."
The town of Neath is very interested in this question owing to the anthracite industry there, and I have an extract from a little book issued by that town, as follows:
"In Rome last year a conference of delegates inspected a fleet of 130 omnibuses, and by the end of 1938 the Italians expect to have 2,500 buses of this type. In France about 5,500 gas-producer vehicles are in use, and one company alone is selling producers at the rate of about 250 a month. Out of every to commercial vehicles now produced in France, one must be gas-producer driven."
Those extracts deal with 1938, and I give them in order to show the House the importance of this Bill, the possibilities of the development of this type of vehicle, and how this country is lagging behind other nations of the world in this respect. I found that there were vehicles of this type running in South Africa two or three years ago. Our Government have now taken a step in the right direction, and, of course, it is up to the manufacturer to do his part. I believe that much progress will be made. I can understand critics of the Bill saying, Well, the only advantage that the user is getting is a few pounds saved on taxation." It should be remembered that in the case of a lot of people, when they buy a car the first question that they ask is not what the insurance or depreciation will be, but what the consumption and the costs of running and taxation will be. The taxation is the great point, because people look upon it as though they are paying something for nothing when they are paying taxation. That state of mind towards this vehicle exists, and I am convinced

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that with this reduction of taxation there will be a considerable advance in the quantity manufactured. As a matter of fact, there are practically no vehicles of this type running in this country to-day —five or six at the most.
With regard to what the hon. Member opposite said as to the importation of fuel, in 1938 we imported daily 50,000 tons of food, and in that same year we imported daily 30,000 tons of oil. If we could reduce that importation of oil by using vehicles of this description, surely it would be a great national asset. There is far more work being done on this problem throughout the world and by engineering concerns in this country than the man in the street realises, but a lot of people realise it and are very anxious indeed to get the article on the market. Several engines have now been developed that make it possible to run this type of vehicle at a cost equal to 7d. a gallon for petrol. That is referring to the producer kind of vehicle, generally fitted on a trailer. In many parts of the world oil is very expensive. Petrol evaporates very rapidly in hot climates, and there is quite an export market for this type of producer. Before the war Germany exported this type of vehicle, using producer-gas, to the Far East, and they were running them on ground nut oil and bean oil. They can be run on many fuels, whereas the petrol vehicle cannot, and I consider that after the war is over, if we develop this vehicle as I anticipate we shall develop it, it will be of considerable advantage to our export trade. We are wrong in continuing to operate all our road transport on imported petroleum, and I am indeed delighted that the Government have seen their way to introduce this Bill. I agree with the hon. Member opposite that the Bill does not go far enough and that probably further concessions will have to be given, but it is a step in the right direction, and I am very pleased to see that the Bill has been introduced.
4.15 p.m.
Mr. Pethick-Lawrence: I feel sure that right hon. Gentlemen on the Government Front Bench and hon. Members in all parts of the House will agree that my hon. Friend the Member for Stoke (Mr. Ellis Smith) made an interesting speech. My hon. Friend did not inform me beforehand that he was anxious to have
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a postponement of the Committee stage. If he had done so, perhaps we might have been able to arrange that before the Business of the House was settled; but I am sure the Patronage Secretary will not allow a technicality of that kind to stand in the way if there is some point of importance to be discussed. It is the usual procedure of the House to have an interval between the Second Reading and the Committee stage for the purpose of giving hon. Members an opportunity, if they think fit, to put down Amendments for the consideration of Ministers and the House, and if those Amendments prove to be good, we adopt them. The only reason this procedure was not followed in the case of some recent legislation was that a great deal of that legislation was of an agreed character, and it did not seem to hon. Members on either side that it was necessary to have a long delay between the Second Reading and the Committee stage.
I should like to suggest to the Minister and the Patronage Secretary that this matter of a postponement might be discussed through the usual channels. During the interval, no doubt my hon. Friend the Member for Stoke would formulate his Amendments, and then we could see whether they could be fitted into the structure of the Bill. Those Amendments would, of course, have to be in line with the general scope of the Bill, but apart from that, there is no rigid yardstick with which they would have to conform; and if my hon. Friend's Amendments contained proposals which would be of benefit to this very important industry, and if the Government and the House found that it was suitable to insert those Amendments in the Bill, that could be done. Therefore, I hope the Patronage Secretary will give consideration to the suggestion that a postponement of the Committee stage should be discussed through the usual channels.
Mr. E. Smith: I would not like it to be thought that in this matter I have not played the game. I did not know that it was proposed to take the Committee stage to-morrow until the Prime Minister made his statement on the Business. That is the explanation of the position.
4.18 p.m.
The Parliamentary Secretary to the Treasury (Captain Margesson): I see no reason why the Government should not

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accede to the request that the Committee stage of this Bill should be postponed from to-morrow to an early day next week. Like the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence), I had no idea that there was any objection to taking the Committee stage to-morrow. From the Debate on the Ways and Means Resolution, I thought that the House as a whole was anxious that the Bill should be passed as quickly as possible. All the speeches that were made then, including the speech of the hon. Member for Stoke (Mr. Ellis Smith), were in favour of the Resolution, and consequently, the Government felt that we might as well get to the Committee stage as quickly as possible. In view of what has been said, however, I think that obviously it would be convenient to put off the Committee stage until early next week.
4.19 P.m.
Sir Stanley Reed: I should like to say a few words in support of three principles which have been stated by hon. Members. First, the hon. Member for Aberdare (Mr. George Hall) urged the Minister of Mines not to relax in his anxiety to produce alternative fuels to the fuels now available. We know from experience that when there is a limited supply of any commodity and a fresh demand suddenly springs up, the price is apt to go up disproportionately. Those who come from mining districts know that not so very long ago part of the product of the anthracite mines—anthracite grit—was virtually going to waste, but that as a result of the discovery of a new method of using this anthracite grit, this product is now being sold at £3 or £4 a ton. Secondly, with all deference to my hon. Friend the Member for West Birmingham (Mr. Higgs), I hope the Minister will accept the suggestion of the hon. Member for Aberdare, and not turn a cold shoulder to the steam engine. If there were more steam engines on the roads to-day, that would be a solution of some of the problems, the losses and the disabilities, that arise in all parts of the country owing to a lack of adequate road transport as a result of petrol rationing.
It seems to me that the basic point was raised by the hon. Member for Stoke (Mr. Ellis Smith). I think that the principle which the hon. Member adumbrated was absolutely unanswerable—namely, that this Bill should do something more than
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remove a disability, and that it should give an incentive—that it should guarantee—to those who will turn from petrol to producer-gas, either in the form of a direct financial inducement or in the form of a long-term assurance, that the Bill will operate long enough to cover the whole capital cost which the conversion of the lorries entails. How that could be done is a matter for consideration, but I hope that in all parts of the House there will be support for the principle which the hon. Member put with such clarity. I was for many years engaged on work in connection with transport. I know how fatally easy it is to concentrate on the simple method of using petrol and petroleum products for transportation purposes. With the perfection of the petrol vehicle, and even more the engine using Diesel oil, there is every inducement to use oils everywhere available, and not to embark on any form of experimentation. I hope that whatever Amendments may be framed, they will embody the principle that the Bill should not only remove a disability, but give a direct and definite inducement to road transport operators to swing over to producer-gas. If this were done, it would relieve the demand for petrol, and so conserve our shipping resources and what is equally important, our command of foreign exchange.
Mr. E. Smith: I should like to thank the Patronage Secretary and the Minister for the course which they have taken.
Question, "That the Bill be now read a Second time," put, and agreed to.
Bill read a Second time.
Bill committed to a Committee of the whole House for To-morrow.—[Captain Margesson.]

PUBLIC PETITIONS.
Ordered,
"That a Select Committee be appointed to whom shall be referred all Petitions presented to the House, with the exception of such as relate to Private Bills, and that such Committee do classify and prepare abstracts of the same in such form and manner as shall appear to them best suited to convey to the House all requisite information respecting their contents, and do report the same from time to time to the House; and that the reports of the Committee do set forth, in respect of each Petition, the number of signatures which are accompanied by addresses, and which are written on sheets headed in every case by the prayer of the Petition, provided that on every sheet after the first the prayer may be

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reproduced in print or by other mechanical process; and that such Committee have power to direct the printing in extenso of such Petitions, or of such parts of Petitions as shall appear to require it; and that such Committee have power to report their opinion and observations thereupon to the House:
Committee nominated of Lieut.-Colonel Acland-Troyte, Mr. Batey, Mr. Beech-man, Sir Edward Campbell, Mr. Chater, Sir Reginald Clarry, Mr. Daggar, Captain Alan Graham, Captain Hambro, Sir Percy Hurd, Brigadier-General Sir Ernest Makins, Mr. Wilfrid Roberts, Mr. Marcus Samuel, Sir Annesley Somerville, and Mr. Viant.
Ordered,
"That the Committee have power to send for persons, papers, and records."
Ordered,
"That three be the quorum."—[Captain Margesson.]

ECONOMIC WARFARE.
Motion made, and Question proposed, "That this House do now adjourn."—[Captain Margesson.]
4.24 p.m.
The Minister of Economic Warfare (Mr. Cross): I feel that my main task to-day should be to give the House an account of the development of the economic campaign which we are waging against Germany, to tell the House something of the machinery that has been built up and which we hope to extend, and, finally, to give some indication of the effects of our campaign on the enemy; but before I come to these matters, it seems to me best to attempt some brief essay in what is meant by economic warfare. To my mind, economic warfare aims at attacking the industrial, financial, and economic structure of the enemy, and thus so to cripple and enfeeble his armed forces that they can no longer effectively carry on war. Economic warfare is therefore as old as war itself. It dates from the first siege. But with the passing of time it has become infinitely more complicated. Obviously the mediaeval archer did not have to go very far to get the wood for his bows and feathers for his arrows, and contraband controls would have meant very little to him. But modern warfare requires equipment and materials some of which have to be fetched from the ends of the earth. The object of our attack is, therefore, in some respects larger and
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more vulnerable than ever it has been before. On the other hand, there is a new human factor. We are fighting a country in which the whole people have been moulded and hammered into one vast economic and military machine, and that country has at its disposal the economic organisation which has long been in preparation against the day of war. That fact, in my view, makes Germany technically stronger than in 1914–1918, but it also makes her more brittle than she ever has been before. If that conclusion is the right one, then it means that the course of economic events in Germany will take a different form from those of 1914–1918.
Profiting from the lessons of that war, the Ministry of Economic Warfare was set up on the very day war broke out and began to function forthwith. Profiting also from the lessons of the last war, we started our work in close co-operation with our French allies. We have been strengthened from the earliest days of the war by the presence in London of a permanent French Mission of Economic Warfare. The French Mission has shared in all our activities, and I have had the further advantage of an opportunity of personal discussions with the French Ministre du Blocus, Monsieur Georges Perrot, both on the occasion of his visit to London, and on the occasion when I had discussions with him in Paris. I am glad to be able to assure the House that in the sphere of economic warfare our Anglo-French relations are of the happiest; indeed, I feel that I could not easily exaggerate the cordiality and good understanding which exist. Let me add further that, after four and a half months' experience, we value the contribution which our French allies are making to our work here, and I am glad to have this opportunity of acknowledging publicly the clear-sighted and vigorous way they are pursuing their economic war effort.
I need hardly add that we have also ensured the closest co-operation with the Governments of the Dominions, with the Government of India, and with the Colonies. At the beginning of November I had the advantage of meeting the Dominion and Indian Ministers then in London, when we were able to discuss both major questions of policy and the machinery for carrying out that policy in the Dominions and India. The main

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methods of co-operation are our arrangements for carrying out the law about trading with the enemy and enemy exports, for the exchange of economic intelligence, and for the control of exports. This last item, the control of exports, is clearly the most important of them all. Export licensing systems exist throughout the Dominions, in India, and in the Colonies. Every effort is made to render this control as comprehensive as possible. The Empire, I may say, is participating as a whole in the economic war, and we are deeply grateful for the co-operation of the Dominions and Indian Governments and of the Colonial Administrations.
Now let me turn to the position which confronts us in the economic war to-day. Our problem is different from the problem which confronted us in the last war, and is immeasurably more complicated. In the war of 1914 to 1918 nearly all the countries of Europe were, sooner or later, engaged in the fight. There were, consequently, comparatively few gaps in the enemy's frontier through which it was possible for supplies to reach him. But to-day there is only the French frontier that is closed. The rest of Germany's neighbours are neutral and Germany's possible channels of supply are, therefore, enormously increased. The problem is not only different but is also more extensive, and the difficulties which have to be overcome are multiplied. The facts of the position which I have thus briefly described have caused us to adopt what is almost a new technique, or something in the nature of a new system, in framing our campaign.
In describing it, I will begin with the method of economic war which is best known and which is also our ultimate sanction. That is the contraband control. On the outbreak of war, a number of contraband control bases were set up and more have since been added. At these bases shipping, whether Allied or neutral, is searched for contraband, suspected of being destined for the enemy. Thanks to our naval supremacy, very few ships succeed in evading our controls. Contraband control was easy in the first two or three weeks of the war because at that time cargoes had already been despatched from overseas and were openly consigned to Germany. That, of course, has now come to an end. Then we entered on the next phase, in which Germany planned for goods to be sent to
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neutral persons or firms who, in their turn, sent them on to Germany, and although many neutral countries have systems of export licences, there remain cunning dodges whereby the neutral trader may seek to circumvent the regulations of his own Government. In order to cope with these devices, we require, and, indeed, we have, a world-wide service of information. We require also in my Department officers of the right ability to examine and to piece together this information and thus produce the evidence on which goods may be seized.
It will be readily recognised by the House that there are tremendous difficulties in determining which goods should be detained as suspect of being destined for the enemy and which are the harmless requirements of neutral trade which should not be unduly embarrassed or delayed. That task involves the employment of a large staff. It requires high ability on the part of the administrative officers. The construction of this machinery, which is still growing, is a part of the enormous task which has rested on the shoulders of the senior officers of my Department in constructing a brand-new Ministry of whom the overwhelming majority—I think over 85 per cent.—are volunteers. These volunteers—bankers, professors of economics, commercial solicitors, business men, scientists and technicians—between them dispose of a remarkable body of expert knowledge, and I want to take this opportunity of acknowledging publicly the admirable spirit and the untiring efforts of these men in coping with new and often difficult and delicate problems.
I was speaking of preventing goods from reaching the enemy by passing through neutral countries. It goes without saying, and yet perhaps it must be said, that our campaign is not aimed against neutrals and that we use every endeavour to smooth the path of neutral trade, subject always to the overriding consideration, which is our need to exercise our belligerent rights to the full. There is, I think, a prevailing conception of our economic war as being a sort of wall of naval patrols from Norway to the Orkney and Shetland Islands and across the English Channel, that wall having its counterpart in the contraband control bases at the entrance to the Mediterranean. While the Navy is the foundation of these branches of economic

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war, that picture is, in some respects, an unfortunate and misleading one. It suggests that the neutral States, as well as Germany, are inside the wall and not outside it, with complete freedom of access to the world at large. I want to say most formally that in no sense is it our desire to build a wall against any neutral State. We are anxious to put nothing in the way of the freedom of neutrals to import whatever materials they need from overseas for their own legitimate consumption. What we do seek to attain is that while such goods may penetrate as far as the German frontier, they shall not pass over it. We seek, therefore, to put our barrier round German occupied territory.
The more we can succeed in shifting this barrier from the sea approaches to the Continent to the actual German frontier, provided always that the efficiency of our control is in no wise relaxed, the fewer will be the delays to neutral shipping and the greater the convenience to bona fide neutral trade. In order to attain this end, we have had to evolve, and we are in the course of perfecting, a technique which goes far beyond anything that was seen in the last war. One instrument of which we are making use is the system of navicerts—a form of commercial passports. This system was used up to a point in the latter part of the last war, but this time we have already introduced it for exports from the United States, from the Argentine, from Brazil, and from Uruguay to some 19 European countries of destination. We are considering the further extension of the system. It enables advance information regarding cargoes from oversea to be examined by my Department before the cargoes are shipped, and in this way we greatly reduce delays to shipping at the control bases. It is a purely voluntary system, but, I am glad to say, we find that it is being warmly welcomed and taken up by traders and shippers. Over 11,000 applications for navicerts have already been received since the system was first instituted on 1st December, and applications are coming forward now at the rate of about 500 a day.
Another means of reconciling our con" traband control with the needs of neutrals is in negotiating war trade agreements. Not only is it the desire of the Government to keep up normal trade with
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neutrals as far as war-time circumstances permit, but there are also many points at which our rights as a belligerent and the rights of neutrals touch upon one another. It is part of our task to harmonise those rights as far as we possibly can. I say, frankly, that for our part, subject always to our main purpose, we have every desire to facilitate in every way the passage through our control of the regular flow of goods and materials required for legitimate neutral trade and consumption. It is in this spirit that we are carrying on our various negotiations. War-trade agreements are not an invention of the present war. The technique was highly developed between 1914 and 1918. But such agreements then were few; they were often far from comprehensive, and only in the final stages of the war did they begin to play an important part. To-day, I can say that we have completed or are conducting negotiations of different kinds with 14 Governments, and, while I must be reticent when it comes to detail, I can instance the agreement signed with Sweden, the conclusion of negotiations with Belgium and Iceland, and the active conduct of discussions with Norway, Denmark and Holland.
To turn for a moment to a different area, special problems have to be faced in the Mediterranean, where there are obvious difficulties in operating a system of contraband control so far away from home. Owing to these difficulties, neutral shipping in the Mediterranean has, on the one hand, sometimes been exposed to inconveniences not felt in the same degree by shipping passing the United Kingdom, while, on the other hand, it has not always been possible to maintain in the Mediterranean the same effective control as exists in home waters. It is in a spirit of good will that we and the neutral Governments concerned are endeavouring to solve these problems. In this connection I would particularly like to mention the Anglo-Italian Commission which has been set up in Rome and which is empowered to discuss all commercial matters affecting the two countries arising out of the war.
The House will observe that a consequence of the system of navicerts and of war-trade agreements is that fewer goods are detained at our contraband control bases, and a diminution therefore in the figure of goods detained may be, at least in part, a reflection of the operation of

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this control machinery. We have however not only to stop contraband imports from reaching Germany. We have also, as a result of the Reprisals Order-in-Council, to stop Germany from obtaining resources abroad by means of her exports. Much of the machinery which I have outlined is paralleled by the machinery devised for enforcing the detention of German exports. Here again we have the power to act because our Navy commands the seas, and the Allied contraband control bases serve also as examination points for outward bound shipping. Within my Department the Enemy Exports Committee takes the place of the Contraband Committee, and our consuls abroad issue certificates of neutral origin and interest in the place of navicerts.
But there is this broad difference. Germany is seriously deficient in certain vitally important commodities and, whatever the risk, must endeavour to run consignments through our contraband control. Neutral importers overseas have, however, little or, I think I may say, no inducement to order German products, once they know that they are liable to detention. The mere decision, therefore, to detain German exports is thus, in itself, sufficient to cut off the overwhelming bulk of Germany's exports overseas. The result is that the quantity of goods which are admitted after examination is, and is likely to remain, very small. At the same time I have no doubt—indeed, I know—that the Germans are developing devices to be adopted by their traders in order to camouflage their goods, and I give them fair warning that the necessary steps are being taken to check that practice.
I have described our campaign against Germany's sea-borne imports and exports. There remains another and very important field of economic warfare, namely, the markets and sources of supply to which Germany still has access by land. German propaganda is fond of declaring that our contraband control can have no effect because Germany can import all she requires from contiguous countries. That statement, like many another German statement, is something which is very much less than the truth. In the first place, there are many extremely important commodities which can only be obtained from overseas, and, in the second place, there are other equally important commodities which Germany can-
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not obtain in Europe in quantities which are sufficient for her requirements. There does remain, over and above that, a very important field of economic war activity. It is a field, which from our point of view, consists very largely of highly competitive sales and purchases in certain neutral countries.
I will not go into the sales, or British export, side of the problem. It is primarily a matter for the Board of Trade, and it was fully dealt with by the Secretary of State for War, when he was President of the Board of Trade, in a speech last month. My Department is concerned with purchases, or, to define our functions more accurately, is concerned with preventing Germany from obtaining essential supplies. This aspect of the economic war, the vital importance of which has been realised in my Department, has been the subject of our work from the very start of the war. We started in this country under a severe handicap. For years past Germany has been conducting her foreign trade, particularly in the Danubian countries, not as an ordinary trader in a free country, but by elaborate clearing and barter organisations which had the effect of giving her a substantial hold over the foreign trade of a number of smaller countries. Germany, moreover, was operating in her natural market, and she had welded her commercial, industrial, and military-political power into an effective instrument of economic warfare, and had been waging such a war against some of her smaller neighbours for some years past.
To attack this enemy position requires new departures in a country which lives under a free economy. We had, it is true, modified our normal system to the extent that in war time the purchase of many commodities was already centred in the Ministries of Food and Supply. On the other hand, the first purpose of those Ministries is to provide for the needs of the community on a commercial basis, and the kind of purchasing with which I am concerned often means paying higher prices than need be paid for the same goods elsewhere. Consequently, it is necessary for the Treasury to come in and foot the bill for the difference in price. Other Departments are obviously also concerned. One of the first things, therefore, to be done was to co-ordinate the Government Departments concerned in order to

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be able to get rapid decision and rapid action. To this end, two Committees have been set up. One is a Committee of Ministers, of which I am Chairman, to decide matters of policy. The other is a Committee of senior officials under Sir Frederick Leith Ross, Director-General of the Ministry of Economic Warfare, which provides for executive action. I know that Committees tend to be regarded as a joke, with what justice I will not pretend to say, but I can assure the House that these Committees have really cut out the delays normally involved in
inter-departmental consideration and correspondence. They have enabled questions to be discussed personally and decisions to be taken rapidly. Especially, in view of suspicions that have appeared here and there, I should like to pay a tribute to the cooperation of my right hon. Friend the Chancellor of the Exchequer The Treasury have never failed on a single occasion to give a prompt and generous decision when my Department have asked them to shoulder a risk, or bear a loss, on a purchase designed to rob the enemy of vital goods.
The House will not expect me to give details of the purchases which have been made in the field of economic warfare. Hon. Members will doubtless make their own guesses as to the nature of goods which we are trying to pre-empt, and some of them would be, I dare say, fairly easy to guess. But I do not intend to give the Germans handles for blackmail and bullying of neutral traders and Governments, nor, indeed, to give the vendors direct incentives to raise their prices against us. I am afraid that even to give the House total figures of the purchases, or contracts, we have made for this purpose would be merely misleading. For it may be possible by spending £100,000 to buy up the whole supply available to Germany of a key material; while we may, quite justifiably, buy goods worth a million pounds in another case merely in order to tighten Germany's industrial belt. The effect upon the enemy is not to be measured by the amount of money we spend. I can only say that very considerable purchases have been made. We have bought goods in countries where we have never bought them before. We have made forward contracts for the national
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production of commodities, contracts that would make a sober business man in peace time shudder. We have concluded barter transactions. Our agents have ransacked countries to find the last ounce of a vital commodity, and have bought it. Where we have not bought enough to endanger Germany's supplies, our purchases have often made the German supplies a great deal more expensive. In this respect we have been aided in a number of countries by what I might call the intelligent anticipation of the sellers of goods. The mere expectation of a strong market has often meant that German buyers have found themselves confronted with scarcity and high prices. If the German complaints are any true guide, our policy has been very effective.
There is yet one other aspect of our activity about which I want to say a few words. To obtain the supplies she needs from abroad, Germany must either export or borrow, or else must utilise whatever liquid assets she may already have or may build up abroad. It is, therefore, a further task of my Ministry to prevent, as far as possible, the effective use by Germany of existing assets, and to use all legitimate means to prevent their increase. I can give the assurance that this aspect of our work has received the fullest practical attention since the beginning of the war. I can also assure the House that every step has been taken to make certain that our financial resources are not unwittingly, or indirectly, used to the benefit of the enemy.
Let me summarise the economic warfare activities which I have described. On the American continent we have a voluntary development of the navicert system, and hundreds of applications are pouring daily into London. It is a new development which we hope to see grow. On the other side, in Germany, we are anxious to stop the export of goods. In the important centres of most of the neutral countries of Europe there are the expanding consular staffs examining great numbers of applications for certificates of origin and interest, and issuing certificates. That machinery is new and is already effective. As time goes on, and with the greater experience, it will become unquestionably more effective. Then we come to the war-time arrangements that we seek at the present time with 14 countries. Every one of these negotiations involves an exhaustive examination of the

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seaborne imports of that country, and much more beside. In the background there is always our contraband control system—our ultimate sanction. It continues to be the subject of development and improvement. There is also the whole machinery that leads up to the prize court. The task then is to supervise, in detail, and to some extent to control, the world's exports to Europe, and Europe's exports to the rest of the world. It is a very big business, and, as a separate subject, quite apart from that, there is the business of pre-emption, about which I have been talking, and the negotiations and deals carried through in a number of countries by other Departments concerned.
That is a sketch of our economic warfare development. The House will agree that a brand-new Department has not been idle. I have already spoken of their enthusiasm, imagination, and vigour. They work a very long day, and a seven-day week. A great deal has been built up, and we have now reached a point at which we can see clearly much that remains to be done.
Before I sit down, there is one other question with which I should like to try and deal. What effect is our economic warfare having upon Germany? There are encouraging signs. Our economic attack has come into operation with a rapidity and a suddenness that there is some evidence was not anticipated and which has given the German economy a sharp shock. There was no opportunity on this occasion for filling up deficiencies in the opening weeks of the war. At the end of 4½ months of war, we find Germany in something like the same economic straits as she was in after two years of the last war.
We have a good start, but tougher and slower problems lie ahead. We must bear in mind that Germany has not the same reserves as she had 25 years ago. Her resources in gold and foreign currency are smaller, and her stocks of industrial raw materials are far smaller. The conditions of life are strained. Rationing already extends to clothing and soap, and the inhabitants of Berlin are shivering for the lack of coal which is being used to provide the raw material for synthetic petrol, for synthetic rubber, and is being forced into export markets. There are signs of an abnormal desire to convert currency into goods from fear of future inflation. For example, there
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has been a rush to buy quantities of such unusual goods as zinc baths, because they are not rationed. A black market for food is growing up for those who can afford to pay.
Let me give the House this contrast: A neutral sent a cake to a German family for Christmas this year. A warm letter of thanks came back, in which the German said his family wondered when they would ever see another. On the other hand, sufficient crayfish are being imported by aeroplane from the Danubian countries to provide a standing delicacy on the table of the party leaders.
But whilst in this sphere there are definite indications of human strain, it is in the industrial sphere that we find Germany's real economic vitals. Germany's difficulties are serious in regard to her supplies of certain materials. Shortages are apparent in petroleum, copper, iron, cotton, wool, oils and fats, and in many other commodities. The requirements of the export trade are very naturally given priority over the home market, since without any export trade Germany would blockade herself. It is this field, therefore, which is the best test of Germany's industrial discomfort. For example, Germany is exporting cars and bicycles without tyres. For some considerable time past Germany has been refusing to export manufactured goods containing copper, tin, and other nonferrous metals, unless she first obtains the raw materials from the prospective purchasers.
We have reports, too, that an important steel works may have to suspend operations shortly through lack of raw materials, and there are definite refusals to supply for export purposes highspeed nickel steel, stainless steel, and so on. Many factories making rubber manufactures in Austria have had to close down through lack of raw materials and others are working a long way below capacity. Even when basic raw materials are available there is frequently shortage of accessories. Thus, furniture factories have been unable to deliver for export to Holland because of a lack of screws, upholstering and stuffing materials, etc. As practically all Germany's supplies of raw cotton and 85 per cent. of her supplies of new wool are obtained normally from overseas, it is not surprising that the textile situation is acute and that rationing has had to be introduced

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for clothing of all kinds. I have here a ration card for clothing of the type issued for men in Czecho-Slovakia. It is quite an interesting system and works like a parlour game. There are 100 coupons which can be detached and have to last for a year. You give up 60 coupons for one suit. You give up two coupons for a man's handkerchief, so for a mackintosh, 20 or 30 for a shirt, and so on. It becomes pretty clear that at the end of the year you will not be able to obtain a great deal of clothing by means of this ration card. Even so, there is a number of articles, such as overcoats, bed and table linen, etc., which can only be obtained on the production of a licence.
There is one final question to which I ought to give a brief answer. That is, Is our contraband control really effective? The Germans are naturally fertile in devices for evasion, but our net is, I am sure, drawn very tightly. After four and a half months of war I think we can fairly claim that there are no important leakages through the control and that virtually the whole of Germany's imports which can be assailed by this weapon have been effectively stopped. We look forward to the day when we shall so have strangled Germany's economic life that it can no longer sustain her war efforts. We believe that we can bring very much nearer the day of victory, and in doing so we shall have played a great part in saving the lives of our own people.
5.3 P.m.
Mr. Dalton: I am sure the House will have listened with great interest to the statement of the Minister of Economic Warfare. He has delayed his first statement for more than four months, but of that I make no complaint, because he has had a fuller story to tell to-day. It may also be that in the course of these four months obstacles and difficulties have been overcome so that he is in a better position than he would have been earlier to answer certain criticisms that have been addressed, in the Press and elsewhere, to his Department. I was glad to hear what he said about the close co-operation taking place between himself and his French opposite number and the corresponding Ministers in the Dominions. A few weeks ago I heard a French high authority, whom I will not name, praising very highly, not, indeed, everything
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British, but the information and intelligence department at the Ministry of Economic Warfare. He said that they seemed to know all over the world where every ship was and what was in it. So that part, at any rate of the Ministry's work seems well established.
I want to offer a few observations, some of which will be somewhat critical, not merely on what the hon. Gentleman has said, but on some matters which he has not particularly touched upon. Broadly speaking, as he told us, the work of his Department divides itself into blockade and pre-emption. So far as blockade and the work of the contraband control are concerned, I doubt whether serious criticism can be levelled against it. He referred to navicerts, and I was glad to notice that he pronounced it "navycerts" and not, as the B.B.C. pronounce it, "navvi-certs." The hon. Gentleman's pronunciation is the more natural one, and I hope Mr. Ogilvie will take notice. The system of navicerts appears to be working well. It is very satisfactory that the United States have accepted it with such good will. If the greatest of the neutrals can accept this system of control and co-operation, there seems no reason why any other neutral should regard it as derogatory or infringing upon its sovereignty or its dignity to follow the American example.
With regard to the war-trade agreements with the neutrals, I assume that the hon. Gentleman would agree with me that they should all provide that no commodity should go into a neutral country in greater quantities than it did before the war. If it can be agreed that it shall go in in lesser quantities, all the better, but it should at least be one of the foundations of these agreements that no neutral country should to-day import any greater quantity of any commodity than it did before the war, because if there were any excess of that kind, there would be a presumption that it was passing into Germany. If the hon. Gentleman accepts that proposition, I would ask him whether he is satisfied that there is not to-day going into any of the neutral countries adjacent to Germany increased quantities of commodities having a use for war as compared with the pre-war position. The House should be given an assurance of that kind, because otherwise these war-trade agreements are not being constructed on the right basis.

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I will offer one example only. Others may perhaps be raised by other hon. Members in the discussion. Information has been published, which I hope can be denied, that in Holland and the Scandinavian countries there are greatly increased imports of soya beans compared with the pre-war level. I am told there is an increase of several hundred per cent. into Holland and the Scandinavian countries. But their needs and tastes cannot have developed to the extent that they should want themselves to make use of this greatly increasd quantity of soya beans. If that be true, the only deduction can be that it is going into Germany, where it would be very useful. I hope that the war-trade agreements with these countries will provide for a cutting down of any such excess to at least the prewar level of importation.
I turn to consider the question of preemption. In some respects this is the most important of all the matters with which the Minister dealt. It may well be that in contraband control a position of efficiency has been reached, but there is a good deal of concern in various circles in the country with regard to pre-emption. It is feared that we have been very slow to start along this road and that even now we are not doing as much as we could to buy away from Germany goods which contribute to her war effort. That fear particularly applies to South-East Europe. The hon. Gentleman paid a tribute, so warm as to be notable, to the Chancellor of the Exchequer for his kindly assistance in this branch of our war efforts. I feel that the hon. Gentleman did protest almost too much. He said that he always got a very quick decision from the Chancellor. He did not say that they were the decisions he always wanted.
Mr. Cross: They were not refusals.
Mr. Dalton: That seems almost too good to be credible. It surely cannot be untrue that in the early stages of the war there was a great inability at the Treasury to realise the importance of pre-emption. If the hon. Gentleman later on chooses to give us further information to suggest that the Treasury have never been a stumbling block, the House will he interested. One hears in many circles and from many different sources of information that the Treasury has, at any
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rate until quite recently, been postponing decisions on important cases of preemption, and in certain cases, if not refusing, at any rate delaying, qualifying, and obstructing the decisions desired by the hon. Gentleman and his officials. There has been so much talk of this kind that we should like a little more detail in denial of it, if the hon. Gentleman can give it.
I am not going to ask too much about Rumanian oil, but it has astonished many well-placed people that there has been so long a delay over the effective purchase by us of all the available Rumanian oil supplies. I do not know whether the hon. Gentleman is prepared to give the Minister of Supply as warm a testimonial as he gave to the Chancellor, but it has been widely reported that in the early stages of the war the Minister of Supply, in buying oil for the Forces, thought it cheaper and easier to buy from American countries, which are well out of German reach, than to buy it from Rumania, and that it took a great effort to interest him in Rumanian oil. I think the hon. Gentleman is not doing himself credit if he tells us that he has reached the point of efficiency of which his Department can now boast without having had considerable tussles with a number of his colleagues. I believe that he has had great difficulty in carrying some of his colleagues even to the point where he has got them now.
I hope that we have now effective buying agencies in the countries of South-East Europe. It is notorious that in the early stages of the war we were completely outdistanced by Germany, who had buying agents going round all the little villages of Yugoslavia and other countries. They used to sweep up every pig and every other saleable thing they wanted, whereas in this country there was hardly a business man who had had the enterprise to trade in those areas. At the beginning, therefore, we were at a disadvantage, but I hope that it has now been largely overtaken. Much apprehension is expressed that Germany is still getting the major part of the Yugoslavian metal production, which is very considerable, including bauxite, for war purposes. Without pressing for too much detail, I hope we can be assured that we are now exercising a pull upon the mineral resources of that part of the world as well as of the northern part of Europe.

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In the South-East it has been necessary, no doubt, to make new trade contacts, but I trust the Minister is regarding it as part of the duty of his Department to step in and fill gaps which private enterprise in the past has left unfilled.
Tobacco was not mentioned by the Minister. It is not directly a war product, and therefore a little less reticence can be displayed, and I hope the Minister will be able to answer more specifically the questions I wish to ask about it. There has been a great deal of discussion in the Press about the Turkish, Grecian, and Bulgarian tobacco crops and the possibility of a considerable portion of them being bought by us. There has also been correspondence in the Press regarding the reluctance of the tobacco magnates in this country, the Imperial Tobacco Company and the British-American Tobacco Company, to blend even a small proportion of Balkan or Turkish tobacco with the tobacco which they habitually get from America. There has been a correspondence in the "Times" and other papers, which no doubt the hon. Gentleman has noticed. I hope he will appreciate that it may be necessary to give orders to Lord Dulverton and Sir Hugo Cunliffe-Owen, if their patriotism does not lead them to do it of their own free will, to secure that they will aid our war effort by economising their demand for dollars. It is very desirable to reduce our demand for dollars at present. They should realise that more important things than tobacco have now to be brought across the Atlantic from the United States, and that they should do their part by blending Turkish or Balkan tobacco with the tobacco they at present sell.
I do not suggest anything so drastic as completely substituting Turkish tobacco for American. Personally, I prefer Turkish to Virginian cigarettes, but I am advised that you can blend up to 5 or 6 per cent. of Balkan or Turkish tobacco with Virginian without the ordinary smoker noticing the difference. If Lord Dulverton and Sir Hugo Cunliffe-Owen will not do it by themselves, let the hon. Gentleman take steps to give them orders. There has been some rather displeasing correspondence on the subject in the "Times." In reply to criticisms, Lord Dulverton wrote a self-satisfied letter which did not make a very good impression. I should like specific answers from
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the hon. Gentleman on this question of tobacco.
Here it is not so much a matter of buying tobacco away from Germany, though that may have a slight importance, but of giving support and economic and financial assistance to the Greeks and Bulgarians and to our gallant friends the Turks. After the terrible disaster they have just suffered, it will be all the more fitting if such a gesture can be made by way of a further purchase of their tobacco. And after all, we have guaranteed Greece against aggression. I propose only a comparatively small purchase by us of the tobaccos of those regions—small, that is, in proportion to our total consumption and so small that, if our tobacco magnates used their brains and their technical skill, they could easily blend it into their products without diminishing their very large profits. If that were done, we should be able to give very great assistance to those three Balkan countries which it is most important we should encourage and assist, countries which in the past used to depend greatly upon the German market, now increasingly closed to them.
I pass from that to the question of the work of the hon. Gentleman's Department in relation to other Departments. My hon. and right hon. Friends have frequently expressed the view that one of the weaknesses in the conduct of the war at present is the lack of one supreme co-ordinating Minister for economic affairs. In spite of the glowing tribute paid to the Chancellor of the Exchequer this afternoon, to which I have already referred, we are not satisfied that in a War Cabinet in which there are four Ministers concerned with the conduct of the war in a military sense—the Minister for the Co-ordination of Defence, the First Lord of the Admiralty, the Secretary of State for War, and the Secretary of State for Air—it is sufficient to have merely the Chancellor of the Exchequer representing economic interests. It appears to me very paradoxical that the Minister of Economic Warfare is excluded from a Cabinet in which four Ministers are present to repr— sent the naval, air, and land forces. Therefore, not for the first time—nor, I can tell the Prime Minister, will it be for the last time—we on this side of the House emphasise that we shall not have maximum efficiency in the conduct of this war until we give to economic warfare,

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and to our economic activities generally, a more substantial place in the War Cabinet than at present.
The hon. Gentleman disclaimed any concern with the promotion of British exports. Departmentally he was, no doubt, right. He said, "It is not my business to push British exports; it is the business of the President of the Board of Trade." That may be departmentally true, but is it not desirable that there should be some Minister sitting, as it were, above the departmental activities of the hon. Gentleman, the President of the Board of Trade, the Minister of Shipping, and other Ministers with economic functions, and exercising from the top a general co-ordinating function? How often I wonder does the hon. Gentleman discuss with the President of the Board of Trade border-line problems between his functions and those of the President? He told us of two committees. I am not going to laugh at committees, as he said so many people always do. I am only going to say that I hope they are succeeding in their functions. I am glad that he is the chairman of one committee, and I hope that he gets his way when the Treasury representative argues with him. But the kind of committees he indicated are not really a substitute for what we have in mind. He has a committee, over which he presides, which I gather is also attended by the under-secretaries from a number of other Departments. They discuss various matters, but the hon. Gentleman then has to discuss them again somewhere outside, in some other room in some other building, with the Chancellor of the Exchequer if it is a question of money or with the President of the Board of Trade if it is a matter relating to exports. Although we welcome the statement that this committee is getting on with the job, we do not feel that that in itself is sufficient.
I will not speak this afternoon about any matters which do not fall within the hon. Gentleman's Department, but, unless the Prime Minister changes his attitude in the matter, we shall have to ask again at some early date for an opportunity to discuss a number of the larger questions affecting the economic conduct of the war. So far as the work of the hon. Gentleman's Department is concerned, I think that no Member in any part of the House is likely to underestimate its importance. It may well be,
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as he has said, that the economic operations of which he is in charge may be a decisive factor in the outcome of the war. Alone, they will not suffice to prevail over the German will to world domination, but in conjunction with other factors they may just turn the scale in our favour. Therefore, we must urge that they shall be pressed forward with the greatest vigour. No word has been spoken from the benches behind me nor I think is likely to be, urging the hon. Gentleman to go slow or to do less than he is doing now. All the stimulus he will get from us will be in quite the opposite direction.
We believe that the vigorous conduct of the economic side of this war may save millions of lives, may save years of time, and may save thousands of millions of pounds by shortening the contest and bringing the hour of victory nearer. We recall that in the last war it was said, not untruthfully, that the Allies floated to victory upon a wave of oil. We had it and the Germans had it not, and that, among other factors, including the great gallantry of our airmen, gave us the command of the sky and immobilised German motor transport on the ground. It may be that in that respect this war will move to a similar conclusion, but just how these streaks of scarcity will first appear in, and then spread across, the German economic life it is difficult at this moment to prophesy. We can point to certain commodities; oil, iron-ore, and animal fats, to mention three obvious examples. If there were a great shortage of any of those commodities in Germany —and that is by no means out of reach if we conduct our economic warfare with energy—the German war effort would indeed become very difficult to carry on.
Therefore, having listened to the hon. Gentleman with interest and with appreciation of the effort he has evidently made and is still making in his Department, but with some scepticism as to whether he is even yet getting enough support from certain other quarters in the Government, and even greater scepticism as to whether the economic activities of the Government are properly co-ordinated, none the less we wish the hon. Member well in his efforts, and we hope that the economic attack upon Germany is going to be pressed home with an obstinate determination, with the use of all our available resources, and with a

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skill and courage, in a different field, not less than that displayed by our soldiers, our sailors, and our airmen.
5.27 p.m.
Mr. Mander: I am sure that the House has greatly appreciated the very lucid, interesting and modest statement which the Minister has made this afternoon in setting forth the work which has been done by his Department. I believe that his Department, within its limitations, and it is severely limited, has been doing a very good piece of work. The Minister is doing his very best, and he is supported by an enthusiastic and highly efficient staff. They are doing everything in their power to achieve the results which we desire to see obtained in this particular field. At the same time I think they might do a great deal more if they were given wider powers, on which point I shall say something later. Towards the end of his speech the Minister drew a rather flattering picture of the success of his Department, saying how well we in this country were doing and how badly things were going in Germany. He pointed to factories in Germany having been closed down owing to a shortage of steel and other things. Has nobody ever heard of a factory in this country being closed down owing to a shortage of steel and other things? I have, and I venture to think it is quite well known that we are not able to point the finger of scorn at Germany in that respect, because we have not all that we need.
There is another side to what the Minister said. In the "Economist" of 13th January I read an extract of information obtained from German and neutral sources which sets out rather a different point of view. It said:
"The trade situation in Germany is not so unsatisfactory as some feared when war began. The increases made in food rations are evidence of this. It seems not improbable that this is in some part due to the fact that the Allied blockade has not been so complete in its effects as it set out to be. More important is the fact that there has been no large-scale military or air operations."
I think we ought to consider whether there is not some foundation for those remarks. I regret very much that in the reconstruction of the Cabinet which has been made on a very limited scale and in special circumstances an opportunity was not taken to do what will have to be done in the
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end, and we all know it, and that is, as my hon. Friend said, to introduce into the War Cabinet some Minister in charge of the economic activities of the Government. There has been very strong public support for it for a considerable time. The "Times" has published leading articles and a number of letters from prominent citizens upon the subject. The British Association of Chambers of Commerce has expressed similar views and there is a widespread feeling that something of the kind should be done, shared by almost everybody and I imagine by Members of the Cabinet itself—with the exception, up to the present, of a leading Member of it. I cannot help feeling that the machinery which was set up—the Stamp Committee and the Simon Committee—has not functioned satisfactorily, and that some improvement and some change should now be made. The Chancellor said at the time that it was an experiment and that we were not necessarily tied to using that machinery for all time. I think the moment has come when some change should be made.
At the present time no one person is able to give a definite decision on matters of high policy in the realm of economic activity. There is a large number of Departments. The Board of Trade deals with imports, and the Department of Overseas Trade with exports. It is obvious that they should be related in some way. The Ministry of Food deals with edibles and the Ministry of Supply deals with munitions. The Ministry of Shipping has a function which speaks for itself, while the Ministry of Mines has economic activities of great importance. Then there are the Ministry of Economic Warfare and the Treasury. All those activities ought to be closely co-ordinated inside the Cabinet.
In order to indicate the overlapping and the indecision which exist at the present time I would give an example, and perhaps the Minister would be good enough to consider it. Some month or so ago, representations were made to his Department as to the importance of buying for this country by pre-emption foodstuffs which were in a country in southeastern Europe. The reply was to the effect that that matter interested the Ministries of Food and Shipping. The Minister himself was naturally interested, but he was not in a position to give a definite decision; though, of course, he would be

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able to pass on any information which was supplied to him. He made it clear, as I think he has done also in answer to a question, that anything to do with shipping was for the Ministry of Shipping, even when it covered a matter of pre-emption.
Having received that information, I proceeded to put a question to the Minister of Shipping in the course of Debate, as to whether he accepted responsibility for shipping in those circumstances. He said: "Oh no; that is a matter for the Ministry of Economic Warfare." That shows an astounding state of affairs. There is no one Department in the realm of economics willing to accept responsibility for doing a certain thing in connection with an important matter of pre-emption. I would ask the Minister to be good enough when he replies to say where authority now lies, with what Minister or committee, for taking action in a question of buying, say in south-eastern Europe, foodstuffs which require to be brought to this country and require shipping. Who is the person able to decide? So far, I have had only conflicting replies, and it is very important that the existing position should be known. It may have been straightened out by now.
In spite of the tributes paid by the Minister to the Chancellor of the Exchequer this afternoon, and which may, to some extent, have been in anticipation of benefits to come, it is profoundly unsatisfactory that the head of the Treasury should be sitting as chairman of a committee of that kind. He ought to be powerfully represented on the committee, but the outlook of the Treasury and its traditions in peace time of rigid adherence to sound finance and all that sort of thing, prohibit it from taking the profoundly different point of view which is required in time of war. A great many cases of subsidy arise. The Minister has referred to some of them. How horrible such a thought must be to a Treasury official. It has been well said that, in present circumstances, no device can be too unsound to be made use of in economic warfare. It might even be the right thing to pay an uneconomic price for materials which we do not want, and even to throw them into the sea, or to hire shipping and make no use of it. Those are all matters which may arise and, they may have been done. It may be wiser
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to buy oil of an inferior kind for economic reasons. What we require is not a purely negative policy of blockade—I gather that the Minister is engaged on this matter at the present time to some extent—but a positive policy of preemption carried out on a bold scale.
I would like to make a constructive suggestion in regard to the future of his Department. A Department of that kind cannot carry on without finance. It is absurd that it should have to go to the Treasury for finance for all of its purposes. It ought to be able to go to the Treasury for a grant, which might be of £100,000, and have, the right to spend that money as it thinks fit. When it had spent that amount it ought to be able to go to the Treasury again and ask for a further grant just as other Departments of State engaged in these affairs are doing at the present time. I would like to give an example. It is within my knowledge that very important negotiations are going on in connection with certain interests in south-eastern Europe. Some of the persons engaged in these negotiations said to one of the officials, a most enthusiastic and admirable person, that they ought to take a definite action of a certain kind in order to push the matter forward. His reply was: "For Heaven's sake do nothing of the kind. We have no authority here to spend money, even on petty cash." The Ministry ought to be placed in an entirely different position and to have money of its own to spend as it thinks fit. Until that is the case, matters will not be satisfactory.
A great deal of difficulty is being experienced now because of the looseness of connection between the Ministry of Economic Warfare and the Ministry of Shipping. They ought to be closely interrelated, more closely than any other two Ministries, in connection with our economic effort. I suggest that, quite apart from the two committees to which the hon. Member has referred, and which, I dare say, are doing very useful work, there ought to be a separate committee, small in number no doubt, representative purely of his Department and of the Ministry of Shipping. It ought to meet daily to settle questions which, I am sure, are lying unsettled owing to the fact that the necessary contact is not being made. I would ask the Minister seriously to consider whether that would not be a very

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useful thing to do. There might be a representative of the Treasury upon that committee. I think that the public at the present time is living in an unreal world by thinking that everything is going perfectly smoothly and that we have only to wait until the fruit drops into our laps. There will be a rude awakening some day. The change, the larger change to which I have been referring, is inevitable, and the sooner it comes the better.
Now I want to make a specific criticism of the work of the Ministry of Economic Warfare in connection with a matter which has been referred to in the Press. There can be no harm in mentioning the facts, which are well known to the enemy. Within a few weeks of the beginning of the war representations were made by persons in this country, who had full information and who were fully experienced in regard to the matter, about the importance of purchasing certain plant in Rumania that was producing oil. Those persons offered to intervene, offering their services very often in a purely voluntary capacity, but the offers were not taken up and their advice was not taken. The result was that we read in the Press some time ago that a very important concern called the Petrol Bloc, S.A. Romana, had been purchased by Germany. In December we read in the "Times"
"In addition, however, Germany will be allowed to import, without restriction, oil products from German-control companies in Rumania The petrol bloc, with a daily refinery production of 450 tons"—
It gives this figure in the "Times," but the actual amount is 1,500 tons—
"is one such company. In all, it is thought that Germany will be able to take up to about 45 per cent. of Rumania's total oil exports."
Further information about this transaction enables me to say that the purchase of the controlling interest in Petrol Bloc gives the Germans a 25 per cent. interest in the I.R.D.P., which is an oil-producing company. This 25 per cent. interest gives them virtual control, as the other 75 per cent. is spread over numerous people throughout Rumania.
In addition, this Petrol Bloc owns a large number of railway oil-tank wagons. They can make up 10 trains of 50o tons each with them. It is hardly necessary to point out that the Germans who now
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control the companies will be using these trains all the winter for the transport of oil to Germany. It was stated in the "Times" only a few days ago that while the Danube is closed and other means of access are not open, and ordinary passenger transport is restricted on the railways, exactly what I am saying is now taking place. Trains with the tank wagons in them are running regularly into Germany. It is a serious criticism of the hon. Gentleman's Department that this transaction was allowed to go through. No doubt it has taken the hon. Gentleman some time to rise to the state of efficiency which now obtains in his office, and those matters took place in the earlier days. Nevertheless, I would ask him to give some explanation of how it was that we let this piece of work slip through our fingers.
Something has been said this afternoon by my hon. Friend about tobacco and I entirely support what he said. We were informed, I think it was yesterday, that arrangements had been made to purchase some of the Turkish tobacco. I hope that will be true also of Bulgaria and Greece. Until recently the Greek tobacco crop was still going to Germany. We were permitting the export of German coal into Greece in order that it might pay for the tobacco. I would ask the Minister whether that is still the case, whether we are still allowing German coal to go into Greece. I put a question to him on that matter before the Recess, and he said, "The question is now under consideration." I hope he will now be able to state that no more German coal will be allowed to go to Greece, even if we have to buy the Greek tobacco from them in order to do it. The Minister said something with regard to reprisals and I am very glad he brought them into effect and that they are working properly. I hope he will bear in mind that if they are not completely effective and we find that there are loopholes and that exports are being sent by Germany, there is a precedent of the Reprisals Order of 1917, which was much more drastic in its character and which made ships carrying prohibited articles and the goods which were sent out liable to confiscation, and I believe that had a very useful effect in the last war in certain cases. If that situation should arise I hope the Minister will not hesitate for a moment to use again that precedent of the last war.

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With regard to the question of rationing, I entirely support what was said by the hon. Member for Bishop Auckland (Mr. Dalton). If we are making these trade agreements with a number of different countries it should be a fundamental principle that the countries concerned should be rationed, as they were in the last war, to the average amount which they were taking over the previous years. In 1915 and 1916 we built it up and we had a number of effective agreements in operation. There were certain cases where we could arrive at no agreement and in those cases we made them accept our system, unilaterally imposed, and it worked quite satisfactorily. We do not anticipate that anything of that kind will arise. I merely mentioned it to show the length to which we went in the last war to insist on this principle, and I hope the Minister will be able to say that in concluding the trade agreements he definitely ha.s in mind this principle of rationing.
I wonder whether he can give any information on the question whether Sweden has prohibited not only the export of munitions of war to belligerents but the materials from which they can be made. That has an extremely important bearing on this aspect of the war and I should have thought it would appeal to the Swedish Government as being only a fair and neutral attitude to say to those engaged in war, "We will not sell to either side arms, or anything from which they can be made." I have my doubts as to whether that is the position at the present moment.
In conclusion, I would say that I agree with the statement that the blockade cannot win the war. We shall have to do something more than that if we are to make the German people realise they are beaten, although it can play an enormously effective part and an absolutely essential part. I believe the Minister is doing all he possibly can with the powers that he possesses. I only hope that he will be encouraged, strengthened and buttressed, and will be given finance and wider powers, and that he will have superimposed upon him, some person in the War Cabinet, say of the stamp of the late Sir Eric Geddes—some man with wide business experience, with tremendous drive, who would get his way and who would do drastic and unorthodox
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things if they were necessary without bothering to consult too many committees about it, and a man who would have his say in the War Cabinet itself with the Prime Minister and the other great officers of State. I hope one of the results of this Debate will be that we shall bring that stage nearer and in that way bring the war to an earlier conclusion and save a very large number of human lives.
5.50 p.m.
Mr. Harold Macmillan: I would like to add my congratulations to the very lucid and interesting statements which my hon. Friend has made. He has given us a great deal of information and, if I may say so, if he has glossed over one or two difficulties that is only natural in the situation in which we find ourselves. It is extremely difficult to carry on a Debate of this kind without all the time wondering whether things may be said which had better be left unsaid. I believe it would be very useful if we could repeat the experiment that we had before Christmas and have in private Session a Debate on the general economic aspects of the war. It would then be possible, without that feeling all the time that perhaps something had better not be said, to get a really comprehensive Debate upon this aspect of the war as a whole.
Meanwhile there are one or two points I desire to raise and one or two questions I would like to ask my hon. Friend. He has, of course, a supremely important task and presides over, I think many of us believe, the most important of all the Ministries at the present time—certainly as important as any of the Service Departments, because he presides over what is one of the most powerful instruments used for the conduct of the war and the defeat of the enemy. In his speech he drew some comparisons between this war and the last war and the situation with which we had to deal then. He pointed out the supreme difference, that the circular blockade is nothing like as complete as it was in the last war. Germany has great land frontiers open to her and she has, or may have, great countries whose resources may be open to her. It is not altogether true to say that time is necessarily upon our side. Time properly used is on our side, but we must not take the complacent view that the mere continuation of the war without any serious military losses to ourselves means that it will necessarily end in our favour.

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We have to thank the hon. Gentleman for one decision of vital importance which was taken much earlier in this war than in the last war, and that was the decision to institute the blockade of German exports. Some of us thought this decision might have been taken at the beginning of the war, and that it was perfectly justified by the brutal and absolutely illegal sinking of the "Athenia." At any rate, only a few weeks or months were lost, and instead of waiting two years, as in the last war, we have imposed this immensely powerful machinery within two or three months of the beginning of the war. We know what my hon. Friend's views were on that problem and we congratulate him upon the decision that has been reached, upon the power of the Department which built up the machinery in readiness and upon the skill with which it has been imposed since then.
Upon the purely blockade aspect there are one or two points which have been only touched upon by the previous speakers. In the war-trading agreements which we make with certain countries it is, of course, generally understood that the rationing of commodities should be based upon the average of pre-war years. But there are some differences between this time and last time. I have some figures, but I will not produce them now, because I do not think it would be right to do so; however, I feel certain in my mind that the German authorities have not altogether forgotten the lesson of the last war, and during the enormous rearmament period in Germany, during the six years from 1933 to 1939, I think they were purposely employing the agency of certain neutral and adjacent countries to obtain some of these vital necessities. So the average of those years might be more favourable than it ought to be, because they have been purposely used for building up this vast machinery of war.
I hope this matter will not be taken too easily. I have no doubt that it is in my hon. Friend's mind. It is not only a question of the agreements between the Governments of these countries; it is a matter of how they are worked between the individual trading firms. In the last war we found it necessary to use a black list, to put names on it, and to use it ruthlessly, quite apart from the financial agreements which were reached between the Governments. I hope the black-listing
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of firms who are not keeping to the rule agreed to by their Governments is once again used with the same power as in the last war.
Passing from that aspect of the blockade to what my hon. Friend called the second part of his task, the new technique as he described it, there is not quite the same feeling of certainty in all parts of the country or of the House that everything is being done that might be done. It is, of course, a new method and requires new machinery to carry it out. It is contrary to the ordinary activities of this country, which is not, thank Heaven, a totalitarian State. It is the kind of thing which our Government were not organised to do and it is contrary to our commercial practice. For that reason it is difficult to organise satisfactorily a technique of that kind. My hon. Friend described the machinery. He said there was a committee of Ministers and a committee of people charged with co-ordinating the views of the Departments. Two of the Departments, the Ministry of Supply and the Ministry of Food, are not interested in this aspect of the blockade and economic warfare. They are interested only in getting food to the people of this country or the supply of material for rearmament or for manufacture.
The onus of putting this part of the economic warfare aspect of the problem into practice lies upon my hon. Friend and upon these committees. He made a very high claim and said he could not remember a single case since the beginning of the war of something which had not been done as the result of these committees and which might have been done. He alone is the judge of that; we can only accept what he has told us. He has a very high responsibility because we have to accept what he tells us. If this machinery works satisfactorily and if everything is done with the highest degree of rapidity, there is no use in altering it merely for the sake of altering it, but I hope my hon. Friend will bear in mind the immense responsibility which he carries. We welcome the attention of the Minister and of some of his colleagues to the general problem of the organisation of this part of the machinery with a view to accelerating decisions and making them with greater promptitude and power.
It is common knowledge that one of the main things of which Germany has a

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scarcity is animal fats. Nobody really knows what stores of materials they have: even the Government cannot have exact knowledge of German military stores; but we believe that they have a shortage of animal fats. But it is also common knowledge that since the war began they have acquired a very large supply from Balkan countries. From one country they have obtained the whole output of pigs. I know that many of these countries are very frightened of Germany. It is not merely a question of our buying the oil or the cattle or whatever it may be; it is a question of very nice bargaining between the diplomatic powers and financial powers. These countries have to make very difficult decisions. Their decisions will depend partly on the actions of my hon. Friend's Department, but they will depend also on the general progress of the war, and which side the neutral countries think is going to win. That complicates and makes more difficult the problems of the Department we are now discussing. We have, besides making these pre-emptive purchases in order to deprive Germany of certain goods, to consider also what I would call diplomatic purchases of goods in order to create good relations between us and countries whose help is important to us. Tobacco, which was referred to by the hon. Member for Bishop Auckland (Mr. Dalton), is one of those commodities. It is not a question of whether we want one kind of tobacco more than another, but of whether it is desirable, from a diplomatic point of view, to ease the economic problems of a country whose support we want.
I think the House must have been pleased with the confident tone of my hon. Friend, and, if I may say so without impertinence, with the efficiency which he showed in making his statement. Certainly, the tribute which he paid to the members of the staff of this rapidly-constructed Ministry was deserved. It is within the knowledge of anyone who has any kind of contact with this Department that many of its members have been led to join it by an extraordinary devotion to the public service and that they have brought great skill and knowledge to their work. Nevertheless, if I might utter a note of warning, I did detect in the latter part of his observations a certain degree of, not complacency—that would be too strong
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a word—but of satisfaction, which I think is dangerous in the present state of public opinion. He told us that Germany is in the same position, from an economic point of view, as she was after two years of the last war. That may be true, but remember that Germany has been for five years preparing for this war. She has been for five years building up armaments while we have only just made a beginning. She has vast reserves of many of the necessary materials for war, and I think we run a risk of making our people unwilling to understand how great are the sacrifices they will be called upon to make if we adopt too complacent a view of the sufferings and difficulties of Germany to-day.
My hon. Friend produced the actual physical example of a German ration card for clothing. We ought to have had rationing of almost every article from the very beginning of the war. That is no reason for us to laugh at the Germans; we should have done it ourselves. He told us of the difficulties experienced by the Germans in regard to exports owing to the shortage of materials. That is equally a difficulty in regard to British exports. Our difficulty is not a shortage of markets but our inability to import sufficient raw materials. My right hon. Friend the Chancellor of the Exchequer has on several occasions recently warned the people of this country; and the Prime Minister lifted the curtain, as we might say, in his speech at Guildhall sufficiently to show that when we are deprived—by our own folly, it is true—of the power of borrowing large sums of money from the United States, we can keep our machine going only by voluntarily reducing the standard of life of the community as a whole during the war. We have to ration ourselves, whether by means of ration cards or by any other method that we may adopt. We have to give the maximum amount we can to the exporting industries, in order that they may get the necessary exchange for us to carry on the war.
I hope and believe that the German situation is a very bad one, but do not let us delude ourselves. They have made very long, careful and exact preparations during the years in which we have been living in a fool's paradise, making barely any preparations for war. They have instituted—through this tremendous

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machine, if you like, of a slave state—an artificial shortage of commodities, in order to reduce the purchasing power of their people and force them to save, so that the State may have money for rearmament which otherwise the people would use for clothing and food. We have great weapons to meet that, and my hon. Friend's Ministry is one of the weapons. But we have to remember that, great as can be the pressure of this Department, Germany's stocks of many of these materials are not now being used. As long as the war is not really engaged, these great resources are not being consumed; therefore, they need not be replenished at the same rate.
That is not my hon. Friend's problem, but he has to take it into account. Welcoming, as I do, his statement of the efficiency and skill with which his Department has been built up in a very short time, and proud as I am to hear that statement, I feel sure that my hon. Friend will do the greatest service to his place in history and to the country by regarding this problem as a tremendously difficult, not overwhelming, but immense, task, and by bringing into play every single method, every possible device of economic warfare, every kind of machinery we can get to increase the pressure on Germany, so that we may win the war within that degree of time which is necessary if we are to preserve any kind of civilisation.
6.10 p.m.
Mr. Price: I am sure the House is glad that the Government have given time to-day for a discussion on the work of this most important Ministry. I entirely agree with the hon. Member for Stockton (Mr. Harold Macmillan) that time is not necessarily on our side unless it is properly used. That is a thing that the general public has to realise. Not long ago I saw an estimate by a group of American economists as to the possibility of Russia being able to supply Germany with materials in the course of the next year or so. The conclusion seemed to be that the state of the Russian transport system and of her general economy was not such as to enable Russian help to make any appreciable difference to Germany in the immediate future, but that there was no guarantee that within about two years German engineers would not be able to get to work in Russia and so
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transform the system as to make her a serious asset to Germany, and liability to us. I mention that in order to show that time is not necessarily on the side of the Allies, and that unless we make use of the opportunity that we possess of blockading Germany and rendering her position impossible at as early a date as we can, we run very serious risks.
It seems that there are three main weapons which we can use most effectively. The weapon of land warfare seems to have reached a deadlock; whether it will remain so, we cannot say. The air weapon, apparently, cannot by itself bring decisions. Naval action is one of the three most effective weapons, but it seems to me that the other two are equally effective. One is propaganda which will undermine the psychology of the enemy, and the other is what we are discussing to-day, the organisation of economic warfare so as to bring to our aid the economic assistance of neutral countries, and to draw them away from the economic sphere of Germany. We have reason to fear that much valuable time has been lost. It is not satisfactory for us to feel that possibly there are still important leakages. It has been mentioned already that increased purchases of soya beans are probably being made by Germany through the Scandinavian countries. Is it not a fact that there is a very large contraband trade going on to-day through the ports of Genoa and Trieste? I know that our relations with Italy are delicate, and that we do not want to make the position between Italy and ourselves any more difficult than it is; but we should see whether that back door opening into Germany cannot be effectively stopped. I am referring to what has been left undone during this last four and a half months, probably before the Ministry of Economic Warfare got properly into working order. Still, I think it is inexcusable, and we ought to have the reason why Germany has been able to get far better control over the resources of Rumania than she should have done.
The hon. Member for East Wolver-hampton (Mr. Mander) has referred to the purchases of Rumanian oil, and to Rumanian land transport, which has enabled Germany to get increasing supplies of oil. I have also heard of another matter in that connection, which, I think, requires some explanation. I understand that an offer was made to this country of

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the option on certain oil tankers on the Danube which could be used to transport oil to Germany. An option to purchase them was made to this country, or at least to control them for a certain period, to prevent them getting into the hands of Germany, and that was refused. Moreover, I understand that this information got into the hands of certain organs of the Press, but they were forbidden by the censor to publish the information. I do not know who was responsible, but that is a thing about which we certainly ought to have information.
There is still another point in connection with the South-East of Europe which again shows a certain lack of taking time by the forelock, and that is Bulgaria. Of all the countries in the Balkans, Bulgaria is the most dissatisfied with her present situation and the one most likely to give trouble. She has always traditionally had a sympathy with Russia, dating back to the Russo-Turkish war of 1887, when she was liberated from the Turks by the Russian army. It is known too, that Bulgaria is in need of oil, and of markets for her agricultural products, mainly dried fruits. She vas ready, I understand, to do a deal with us on tobacco not so very long ago, but owing to the fact that the tobacco interests of this country were not prepared to act, she has sent a delegate to Moscow and has fixed up a trade agreement with Russia to deal with her imports of oil and exports of agricultural produce. I do not wish to suggest to this House that we should regard Russia as an enemy, although the fact that she is virtually allied to Germany to-day in this way and has committed this gross act of aggression against Finland makes us justly all the more suspicious of any activities she may be carrying on in the Balkans. Therefore, it is only wise on our part to do everything we can to improve our economic relations with a country like Bulgaria, and steps ought to have been taken in regard to providing her with a market for tobacco in the public interest, no matter what private interests stood in the way.
I was reading only yesterday the speech of the chairman of the Imperial Tobacco Company, who referred to the important assistance which his firm have received from the Government in connection with obtaining foreign exchange for the operation of their great concern. No doubt the Government have been assisting
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them—there is no objection to that—but the Government have not asked for a quid pro quo, or, if they have, we ought to know about it. A big concern like that, handling an enormous quantity of tobacco, if they get assistance from the Government in regard to foreign exchange, must give some concession in exchange, and that concession in this case should be that we ought to insist upon a considerable blend of Balkan and Turkish tobaccos in the tobacco which that concern purchases from overseas, in the national interest, in the interests of the allies and in the interests of winning the war. The Government have helped other companies like the Imperial Tobacco Company, and it is their business to see that that help is effective.
The war trade agreement with Turkey, which the Prime Minister announced, is of great importance, but, unfortunately, we cannot really discuss it here to-day in all its details, because it does not directly concern the Minister, yet the two subjects are closely interlocked. You cannot discuss the question of preventing the enemy from getting certain products, if you cannot also discuss trade relations between the countries who provide these products. I entirely agree with the hon. Member for East Wolverhampton that it is time that we had a department of the Government, the representative of which we could have here, and, if necessary, criticise, and to whom we could put questions and ask for answers on all these matters concerning this most important subject. For instance, in the case of Turkish tobacco which comes in under this new agreement with Turkey, the matter is all tied up with the question of liquidating certain commercial debts which Turkey owes to us and to France. That cannot be properly done unless we discuss the whole question of credits to Turkey, our imports from Turkey, and our exports to Turkey, which concern the Department of the right hon. Gentleman the Member for Southport (Mr. R. S. Hudson).
We ought to be able in a single Debate to deal with these questions. Our trade agreement with Turkey, which was announced by the Prime Minister, shows that the import of Turkish tobacco is linked with the former commercial debts which are still outstanding between us and the Turkish Republic. That is also

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linked up with our whole export trade with Turkey. But one cannot expect the exporter of machinery in this country to be bothered with questions concerning the imports of Turkish tobacco. The whole thing leads up to the fact that we ought to have our import and export trades with countries in the South-East of Europe brought under public control in the sense that we ought to have an import and an export corporation, or some organisation through which all these transactions can be carried out. We ought to have a public utility body working under the control of the Government, a sort of import and export board, to carry out these complicated transactions concerned with past commercial debts, the economic blockade of Germany, our import trade with these countries, and our export trade too. All these should come under one Department, and we ought to be able to deal with these matters in this House in one Debate. I know that if I put a question to the hon. Member he cannot really answer it now. The matter ought to be brought up at an early date by pressure from this House, for only in that way can we bring that economic pressure upon Germany which will enable us to use the weapon which we need in order to win this war.
6.25 p.m.
Mr. John Morgan: One almost apologises for coming into the Debate at this stage. The atmosphere is so friendly to the Minister, and we are to a certain extent rather fascinated by the scope of his office and the record that he has given us that I feel a little diffident in coming in. At the same time I feel that the importance of this Debate is measured by the simple fact that the whole Nazi philosophy, the whole basis of their economy, is founded not upon some creed that was discovered and propagated by some prophet, but is the result of their experience of the last war. The whole structure of the Nazi economy is to attempt to evade the very instrument that we are discussing here to-day on the simple ground that it is the one thing that brought them down. That is their accepted view of the last war. They take it that they won on the military field but they were beaten on the economic field, and so the importance of this office which is being discussed here to-day is
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exemplified by the whole structure of Nazism as it has developed in the last few years.
I was glad when I heard the hon. Member for Stockton-on-Tees (Mr. Harold Macmillan) sounding that warning note with regard to the concluding passages of the Minister's statement. One gets the uneasy feeling that there are two things that are happening; that many of the measures taken in Germany to-day—and I have had the privilege of being in Germany and living in one or two households for a while—that the measure of their rationing and the shortage they are undergoing in certain respects, are calculated measures on their part and not enforced ones. It is something that has been well planned, and although they may have less resources than we have, yet by making much better use of those resources than we shall of our abundance they may yet head off a disaster for themselves. That is our danger. There is also a significance developing, of which, I fancy, we shall have to take more account, and that is that Germany is undoubtedly placing some weight upon the value that she expects to get from her Russian alliance. She has not got very much out of it up to the moment, but the fact that she is jeopardising her relationships with other countries, the neutrals in this part of Europe, indicates that she hopes to get Russia into a state where Russia seeks definite economic aid from her so that Germany can actually exploit the Russian resources to a degree that has not been possible up till now. If that is true, then time is not on our side and the American investigator referred to by the hon. Member for the Forest of Dean (Mr. Price) may be near the mark. If Russia has to seek German aid in this way, it may be precisely that for which Germany has prayed, namely, that the Scandinavian countries will involve Russia to such a degree that she will be obliged to get Germany to come in to her aid and get her out of the mess. In that event, the Germans can use the Russian peasantry as helots in the same way as she is using the Poles and the Czechs, compelling them to work for their subsistence and the German economy. That seems to be indicated by tendencies that are developing in the Scandinavian field.
Other Members have referred to the importance of animal fats in the economy of Germany. Well, we shall have reason

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to find out the effects of economy in animal fats in this country before we have gone very much further. I think of the Danubian countries in this regard. It is often thought that by buying the grain crop of the Danubian countries you are merely buying grain for bread. Actually you are eating up the animal food stores of the Danubian economy, because it is the surplus grain of these countries which feeds the farm animal population of these countries. Our own foodstuff problem at the moment is being exaggerated by a piece of business done by the Ministry of Food in this country. We are congratulating ourselves at the moment that from Canada we are going to have so many million cwts. of bacon the coming year. It looks good, but what is happening? Canada has decided to keep every hit of feedingstuff she has got when we are having trouble with the Greeks over Argentine trade in the same class of material. This is at a time when Canada is not selling to relieve us with foodstuffs for our own poultry and pig population. So one sees how ramified and how fascinating is the scope of the office of the hon. Gentleman on the other side. In buying up the next harvest of the Danubian countries, he may actually put a stop to the source of supply for animal fats to Germany at the same time, and I am sure that that type of discovery is rapidly coming to those in his Department. I think they must be making new discoveries every day as to the reactions of the business that they are doing.
May I ask one or two questions that may be regarded as sufficiently important to attract an answer? I have wondered, in the discussion on the tribute made to the co-operation of the French, to what degree they are co-operating with us on the actual purchase policy connected with commodities. Is France in complete agreement with us and in a position to associate herself with us on the actual cash purchase of stocks of the kind that we have discussed this afternoon?
There is another aspect of this policy. It must be increasing the income of those neutral countries who are so favourably treated for reasons of our own. What are they going to do with this additional income? Are they going to buy from Germany? Germany may not be able to supply the kind of goods that hitherto they have had, but it does raise the
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question of whether our exporters can be encouraged to provide those countries with this higher income, with the class of goods that they can buy, instead of letting this additional income go to Germany. One wonders whether our export departments and business houses are alive to the fact that possibly some of these countries will register a marked increase in their ability to buy goods from abroad and Germany. There is another point which I felt ought to be borne in mind in discussing the position of countries like Holland and Belgium in particular. It must be embarrassing to the Department to find it is difficult to trade with such countries because of our exchange position. I have had occasion to make inquiries on behalf of one or two firms about trade with Belgium, and I find the Board of Trade are extremely reluctant to deal with that country because of the sterling position there. I was wondering whether his Department ought to be granted a premium position in order to trade with Belgium. Otherwise we shall be forcing Belgium into the German economy, and that kind of consideration must be continually in front of the hon. Gentleman's Department. I can feel that the sympathy of the House is with him in that predicament.
I do feel, when Germany is falling off in her capacity to supply the trading needs of countries, that it is not always necessary to offer increased cash attractions to the neutrals if our own exporters are responding to the trading possibilities so created. If we can at any given time offer those countries goods that are ceasing to flow from Germany, we may be able to offer quite a hard bargain because we are able to meet them on the character of the goods that our manufacturers here have been encouraged, in advance, to make. I am wondering whether the hon. Gentleman's Department of State should set up some kind of contact either with the Board of Trade or commercial institutions, advising them in advance not only of the goods cut off from Germany but the kind of things that particular countries have hitherto bought from Germany and if supplied by us would enable better bargains to be made with those countries. I think assessment of the goods that are likely to fall off can be made in order to put our own people up to the chances that may be taken not necessarily to-morrow but in a

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year's time. If our people could, by this type of advice, be encouraged to produce goods that could replace German goods and give satisfaction to the neutrals, this, I feel, would be the right kind of approach to part of the problem before us to-day.
I wish to press the point of the next harvest in the Danubian countries; they will be starting soon after June. If there is any way in which we can undertake to handle this harvest, we can direct a shrewd blow at the type of purchases Germany is likely to make for desperate reasons. I think it is a fact that a Hungarian delegation is on its way to this country, or has actually arrived. Their territory is likely to be a bit near the heart of things so far as German economy is concerned, and if we can embarrass the German position by dealing with such an agricultural country, the animal feeding position will be a vital point. Just as we are discovering to-day that our own farmers are breaking up their poultry flocks and destroying their pig herds because they cannot get hold of feedingstuffs; so let us learn from the lesson of our own farming dilemmas at this moment and see how we can disturb Germany by diminishing the farm live-stocks that have hitherto fallen into her hands through buying up Danubian harvests in the grain.
6.40 p.m.
Mr. David Adams: I would like, with the rest of the House, to offer congratulations to the Minister upon his lucid and extraordinarily optimistic statement to the House. If there is one advantage to be derived from the Debate, that is, the setting-up of a central board of overriding economic authority with a seat for its representative in the Cabinet, great work will have been achieved. That that is necessary an examination of the situation makes perfectly clear. Take one aspect alone—that of shipping. The Minister has been unable to advise us whether the purchases he has made in the matter of exports or imports are to be satisfactorily handled by the Minister of Shipping. My personal experience of that Ministry is that it is remarkably tardy in responding to advances made to it. I put forward two questions of considerable importance. One was that the sending of vessels to more than one port for
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discharge had had the result of vessels being lost in transit to the second port, and the other was in connection with the transfer from one firm to another of a British vessel. The firms desired this transfer and adhered strictly to all the rules laid down, but could not obtain replies from the Ministry of Shipping. Their business is being held up, and therefore we are entitled to wonder whether the Ministry are making adequate provision for the handling of the goods and for the changes that are taking place in our sea-borne traffic. I was advised recently that the Ministry were encouraging the purchase and building of additional tonnage, but no specific information has as yet been supplied. Thus one is entitled to cast a doubt whether the grip that we are supposed to have on the enemy is effective in reality.
There is another question that has been mentioned—that of feeding stuffs for this country. We know what has recently ensued. We have been driven more and more to rely on Denmark for supplies of bacon, and all the world knows that the moneys we are paying out are in due course likely to pass on to Germany. That transaction could certainly be reduced and perhaps eliminated if there were adequate supplies of feeding stuffs in this country. Feeding stuffs are available, but tonnage is not. Have we been slow in making that provision? That is the important point. Indeed, it is admitted that in some cases it passes into the hands of our enemy. The one point which I particularly desire to mention is whether the important and vital factor in our warfare, that of shipping, is being handled in the way which is desired.
6.46 p.m.
Mr. Tomlinson: There is one question to which I wish to refer, and so far it has not been mentioned., The only approach to it was by the hon. Member for Stockton-on-Tees (Mr. Harold Macmillan), who, in dealing with the question of rationing and the comparison which has been made with Germany, approached the question from one angle. I am thinking of the position of the cotton industry in Lancashire. Those who were living there during the last war are anxious that the mistakes which were made on that occasion shall not be repeated. As everybody knows, we lost during the last war a great part of our export trade, and the

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question which is agitating the minds of many people in Lancashire at the moment, in spite of the fact that they are apparently doing very well, is, What is going to happen when the war is over? Let me give an illustration. I went into a mill last week and asked the manager how they were getting on. He said, "Very well." I was pleased to hear that, and I asked him what proportion of their goods were manufactured for export and what proportion for the home market. He said, "We are doing about 70 per cent. for the home market and 30 per cent. for export." Normally that firm is engaged in exactly the reverse way—70 per cent. for export and 30 per cent. for the home market. If that is happening all round, we are building up trouble for ourselves in the not far distant future.
Sir Robert Aske: What kind of trade is it?
Mr. Tomlinson: It is the manufacture of cotton goods. I know the way in which the shipping of the country is having to be used and the difficulty of bringing in raw materials. It will be necessary for somebody to say what proportion of the raw cotton is going to be available through the shipping that is available. I want to ask whether the resources now available are being used to the best advantage when everybody is allowed to go as you please. If we have to face a situation in which rationing is necessary, ought we not to be taking the necessary steps now rather than wait until everybody has had a good time? I know the temptation for a firm that has been in Queer Street for the last few years, while the going is good, to manufacture goods for the Government or the home market. Is it something upon which to pride ourselves that while the people of Germany are being cut down to one suit a year or two shirts a year, we can have as many suits and shirts as we like? For the time being we can, but are we employing our economic resources to the best advantage when we are utilising our resources in that way? That question has been asked, but has not yet been answered. Many people in Lancashire are anxious about the position. We had an export trade on the last occasion, but we cannot afford to lose any export trade now, and, therefore, anything that is likely to lead to a diminution of that trade is going to increase the difficulties of Lancashire.
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We discussed in this House a reorganisation Bill for cotton, but it had to be withdrawn because it was no longer operative in war time. But immediately war ceases and the Government demand for material ceases, we shall have an aggravated problem greater than the problem with which we were faced before war began. I know that we have appointed a cotton controller, who is regulating prices. No question has yet been raised of the rationing of raw material, but to allow people to go on as they are to-day seems to be telling them in effect that they can go on living in a fool's paradise until the Government decide that the situation is serious enough for something to be done. I suggest that a Government which is in earnest will not make the best of things as they are, but will look ahead and plan now for the immediate future.
6.50 p.m.
Mr. Ammon: There are two questions I should like to put to the Minister of Economic Warfare. In this Debate we must to a large extent put aside many of our preconceived economic theories and make our sole object the winning of the war. The first thing I want to ask is, whether the professors and technical people of whom the right hon. Gentleman spoke were giving their services free? I should also like to know whether anything had been done by the way of pooling information. It is quite possible that orders may be given to a firm which is already full up with Government orders, or which has not sufficient raw material. Such an order might be lost, and I think there should be some way of transferring such orders to other firms. In addition, we must also set aside any idea of individual rivalry between firms. To a large extent the State must take over all the export trade and control it. In that case there should be some pooling of information; probably it might be done by the Board of Trade.
The other point that I want to suggest is that it is not sufficient to be concerned with the capture of German overseas markets. We have to find some means of entry into those markets to which Germany still has access, and I would suggest that it might be worth while subsidising some trades in order to gain access to these markets. It is one of our weapons in this war, and it might help considerably to shorten it and thus mean

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the saving of life. We may be able to prevent German overseas trade, but that is not sufficient. We want to do more, to get into those countries where Germany still has access and to endeavour to undercut her in those markets and by this means considerably shorten the war.
6.53 p.m.
Mr. Cross: I can speak again only by leave of the House, but several hon. Members have raised interesting points to which I should like to reply. I must express my gratitude for the extremely constructive and helpful manner in which all hon. Members have spoken. We may feel that at least on this subject we are for the time being a Council of State. It will be a great encouragement to my Department, and I might mention in passing that when I used the word "volunteers" in reference to the work of the Department, I meant amateurs; although I am glad to think that some of them are getting paid for what they are doing. A number of points have been raised in the Debate. The hon. Member for Stockton-on-Tees (Mr. Harold Macmillan) suggested that I was a little misleading or might be stimulating overconfidence when I spoke of Germany's difficulties. If he reads the Debate tomorrow, he will, in justice to me, admit that some of the words he used in criticism are almost the words I used myself in the statement that I made. Nevertheless, I am glad that he has called attention to that aspect of the matter.
The hon. Member for North Camberwell (Mr. Ammon) has referred to the pooling of information in respect of export orders. That is a matter for the Board of Trade. He also referred to subsidising competition in countries adjacent to Germany. That again is a matter for the Board of Trade, though, of course, I shall be deeply interested in any such matter, and I can assure him that if any new departure of that kind is necessary, I am perfectly ready to do things which are unconventional and for which there is no precedent. Other hon. Members have spoken of co-ordination in the economic sphere, and said that they wanted one economic Minister. Clearly it is not for me to answer on that point, but the suggestion raises one question in my mind. Do hon. Members really want to put me under an economic co-ordinating Minister? I am not at all sure that
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it is the right place for the Minister of Economic Warfare, and I invite hon. Members who have made the suggestion to give further thought to the matter. The Ministry of Economic Warfare is not a constructive Department at all; it is very much the reverse. The Departments to which co-ordination might apply are Departments such as the Board of Trade, the Ministry of Supply, the Ministry of Food, and the Ministry of Shipping, but I feel that my Department would more naturally rank alongside the fighting Services, and that its functions are parallel with theirs.
The hon. Member for Bishop Auckland (Mr. Dalton) raised the question whether some neutrals might be obtaining more than normal supplies, and he asked for an assurance that they would not. I cannot give that assurance, because the point to which I address myself mainly in these matters—and it is far and away the most important point—is that we should have complete confidence that certain commodities which pass into neutral countries do not go out of them into Germany. There can be exceptions which are justified. For instance, there may be an increase in the supply of one commodity when the country concerned is getting less of some other commodity of a similar nature. Alternatively, it can, and does, occur that some of these countries are anxious to acquire to some extent stocks of commodities because they fear that in the course of the war they may find it very difficult to maintain their ordinary rate of imports. Where that is the position, it does occur that imports are in excess of the normal. But, in general, I can give the House a definite assurance that where that has occurred we are satisfied that it has not meant that there has been a back-door leakage into Germany. Germany has not got those supplies.
The hon. Member for East Wolverhampton (Mr. Mander) asked a question in connection with a company called the Petrol Bloc. In reply to that question, the purchase of a minority share in a small concern at a high price is not always the best way of preventing supplies from reaching the enemy. I think that, with the understanding I have of this subject, I can give the hon. Member an assurance that we have not lost anything through that, but the subject is not one which, speaking in the conditions in which we

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are, I can pursue in any more detail. The hon. Member for Doncaster (Mr. J. Morgan) spoke mainly on the subject of French pre-emptive arrangements. Where we have agreed with our French allies to make certain purchases, the practice so far has been for one country or the other to undertake to make those purchases, and where it is, as I think in the case which the hon. Member had in mind, a question of a commodity on which it is probable that a loss will be made, it is the intention that the loss shall be divided between the allies on a pre-arranged basis, and I take it that, unless exceptional circumstances appertained to a particular deal, that basis would in general apply for the future. The hon. Member also dealt with other problems. I would ask him to believe that they are matters which we have very much in mind, but they are not matters which can be easily discussed in public; nor are they matters on which we have taken actual action as yet. They are things with which we are trying to get to grips. I think the moral of what the hon. Member had to say was that the encouragement of exports is the corollary of the encouragement of purchases, and I endorse that statement very heartily. It is entirely the view taken by my Department.
The hon. Member for Consett (Mr. David Adams) called attention to shipping matters, which are rather beyond the immediate reach of the Ministry of Economic Warfare, but I feel he will be glad to hear that we work in the very closest co-operation with the Ministry of Shipping. There is, indeed, a Neutral Tonnage Committee attached to my Department, so that in making either shipping agreements or war trade agreements we are certain that we are marching hand in hand. The hon. Member for Farnsworth (Mr. Tomlinson) referred to a matter which I know is very near his heart, and which he knows is very much nearer to my heart than it is to my Department—namely, the export of cotton yarns and cotton piece goods. I think the hon. Member knows enough of me, particularly in connection with the Cotton Bill of last summer, to be certain that wherever I come into touch with that matter, I cannot forget the interests of the county from which both he and I come.
The hon. Member for Bishop Auckland asked a question with regard to tobacco. A very large part of the answer to that
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question is, of course, the responsibility of the Board of Trade, and I understand that there is a Parliamentary Question on the Paper for to-morrow on which the Board of Trade will be making a statement on their side of the question. I ask the hon. Member to allow me to leave that part of the answer to the Board of Trade. The Ministry of Economic Warfare have an interest in the purchase of tobacco from another point of view. The House will remember that before the Recess the Government offered to make purchases of tobacco, on certain conditions, from Greece. A delegation headed by the Greek Minister of Finance is in London at present, and we are having discussions with him concerning the terms on which these purchases might be made. There is also a number of other questions concerning the mutual trading relations of Greece and the United Kingdom which are likely to come up in the course of the same discussions. With regard to Turkey, it has already been announced that, as part of the general political arrangements with the Turkish Government, the Government have agreed to take part of the service of the loans which have been made to a Turkish Government in the form of tobacco.
Mr. Dalton: As I recall the statement made to the Press, it was that an agreement had been reached for the purchase of, I think, £10,000,000 worth of Turkish products, and raisins, figs, hazel-nuts, and so on, were enumerated, but tobacco was not mentioned in the list. The hon. Gentleman now says that we are to take part of the service of the loans in tobacco. Presumably that relates to future transactions in distant years. What I and other hon. Members are concerned about is whether, at this moment, when Turkey is subject to additional difficulties owing to the terrible misfortunes that have come upon her through the earthquake, we are going to buy part of the present crop of tobacco.
Mr. Cross: The point which the hon. Member makes is met. As he said, the service of the loan would clearly not become due until a certain time had elapsed, but I understand that service is being anticipated by immediate purchases of tobacco which in due course will play the part of being the service of the loan. It is simply a question of some detailed financial arrangement on which I cannot speak with any certainty, but the effect is immediate purchase.

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The other matter to which hon. Members have in the main addressed themselves has been that of purchases in the Balkans. I feel it is desirable that we should get the importance of the Balkans to Germany as a source of supply correctly and proportionately in our minds. Germany has obtained only about 14 per cent. of her pre-war imports from the countries of South-Eastern Europe, and as that 14 per cent. constituted a very large proportion of the exports of those countries, it is obvious that any possible increase in Germany's imports from those countries cannot go very far to fill the gap which is caused by the cutting off of her sea-borne supplies, which constituted 52 per cent. of her total imports before the war. I say this because I think it puts the problem into its right proportion. Moreover, many of the German imports from South-Eastern Europe are commodities which, from the point of view of economic warfare, are of only secondary interest, and to attempt to buy them all would undoubtedly be a serious waste of our reserves of gold and of foreign exchange. It seems to be certain that it would not be possible to buy on so extensive a scale if we were dependent on our exports, as I think we ought to be, to pay for these purchases.
I would make this further point: We have to remember the position in which all these small neutral countries find themselves. The bulk of their populations are, I think I am right in saying, overwhelmingly anti-Hitler. Perhaps it would be too much to say that they are all friends of ours, but they are certainly anti-Nazi. The political position in which these countries find themselves is, however, a very different matter. They live under the shadow of aggression. They are, as I know, frequently subject to threats, and they are extremely anxious to maintain their neutrality and to avoid giving Germany anything that could appear to be a pretext for violating that neutrality. On the other hand, we are determined to use our power to the full to ensure that the neutrals do not favour Germany, and I think that the consequence of those two opposing forces is that a correct attitude of neutrality is observed. I am confident that, from our point of view, no inducement or persuasion could possibly cause those countries to depart from that correct
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attitude of neutrality. If they were to discriminate in favour of one country, by selling the whole of their production or an unduly large part of their production, to a belligerent country, the consequences can be very easily imagined. In point of fact, I am sure that no neutral country which felt itself threatened—and it is difficult to say which small European country does not feel itself threatened—would be willing to place itself in such a position.
The hon. Member for Bishop Auckland also asked whether we had purchasing agencies. We have purchasing agencies of one kind or another in all these countries for the commodities in which we are interested. We use the existing channels as far as we can, but where it is necessary we would not hesitate to create new agencies. We are quite ready in this matter for new departures. We are ready to adopt new methods which may be found of advantage in securing our preemptive needs. While these matters are under the most active consideration by my Department, I would ask the House to support us in the adoption of such methods in the future as may be found necessary.
Mr. Mander: Would the Minister be good enough to deal with the point which I put, not for the first time, in regard to where the responsibility lies in connection with shipping for pre-emptive purposes? Should an approach be made to the Ministry of Shipping or to his Department for a decision on that matter; and will he also bear in mind the differing replies that I have received from different Departments?
Mr. Cross: Shipping for pre-emptive purposes is an extraordinary example about which I am sure other hon. Members must be puzzling their brains. I would say that the policy in a matter of that kind would emanate either from the Foreign Office or from my Department in the first instance—it does not matter from which—and as for the rest, the actual responsibility for chartering or signing the charter would be the responsibility of the Ministry of Shipping.
Question, "That this House do now adjourn," put, and agreed to.
Adjourned accordingly at Fifteen Minutes after Seven o' Clock.

  OIL FROM COAL.
  OIL FROM COAL.
BRITISH ARMY.
  SERVING MEMBERS OF PARLIAMENT.
  SERVING MEMBERS OF PARLIAMENT.

Preamble
The House met at half-past three of the clock, The LORD CHANCELLOR on the Woolsack.
The Earl of Rosslyn—Sat first in Parliament after the death of his grandfather.

ECONOMIC WARFARE.
VISCOUNT CECIL OF CHELWOOD 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
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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

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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
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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

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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
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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

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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
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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-

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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.
VISCOUNT SWINTON: 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
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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

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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
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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

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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
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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

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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
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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

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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
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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.
LORD STRABOLGI: 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,

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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
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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

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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?
VISCOUNT CECIL OF CHELWOOD: There is only one now.
LORD STRABOLGI: There is only one. All he suggests is that he must be a member of the War Cabinet. That clears that up.
VISCOUNT CECIL OF CHELWOOD: No, the War Cabinet would be quite separate if you had that system. Now it would be a different matter.
LORD STRABOLGI: He must be a member of the War Cabinet, as things are to-day, surely.
VISCOUNT CECIL OF CHELWOOD: 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.
THE MINISTER WITHOUT PORTFOLIO (LORD HANKEY): 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?
VISCOUNT CECIL OF CHELWOOD: It met I think about three times. I was individually a member of the outside
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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.
LORD STRABOLGI: 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.
LORD HANKEY: That is exactly the position as it was in the last war.
LORD STRABOLGI: The position is the same as in the last war?
LORD HANKEY: Yes.
LORD STRABOLGI: 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?
LORD HANKEY: No.
LORD STRABOLGI: There is no Secretariat now?
LORD HANKEY: No, not in that sense.
LORD STRABOLGI: 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.
VISCOUNT ELIBANK: 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

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all, that therefore none of the Departmental Ministers ever took any part in the War Cabinet?
LORD HANKEY: 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.
LORD ADDISON: 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?
LORD HANKEY: 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
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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.
LORD STRABOLGI: 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

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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.
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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.
VISCOUNT CECIL OF CHELWOOD: We do not know anything about it.
LORD STRABOLGI: I am speaking of the policy, and I am sure the noble Viscount will agree with me there, that

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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
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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.
VISCOUNT ELIBANK: 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.
LORD BARNBY: 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
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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

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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-
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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

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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.
LORD STRABOLGI: 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.
LORD BARNBY: 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,
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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

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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
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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.
LORD ROCHE: 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

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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.
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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

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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.
LORD HANKEY: 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
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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

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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.
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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

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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.
VISCOUNT CECIL OF CHELWOOD: No. The inventor was the American Consul-General in London.
LORD HANKEY: 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,
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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

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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
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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.
LORD STRABOLGI: Was that purchase completed?
LORD HANKEY: 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.

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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.
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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

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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.
VISCOUNT SWINTON: 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.
LORD HANKEY: Perhaps I was dealing with the question a little more widely, and with outside criticisms.
VISCOUNT SWINTON: I beg pardon, I thought the noble Lord was answering me.
LORD HANKEY: I was answering the noble Viscount and outside criticisms as
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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.
LORD BARNBY: 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.
LORD HANKEY: 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-

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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
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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.
LORD STRABOLGI: That, I think, must be the effect of the destruction of the "Graf Spee."
LORD HANKEY: 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.
LORD STRABOLGI: It put our prestige up.
LORD HANKEY: 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-

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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:
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"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.
VISCOUNT CECIL OF CHELWOOD: 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.
LORD HANKEY: I did say "in or near."
VISCOUNT CECIL OF CHELWOOD: 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.

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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
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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.