Sitting of 12 May 1943

Preamble
[Mr. SPEAKER in the Chair]
NEW WRIT
For the Borough of The Hartlepools, in the room of William George Howard Gritten, Esquire, deceased.—[Mr. James Stuart.]
ORAL ANSWERS TO QUESTIONS
  BRITISH COUNCIL

    Middle East (Chairman's Visit)
    Sir Patrick Hannonasked the Secretary of State for Foreign Affairs whether he will make a statement on the mission recently undertaken to the Middle East by the right hon. Member for Mitcham (Sir M. Robertson); whether he is satisfied that the valuable educational work which is being conducted by the British Council has been strengthened and expanded during the process of this visit; and whether a report will be published?
    The Secretary of State for Foreign Affairs (Mr. Eden): My right hon. Friend the Member for Mitcham (Sir M. Robertson), with my approval, recently visited Egypt, Turkey, Iraq and Palestine, in the capacity of Chairman of the British Council, to inspect the Council's establishments and to make personal contact with the authorities and others interested in the promotion of cultural relations with Great Britain. The importance of the Council's work is clearly realised by all those whom he met and it is hoped that as a result of the visit the educational and other activities of the Council will be considerably expanded. The report of my right hon. Friend is now under consideration, as also the question of the publicity to be given to it. Its substance will be embodied in one of the quarterly reports of the Council, which are placed in the Libraries of both Houses.
    Sir P. Hannon: In view of the work that has been done by the British Council
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    and of the valuable effect of missions of this kind, is such work still receiving the continued support of the Foreign Office?
    Mr. Eden: Yes, Sir, certainly. We are very encouraged by the results of my right hon. Friend's mission.

    Brazil
    Sir P. Hannonasked the Secretary of State for Foreign Affairs whether he will make a statement on the recent progress of the activities of the British Council in Brazil, with the number of branches which have been founded and their approximate membership; and whether the British Council is prepared to accept the co-operation and support of the recently-formed Anglo-Brazilian Society?
    Mr. Eden: New Anglo-Brazilian cultural societies have been opened at Santos and Curityba, the capital of the State of Paraná. There are now five of these societies in Brazil, and about 5,000 attend classes there. Four additional teachers of English have recently been sent out. The members of the societies are showing great interest in books, periodicals, films and pictures illustrating British life and British scientific achievements. Exhibitions of graphic art have been sent to Brazil. The British Council will gladly co-operate with the Anglo-Brazilian Society in London.
    Sir P. Hannon: If an application is made to the Foreign Office by the Anglo-Brazilian Society, will my right hon. Friend see that it receives favourable consideration?
    Mr. Eden: Yes, Sir. I shall be glad to receive it.

    NORTH AFRICA (INTERNEES)
    4. Mr. John Dugdaleasked the Secretary of State for Foreign Affairs how many political prisoners are still interned in North Africa?
    Mr. Eden: No exact figures are available, but my latest information indicates that between 3,000 and 4,000 have been released during the past two months. I understand that there remain two to three hundred Frenchmen and probably rather less than 2,000 internees of all other nationalities. The majority of these are Spaniards, and a large number of these Spaniards are waiting until transport can

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    be provided to take them to Mexico. Others are waiting for definite jobs and accommodation to be made available to them. There are likely to be a hundred or two who are medically unfit or incapable of employment for one reason or another. The medically unfit are to be admitted into a special rest centre organised with the assistance of the Red Cross. Up to 1st May, 794 internees had joined the British Pioneer Corps and a further 106 have been accepted for enrolment. The French authorities in Algiers have stated officially that all internment camps, except those for enemy nationals, are to be dissolved. I understand that this will be done as soon as employment and accommodation have been found for the remaining internees and as soon as transport has been provided for those of them that are willing and able to leave North Africa.
    Mr. Dugdale: While thanking the right hon. Gentleman very much for that very satisfactory reply, may I ask whether particular attention could be paid to the small number of so-called enemy nationals, many of whom have fought as anti-Fascists for many years, and see whether something can be done to improve their conditions, which, I understand, are not as satisfactory as those of some other nationals?
    Mr. Eden: My attention had not been drawn to that matter, and I will look into it.
    Miss Rathbone: Do the figures which the right hon. Gentleman gave for people interned include people who are working in the mines, who are not exactly interned, but whose conditions are reported as being extremely unsatisfactory? They are said to be working in the mines under semi-prison conditions.
    Mr. Eden: I am not quite sure of the definition, but I rather think my figures include all who could be described as interned; but I will look into the matter.

  ROYAL AIR FORCE

    Vesuvius (Bombing)
    Mr. Purbrickasked the Secretary of State for Air the size and number of bombs dropped in the crater of Mount Vesuvius; and whether he will give full details of the operation?
    The Joint Under-Secretary of State for Air (Captain Harold Balfour): I presume the hon. Member is referring to a recent Press report to the effect that bombs were dropped on Vesuvius by accident during the first raid on Naples in 1940. No report of this incident has been received in my Department.
    Mr. Hannah: Would not Fuji Yama have been a better target?
    Mr. Purbrick: Is it not a fact that no scientific evidence exists to show that earthquakes, volcanic eruptions and tidal waves cannot be produced by artificial means? Would it not be advisable for the Air Ministry to have some experiments carried out?
    Captain Balfour: My hon. Friend may be assured that we have been in touch with seismologists, who are experts in this aspect of the possibilities of bombing.
    Colonel Sir A. Lambert Ward: Has my right hon. and gallant Friend ever heard of the old proverb about carrying coals to Newcastle?
    Mr. Stokes: Before the right hon. and gallant Member goes any further, may I remind him that I am one of the few people who have flown round the inside of the crater in an aeroplane, and that the active part of the crater is only about 12 feet in diameter?
    Sir Edward Campbell: Why did the hon. Member not stop there?

    Women's Auxiliary Air Force
    Mr. Woodburnasked the Secretary of State for Air on what grounds women are excluded from the Women's Auxiliary Air Force unless they have family connections with the Force; and whether there will be equality of opportunity for all applicants and selection made only on grounds of merit and suitability?
    Captain Balfour: Merit and suitability remain essential qualifications for enlistment in the Women's Auxiliary Air Force. As, however, in the age group recently called up, the number who had expressed a preference for service in the W.A.A.F. greatly exceeded the authorised allocation for that Service, recruitment was restricted, except in cases of special qualification, to those who had been in civil employment under the Air Ministry

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    or were closely related to personnel already in Air Force service. I am advised that under this arrangement sufficient recruits will be obtained of the requisite standard to meet the needs of the Service.
    Mr. Woodburn: While it may suit the Air Force Selection Board to carry it through in this manner, is it not very unfair that intelligent and capable girls who are anxious and keen, and who are qualified to join the Air Force, are denied, simply because they have not family connections, while somebody with poorer qualifications may be admitted on these grounds?
    Captain Balfour: The position is that we have far more applicants for the Women's Air Force, suitable applicants, than we can accept. Therefore, among the suitable applicants, we give preference to those who have some close connection with the Air Force. I think that is a fair and reasonable system.
    Mr. Woodburn: Is it not a fact that the documents issued to the girls say that they are debarred, although they are qualified, unless they have these family connections?
    Dr. Edith Summerskill: Although the right hon. and gallant Gentleman has a large number of applicants, would it not be more efficient to choose the girls on the ground of merit rather than of background?
    Captain Balfour: We have so many girl applicants with the requisite merit and qualifications that we have to make a distinction within the category of those who are eminently suitable. Therefore we say:
    "Previous civilian work at R.A.F. unit or in the Air Ministry.
    Father or brother in the Royal Air Force.
    Fiancé, deceased, formerly member of the Royal Air Force.
    Fiancé, prisoner of war, member of the Royal Air For e.
    Widow of former member of the Royal Air Force.
    Mother or sister in the W.A.A.F."
    Dr. Summerskill: Does the right hon. and gallant Gentleman say that the existence of a former fiancé makes a girl more suitable?
    Captain Balfour: Yes, Sir.

    Air Crew Refresher Course
    Mr. Loverseedasked the Secretary of State for Air the purpose of the Royal Air Force officers' disciplinary course at a town of which he has been informed; and whether he is aware that officer and sergeant pilots are sent there for offences involving not discipline but some error of judgment in flying, correctable more readily at a flying refresher course than on a barrack square?
    Captain Balfour: The purpose of the air crew refresher course is to assist in the elimination of tendencies likely to contribute to avoidable flying accidents. The course forms part of a general scheme of accident prevention. As for the second part of the Question, only those pilots are sent on the course who, in the opinion of their commanding officers, are likely to benefit from it.
    Mr. Loverseed: Is the right hon. and gallant Gentleman aware that there have been a number of cases in which sergeant pilots in particular have been sent there with a view to sending them on a punishment course?
    Captain Balfour: No, Sir. Pilots who made an error of judgment in flying would not be sent to a course, except when the commanding officer considers that carelessness or disobedience of orders, or tendencies in those directions, have been the cause of the error or are likely to cause errors in the future. Of course, there will be cases in which pilots consider that their error has not been due to carelessness. The commanding officer must be the deciding authority.
    Mr. Loverseed: Will the Minister investigate certain cases I have in mind if I send them to him?
    Captain Balfour: Yes, Sir, certainly. If the hon. Member will send me any particular individual case, I shall be glad to look into it.

    100 Octane Aviation Fuel
    Mr. Loverseedasked the Secretary of State for Air whether the statement made by Mr. Patterson, United States Under Secretary for War, to the Senate Truman Committee, regarding the serious shortage of 100 octane aviation fuel applies also to Great Britain; and whether he will again bring to the notice

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    of officers commanding Royal Air Force units the need for the utmost economy in this matter?
    Captain Balfour: I have seen Press reports of the statement referred to. The United States and United Kingdom Governments collaborate closely in the matter of supplies of 100 octane aviation fuel and operational needs have been and are being fully met. As regards the last part of the Question, regulations designed to ensure economy in the use of aviation fuel are in force throughout the Service.
    Mr. Loverseed: Will the right hon. and gallant Gentleman consider a case I have in mind in which, owing to the tightness of the rule about pool petrol, a journey which would have involved two gallons of pool petrol was found to be much more conveniently done by means of aircraft at a cost of about 40 gallons of 100 octane fuel?
    Captain Balfour: Naturally, I cannot accept that version of the case until I have investigated it. If my hon. Friend will send me particulars, I will look into them.

    Volunteer Reserve Officers (Promotion)
    Mr. Purbrickasked the Secretary of State for Air how many officers of the Royal Air Force Volunteer Reserve have been promoted to air rank since December, 1942; and how many have been promoted to group-captains in Bomber, Fighter, Coastal and Army Co-operation Commands, respectively?
    Captain Balfour: The answer to the first part of the Question is "One." As for the second part, no such promotions have been made in the Commands referred to in the period in question.
    Mr. Purbrick: In view of the high qualifications of so many officers of the Royal Air Force Volunteer Reserve, does not the right hon. and gallant Gentleman think that this matter might be stepped up a bit?
    Captain Balfour: We have only one test for filling these air posts, and that is, to try to get the best man available for the post, irrespective of whether he is a Regular officer or an officer of the Royal Air Force Volunteer Reserve.

    Security Work (Second Front)
    Mr. Purbrickasked the Secretary of State for Air whether the organisation of the Royal Air Force security police for sending personnel abroad when we make a second front in Europe is complete?
    Captain Balfour: In the circumstances referred to, the Army Field Security organisation will undertake security work for the Royal Air Force.

    BRITISH OVERSEAS AIRWAYS CORPORATION
    Rear-Admiral Sir Murray Sueterasked the Secretary of State for Air whether, in view of the opinion of the former members of the Board of British Airways Corporation, now made public, that they consider undue hindrance to the efficient discharge of their responsibilities and their duty of planning for a rapid expansion of air transport, during and after the war, was due to the attitude of the Government, he has any statement to make?
    Captain Balfour: I cannot accept the implication of my hon. and gallant Friend's Question. In order that our limited air transport resources might be used to best advantage in the prosecution of the war, the Corporation were required in April, 1940, to place their undertaking at the disposal of the Secretary of State for Air in accordance with Section 32 of the British Overseas Airways Act. In these circumstances while management remains a function of the Corporation, the formulation of war-time policy is, and must be, the responsibility of His Majesty's Government. As regards the last part of the Question, I would refer my hon. and gallant Friend to the statement which my right hon. Friend made to the House on behalf of the Government, in the course of the Debate on Civil Aviation on 11th March.

  AIRCRAFT PRODUCTION

    Output (Workers' Limitation)
    Captain Gammansasked the Minister of Aircraft Production in how many factories there has been a deliberate limitation of output, and a refusal to do overtime, on account of dissatisfaction regarding piece-time rates or for other reasons;

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    whether he will give an estimate of the effect this action will have on the supply of aircraft to our Forces and the armies of our Russian Allies; and what steps he is taking in the matter?
    The Minister of Aircraft Production (Sir Stafford Cripps): Arising out of the recent award in the engineering trade, there have been a number of cases in which action such as that mentioned in the hon. and gallant Member's Question has been taken by the workers without the authority of their union. None of these were, however, in aircraft factories, though in some cases sub-contracts were being executed for aircraft or air engine contractors. My right hon. Friend the Minister of Labour, with whom I have been in close touch on the matter, has taken the view, with which I am in complete agreement, that this is primarily a matter for the executives of the trade unions concerned. In the majority of cases the difficulties have been now resolved; in the rest the matter is being dealt with by the trade union executives. It is not possible to form any exact estimate of the effect of this action upon the output of aircraft, but any such action must, of course, interfere with our war production and is therefore to be deplored.

    Factory Site Clearance, Wales
    Mr. Ness Edwardsasked the Minister of Aircraft Production whether any charge was made to the demolition contractor for the use of Army motor-lorries and personnel for the removal of the stores from a fire damaged balloon factory in South Wales; and whether the clearance of these stores was included in the demolition contract?
    Sir S. Cripps: With regard to the first part of the Question, I would refer my hon. Friend to the answer given to him yesterday by my right hon. Friend the Secretary of State for War. As to the second part, the answer is in the negative. The firm at whose premises the fire occurred requested help from the emergency services organisation of my Ministry in removing stores from the damaged premises to other premises close by. Transport was arranged which was paid for by the firm in question at the usual rates.

  COLONIAL EMPIRE

    Housing
    Major Lyonsasked the Secretary of State for the Colonies what steps he proposes to take to improve the urban housing conditions of non-Europeans in our Colonies, especially in the areas of ports and municipalities, and on a basis both of economic and sub-economic rental; whether he will insist on all Governments and railways preparing plans for improved housing of their non-European employees once hostilities cease; and whether he has yet acquainted himself with the success of the work in these directions by the Central Housing Board in the Union of South Africa, notably at Port Elizabeth?
    The Secretary of State for the Colonies (Colonel Oliver Stanley): Measures for the improvement of housing conditions are being taken in a considerable number of Colonial territories, but their progress has been retarded by difficulties in obtaining personnel and material under war conditions, and by the prior claims of construction for military purposes. Expert advice is, however, being sought for those areas where the need is most immediate and I propose shortly to invite the attention of certain Colonial Governments to the need to proceed now with any planning which is an essential preliminary to the taking of early action when hostilities cease. Experiments with local materials are being carried out in several Colonies, and my hon. and gallant Friend can rest assured that experience gained in South Africa and elsewhere will not be overlooked in considering parallel problems in the Colonial Empire.
    Major Lyons: Does my right hon. and gallant Friend recollect the correspondence we had on that matter, and has he yet been able to acquaint himself with the material which was last submitted to his Department by the consent of the right hon. and gallant Gentleman himself?
    Colonel Stanley: I recollect having had some very interesting correspondence with my hon. and gallant Friend, but I must confess I cannot at the moment recall what his last suggestion was. I must look it up.
    Major Lyons: It is not my suggestion but a published document, which the

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    right hon. and gallant Gentleman was good enough to say he would consider if I sent it to him.
    Colonel Stanley: If I said we would consider it, I am certain we are considering it.

    Post-War Reconstruction
    Mr. Creech Jonesasked the Secretary of State for the Colonies whether the Colonial Governments have been asked to give their attention to the problems arising from demobilisation and transfer to peace conditions; and whether schemes of industrial expansion and agricultural improvement, together with economic planning and schemes of development, are being prepared in anticipation of this contingency?
    Colonel Stanley: This important subject is one which has already been closely examined by those Governments most concerned. In the course of this examination the various matters mentioned by the hon. Member in the second part of the Question are being taken into account. I am about to address Colonial Governments on the whole matter.

    Rehabilitation and Training
    Mr. Creech Jonesasked the Secretary of State for the Colonies what steps are being taken for the rehabilitation and training of men and women discharged from the various services in the colonial territories?
    Colonel Stanley: An African Rehabilitation Centre has been set up in Kenya for the treatment of Africans belonging to any of the East African territories who have been discharged from the military Forces on account of injuries sustained during their service. The provision of similar facilities is being considered for West Africa. In Malta special consideration is being given to the problem of persons disabled, whether by enemy action, accident or disease. As regards other parts of the Colonial Empire, I have no detailed information.

    Excess Profits (Taxation)
    Mr. Sorensenasked the Secretary of State for the Colonies, what percentage of Excess Profits Tax is charged in the various Colonies; why there is no Excess Profits Tax in West Africa; and, in view of the necessity of West African Colonies
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    securing a share of the extra profits from increased mineral exploitation for war purposes, whether steps will be taken to achieve this in West Africa?
    Colonel Stanley: The rates of Excess Profits Tax in the Colonies vary from 40 per cent. to 80 per cent., and I will circulate details as regards the several Colonies in the OFFICIAL REPORT. The primary reason why Excess Profits Tax has not been introduced in West Africa is the administrative difficulty of accurate assessment, in view of the absence of any well-established Income Tax machinery. Full Income Tax has only recently been established in Nigeria and in the Gambia, and is only now being introduced in the Gold Coast and in Sierra Leone. This has caused a very acute shortage of competent technical staff, and, although I should certainly like to see Excess Profits Taxes introduced there, as elsewhere, I prefer that the available staff should be used in the establishment of the Income Tax system on a sound basis before being asked to take on the additional responsibility of administering Excess Profits Tax. The hon. Member will no doubt realise that the larger companies are already subject to Excess Profits Tax in this country.
    Mr. Sorensen: Could we have an assurance that when the Income Tax arrangements have been completed, special attention will be paid to the Excess Profits Tax to be operative in that area?
    Colonel Stanley: I certainly shall give it most serious consideration as soon as am satisfied that the Income Tax arrangements are working properly.
    Following is the reply to the first part of the Question:
    The present rates of Colonial Excess Profits Tax are as follow:

    Per cent

    Aden

    60⅔

    British Guiana

    60

    Ceylon

    50

    Jamaica

    50

    Kenya

    60

    Mauritius

    40

    Northern Rhodesia

    60

    Seychelles

    50

    Tanganyika

    60

    Trinidad

    80

    Uganda

    60

    Zanzibar

    60

    Students (Travel Restrictions)
    Mr. Sorensenasked the Secretary of State for the Colonies whether he has any information regarding regulations restricting Nigerians and others from proceeding abroad for study?
    Colonel Stanley: Owing to war conditions, it was decided in June, 1941, to advise all Colonial Governments that it would be in the best interests of students that certain conditions should be fulfilled before they came to this country. The main conditions were that they should have carried their studies as far as possible in their own countries, and that they should be adequately equipped financially. They were also to be warned that they would be ill advised to come for short time studies, in view of passage difficulties. Acting on this advice, the Government of Nigeria recently issued a notice in the Government Gazette, a copy of which I am sending to my hon. Friend.

  WEST INDIES

    Jamaica Civil Service
    Mr. Rileyasked the Secretary of State for the Colonies whether he can make any statement regarding the recommendations of the Public Service Committee appointed four years ago to inquire into the working of the Civil Service in Jamaica; and whether it is proposed to take any action arising from the investigations of the committee?
    Colonel Stanley: Subject to a few minor modifications made by the Finance Committee of the Legislative Council, the recommendations of the Public Services Committee for the regrading and reorganisation of the Jamaica Civil Service have been approved, and the necessary provision was made in the estimates for 1943–44 which have been passed by the Legislative Council.

    Chief Probation Officers
    Mr. Rileyasked the Secretary of State for the Colonies whether chief probation officers for Jamaica and Trinidad, as recommended in the recent Stockdale Report, have been appointed?
    Colonel Stanley: No, Sir. Although my right hon. Friend the Home Secretary has been most helpful and the National Association of Probation Officers have
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    given every assistance, it has not so far been possible to secure the services of suitable candidates for these two appointments. Efforts to do this are, however, being continued.

    Electoral Reform (Barbados)
    Mr. David Adamsasked the Secretary of State for the Colonies what action it is proposed to take in Barbados following on the presentation of a Select Committee's Report on a Bill to amend the Representation of the People Act, this Bill having provided for the reduction of income qualifications for voters and the introduction of the female franchise?
    Colonel Stanley: This report by a Select Committee of the Barbados House of Assembly has been under discussion in that House, but I have not yet heard whether, and, if so, in what form, they passed the Bill. The next step would be consideration of the Bill by the Legislative Council.

    Firewood Shortage, Barbados
    Mr. David Adamsasked the Secretary of State for the Colonies whether he is aware of the hardship experienced by the people of Barbados due to the shortage of firewood; and whether the Government are taking any steps to improve the position?
    Colonel Stanley: Yes, Sir, I am aware of the shortage of firewood in Barbados, and the Colonial Government are doing what they can to meet the position. But there are grave difficulties, owing to the lack of timber on the island itself and the shortage of supplies from Trinidad and the Windward Islands, due partly to the lack of shipping and partly to the necessity for maintaining the existing forests in those islands to avoid soil erosion.
    Mr. Adams: In view.of the urgency of this matter, may we take it that the Minister is doing his best to rectify the position?
    Colonel Stanley: Yes, Sir, the hon. Member is quite right. This is a serious difficulty, one of the many caused by' shipping difficulties in that area, and I will give it attention.

    KENYA (COMPULSORY LABOUR)
    Mr. Sorensenasked the Secretary of State for the Colonies how many natives

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    of Kenya are working in the tea and coffee plantations under forced labour; and why this compulsory labour on tea and coffee production is considered essential for war purposes?
    Colonel Stanley: Compulsory labour has been suspended since February. There are, however, at present, according to the latest figures available, about 550 Africans who have been recruited for the coffee industry and rather less than 100 for the tea industry under the Defence Regulations. The main object of declaring these two important industries in Kenya to be essential undertakings under those Regulations was in order that they might be maintained in operation on a scale which would enable the Colony to play its part in meeting the food supply requirements of the United Nations, including those of the large numbers of refugees and prisoners in East Africa.
    Mr. Sorensen: Is it considered necessary that these 700 should be subject to enforced labour? Is there no other means by which the requisite labour can be obtained?
    Colonel Stanley: I think it was because it could not be obtained by other means that these Regulations were brought into force.
    Mr. Thorne: Can the right hon. and gallant Gentleman say how I am to distinguish between coffee produced by enforced labour and coffee that is not?
    Colonel Stanley: I am afraid I can make no useful suggestion at all to my hon. Friend on that point.
    Mr. Creech Jones: In view of the very severe food shortage and the breakdown of food supplies due partly to the fact that native labour has been diverted to work other than food production, would the right hon. and gallant Gentleman give special consideration to the transfer back to the reserves of some of these men, so that they can build up the food supply necessary for sustaining the lives of the natives in the reserves?
    Colonel Stanley: As I said in my answer, compulsory labour has been suspended since February.
    Mr. Sorensen: I understand that there are 700 still employed?
    Colonel Stanley: No, Sir. I said that compulsory labour had been suspended in February. At that time, when it was suspended, those were the numbers employed.

    WEST AFRICA (LEGISLATIVE CONSTITUTIONS)
    Mr. Rileyasked the Secretary of State for the Colonies whether he has under consideration a revision of the legislative Constitutions of our West African Colonies, particularly with a view to the extension of self-government in the coastal areas?
    Colonel Stanley: I cannot at this stage add anything to the reply which I gave to the hon. Member on 14th April.
    Mr. Riley: Is it not time, in view of the fact that our declared policy is to give self-government in our Colonial Empire, for something to be done in the West African Colonies, after the change in Jamaica?
    Colonel Stanley: I do not think that that. necessarily follows. Changes to be made in any Colony must depend on the conditions in that Colony. We are anxious to see an advance there, as elsewhere.
    Mr. Sorensen: Will the right hon. and gallant Gentleman give an assurance that this matter of constitutional development in West Africa will be seriously considered?
    Colonel Stanley: It is being seriously considered now.

  RAILWAYS

    Payment of Fares (Change)
    Mr. Liddallasked the Parliamentary Secretary to the Ministry of War Transport whether he is aware that the Southern Railway have given instructions that change must not be given by booking clerks to persons who tender a £5 note in payment of fares; and whether this refusal of the company to accept legal tender is the result of instructions given by his Department?
    The Joint Parliamentary Secretary to the Ministry of War Transport (Mr. NoelBaker): I am looking into this matter, and will let my hon. Friend know the result.
    Mr. Liddall: If I let the hon. Member have details of the case of a squadron-leader who was unable to get a ticket for his wife and child because he had not less than a £5 note in his possession, will he look into them.
    Mr. Noel-Baker: I shall be glad to look into any details that the hon. Member can give me.

    Seating Accommodation
    Mr. Ellis Smithasked the Parliamentary Secretary to the Ministry of War Transport whether he is aware of the difficulties of passengers in obtaining seats at Stoke-on-Trent; that there were no seats available on several trains on 30th April, when people were not allowed to use first-class seats; and what action it is intended to take?
    Mr. Noel-Baker: Apart from special trains for workmen, 113 local and through trains left Stoke on 3oth April. The loading of the local trains was normal, and it was only in certain main-line express trains that passengers had difficulty in finding accommodation. I am informed that only one instance can be traced in which third-class passengers were prevented from using first-class seats. This was on a train from Birmingham to Manchester, which leaves Stoke at 11.40 a.m. Passengers who were about to enter first-class compartments were directed to third-class compartments, in which there were unoccupied seats.
    Mr. Smith: Will the Minister have observation made at this station, and, if necessary, take appropriate action?
    Mr. Noel-Baker: Yes, Sir.
    Mr. Tinker: Will my hon. Friend pay attention to this matter, because there is no doubt that porters are stopping people from occupying first-class carriages, when there is room in them and no room in third-class carriages?
    Mr. Noel-Baker: I said yesterday that we shall see that these instructions are observed.
    Mr. John Dugdale: Is my hon. Friend aware that although soldiers are allowed to enter first-class compartments, they do not dare to do so if officers are in those compartments?
    Mr. Noel-Baker: That is not a matter for my Department.
    Mr. Ellis Smithasked the Parliamentary Secretary to the Ministry of War Transport what action it is intended to take in order that men and women serving in the Armed Forces, the Merchant Service, women with young children and those engaged on special National Service shall be given preference in the whole of the seating accommodation on all long-distance trains and in the use of trucks and other assistance in the carrying of kitbags, etc., on all railway platforms?
    Mr. Noel-Baker: My hon. Friend's proposal would require the establishment of a system of priority permits for all those who use long-distance trains for any essential purpose. This would entail great inconvenience to travellers, and would necessitate the creation of an elaborate and costly administrative organisation. I regret that these disadvantages would outweigh the advantages which the plan might have.
    Mr. Smith: If the action I have suggested cannot be taken, what action is being taken to deal with this problem?
    Mr. Noel-Baker: I am afraid that there must be great discomfort for all classes of passengers in present conditions, because of the pressure upon our transport system. The railways are doing their best; I am not sure what more they can do. If my hon. Friend will make any proposals, I will consider them.
    Mr. Smith: We recognise that there must be inconvenience, but will my hon. Friend see that that inconvenience is spread over all classes of travellers?
    Mr. R. J. Taylor: Is my hon. Friend aware that the Ministry of War Transport itself is aggravating the position in some districts by increasing the fares by 60 per cent.?
    Mr. Shinwell: As this war is being fought for democracy, why not abolish first-class carriages?

    MacBRAYNE, LIMITED (INSPECTION TRIP)
    Mr. McKinlayasked the Parliamentary Secretary to the Ministry of War Transport whether he is aware that on i7th April, the chairman of Coast Lines, Limited, with one other person, made a special trip on the ss. "Lochearn" from

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    Oban to Tobermory; that this is not the ship's normal voyage; that the mail boat ss. "Lochinvar" had left for the same destination one hour earlier; that both ships arrived at Tobermory within 10 minutes of one another; and the amount of oil fuel consumed on the voyage and the cost in overtime paid to the ship's company?
    Mr. Noel-Baker: I am informed that the chairman and general manager of MacBrayne, Limited, had to make a necessary inspection of extensions to the shipping facilities at Lochaline, which is about midway between Oban and Tobermory, and that they took the "Lochearn," intending to land at Lochaline, and to go on from there, with the mail boat. They made this arrangement in order to avoid delaying the mail boat at Lochaline while their inspection was made. Unfortunately, the weather made it impossible for the "Lochearn" to land her passengers at Lochaline, and they were, therefore, obliged to take her on to Tobermory. The fuel consumed by the "Lochearn" was about 70 gallons, and the cost of overtime was £3 3s.
    Mr. McKinlay: Does the Minister suggest that it was impossible for the "Lochinvar" to take this diversion on its way to Tobermory and save both time and money?
    Mr. Noel-Baker: Of course, that could have been done, but it would have meant that passengers and mails would have been delayed for a considerable time at Lochaline.
    Mr. Shinwell: What was the nature of this inspection?
    Mr. Noel-Baker: Inspections of this kind must be made.
    Mr. Shinwell: Was this an inspection undertaken on behalf of the Ministry of War Transport, or was it simply an inspection conducted by Coast Lines, Limited, of which Sir Alfred Reed is chairman?
    Mr. Noel-Baker: We are anxious to keep these services at the highest point of efficiency, and such inspections must be made by those responsible for running them.
    Mr. Shinwell: I asked whether the inspection was undertaken on behalf of the
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    Ministry of War Transport, and, if so, what was the nature of the inspection?
    Mr. Noel-Baker: I have already said that in our view this was a necessary inspection.
    Mr. McKinlay: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

  MINISTRY OF INFORMATION

    "Daily Worker"
    The following Question stood upon the Order Paper, in the name of Mr.DRIBERG:
    31. To ask the Minister of Information whether he can now make any statement concerning the ban on the export of the "Daily Worker."
    Mr. Wakefield: In view of the great interest in Question 31, is it not possible for the Minister to give a reply?
    Mr. Speaker: The Question is not being asked.
    Mr. Driberg: I have postponed the Question by arrangement.

    Publicity Campaign (Cost)
    Mr. Manderasked the Minister of Information the amount of expenditure that has been incurred in paper and printing, salaries, etc., in connection with the propagation of the slogan "It all depends on me"; and whether he is satisfied that the results have been commensurate with the time, money and energy expended and the paper used?
    The Minister of Information (Mr. Brendan Bracken): This campaign is run by a non-official organisation. The M.O.I. has always been ready to give it what assistance it can, and altogether an expenditure of £2,900 has been incurred in helping it. At present no financial help is being given, but we still feel justified in assisting it in other ways.
    Mr. Mander: Is my right hon. Friend aware that some of my constituents have been very much puzzled when they have received by the same post details of the scheme, and an appeal from the Ministry of Production Economic Committee to use as little paper as they can, and that they do not know what advice to follow?
    Mr. Bracken: May I point out to my hon. Friend that it is impossible to have a publicity campaign without using paper?

    Russian Department (Mr. H. P. Smollett)
    Captain Cunningham-Reidasked the Minister of Information when Mr. H. P. Smollett was appointed director of the Russian Department of the Ministry?
    Mr. Bracken: Mr. Smollett has been in charge of Anglo-Soviet relations work in the Ministry since October, 1941, to the great satisfaction of all those concerned with his work.
    Captain Cunningham-Reid: Can the Minister tell me what the Gentleman's name was before he changed it?
    Mr. Bracken: I do not know, but in answer to the hon. and gallant Gentleman's question, he might perhaps give me notice of it. He does not seem to like foreigners, at any rate, poor foreigners.
    Commander Locker-Lampson: That was a catty question.
    Captain Cunningham-Reidasked the Minister of Information how long Mr. H. P. Smollett, of the Ministry of Information, has been a British subject; and when did he take up a permanent residence in Great Britain?
    Mr. Bracken: Mr. Smollett has been a British subject for 4½ years. He took up permanent residence in Great Britain in the autumn of 1930.
    Captain Cunningham-Reid: Since this gentleman is a Hungarian by birth and since Hungary and Russia are at war, does the Minister consider that his appointment to the important post of director of the Russian section of his Ministry is calculated to show our good faith in the Russian people?
    Mr. Bracken: Yes, Sir. I do not know whether he is a Hungarian or not, but he was selected because of his supreme technical qualifications, and, let me say, he has constant dealings with Russian representatives in London, who are entirely satisfied with his work in every respect.

  POST OFFICE

    Letter Delivery, Glasgow
    Mr. Kirkwoodasked the Postmaster-General whether he is aware that busi-
    616
    ness firms in Glasgow are concerned at the proposal to abolish the mid-day delivery of letters bringing the bulk of the mail from the South which, if not delivered until the afternoon, cannot be dealt with the same day; and whether he will reconsider his decision and do away with the morning delivery and retain that at midday?
    The Assistant Postmaster-General (Mr. Grimston): Yes, Sir. My right hon. and gallant Friend proposes to arrange for the second delivery in Glasgow to commence before noon. This arrangement is understood to be acceptable locally. The second part of the Question does not therefore arise.
    Mr. Kirkwood: Thank you very much.

    Northern District Office, Islington (Working Conditions)
    Mr. Cluseasked the Postmaster-General whether he is satisfied that the conditions of service at the Northern District Office, Islington, are such as to take fully into account the lower physique and higher age of those engaged there; and whether he will look into these conditions, as women sorters perform more work than pre-war male sorters and non-able-bodied men carry out duties beyond reasonable limits?
    Mr. Grimston: I am satisfied that the staffing arrangements generally at the Northern District Office have been framed with due regard to the age and physique of the present-day staff and that the duties of the women sorters and non-able-bodied men should be well within their capacity. The working arrangements are under constant review, and they are adjusted as necessary in consultation with the accredited representatives of the staff. My right hon. and gallant Friend is looking further into the specific points to which my hon. Friend has drawn his attention by letter and will write to him when his inquiries are completed.

    WAR DAMAGED HOUSES (REPAIR EXPENDITURE)
    Mr. Rostron Duckworthasked the Parliamentary Secretary to the Ministry of Works why local authorities are permitted an expenditure of up to £250 per house in the case of war damage whereas

    617
    private owners are only to be permitted to expend £200 per house, while the need is the same in both cases?
    The Parliamentary Secretary to the Ministry of Works (Mr. Hicks): Under the special scheme for the repair by local authorities of some 40,000 war damaged houses in England and Wales, the authorised average expenditure per house has been fixed at £200. Licences under Defence Regulation 56A are not required in these cases, but private owners wishing to do their own repairs must obtain a licence where the total amount spent on the property in any period of 12 months exceeds £100. The grant of a licence is dependent upon the facts of each case and is not determined by an arbitrary money limit such as that mentioned in the Question. For houses comparable with those being repaired under the special scheme, a broadly equivalent standard is now being applied provided labour and materials are available in the district.

    SALVAGE NOTICES (FIXTURES)
    Brigadier-General Clifton Brownasked the Parliamentary Secretary to the Ministry of Works whether he is aware that in numerous cases salvage committees have not filled up on the D.D. & R. 47 requisition notices the fixtures to be taken, making it impossible for occupier or owner to object or claim compensation; and whether he will make these notices valid only for the fixtures enumerated on the forms themselves as directed on the D.D. & R. 47 notice itself?
    Mr. Hicks: The form D.D. & R. 47 is not a requisition notice and is not intended, nor is it in fact used, to notify details of the fixtures to be taken. It warns the recipient that the schedule prepared and held by the local authority affects the property. Claims for compensation, if made, can be supported by the detailed receipt given when the fixtures are removed.
    Brigadier-General Brown: Is the hon. Gentleman aware that when officials send out the forms they are directed to fill in the fixtures they are going to take, and they do not do that; and that it is a great hardship on the owner in not knowing if they can go inside the house or anywhere outside without notifying any details on the back of the form, which they should have filled up?
    Mr. Hicks: The purpose of the notice is to avoid criticism about entering property without informing the occupier, and if the occupier wishes to object to the removal of fixtures, he should object to the local authority.
    Brigadier-General Brown: But notice is not given. Then these forms are of no use at all if they do not contain any fixtures on the back which are not there.

    HOUSE OF COMMONS CHAMBER (LOUD-SPEAKING APPARATUS)
    Captain Gammansasked the Parliamentary Secretary to the Ministry of Works whether he is prepared to instal additional loud-speaking apparatus in the Visitors' Gallery of this Chamber?
    Mr. Hicks: Yes, Sir. I am quite prepared if hon. Members so desire to consider the installation of additional loud-speaking apparatus in the Visitors' Gallery of this Chamber.
    Captain Gammansasked the Parliamentary Secretary to the Ministry of Works whether he has carried out any experiments with additional loud-speaking apparatus in this Chamber to improve its acoustic properties so that the Chamber can be fitted with glass windows and ventilated with fresh air?
    Mr. Hicks: No, Sir. The existing microphones have been so placed and adjusted as to pick up speech from any part of the Chamber and relay it satisfactorily to the Gallery. I am advised that if loud speakers were installed on the Floor of the Chamber, the microphones would pick up the sound, and there would be an uncontrollable volume of noise.

  ROYAL NAVY

    Limbless Ratings (Pre-19I4 Pensions)
    Lady Apsleyasked the First Lord of the Admiralty on what scale sailors who lost limbs when on duty prior to the war of 1914 to 1918 were pensioned; and what weekly amount was accorded to a man who lost one leg?
    The First Lord of the Admiralty (Mr. A. V. Alexander): The naval regulations in force prior to the last war provided for the grant of pensions to the ratings

    619
    in question according to length of service, rating, and character, and the circumstances of the casualty, within a range of 7s. to 10s. 6d. a week for the loss of one limb and l0s. 6d. to 14s. a week for the loss of two limbs, with appropriate additions in respect of Good Conduct Badges and Medal, arid for each year's service in the rating of petty officer.
    Commander Sir Archibald Southby: Can my right hon. Friend say whether any wound pensions are now paid to officers and men who have lost a limb or who have been wounded in this war and whose services are retained in this war and who are still serving?
    Mr. Alexander: I would like to have notice of that Question.

    Industrial Undertakings (Authorised Controllers)
    Mr. Higgsasked the First Lord of the Admiralty the number of industrial undertakings predominantly working for his department to which, as competent authority, he has appointed an official controller?
    Mr. Alexander: Two authorised controllers have in the past been appointed to industrial undertakings by the Admiralty. In one case the control was terminated by the Admiralty when they were satisfied that it was no longer necessary; in the other case it was terminated by the Admiralty because the undertaking was being taken over by the Government at the request of the shareholders of the company.

    Constantinesco Watercraft Invention
    Commander Bowerasked the First Lord of the Admiralty whether the powers granted to the Admiralty by Order No. 1780/1941, paragraph 3 (3), under the Defence (Patents, Trade Marks, etc.) Regulations, 1941, have been exercised in order to obtain the design of the watercraft invented by Mr. George Constaninesco?
    Mr. Alexander: No, Sir.
    Commander Bower: Why not?
    Mr. Alexander: I think the hon. and gallant Gentleman is aware that Mr. Constantinesco has been asked to supply in confidence particulars of his design but
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    has consistently refused to do so. If he wishes, as I am sure is the best method, to let this be of advantage to the country from patriotic motives, we are prepared at any time for experts to examine it under the assurances that I have repeatedly given.
    Commander Bower: What on earth is the use of taking powers to acquire particulars of an invention of this sort if they are not used? Surely the Admiralty want to use this thing?
    Mr. Alexander: I cannot see how the Admiralty can want to use a thing of which they have been given no particulars.
    Mr. Stokes: Is it not a fact that Mr. Constaninesco refused to submit his invention because it had to go to Professor Lindemann, in whom he had no faith?
    Mr. Alexander: I have no such information.

    Barge Sinkings, Welsh Coast
    Mr. Ammonasked the First Lord of the Admiralty whether he has yet received the report on the disaster off the Welsh coast in which a number of ratings and marines lost their lives; and will he communicate its terms to Parliament?
    Sir Herbert Williamsasked the First Lord of the Admiralty whether he can now make a further statement on the result of the recent inquiry into the disaster to two barges off the Welsh coast as a result of which 81 ratings lost their lives?
    Mr. Alexander: The Report of the Board of Inquiry which was convened to inquire into the circumstances attending the loss of these barges has now been received, and is being examined. Until this examination is finished, it is not in the public interest to make a statement, except that in the meantime steps are being taken to prevent, as far as is humanly possible, any recurrence of this unfortunate event.
    Mr. Ammon: I take it that my right hon. Friend has not definitely turned down the idea of communicating the Report to the House?
    Mr. Alexander: There is no precedent at all for the Report of a Board of Inquiry being published, but I am prepared to

    621
    consider, when due consideration has been given to it, the question of making a statement.
    Mr. Ammon: I am sure my right hon. Friend is too progressive-minded to say he will not make a statement because it has never been done before.
    Mr. Alexander: There are considerations that arise about the holding of a Board of Inquiry which it is essential to observe if we are always to get the fullest possible information.

    FRUIT DRYING EXPERIMENTS
    Mr. Thorneasked the Lord President of the Council whether he can give any information as to the test of drying English fruit carried out by the Department of Scientific and Industrial Research at the Ditton laboratory, near Maidstone, Kent?
    The Lord President of the Council (Sir John Anderson): Preliminary experiments were carried out last season at the Ditton Laboratory of the Department of Scientific and Industrial Research on the drying of English fruits, mainly apples, pears and plums. The results so far obtained from these experiments and from the examination of the dried products after six months' storage are encouraging. The subject is being further pursued. Close contact in this work is being maintained between the Department of Scientific and Industrial Research, the Ministry of Food, the Agricultural Research Council and the Ministry of Agriculture. Representatives of the National Farmers' Union visited the laboratory last week and were told of the methods employed and shown the results obtained.
    Mr. Mathers: Does this experiment in any way extend to Scotland at the present time, or will it be extended to include Scotland?
    Sir J. Anderson: Certainly, if it continues to be satisfactory.
    Mr. Mathers: In that case will the Secretary of State for Scotland be brought into the picture in addition to those mentioned by the right hon. Gentleman?
    Sir J. Anderson: Certainly.

    CIVIL AVIATION
    Rear-Admiral Sir Murray Sueterasked the Minister without Portfolio when he will be in the position to make a full statement of the Government's policy with regard to civil aviation generally and so relieve public anxiety that little progress is being made in this connection?
    The Minister without Portfolio (Sir William Jowitt): I have at present nothing to add to the answer which I gave on 20th April to Questions by my hon. Friend the Member for Stoke (Mr. Ellis Smith).
    Sir M. Sueter: Can my right hon. and learned Friend say when he will be in a position to announce the policy of the Government?
    Sir W. Jowitt: It depends on the conclusion of the discussions with the Dominion and Indian Governments, and I cannot give any date at all.
    Sir M. Sueter: That is the answer my right hon. and learned Friend gave before.

    MACHINE TOOLS
    Mr. Hammersieyasked the Minister of Production whether he is aware that a large number of machine tools from America are still unallocated and are lying in stores; that machine tools now being manufactured in this country are being sent into store; that the production of machine tools and the placing of orders for machines continue uninterruptedly; and what steps he is taking to obviate surplus production?
    The Minister of Production (Mr. Lyttelton): Unallocated new British and American machine tools, of which the large majority are British, amount to only a small fraction of a year's supply. Of the machines in stores some are held available to meet requirements for the replacement of worn out and damaged machines: while a small number go into store as a result of changes in production programmes with consequential changes in the type of machines required. As in other forms of business, a small stock of machine tools is essential to secure prompt replacement and flexibility.
    Mr. Hammersley: In view of the fact that it is a little difficult to reconcile that answer with the fact that there are over

    623
    8,000 machine tools in the hands of either stockists or agents, and that I do not think we shall be able to make much progress, will my right hon. Friend consent to receive some representations from me afterwards?
    Mr. Lyttelton: Certainly.

    JOINT PRODUCTION COMMITTEES
    Mr. Manderasked the Minister of Production whether he will give an assurance that the advisability of continuing in peace-time as a permanent part of our industrial system joint production committees is receiving active consideration?
    Mr. Lyttelton: Joint production committees are voluntary bodies established by agreement between employers and workpeople. I am sure that in the light of the experience gained their continuance after the war will be given the closest consideration by the organisations directly concerned.
    Mr. Mander: Is there any possibility that these bodies will be continued after the war so far as the Government have any influence in the matter?
    Mr. Lyttelton: They are voluntary bodies, and the initiative must lie with industry.
    Mr. Mander: Does the Minister suggest that there is any question of abandoning these most useful institutions?
    Mr. Lyttelton: I made no such suggestion.

  MINISTRY OF SUPPLY

    Trade Advertisements (Circulars)
    Mr. John Dugdaleasked the Minister of Supply why it is considered necessary to allow paper to be used for sending out circulars asking people to spend money on goods and services which they would not otherwise have demanded?
    The Minister of Supply (Sir Andrew Duncan): The gratuitous distribution of advertising circulars relating to the sale of goods or to any profession, trade or business is in general prohibited by the Control of Paper (No. 48) Order.
    Mr. Dugdale: Is the Minister not aware that Members of Parliament, among
    624
    others, receive numerous such circulars? How can he say that this prohibition is effective?
    Sir A. Duncan: I am not aware of the circulars so described in the question, but if the hon. Member will give me any particulars, I shall be glad to look into the matter.
    Mr. Shinwell: I will send the Minister all my circulars.

    Industrial Undertakings (Authorised Controllers)
    Mr. Higgsasked the Minister of Supply the number of industrial undertakings predominantly working for his Department to which, as competent authority, he has appointed an official controller?
    Sir A. Duncan: Authorised controllers have from time to time been appointed by the Minister of Supply to 17 undertakings in all, but in 15 of the cases the Control Order has been revoked, so that there are now only two firms with authorised controllers.
    Mr. Higgs: Does the Minister consider that production will be doubled through taking action of this character?
    Sir A. Duncan: The Ministry's production has gained by it.

    Anti-Diphtheria Immunisation Posters
    Mr. Minderasked the Minister of Supply the conditions under which paper was supplied to the British Union for Abolition of Vivisection for the purpose of attacking on large placards throughout the country the Government's diphtheria immunisation campaign; and what is the quantity involved?
    Sir A. Duncan: I have been unable to trace that any paper has been licensed specifically for these placards, but I am making further inquiries into the matter.
    Mr. Mander: Will the Minister let me know as soon as he has taken action?
    Sir A. Duncan: Yes, Sir.
    Mr. Buchanan: Can we be assured that no penalty will be attached to this body because they hold certain opinions?
    Sir A. Duncan: I have already explained on a number of occasions that the Ministry of Supply do not apply censorship of any kind.
    Mr. Mander: But does not the Minister think that a rather excessive amount of paper is being used for the purpose of attacking the war-time policy of the Government and the health of the nation?
    Sir A. Duncan: So long as our own rules are observed we have no status.
    Mr. Hogg: Will my right hon. Friend bear in Blind that bodies like the Oxford University Press have no paper for essential printing while this sort of thing is going on?
    Mr. Stephen: Is not a rather excessive amount of paper being allowed for the Government's bogus campaign on immunisation?

  FOOD SUPPLIES

    Milk
    Major Yorkasked the Parliamentary Secretary to the Ministry of Food whether retail supplies of tuberculin-tested milk are included in the rationalisation of distribution scheme; and whether consumers requiring to change from non-tuberculin-tested milk to tuberculin-tested milk are at liberty to do so providing they can arrange a supply?
    The Parliamentary Secretary to the Ministry of Food (Mr. Mabane): The answer to the first part of the Question is in the affirmative. With regard to the second part, consumers may purchase whatever type of milk the supplier with whom they are registered provides, but if he does not provide "T.T." milk they are not permitted to transfer their registrations to another dairyman in order to obtain "T.T." milk. Efforts are being made to encourage and to assist dairymen to provide "T.T." milk for such customers as require it.
    Major York: Is the Parliamentary Secretary aware of the despondency his answer will cause, and, further, is he aware that this will wreck the possibility of the extension of supplies of this clean and disease-free milk.?
    Mr. Mabane: I hope the hon. and gallant Gentleman will do his best to dispel any such despondency. The basis of the scheme is fixed registrations.
    Major York: But is the Parliamentary Secretary aware that this milk is different
    626
    from ordinary milk, and that in the past it has been outside normal regulations? Will he reconsider the matter?
    Mr. Mabane: We are doing all we can to see that as little "T.T." milk as possible is bulked and that as much as possible is sold as "T.T."
    Major York: In view of the unsatisfactory nature of the reply, I beg to give notice that I will raise the matter on the Adjournment.
    Mr. Tinkerasked the Parliamentary Secretary to the Ministry of Food whether he will give the number of gallons of milk used for consumption daily and what percentage of this is pasteurised; and whether the milk for school feeding is confined to one kind only?
    Mr. Mabane: I regret it is not in the national interest to publish the total gallonage of milk consumed daily, but I am able to say that from 6o to 65 per cent. is pasteurised. Milk supplied to schools does not all fall within one category but must be approved as to source of supply and quality by the appropriate Medical Officer of Health.
    Dr. Russell Thomas: If all this milk was pasteurised, would it not have the effect of putting small retailer-producers out of business? Is not that the chief object of such a scheme?
    Mr. Mabane: That is quite a different question.
    Mr. Shinwell: How can figures of the production of milk afford comfort to the Axis?
    Mr. Mabane: Publication of figures of total production of any foodstuffs in this country is against the national interest.
    Mr. Stephen: What percentage of pasteurised milk is more than one or two days old?
    Mr. Mabane: I could not say without notice.
    Mr. Thorne: Will the hon. Gentleman see that dried and tinned milk is taken off points?
    Mr. Mabane: As I have represented to my hon. Friend before, dried milk is not on points.
    Mr. David Adamsasked the Parliamentary Secretary to the Ministry of Food whether he can now give an assurance that it has been decided by his Ministry that all milk for human consumption shall be scientifically pasteurised, and by efficient handling and transit thereafter to consumers, ensure to the nation a clean, fresh and safe supply of this food?
    Mr. Mabane: I am not yet in a position to make a statement on this matter.
    Mr. Adams: When will the hon. Gentleman be in a position to make a statement?
    Mr. Mabane: I cannot say.
    Sir Frank Sanderson: Is the hon. Gentleman aware that there is by no means complete agreement?
    Mr. Mabane: That has become apparent.

    Fish Zoning Scheme
    Dr. Russell Thomasasked the Parliamentary Secretary to the Ministry of Food whether the scheme for the allocation of fish is related to the normal consumption of any particular district, or, if not, by what method is it allocated?
    Mr. Mabane: Under the Fish Distribution Scheme the country is divided into zones and sub-zones, and fish is allocated to each sub-zone in proportion to the population of that sub-zone. The fish sent to each sub-zone is allocated to each wholesale and retail trader and fish frier according to the purchases made during the datum period, July to September, 1941, which was agreed by the trade as a period during which distribution was on a reasonably equitable basis.
    Dr. Thomas: Does not this scheme encourage fish eating in districts where it is not normally eaten, and will it not make it difficult to get fish in the places where it is always eaten, both in fried fish shops and at home?
    Mr. Mabane: I do not think so.
    Sir Percy Hurd: Is the Parliamentary Secretary aware that his answer is not consistent with what is happening in towns in Wiltshire which are getting fish in nothing like the proportion that they formerly received?
    Mr. Mabane: Having regard to the present catches that may be so, but the
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    hon. Member must remember that present catches are substantially lower, and must be lower, than in pre-war days.
    Sir P. Hurd: But we are getting none at all.

    Catering Establishments (Returns)
    Mr. McKinlayasked the Parliamentary Secretary to the Ministry of Food whether he will state the method adopted by the Ministry to check the accuracy of the returns made by catering establishments of the number of main meals served?
    Mr. Mabane: The returns made by catering establishments of the number of meals they serve are checked where necessary by means of the records which the establishments are required to keep on their premises These records must be supported by invoices, vouchers, permits and other relevant documents necessary for the purpose of checking the entries made on the records.

    Prosecutions, Glasgow
    Mr. McKinlayasked the Parliamentary Secretary to the Ministry of Food whether his attention has been drawn to the numerous prosecutions of caterers in Glasgow for having obtained fish supplies greatly in excess of their permits; and what steps he proposes to take to deal with the firms who supplied the fish?
    Mr. Mabane: I am aware of the cases to which my hon. Friend refers. No action is proposed against the suppliers since my Noble Friend is advised that they have not committed any offence under the Fish (Supplies to Catering Establishments) Order 1942.
    Mr. McKinlay: Is it not absurd that a receiver who gets a permit can be prosecuted and fined up to £200, while a person who supplies in excess of the permit gets away scot free?
    Mr. Mabane: Catering establishments are not tied to any particular suppliers, and, therefore, it may well be that excessive supplies could be obtained from one supplier. We are considering whether we can have some system of permits which would tie a catering establishment to a particular supplier, which would allow us to take action, as he suggests, if offences were committed.
    Mr. McKinlay: Will the hon. Gentleman give power to local food control committees to deal with suppliers who do not take steps to ascertain what permits to purchase amount to?
    Mr. Mabane: That is the sort of action we have in contemplation.
    Mr. Holdsworth: Will the Parliamentary Secretary remember that we have enough bureaucrats without adding to them?

    Damaged Foodstuffs (Sale Price)
    Lieut.-Colonel Heneageasked the Parliamentary Secretary to the Ministry of Food whether his attention has been called to cases of grains and foodstuffs damaged by war action or otherwise being sold above the controlled price for undamaged goods; and whether he will take any action?
    Mr. Mabane: No, Sir; but if my hon. and gallant Friend will give me any information in his possession, I shall be glad to have inquiries made.
    Lieut.-Colonel Heneage: Does the hon. Gentleman mean that he has no knowledge of any action in the civil courts?
    Mr. Mabane: I mean that my attention has not been called to cases coming within the point raised in the Question.

    Casual Labour, Clydeside (Wages)
    Mr. Maxtonasked the Parliamentary Secretary to the Ministry of Food whether he is aware that workers employed by the Ministry in the warehousing of food supplies after they have left the docks, in the Clyde area, are engaged from day to day on a casual basis, have no guarantee of employment for more than a day, and that many of them do not earn a living wage; and whether he will take steps to secure a living wage for these men?
    Mr. Mabane: I am informed that on the Clyde some warehouse workers are employed by firms acting as agents for my Department and that in accordance with local practice on the Clyde some are employed on daily contract. I am further informed that, in view of reports that a surplus of labour was causing intermittent employment, meetings to consider the position were held in March and April. At these meetings my Department, the Ministry of Labour and the
    630
    Dockers Union were represented. It did not then appear that any surplus existed but rather that there was a shortage of labour. It was however decided to make a survey of the position over a period of four weeks. My Noble Friend will keep in close contact with the situation, and I shall be glad to inform the hon. Member of any developments.
    Mr. Maxton: Will the Food Ministry not consider giving these workers a guarantee of regular employment such as the dockers have?
    Mr. Mabane: The matter was considered at a meeting at which the Ministry of Labour and the Dockers' Union were represented, and it was decided that it was better to let the survey be completed and consider what action should be recommended.
    Mr. Maxton: Is the hon. Gentleman aware that the matter has only come to me because conversations have proved fruitless in producing results?
    Mr. Mabane: I was not aware of that. I hope they will produce results.

    Food Offices (Paper Economy)
    Mr. Lipsonasked the Parliamentary Secretary to the Ministry of Food whether he can give any estimate of the number of letters sent out each month from all the food offices; and whether, in order to save paper and labour at both food offices and post offices, he will adopt the proposal sent to him by the Cheltenham Food Committee that franked envelopes or labels be issued to food offices?
    Mr. Mabane: The answer to the first part of this Question is "No, Sir." With regard to the second part of the Question, while I am unable to trace any proposal in the sense suggested by my hon. Friend, the Food Executive Officer for Cheltenham put the question to me verbally at a recent meeting of Food Executive Officers and Chairmen of Food Control Committees in Bristol, and I was able to explain to him why it did not appear possible to meet his request.
    Mr. Lipson: Does the hon. Gentleman not agree that the number of letters sent out is very considerable; is he not aware that the Food Executive Officer for Cheltenham was not convinced by the Minister's reply and that was the reason why

    631
    the Food Committee passed a resolution on the matter; and will he let me have his considered objections to the proposal?
    Mr. Mabane: It is very largely a matter for the Postmaster-General.

BUSINESS OF THE HOUSE
Mr. Loftus: May I ask the Leader of the House, in view of the importance of matters to be discussed to-day and the large number of Members who wish to take part in the discussion, if he will consider either suspending the Rule to-day or affording another day for a continuation of the Debate?
Mr. Eden: I have made such inquiries as were open to me, and, from what I can learn, there is no general desire to adopt the course my hon. Friend suggests.
Mr. Stokes: If the right hon. Gentleman does not see his way to suspending the Rule, will he give an assurance that another day will be afforded in the near future, failing which, will he give a definite undertaking that no commitments shall be entered into without coming to the House?
Mr. Eden: That would be infinitely more difficult. It might meet the situation if speeches were not very long.
Mr. Stephen: Will the right hon. Gentleman consider suspending the Rule later on in the day if there is a widespread desire for it?
Mr. Eden: I shall be here, and we can always look at the situation, but, as far as I can judge, there is no demand for it.
Mr. Hammersley: As it is well known that there is a very large number of speakers, more than would normally get into the Debate, and having regard to the fact that we recently passed a Motion which would give us some facilities in the matter, will my right hon. Friend take note of what happens in the course of the Debate with a view to meeting the wishes of the House?
Mr. Eden: Certainly. My hon. Friend's knowledge may be greater than mine. I only say that, according to mine, there is not a general demand.
Mr. Mathers: On the suggestion that the suspension of the Rule might be
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considered later on, is it possible, under the Order recently passed, to suspend the Rule while we are sitting in Committee?
Mr. Speaker: The Rule cannot be suspended without the House being reformed, and that would end the Committee of Supply.

BILL PRESENTED
  TELEGRAPH BILL
  "to increase the maximum rate for ordinary written telegrams"; presented by Captain Crookshank, supported by Mr. Assheton and Mr. Grimston; to be read a Second time upon the next Sitting Day, and to be printed [Bill 33].
ORDERS OF THE DAY

  SUPPLY
  [6TH ALLOTTED DAY]
  Considered in Committee.
  [Major MILNER in the Chair]

CIVIL ESTIMATES, 1943

  TREASURY AND SUBORDINATE DEPARTMENTS
  Motion made, and Question proposed,
  "That a sum, not exceeding £626,108, be granted to His Majesty, to complete the sum necessary to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1944, for the salaries and other expenses in the Department of His Majesty's Treasury and Subordinate Departments, and the salaries and expenses of certain Ministers appointed for special duties."—[NOTE.—£315,000 has been voted on account.]

  POST-WAR INTERNATIONAL CURRENCY
  The Chancellor of the Exchequer (Sir Kingsley Wood): I am glad that an early opportunity has been given to the Committee to discuss the important subject of an International Clearing Union. This subject, like that of the proposal for a United and Associated Nations Stabilisation Fund, has aroused great interest in this country, in America and in many parts of the world. It is indeed a subject of much moment, and I do not expect that this will be the only Debate on it before the policy of Governments is determined and general agreement, as we hope, is reached on the whole matter. In my introductory statement to-day I do not propose to deal with the many technical sides of a complicated subject. I propose rather to define the problem as the Government have seen it and to underline the salient features of a possible solution which appear in the White Paper recently made available to the House.
  Mr. Pethiek-Lawrence: One of those papers is called the
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  White Paper and the other the British Paper, or something of that kind. Perhaps the right hon. Gentleman will explain what he means?
  Sir K. Wood: I refer to our own British Paper, or something of that kind. Perhaps wish for some explanation of the procedure which has been adopted in relation to the preparation of this Paper, that is, the British White Paper, and of the events that preceded it. It may be remembered that in the Debate on 2nd February on the post-war economic position of the country I mentioned five ways of approach to post-war economic problems which we regard as valuable. They were—an orderly reduction of unnecessary barriers to the flow of goods between one country and another; the prevention of disastrous swings in the prices of raw materials" and primary products; the work of the International Labour Office; the direction of international investments for development; and, which is the subject of our Debate to-day, the approach to an international monetary mechanism which will serve the requirements of international trade. I thus endeavoured to indicate that the Government regard the problem of an international monetary mechanism not as an end in itself, not as something which by itself bring increased prosperity, but as providing a means for the development of international trade and full employment and thus of offering opportunities for the improvement of the standard of living in all countries.
  In the statement which precedes the White Paper it is made clear that the Government are not committed to the principles or details of the scheme. Readers of it have been quick to note the "Keynes touch" in it. It is no secret that the noble Lord has had a big part in preparing the Paper, and I should like to take this opportunity of expressing my personal indebtedness to him. He would be, I think, the first to agree that he has been assisted by all the consultation which has taken place between officials of the various Departments. This does not mean that the Government have not given the subject and the proposals in this Paper very careful consideration. On the contrary, they believe that the principles of the scheme and what I might describe as its economic philosophy deserve serious and continued examination

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  in all quarters. The matter is to some extent a technical one, and I have no doubt that there will be many developments as a result of further expert examination. Even if complete agreement among the experts is not obtainable, at any rate we may be able to obtain a closer definition of the grounds of disagreement, and it will then be for those ultimately concerned to proceed to obtain, if possible, a reconciliation of ideas and opinions.
  The matter is obviously not one of domestic interest only. This Paper is one contribution to a considerable international problem, and the views and judgments of other nations will be essential, for without their co-operation no international scheme of this kind will be of any lasting value. It was on these grounds that the Government thought it would be for the general convenience if this expert Paper were produced and published to the world for consideration on its merits.
  Mr. Stephen: The right hon. Gentleman told us that Keynes had consultation with various people. Can he say whether he had any consultation with Montagu Norman?
  Sir K. Wood: I am going to explain in detail in a moment what those consultations were. I think the Committee will have properly assumed that when I spoke on 2nd February about the desirability of an international monetary mechanism I was not just mentioning something that ought to be planned, but was referring to a question which was then under careful consideration. In fact, the outline and many of the details of this scheme have been in preparation during many months, and have been under frequent revision. Moreover, in agreement with the United States Government, responsible British officials have discussed this matter in an informal and exploratory way with experts of the United States Government, who have throughout displayed the same considerable technical interest in the problem and have similar objectives in their minds, though in certain aspects their way of approach may not be the same as ours.
  I want to make one point clear immediately. This is a British plan, but that does not mean that we are putting the flag on it and will view any criticism of
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  it as derogatory to national prestige. It will indeed be calamitous for any attempts to shape an international economic order if a country which displays any initiative in making detailed suggestions for such an order is regarded as attaching feelings of national pride to its suggestions. Of course this is a British plan, for it is derived from British experience of the banking system and of over a century of international trading and the clearing of international balances. I hope, however, that it will not be received anywhere as a plan drawn solely or mainly in British interests. Everybody concerned in it has genuinely attempted to see an international problem in an international way and to produce something which could be made into an international solution. The justification and reasons for this are plain—perhaps more than any other country we depend for our economic well-being upon a world peace and a world in good order. I mention this because I have observed in the Press both of this country and of the United States that some attention has been paid to the question of voting and the preponderance of votes, to see who will count most in a division in any such scheme. May I say here and now, and quite categorically, that the particular voting rights outlined in the Clearing Union are of secondary significance? A scheme of this kind, which, if it came into being, would have daily contact with the business of many countries, cannot work through an international body, whose first preoccupation is to count heads on every issue of policy, or to attempt to create, or to weigh opposing groups. Something on the lines of the American proposal for voting quotas might suit the Clearing Union plan equally well, although, of course, both we and the United States must remember that in an international organisation we have the rights of other nations to consider on the same basis as our own, and we are aiming not at a voting formula, but at the common-sense working of the participating countries.
  We have also had the good fortune to have had this Paper discussed, again in an exploratory and non-committal way, by officials of the Dominions Governments and of the Government of India. This was not with the desire of creating a common front, though I see no particular harm for the post-war world, if the British

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  Commonwealth of Nations has a common point of view which does not exclude the fullest consideration of the points of views of others. But anybody who looks closely at the economic position of the Dominions, or of India, or of our Colonies, knows that they do not all have the same problems, nor are their problems necessarily the same as ours, and these discussions which we had with the Dominions were, in fact extraordinarily impartial, the discussions of men who were examining a technical problem rather than a political one. Of course economic policy cannot be separated from political policy, but before we make up our minds on what our political policy shall be, obviously we should first consider economic questions and implications.
  Mr. Boothby (Aberdeen and Kincardine, Eastern): Can we take it then, that the Dominions Governments are, in principle, in support of the Keynes plan?
  Sir K. Wood: No, Sir, the Dominions Governments are in exactly the same position as our own. This matter has been dealt with on the official level, and this has merely been put forward on the same basis as that on which the British Government are putting forward this Paper to-day.
  I will now turn to the explanation of the post-war problem as we see it in relation to this question of monetary mechanism. I have seen criticisms of the Clearing Union which suggest that this is all rather fanciful, that it is planning in the worst sense and that there was not much wrong with the situation that existed before the war. I cannot, myself, imagine a blinder attitude to the economic realities of the world between the end of the last war and the outbreak of this. Were the 1920's so satisfactory to this country and to every country, that we want to go completely back to them, or was the abounding prosperity of the United States about 1927 and 1928, so strong that it was free from catastrophe in 1929, 1930, and 1931? Was the economic position of Europe wholly healthy, or is it not more likely that the growth of the evil power of Hitler was nourished by the unstable economic world of those times? Of course, international trade was being done before the Clearing Union was thought of, and, of course, goods were moving from one country to another, for no
  650
  peoples are prepared to stop work and starve. But do not the underlying facts suggest that international trade was being gravely distorted, or even slowly strangled, by commercial policies and exchange devices adopted by each nation in turn as defensive necessities?
  If the world has not learned its lesson, we may have to go back to such a system, and no doubt, again, we could make it work somehow. The British Common-wealth has resources and natural trade affiliations on which it could begin and there are other nations whose economy is complementary to our own and who would wish and be willing to work in with us, but we ought not to begin by thinking that this is our best policy. We have our special responsibilities to the British Commonwealth of Nations, and we have responsibilities to Europe, as has been indicated by my right hon. Friends the Prime Minister and the Foreign Secretary, and we have also a responsibility to the whole framework of the world economic order. I suggest therefore that we should take it as our present policy for the world after this war, that we want to see the goods of each country exchanged as freely as possible, that we want the immense technical developments which are being stimulated by the war to produce a harvest for peace, that we want the unity of the world to be more than a pious phrase. When we speak of the need for full employment in this country we must not at any time forget how much that aim is linked up with good employment for our export industries. It was one of the complicated problems of the years between the wars that we had at times relatively high prosperity and economic development over the country as a whole, accompanied by heavy and continuous unemployment in our export industries.
  I have spoken deliberately of the movement of goods rather than of the movement of money, for any international monetary scheme must, as I have said, serve the interests of international trade, and its success or failure will be conditioned not by the technical skill of the monetary mechanism, but by the sanity of the policy which we shall adopt in international commerce. No monetary mechanism, no system of regional grouping, no adoption of monetary terms such as "bancor" or "unitas", will be of the slightest use in helping goods, services and the results of

  651
  inventive ability to move freely round the world if simultaneously, any nation erects unnecessary barriers to check their movement and flow. If we adopt this policy, it would appear that we should aim at three things—first, to provide a mechanism by which international balances, the sums of the debits and credits incurred by all traders in each country, on account of their international transactions, should be freely cleared; second, to provide that the exchanges, which represent the terms on which clearance is effected, should be reasonably stable so that goods and services can be moved on the international market with knowledge of the value which they will command; thirdly, and in order particularly to meet the difficulties of the early period after the war, that countries whose economy has been gravely dislocated or damaged by the war, should have some temporary international monetary facilities to enable them to start up into national trading without undue delay.
  In the face of these problems the Clearing Union Paper proposes a possible solution which, in its essence, is simple. It rests on certain principles: that all the participating countries should agree to pass their payments of international balances through a Clearing Union; that for this purpose they should use a unit of account called "bancor," which is stated in terms of gold and to which the par value of the exchange of each country should also be related; and that, in order to enable international economy to start up, each of the participating countries should have an international overdraft based upon the value of its foreign trade over a period and upon such other factors as are appropriate for inclusion in such an appreciation. Although these principles are related to each other and, indeed, the scheme must be read as a whole, it may be convenient if I deal separately with each of them at this stage. In the first place, let me remove, if I can, some misunderstandings about the meaning of the Clearing Union and its mechanism. In the years immediately before the war Germany had established clearing arrangements with a number of countries around its frontiers which, so far as I understand 'them, involved the complete centralisation of all commercial transactions between the trader in Germany and the trader in any other country, and this led to a complicated system of blocked balances and
  652
  to a good deal of economic pressure in the special interests of German economy.
  The existence of this system has induced some critics of the Clearing Union to imagine that it means the establishment in this country and in all participating countries, of a similar system, by which each trader who wishes to obtain foreign exchange for the purchase of goods from abroad must go to a central office and will not know whether he can proceed with the transaction until the central office has considered whether foreign exchange for that transaction and that country is to be made available. This is not contemplated in any way by the Clearing Union Paper. So far as the individual trader is concerned, he will not consciously come into touch with the Clearing Union at all. He will go as usual to his own bank to make the necessary arrangements, and his own bank will, in the ordinary way, obtain for him the necessary foreign exchange. I will deal in a moment with the problems of the rates of exchange and of exchange control, but I want to make it clear now that the scheme does not impose upon the ordinary daily business of any country any new and complicated piece of central mechanism.
  But in the working of international trade there remains the clearance of international balances, the account struck as the sum of all the individual transactions that take place over each of the exchanges. In the ordinary way these international balances, so far as they were not smoothed out by credit operations, were disposed of periodically by the central monetary institutions of each country selling or buying gold, and during a period of reasonably stable exchanges and freedom from excessive bilateral agreements, or excrescences like the German+ clearing system immediately before the war, the system worked well enough. The aim of the Clearing Union is to restore that system in the freest possible way, so as to enable the trader to buy from any country what he desires to import and to obtain payment from any country to which he wishes to sell. For these reasons it is proposed that all international balances which are left after individual transactions have been "married" or cancelled out shall be cleared periodically between the central monetary authorities through an International Clearing Union. It is in this respect that the scheme has

  653
  one of its analogies with the domestic banking system. A trader banking with, say, Lloyds' Bank, pays his supplier with a cheque on that bank. His supplier deals with, shall we say, Barclay's, and through the Bankers' Clearing House the cheques are cleared and the accounts 'of the two traders are thus related. The Clearing Union is in this respect a generalisation to the whole of international trading of the "shape and understood principles of domestic banking. At this stage, therefore, I would point out to the Committee that the Clearing Union is but a piece of international monetary mechanism for convenient purposes.
  Let us examine the question of the rates of exchange. I think it will be agreed in all quarters of the Committee that if international trade is to proceed and to expand, it can only do so on the basis of the relative stability of international exchange rates, for it is only such stability which enables a trader to know the value of what he will acquire in the form of international purchasing-power by the sale of his goods abroad. Exchange rates, however, cannot be settled immutably, especially when we realise how difficult it will be for the world to find a real equilibrium on which it can settle down after the war. But what is contemplated is that exchange rates should be fixed by agreement and should not be altered except by similar agreement. This is a principle which, I may remind my hon. Friends, formed part of the important Tripartite Agreement between the United States, France and ourselves signed some years ago. I know that in some quarters it is felt that our foreign trade will be unnecessarily tied up if we make an agreement about exchange rates. The depreciation of exchange rates means, of course, that on the short view you have an advantage over your competitors selling the same goods because you have offered to sell goods at a cheaper rate. That only involves, I would point out, a competitive process in depreciation, and this country has an especial interest in the stability of exchanges. It must not over value the pound, as the phrase is, because it will have greater difficulty in selling its exports, but if it under-values the pound it may have to pay more for the goods which it imports or may have to restrict its imports.
  Therefore, in our own interest and, as we see it, very definitely in the interests of
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  good international relations, and an expanding international trade, we believe it is essential to have an agreement about exchange rates. The Clearing Union proposes this as a fundamental of all post-war trading, that the participating countries should agree to keep their exchanges stable, in the sense that they do not alter them except on certain general Conditions agreed beforehand with the other interested nations. To enable the exchanges to be stated in a simple way, the exchange values are fixed by agreement between the various countries, and each of the exchanges is then related to the unit of international account, which is called bancor, and that unit of account is, in turn, related to the value of gold, but not unalterably. As I have indicated, the problem of finding the appropriate exchange relationship after the war will be difficult, and there will have to be a certain amount of trial and error, which by agreement, would alter the exchange rates and consequently affect the relationship of individual currencies to gold.
  I must now say something about that controversial metal, gold. Mankind has for centuries believed that gold is a real thing and has a real value, and it would be foolish and useless to attempt to ignore this. All the major trading countries have an instinctive respect for gold. The greatest producing country in the world has acquired a very large stock of gold. The British Commonwealth of Nations is the largest producer of gold, and Russia is also an increasing producer of gold, which it uses for monetary purposes. Therefore, we should be acting foolishly if we attempted to separate the unit of international trading account from gold. On the other hand, especially after the dislocation of the war, we do not think that the rate of progress of international trading of each country should be determined entirely by the stocks of gold it possesses and is able to use for final settlement of international balances; nor do we believe it to be wise that the expansion of the trade of the world should be conditioned by the rate of expansion in gold production, which is to some extent affected by matters not directly concerned with the need of the world for gold for international trading purposes.
  What the clearing union does, therefore, is to say that, for the purposes of settling international balances, bancor should be

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  accepted as the equivalent of gold by all the countries participating in the Clearing Union. The Union must provide bancor in exchange for gold; but a member State is not entitled to demand gold from the Union for bancor. Thus, in more technical language, bancor is 'defined in terms of a weight of gold, and since the international currencies of member States are given a definite exchange value in terms of bancor, it follows that each country would have a defined gold content for its currency which would be its official buying price for gold above which it must not pay. As each member State is entitled to obtain a bancor credit by paying in gold to its clearing account, this secures a steady purchaser for the output of the gold-producing countries and for countries holding a large reserve of gold. Thus, I would point out, the position of producers and holders of gold is not affected adversely; on the contrary, it is improved, because they are provided with a secure outlet for any gold they wish to dispose of, which, in the absence of the Clearing Union, they would not have.
  Under the Clearing Union, international bancor credit is not limited by the physical amount of gold which each country possesses at the time when the Union is started up, nor is it limited as the scheme operates by the rise or fall of the amounts of gold held. The credit is based on what I suggest is the truer reality, the volume of goods and services disposed of by each country on international account. I have mentioned that no country is entitled to demand gold from the Clearing Union against its balance of bancor. Bancor is available only for transfer to another clearing account within the Union, and therefore there is no need to require the Union to sell gold for bancor, and, as the Clearing Union Paper points out, this means that there is a one-way convertibility between gold and bancor.
  Having thus briefly described the mechanism of the Clearing Union and the principles by which exchange rates are fixed and related, both to bancor and to gold, I would come to what I believe hon. Members will agree is a bold and ingenious proposal for the establishment for each participating country of an international credit based upon the value of its international trade. In what I am afraid in these days must be familiar parlance, they represent overdraft facilities, but without
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  the pledge of collateral security. This may at first sight seem curious, but let us examine how the proposal would work out. The actual proposal in the Clearing Union is that the credit should represent, say, 75 per cent of the value of each country's exports and imports on the average of the three pre-war years. I think it is possible that, upon examination, it might be found that such a figure was somewhat too high for practical necessities. On the figures published by the League of Nations, the formula in the Clearing Union paper would produce a theoretical aggregate for all the quotas, on the assumption that all the United Nations join the Clearing Union, of about *£25,000,000,000. This sum, however, is entirely misleading as an indication of the actual scale of operations. To begin with, it is impossible that all the countries should simultaneously be employing their overdraft facilities, since there must be creditor countries, having in the aggregate an amount of deposit exactly equal to the advances made to the debtor countries. Apart from that, it would be most unusual for a country to use its overdraft facilities up to the hilt. A debtor country can only employ more than half its quota exceptionally and on stringent conditions. In actual fact the aggregate of the deposits and advances respectively in the Clearing Union will be governed, not by the theoretical maxima, but by the sum actually required to correct the want of balance of trade in the participating countries. No creditor country will have a deposit larger than the favourable balance which it deliberately does not cover in any other way.
  I have heard it argued that the actual aggregate sums outstanding might prove to be quite modest. Nevertheless, there has to be a theoretical maximum for each member, sufficient to satisfy the requirements of the weakest members. Let me, in this connection, remind the House again of the analogy with ordinary banking. If a bank were asked, what is the maximum overdraft it would allow to each of its customers with good credit, and then were to add up those figures, the figures would, of course, amount to many times the actual deposits of the bank. In fact, its overdrafts could never exceed its deposits, and at any given time only a minority of its customers would be
  * [see OFFICIAL REPORT, 25th May, 1943. col. 1400.]

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  making use of the overdraft. Moreover, the more one of them uses its overdraft, the less that will be necessary for all the others. I do not say that some further limitations upon the theoretical maximum may not be advisable, and that is a matter for discussion. But in the end it is the degree of want of balance in the trade between countries which will settle the matter, and we do not want to hamper ourselves by adopting maxima which will be inadequate to meet the position in particular cases. Obviously, there must be some discipline upon countries with an excessive overdraft, just as there is, regretfully, the need for an uncomfortable interview with the bank manager in the case of domestic banking, and the scheme provides that the governing board of the Clearing Union will have fairly substantial powers for putting pressure upon countries whose overdraft is increasing beyond what is regarded as a reasonable initial sum.
  Mr. Austin Hopkinson (Mossley): Does it include the use of armed forces?
  Sir K. Wood: I do not think we need go into that point to-day. I need not elaborate the various methods of discipline suggested, for they are in the paper, and they require and deserve careful study. But at this stage the paper, in a signal way, calls attention to a factor in international trade which is too often neglected. An obdurate debtor may weaken international trade by creating uncertainty whether its debts will be paid. But the position of the persistent creditor is also deserving of study. A persistent creditor can help to maintain equilibrium by more freely admitting goods and services to be imported in exchange for the goods and services which it has exported, and by using the credit balances that it may have created for investment abroad. It is not easy to see in advance who will be the creditor countries over a period of international account. I confidently hope that, in the course of time, we shall again become a creditor country, and I trust that we shall than he mindful of the responsibility to the world that this involves, as we were in the l9th century.
  The Clearing Union proposes that if a country has a debit balance in excess of a certain formula, it should pay interest on that excess, but it also proposes that the same international discipline shall be applied to the creditor country whose
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  credit exceeds the formula. I am sure all Members will realise that while this latter proposal is not an essential part of the scheme itself, it is a logical conception and is a way of emphasising, for all the countries concerned, the responsibilities of an international creditor, in addition to the responsibility that falls upon an international debtor,
  There are one or two other points I must mention. First, the Clearing Union makes provision for groups of countries linked to a common financial centre, such as the existing sterling area or groups which may come into existence in future, for instance, in North or South America, or those groupings of Eastern European States which are now under active discussion. There is nothing in the Clearing Union proposal which would interfere with the discretion of particular countries to form or to maintain such groups. Secondly, I must emphasise that the Clearing Union is intended primarily for clearing balances on current account. It is not expected to be a source of finance for international investment on long-term account. The considerations raised by that problem are rather different. They will need to be related, of course, to the progress of the current accounts of the various countries, but our general view is, and I think the same view is held in the United States, that it is more convenient to examine the two problems separately.
  Similarly, the scheme is designed only for what it is intended to do, to deal with the monetary mechanism which will facilitate international trade. As I said at the beginning of my statement, it does not deal with the commercial policies which must underlie healthy international trade, nor with such important questions as schemes for eliminating excessive short-term fluctuations in the prices of primary products, nor does it deal with the financial problems involved in the provision of relief which will be necessary in the immediate period after the war. All that need be said upon these matters in this connection is that if such an international monetary mechanism were established it would be a convenient mechanism through which some of the finance to be approved for such schemes could pass. But we must be very careful not to waterlog this scheme for handling current trading transactions with problems not directly related to ordinary current trade.

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  I must now turn just for a moment to the Governing Board, and its powers. There may be some Members of the House who will say that if the powers of the Governing Board are exercised to the full, then the control of the economic life of all the participating countries is in effect entrusted to that Board. That is, I suggest, an exaggerated view of the position. If we mean anything at all by international agreements, every country which enters such an agreement must accept the discipline or code of behaviour or whatever it is termed which is explicit in that agreement. If we negotiate a commercial agreement with any country, both countries accept limitations to their sovereign right to do what they like which are contained in that treaty. The Governing Board is to be a Board representing the Governments of the participating countries. Those Governments will have agreed in advance on a code of principles to give effect by international co-operation to methods of preserving equilibrium and avoiding the necessity for deflation and restrictive policies. They will thus preserve the power of controlling their own economic life and to guide it in the path of full employment and prosperity. To resort to economic warfare between the nations, forcing on them the need for safeguards and restrictions, would, in fact, interfere with the freedom of each country to control its economic life to the ends which it desires. An agreed code of discipline gives the freedom to prosper while its absence often gives only a freedom to suffer. We must approach such a matter with what I would describe as realistic faith, not expecting perfection but not always expecting disaster.
  Finally, in relation to the Clearing Union, I must mention the question of exchange control. As I have told the House on a previous occasion, it will, in ray judgment, be necessary for this country at least, and probably for a number of other countries, to control dealings in foreign exchange after the war for a period sufficient to ensure that' foreign exchange resources are devoted primarily to imports which this country requires in the national interest, and probably for a longer period, among other things, to prevent speculative movement of capital on rumours or scares. The scheme contemplates that exchanges shall be held stable against each other by
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  agreement, and to the extent that this requires some control of exchange dealings by the central monetary institutions of each country, exchange control is a feature of the scheme. But the scheme leaves each country free to a large extent to decide on its own policy in this matter, and does not require elaborate exchange control for all participating countries if their own domestic situation does not appear to them to justify it. This must, of course, be subject to the proviso that such freedom as is given to open market transactions across the exchange does not impair the stability of the exchange rates, fixed by agreement and alterable by agreement, or allow speculative flights of capital from one country to another. But nothing in this scheme means that exchange controls need be paralysing to international trade, as they have been in more than one instance between the wars. On the contrary, the scheme allows the maximum flexibility of exchange transactions within the limits imposed by agreed exchange rates. It is not contractionist but on the contrary expansionist for world trade; but if the discipline imposed in the scheme is accepted, that expansionism will not take the form of dangerous inflation.
  If the House will bear with me for one minute or two more, I think I must say a word or two about the differences between the scheme drawn up by officials of the United States Treasury and our own White Paper. May I say in the first instance that I think it would be entirely wrong to emphasise the differences? It seems to me, and it is a fact which I welcome most cordially, that the United States experts started with similar objectives, and in a number of ways, although their technique is somewhat different from that suggested in the Clearing Union Paper, the American scheme has many underlying similarities. It is, I believe, a hopeful matter for the world that these two great trading countries should be thinking like this. The American scheme, it is true, approaches the problem in rather a different way. It assumes that countries will have started up trade and will be creating their international balances of debit and credit, but that for a time, and inevitably after the dislocation of the war, some countries may have need of an accommodation on international account to help them with their financial balances. It contemplates,

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  therefore, the establishment of an International Exchange Stabilisation Fund, or, as we call it, an equalisation account, which will be used to come to the help of a country which is in temporary difficulties. This Stabilisation Fund is created out of subscribed capital, the capital consisting of a relatively small proportion of gold, with supplies of local currency and Government securities. On the basis of that subscribed capital a fund is brought into use through the governing authority of the Stabilisation Fund.
  The details of the formula presented in the American paper are not at present defined, and we therefore cannot yet see what would be the amount of the facilities at the disposal of each of the countries which participate in the fund. There would appear to be differences of approach between this scheme and the international credit account to be opened under the Clearing Union, but though the method of approach is different the objectives and principles, and to a large extent the practical results are similar. Points like this can no doubt be best elucidated by careful discussion between the United States and ourselves and the other United Nations. There is another difference—and this may prove to be a radical one—that the international unit of account, which is called unitas, is not an independent world currency, but a unit of gold value; therefore, it is convertible into gold both ways. This means that gold may purchase unitas, and that any holder of unitas may require gold in place of it at the rate established by the fund. The American plan appears also to hold rates of exchange which are fixed initially more closely than the Clearing Union, but I should judge that this also is a matter which requires further examination. On the face of it, the scheme appears to relate exchanges and balances more closely to gold than does the Clearing Union. The Stabilisation Fund also contemplates a board of directors appointed by the participating Governments, and entrusts these directors with very considerable powers, including that of operating in the international market in the sale and purchase of securities, a proposal which is not in the Clearing Union. There are a number of other matters in which the way of approach in the Stabilisation Fund differs from the Clearing Union, but many of them, I think, are technical differences which are not of particular significance.
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  I began my statement by saying that I did not think that this would be our only Debate on this very complicated subject. We are obviously dealing with a matter on which the maximum of international co-operation is necessary, if not only the principles but the whole working of the scheme are to be satisfactory. Novel and far-reaching arrangements such as we are now discussing cannot voc carried into operation except with a large measure of general agreement and after close expert examination. It seems to me right, therefore, that we should not have attempted to be dogmatic about our ideas, and that is why at this stage we have not sought to reduce them and others to a single alternative until we have had the benefit of a full discussion over as wide a field as possible. This Debate is one of the first stages in such discussions. Ultimately we shall have a conference of Finance Ministers. It is yet too early to make any definite statement on that, for clearly a considerable measure of agreement must be evinced before the calling of such a conference would be wise. The matter, as I have stated, is still at a technical level, and the form which further expert consideration should take must largely be settled by convenience. I shall, of course, continue to keep in close touch with Mr. Secretary Morganthau as the matter proceeds and develops.
  I thank the Committee for the very patient attention they have given me. I trust they will not think I have unduly trespassed on their patience, but it was necessary for a broad statement to be made. It is in that sense that I commend the scheme to the Committee, not for its immediate acceptance, but, in the words of the statement which precedes the White Paper:
  "as a basis for discussion, criticism and constructive amendment, together with similar plans having similar objectives which may be prepared by experts of other Governments."
  I would conclude with this: We can all agree that it is in the interest of the world and its future prosperity and progress that agreement should be arrived at between the nations on this vital matter in economic affairs, and I believe myself that with understanding and good-will the goal will be successfully reached.
  Mr. A. Edwards (Middlesbrough, East): May I put one question? [Interruption.] It is fundamental; it will not involve discussion.
  Mr. Pethick - Lawrence (Edinburgh, East): I never rose in this House with a greater sense of responsibility than I do to-day, for I realise that mine will be the first unofficial voice to discuss this grave subject in this popular Assembly. This is indeed an immense subject; immense in its ramifications and intricacy, immense in its pregnancy for good or ill in the, postwar world. I heartily welcome this Debate; it is essential that the House of Commons should be in at this early stage of the discussion. But, as the Chancellor of the Exchequer has already indicated, a single day cannot possibly exhaust the subject; we shall require much further consideration before we are ready to commit this country to the details of any scheme which may make or mar the future industrial life of our own nation and of the world as a whole.
  Before, therefore, I come to the precise proposals which are being laid before us, I desire to make certain preliminary observations, designed to put them in their right perspective. I shall begin with two statements which I think to-day command general acceptance. The first is that we cannot put the new wine of 20th Century economy into the old bottles of 19th Century finance. The second is that there can be no self-regulating mechanism. Commodity prices do not remain at a constant level, international exchanges do not remain stable, the quantum of physical investment does not equilibriate with the quantum of aggregate saving, without continuous, wise, unremitting watchfulness and direction. That brings me straight to the questions. Who is to be entrusted in future with this direction, and on what principles is it to be exercised? In the 19th Century it was a despotism, and the despot—the benevolent despot, we should like to think—was Britain, acting through the machinery of the Bank of England and the City of London. This despotism was destroyed in the last war. During the inter-war years we had anarchy in finance and the law of the jungle in economics and industry, as I said in a recent speech in this House. If these are to be replaced after this war by an ordered system there must be some government of it. Is it to be once again a despotism, and, if so, who is to be the despot? Some people may fondly imagine that it would again be this country. I beg them to dismiss that dream. However great may be our prestige, however strong our tradition, how-
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  ever wise our technique, we shall not have the resources when the war is over to enable us to fill that role. It may not be generally recognised, but we shall enter upon the peace not merely no longer a creditor nation, but heavily in debt to other nations—in fact, the principal debtor nation in the world. No; if there is to be a despot, it will not be Britain. It is much more likely to be the United States of America. If I may say so without offence, that great nation has much to learn before it can successfully and benevolently maintain the hegemony of the financial world.
  If not a despotism, what shall it be? Shall it be a condominium? Shall the United States and the British Empire combine to rule the financial world? We are now out of dreamland, and facing a quite practicable possibility. Many arguments can be adduced in favour of this form of financial government. Many people on both sides of the Atlantic may rejoice in the thought that it may become an accomplished fact. I am not of their number. I see many dangers in an attempt by the Anglo-Saxon bloc to dominate the financial and economic life of the rest of the world. It would be certain to cause resentment, and every failure of a people to secure well-being in the future would be laid at our door.
  Therefore, I reject this solution and give my vote for democracy—that is to say, for a system which each nation is free to enter or to stay out of, and in which each member nation has a legitimate share of control of the instrument by which it and the others are to be governed or directed. A democracy is, of course, much the most difficult system to originate and to work. It is none the less, in my view, the best. On paper, both the schemes which we are discussing to-day conform to this democratic principle. In the British plan it is specifically stated at the bottom of page 3, that:
  "The management of the institution must be genuinely international without preponderant power of veto or enforcement to any country or group: and the rights and privileges of the smaller countries must be safeguarded."
  In the American plan the idea is also implied in the quota of votes. But I cannot help wondering how far, in practice, either scheme is going to work out in this way. Certainly, in the

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  American plan the combined effect of the four-fifths rule and the one-quarter quota to be assigned to the United States—and probably, I should imagine, something like the same proportion assigned to the British Empire—would undoubtedly give, both to America on the one hand and to the British Empire on the other, a permanent right of veto on many important decisions. Of course it is not only proper but even essential that great nations should have a bigger voice than small ones. I myself should be the last to suggest that our own country, with its wide knowledge and experience and its immense commitments, should put itself at the mercy of ignorant or unfriendly decisions forced upon it by the combined vote of nations with little at stake. But a reality of democracy must be maintained if countries are to be asked to surrender a part of their sovereignty and to accept decisions of the directorate as binding upon themselves. The necessity for this increases with the degree of control that it is proposed to exert over member States, and with the character of the sanctions which are suggested as a means of enforcing it.
  This brings me to a discussion of these subjects. It is quite clear from a perusal of the two schemes that there is considerable divergence between them on these matters. The American plan, as is perhaps natural with a country which has in its own governance a written and exact Constitution, is much more precise and binding. Members on entry are enjoined to conform to a code of behaviour—not, it is true, a decalogue, but a heptalogue, of financial commandments. Once in, they cannot break away except by giving two years' notice. They cannot depreciate their rate of exchange except with permission. They may be instructed in matters of domestic policy. The British plan is more flexible, and to that extent more to my liking. Twelve months' notice of withdrawal is sufficient. A country is free to make on its own initiative at least one cut of five per cent. in the exchange value of its currency. Countries can be advised, but not instructed, in domestic affairs. A good deal of the plan is left to be filled in with later experience. It is frankly faced that the obligations must be, in the words of the paper:
  "voluntary so long as they last and terminable when they have become irksome,"
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  because
  "if they are free to escape from its provisions if necessary they may be the more willing to go on accepting them."
  In my view, no moral obloquy ought to attach to such withdrawal, but I agree that if many member States were to take advantage of their freedom, the plan would break down.
  In another important respect also, the American plan is more rigid. It proposes in fact a full return to the gold standard, from which we in 1931 were compelled to break free, to be followed by the United States, under great stress, a few years later. I hoped that we had all learnt the lesson from those events that shackles bite into and mortify the flesh of international trade, even when they are shackles of gold. I certainly could never support any such proposals. In my view, even the British plan goes further in the direction of restoring gold than I should think wise. I admit, however, that there are in it, two safeguards. The first is the specific suggestion that the gold equivalent of the bancor should be subject to modification. I am not sure how much this provision is worth. The other is, in my opinion, more important. It is that the whole scheme is admittedly, and intentionally, expansionist. The credit to be created by the clearing union is a net addition to the world's credit, a kind of fiduciary issue, as it were. This credit is not fixed in amount, but is capable of expansion, as the international trade of countries increases and with it their quota in future years. I find no such provision in the American plan, which would seem, by withdrawing gold and currency from member States at the outset, to carry with it a degree of deflation.
  Would either of these schemes work in practice? To answer this, let us first examine the physical realities of the postwar world, which must necessarily lie behind any financial facade—a matter to which the Chancellor of the Exchequer, if I may say so, very properly and cogently referred. The basis of all international economic relationship is mutual trade and services rendered. We all recognise, I hope, that in the purely domestic field there is an optimum production for a country at any one time, and that while a bad national financial system may reduce the national output below that optimum, no financial system, however good, can raise it above it. In

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  the same way, the best that can be hoped for from an international financial system is that it will not hinder an optimum world output of goods and services, and will facilitate their distribution and exchange. No financial system will work unless nations bring their economic life into equilibrium. Neither the American plan nor 'the British plan, nor any substitute for these, will of itself achieve this. It must be realised, too, that neither the union nor the fund is designed to provide long-term money. In terms of the Russian system, they are like the Prom-bank and not the Gosbank, or, in perhaps a more familiar illustration, they are like the joint stock banks in this country as distinct from their counterparts in many Continental countries, where they supply long-term capital. Both the Union and the American counterpart are designed only to enable nations to even-out their short-term requirements. Therefore, a member of the system must be free to set its house in order at all times and to regulate its own affairs, including the exchange control of which the Chancellor has already spoken, in which there appears to be a difference between the two schemes. This is a very large subject, into which I do not propose to enter further beyond that passing remark, and to say that I agree with a great deal of what the Chancellor said with regard to it.
  If a country is getting into difficulties, it has two courses open to it. One is to adjust the relationship between its exports and imports, and one way to do this might be the alteration of its exchange rates. The other is to convert its short-term obligations into long-term, a kind of funding operation, as the Chancellor will appreciate, which can only be put through if it can find lenders who will have confidence in it and in the obligations created. In passing, perhaps I may remark that it is this confidence which war destroys, and not only war, but some of the experiences of the prewar years, and it will be that confidence which will be one of the most difficult things, far more difficult than material resources, to build up after the war is over.
  But apart from the duties of what may be called the debtor States, we must all recognise the obligation of creditor coun-
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  tries to make it easy for those who owe them money to pay their debt, and it is in that regard that I think the British plan makes ingenious proposals. It was Irving Fisher, the great American economist, who pointed out that some time in the inter-war years, the more that was paid off the debt to America, the larger in terms of real value did the remaining debt become, and it is perfectly clear that, if the world is to prosper and States are to remain in equilibrium, creditors must be willing to accept payment of the interest on their debt, and the capital on their debt, in so far as it is paid off, in terms of goods and not merely in specie.
  Mr. Loftus (Lowestoft): Does not the convertibility of commodities into gold constitute a direct inducement for the creditor nation to continue the practice of refusing to accept goods and of insisting on gold?
  Mr. Pethick-Lawrence: The hon. Member is entitled to put his own interpretation upon it, but I would rather make my own statement in my own way. I was saying that the creditor countries must accept payment of the interest and capital of the obligations to them in terms of goods and not confine it to specie. I am very glad to see that the British plan, in emphasising this matter, does require that creditors should pay attention to these facts as well as debtor countries.
  Provided all this is understood, and provided nations are prepared to co-operate for their mutual economic benefit, I see no reason why they should not be able to work a central financial institution, and I regard the two plans presented to us as an invaluable contribution towards the creation of such a scheme. I share with the Chancellor the sense of deep gratitude that we owe to those on both sides of the Atlantic who have got out for us these blue prints as draft proposals. The American Government, whose generous contribution in the nature of Lend-Lease has already put us under a great obligation, has now to be thanked most heartily for getting its Treasury to produce this scheme, and the remarks to which the Chancellor has already given expression with regard to our own Treasury, and particularly Lord Keynes, certainly find an echo in my heart. The highest tribute that we in this House can pay to those who have put us under that obligation is that

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  we should criticise these schemes, and criticise them frankly, with a view to reaching ultimately an acceptable solution, differing, it may be, substantially from either of them. I beg, therefore, those who are concerned in this matter—and I think the Chancellor of the Exchequer will probably largely agree with me—in the first place, that in no way will they resent criticism; in the second place, that they will not attempt to arrive at a final draft by haggling over the details of the existing drafts. It is not a question of one nation against another. No nation stands to gain in the long run by imposing a scheme which threatens loss or entanglement on other nations. And, thirdly, not to come to any early final decision.
  I do not want to see the emergence of a cut-and-dried scheme which will be presented to other nations on a take-it-or-leave-it basis. If it is to be a success, it must meet with individual acceptance and deal with the individual requirements and susceptibilities of all participating nations. There are many large and many small nations other than ourselves and the United States of America. They must be consulted in advance, not only on the question of their entrance but on the precise formulation of the scheme, and their approval must be secured, if necessary, by modification. Only by so doing can we hope to reach a world instrument for the self-government of all nations. I believe, therefore, that I am speaking for them as well as for a very large number of people in this country and in America when I say that we are exceedingly anxious to restore order and stability in the international world. For that we are prepared to pay a high price in subordinating national self-interest and individual prejudices. But the order and stability attained must be consistent with free and full life for all. It would be a disaster indeed if we found in the end that all we had got was the stability of an enslaved world and the order of a financial Gestapo.
  Mr. Graham White (Birkenhead, East): I would like to say at once that I find myself in agreement with the conclusion of my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), that if we are so minded and are prepared to adopt the necessary discipline and to sink our own special interests, there is no reason why we should not, upon
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  terms, set up and make a workable scheme for the settlement of international clearances, international trade and financial relations. Whatever differences of view we may take about these draft proposals which have been issued, either from the American or from our own Treasury, or differences that we may find with regard to other schemes that may be brought forward, at least there will be complete agreement on the great importance of the subject. Also, I would like to associate myself again with my right hon. Friend in expressing gratitude to those who have worked so hard and have produced, with differences of emphasis and differences, in some degree, of principle, two very lucid schemes which will help us in our deliberations.
  There has indeed been some criticism of the way in which these projects have been brought forward. It has been suggested that it would have been far better if we had had an agreed scheme of some kind to consider. I can imagine that had that been the case and had such a method been contemplated or adopted, the Congress in America no less than the Parliament in this country would have resented very strongly such a method and reserved to itself the right of discussion and criticism and the right of decision in these matters. We need no division of opinion as to the time at which these matters are to be discussed. The time is the earliest opportunity that we can find to consider them. It has been stated with considerable force and lucidity in the introduction to the American proposals, that if a solution could be found in reasonable time, all these prospective difficulties with regard to the exchange would be in fact a very helpful tendency towards shortening the war. It is pointed out with great cogency that the United Nations would feel much stronger and be more determined if an assurance could be given that, when the war comes to an end, we shall not relapse into that period of chaos and general beggar - my - neighbour policy, which led to the pre-war condition of general instability and economic collapse. Our discussion so far to-day has already shown that there are many angles and points of view that have to be taken into account, and it would be unreasonable and wrong to accept any very speedy conclusions or a final settlement to be reached. I join again with my right hon. Friend in hoping that there will be no

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  attempt to rush this matter. It must receive the fullest and most careful consideration, not only in this House and in America, but—and this is a world question—from all those who are entitled to consider it.
  Sometimes one finds one's friends expressing doubts as to whether it is possible to devise any machinery for coping with all the international phenomena which might be expected to display themselves when the war comes to an end. When that feeling does express itself I think it is right to look back only to the pre-war period to realise that we must try, with all the skill and energy of which we are capable, not to relax into such a period again. If we did, the war would have been fought in vain. That period was one which the Prime Minister has described as being a period of bickering and confusion which squandered the hard-won victory of 1918. We must run no risk of falling back into that sad and lamentable condition. I think it is important, in consideration of proposals which may be brought forward, to bear in mind the fact that any scheme which is to be generally acceptable must aim at making the minimum amount of demand for concession to national sovereignty from any of the members. It is quite obvious that there must be some concession because you cannot have an international scheme of any kind unless you have some obligations attaching to it and unless it is possible to have some disciplinary action. Comparing these two schemes I do not think that there are any definite proposals which are not reconcilable and which would overstep the condition I have laid down, namely, that there should be the minimum amount of interference with internal affairs. The importance of that is of the first magnitude, and it is perhaps relevant to point out that it is not merely a question of direct disciplinary steps one might take to deal with a definite situation which had arisen but the very close relations which obtain between countries with regard to wage levels and exchange rates. That, I think, is one of the things that should be kept in our minds, whatever plan we may be considering.
  It is perfectly natural that a leading part should be taken in this matter by America and by ourselves. It fell to us to make the first proposal in August,
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  1940, when we made a statement of Allied war aims in the Atlantic Charter, and what we are doing now is to try and find mechanism which will serve several very important aspects of international finance and give content to that Charter. I think it is quite impossible to imagine that the Charter could have any real meaning unless we had means, such as are here now proposed, available and machinery for schemes of international development, relief, long-term loan policy and the like. It is quite impossible to imagine the fifth Clause of the Atlantic Charter—a Clause which stipulates that we, the United States, and the other countries which subsequently adhered to the Charter will seek to secure access on equal terms to trade and raw materials for all countries and for all people, great and small—unless we are prepared to devote ourselves to giving real content and meaning to that Clause.
  There is another challenge in Europe to-day which must make us stir ourselves in this matter. The Chancellor of the Exchequer in his observations referred to the exchange control which was adopted by Germany before the war. I do not think we are always apt to remember that there is in operation in Europe to-day a very successful and most complete scheme of exchange control, and that is the system of exchange control imposed by Germany on all countries in Europe which are under her control. It is ingenious; it is, of course, entirely in the interests of Germany and nobody else, and it is the most perfect piece of legalised robbery the world has ever seen. It is working with lamentable efficiency. In this example there is a challenge to the United Nations to set on foot, devise and carry out among themselves by common consent and good will means of co-operation for the common cause, bearing in mind, as is stated by Mr. Morgenthau in his document, that we are now learning for the first time that prosperity, like peace, is indivisible.
  I do not propose to deal in any detail with the actual proposals in either of these Papers. I infinitely prefer, I must say, the greater simplicity of the English plan. Any plan which is most likely to be successful is the plan which is the least rigid; it is essential that any plan, to have success, must be as flexible as possible. It seems to me that there is much more rigidity in the American plan than that which has

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  been devised by our British experts. I am bound to say that we are at a disadvantage when we begin to discuss this matter, in that whereas we have Members on the Treasury Bench who can give us information in regard to the English scheme, we have nobody who can give us information and enlightenment on some aspects of the American scheme, some of which is very obscure. I recognise the essential difference between the two schemes, but I have still to be convinced of the desirability of the proposal to set up a substantial capital fund, which is an essential feature of the American scheme. If it is too small, it is bound to add to that rigidity, which is a great handicap to any scheme, and if it is too large, it is difficult to understand what useful purpose it would serve. In that connection I have not yet satisfied myself as to what is the reason for the adoption of a new monetary unit in the American scheme at all, having regard to the very limited functions which it is suggested that unit has to fulfil. As I have said, I infinitely prefer the simplicity of the English scheme, which would extend—.
  Mr. Mathers (Linlithgow): My hon. Friend keeps talking about' the English scheme, but he said it had been prepared by British experts. Does he not mean British rather than English?
  Mr. White: My hon. Friend can designate the scheme as he likes, but I do,not think we are under any misapprehension as to what these tentative proposals are. The two schemes before us at the moment are one by British experts and one by American experts. If I have expressed myself ill, I can only say I am sorry, but there is no misunderstanding in my own mind about what I mean, and I hope I may be able to convey my meaning to those I am addressing.
  In general, in considering this scheme and any other scheme which in the course of time is likely to be brought before us, we should remember that we are not living in the days of the 19th century. We have to learn from the terrible lessons of the pre-war years, and here I must say that it cheered me to see "a Daniel come to judgment" to-day in regard to many of the things about which we used to disagree so actively in pre-war years. I think we must bear in mind—and it is a
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  hopeful thing—that there is hope of a higher standard of human conduct in relation to economic affairs. The policy of Lend-Lease, which has already been referred to and with which I most cordially agree, was a far-seeing and magnanimous idea of pooling all Allied resources in the hope of achieving common victory. That is the spirit we must carry forward into our post-war planning. I do not think it has been mentioned today, but I am proud to think it was Canada, a member of the British Commonwealth of Nations, who devised and put into operation, for the first time so far as I know, a wonderfully generous, far-seeing and wise proposal for helping this country and the common cause. These are transactions of the kind which point the way to a higher standard of human conduct which it will be necessary to maintain in our economic relations if, at the end of this war, Europe is to be made a place which is fit for human habitation and the world is to be made worthy of the sacrifices of the people.
  Colonel Sir A. Lambert Ward (Kingston-upon-Hull, North-West): I am sure the Committee listened with the greatest interest and keenest appreciation to the very able exposition which the Chancellor of the Exchequer gave to the White Paper, and I should like to congratulate him on the very definite Free Trade flavour of some of his remarks. I hope the Financial Secretary will convey to him how very much the Committee appreciated the way he dealt with an extremely difficult and complicated problem. Anyone who has had experience of trade or has even travelled on the Continent, will realise how the instability of the exchanges militates against any possibility of an expansion of international trade. Instability of the exchanges is not in itself a disease. It is a symptom of a disease, and it is to cure that disease that these schemes of the White Paper and the Morgenthau plan have been introduced. One of the many causes of the instability of the exchanges abroad was the inability of those who had responsibility for the financial direction of those countries to distinguish between wealth and money. They seemed to think that all they had to do to make their country rich and prosperous was to print sufficient paper money, in other words, to provide what they called sufficient purchasing power, and all would be well. It did

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  not work, and, as a result of that among many other things, there is this need for some scheme to regulate foreign exchanges. The Chancellor dealt largely with the theoretical aspects of these schemes, and I am sure he would excuse me, if he were here, if I put before him a few of the practical difficulties as I see them.
  It is suggested in our own White Paper that all the Allied nations should join in this exchange union. It is going to be very difficult to get 39 nations to agree on anything, but getting them to agree on anything is likely to be the merest child's play compared with the difficulty of persuading them to abide by those agreements when they have been reached. The results of the classical example of agreement between nations, namely, the League of Nations, does not give us very much encouragement to hope that the agreement will be kept, even when it is finally arrived at. After all, four out of five of the nations that joined the League did it for one purpose only, for what they could get out of it. The idea of making sacrifices to assist their fellow members never seems to have entered their heads. In the same way I am very much afraid that four out of five of the Allied nations who join the Clearing Union will join it for what they can get out of it and will not consider helping it in any way whatever if, by doing so, they will cause themselves the slightest inconvenience. I cannot help feeling that there would be a better chance of success if, instead of endeavouring to promote this agreement between 39 nations, we were satisfied with coming to an agreement between five, six, seven or eight of the nations primarily interested in foreign trade and industry. Those five or six nations would naturally be ourselves, the United States, and I should suggest also Russia, partly on account of the potential industrial development which we see in that country and partly because I believe the output of gold from the Soviet Union is something like three-sevenths of the entire world output at present, and that in itself must have a very great effect on any system of international exchange and co-operation in the future. Another country which I suggest should be included if possible is China, because the industrial development of China cannot be delayed for any great length of time. It is bound to come in the immediate future.
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  The United States has produced at the same time as our White Paper the Morgenthau plan. I do not know whether it was published as a counter-blast or whether it was intended to assist us. I do not know, of course, to what extent agreements have been arrived at between our Treasury experts and those on the other side of the Atlantic, but I cannot help feeling that agreement will not be facilitated on account of the fact that the close outside resemblance between the two schemes does so much to camouflage the very fundamental differences that exist between them, because those differences are unmistakably both deep and fundamental. First of all there is the very much more important place that is given to gold in the United States plan, and I do not think that we can hope that the United States can be expected to meet us to any great extent on that point. After all, the United States, having acquired something like nine-tenths of the entire gold in the world, are not likely to see its use relegated to the manufacture of wedding rings and the stopping of teeth. Of course, if the United States could be persuaded to disgorge or to distribute some of the gold they have collected, and if at the same time we could be assured that it would not automatically return there, one of the most difficult problems of future world trade would be solved. But I do not think there is any very great possibility of that, because up to the present the United States do not appear to have realised the responsibility which attaches to a creditor nation. Everyone talks of the crimes that debtor nations have committed, but very few people hitherto have criticised the harm that a creditor nation has done to the world if it has not been willing to treat its accumulation of gold in a fair and reasonable way.
  One hears many criticisms advanced in these days of the vast amount of capital that has been lent abroad by this country during the past 100 years and the vast amount of it that has been lost. I think it is estimated, probably with very considerable accuracy, that something like £4,000,000,000 of capital has been invested abroad and lost during the period between 1850 and 1935. That may possibly be true, but had not the British capitalist seen his way to take the risk involved in advancing that money abroad, we should by somewhere about 1890 have

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  arrived at the position which the United States had arrived at in 1935. We should have accumulated all the gold in the world, and, unless we had been prepared to advance it, no further trade would have been possible, because no one would have had any real money to buy it with. That is the position which the United States had brought themselves into by the year 1935, and unfortunately a very large proportion of the United States population do not yet realise that that is the position they have brought themselves into.
  Mr. A. Edwards: Will the hon. and gallant Gentleman elaborate the point about the distribution of gold?
  Sir A. Lambert Ward: Either the United States would have to lend the gold and take the risk of its being lost, which is tantamount to giving it, which is exactly what this country did for 70 years, or else all trade on the basis of real money must end, because all the gold has been accumulated in one group of hands and no one else has any to buy any goods with.
  Mr. Edwards: An extension of Lend-Lease?
  Sir A. Lambert Ward: If you like to look at it that way, but I think the Chairman would call me strictly to Order if I dealt largely with Lend-Lease in this Debate. Another difficulty that I should like to bring to the notice of the Committee is the position of neutrals. Are they to be invited to enter, and, if so, to what extent is it going to prejudice the future of the scheme if they do not accept the invitation? I do not see any reason why Switzerland and the Argentine in particular should forgo their freedom of action by coming into this scheme of a Clearing Union, because I cannot see that it will do them any good, and it may very easily restrict their freedom and impair what they want to do with regard to their own particular trade and industry. In addition, if those countries do not come in, they will present a haven of refuge for refugee capital, which is one of the things that the Chancellor in his speech and in the White Paper has suggested as not being actually necessary.
  While control of capital may be necessary for some short period after the war, I cannot help feeling that it will be desirable to have it done away with at the earliest possible moment. It will be very
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  difficult to control capital once peace has been declared. It is one thing to control it under a war economy, and it is a totally different thing to control it with the different feelings that will develop once peace has been signed. One frequently hears talk of the success which the Germans have met in the control of capital, but we must not lose sight of the fact that the control of capital in Germany only took effect after all that capital had practically gone, and also that it was only rendered effective by means of the secret police and the internment camps, and it-led to that brutal treatment of the Jewish race because they were supposed to be the principal exponents of the financial black market. With regard to the control of capital, I would only say, let us have it if it is absolutely necessary, but if it can only be rendered effective if the proposals adumbrated in the White Paper can only be rendered effectively by Gestapo methods and concentration camps, then let us try something else.
  Mr. Woodburn (Stirling and Clackmannan, Eastern): The proposals that are placed before us for consideration today are an important step towards what has been the tendency through the last 5o years, that is, world government. While they may be a very gentle step towards that, they play an important part in that process. I might describe them in popular terms as proposals to set up a financial League of Nations. The British proposal goes further and proposes a Bank of all the Nations. If we think of the proposals in these terms, we not only see exactly the value of the proposals, but we see what are likely to be their limitation. The League of Nations as a machine was an excellent framework but the trouble was that the nations were not able to work within the framework or abide by the rules, not because the nations did not want to abide by the rules but in many cases simply because their own particular vested interests conflicted with the interests of the general view of the world. America did not come within the League of Nations because she thought she would be better working in isolation. Other countries have come in and gone out as their interests dictated. This framework could only work to the extent that the nations within it found it possible to use it in their own and the general interests.

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  To be successful there has eventually to be developed a world consciousness instead of national consciousness. To that extent it does lead to a surrender of national sovereignty. The Bank of all the Nations has as its corollary the creation of world money for the first time. The name "unitas," which is not original, because it is used by the Co-operative Society in this country extensively, and the word "bancor," which suggests among miners a popular game, are not, I think, happy choices. I think that we could get a much simpler type of name, such as "doros," on the lines of pesos, but I like neither of the names proposed. The purpose of this financial League of Nations is to stabilise international currency and to try and overcome the tendency to economic warfare. In the period between 1920 and 1939, currencies became one weapon in the struggle among the nations for markets. All countries manipulated their currencies in order to give themselves an advantage in competing with the goods of other countries. The net effect of that, economically, was that nations were advertising national "bargain sales." If you reduce the value of your currency, you simply say to all the world, "We are taking 20 per cent. off our goods or 15 per cent., as the case may be, and anybody can buy cheaply in this market." Nothing can prevent nations doing that, and even after this scheme is carried it will not prevent it unless the nations themselves can find ways of settling this question of the struggle for international markets. The scheme itself does something to restrict that struggle, for it says that the external value of currencies cannot be altered without the permission of the Fund on the one hand and of the International Clearing Union on the other except to a small extent of 5 per cent up or down.
  I am not sure that within either of the schemes provision is made to control the other way of achieving the same purpose. For example, supposing we keep our currency stable in relation to bancor, there is nothing to hinder our Government giving a 20 per cent, subsidy on exports. That point would have to be covered before we had completely controlled the possibility of nations breaking through this scheme by roundabout methods. I want to call the attention of the Treasury
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  to that point. It will have to make, as a part of the scheme and not as a subsidiary point, the control of export subsidies as a way of evading the scheme. It is very important to get stability, as the Chancellor said. Those who had experience in industry before the last war know that you could with perfect confidence quote a price to any part of the world for machinery that would take a year to make and with fair confidence rely—with some exceptions—upon being paid in the same kind of money as that in which the price was quoted. That was largely due to the fact that the world accepted gold as the international money and because there was confidence in it and most countries fixed and valued their currencies in terms of gold. One of the great advantages of gold over all the regulations that you might have is that even the best Government in the world and even the best world Government is in the hands of frail human beings who may be actuated by motives which vary from year to year. While it may be true that you are driving a railway train or a motor car very carefully, there is no question that if there is any chance of your getting on to an incline such as a mountain slope, you had better have the additional safeguard of an automatic brake. The importance of gold is that it is something that provides an automatic brake by the real and material world upon the frailties of human mismanagement.
  To that extent I think that the fetish now of despising gold has become as foolish as the former fetish of worshipping gold. This question of tying currencies to gold is very important because, after all, gold is the last commodity to move. Countries do not export and import gold unless they fail to conduct their trade in the form of other commodities. America gets gold because her manufacturers want to sell goods to other countries, but her farmers are going to take jolly good care that she does not buy goods from other countries in order to balance up those sales if these imports injure their home market. Therefore almost the only import that does not interfere with American home markets is gold. America has been conducting a system of Lend-Lease by sending out useful goods and importing relatively useless goods in the form of gold and burying it in the ground in America after it has been taken out of

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  the ground in Russia, America and Australia. That is the economics of a mad house. Countries have to realise that this fetish of accumulating gold is simply nonsense. It may have a value in an emergency, but in normal conditions it is quite useless and remains useless even in America.
  I gather from the hon. Gentleman who spoke last that he is worried in case some nations do not come in and want to attract all capital to their own countries. I think that he is unduly fearful, because it does not matter whether nations are in or not. If they are going to trade with the world, they have to deal in some kind of terms that the rest of the world understands. No country can trade with them unless they can rely upon their currency being the same when the job is finished as when the estimate was made. Therefore, whether you like it or not, countries have in the long run to be true and faithful to their contracts. The experiment of using currency as an economic weapon in the war of trade during the last 10 or 15 years brought home to the nations that as soon as one nation changed its policy and altered its currency terms in relations to gold we all turned. Otherwise there would have been economic chaos. There is therefore no difficulty in all nations eventually agreeing to some scheme of this kind and the common sense of the world will realise that we must have international money whether it is stated in terms of gold or not. It can be stated in terms of coal. I must be certain that if I am purchasing goods in America and have got 100 tons of coal, I want goods that are worth 100 tons of coal. If America sell goods with which they could buy in America 100 tons of coal, they want things from us which are equal to 100 tons of coal. One hundred tons of coal in both countries is equal in value and therefore the goods which are exchanged are approximately equal.
  There must be some measure of value that will give confidence to people that they are not being cheated by currency manipulation. Coal is an inconvenient thing, and the world puts it aside and puts aside silver and choses gold. There is no reason why we should dispense with gold merely because human beings have mismanaged its use. I agree that the American scheme is rather fixed in its ideas about tying international currency to
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  gold. There is a lack of flexibility about it. The British scheme is preferable, because it allows not a fixed gold standard but a managed gold standard. A managed gold standard gives the two advantages of intelligent manipulation with, in the long run, material control of mismanagement. Intelligent manipulation does not do away with the gold standard. The idea that 1931 the gold standard broke down is really farcical. The gold standard did not do anything in 1931. It was the currencies of the countries that broke down because of the international mismanagement of those currencies. After the currencies broke down how did we know the value of the £? We knew that the value of the £ was 15s. because it was worth 15s. in terms of gold. In other words, even if the currencies all go awry, every country in the world still measures its currency in terms of gold. I hope, therefore, that those who speak further in this Debate will not be led away with the anti-gold fetish any more than formerly people used to be misled by the gold fetish, but will realise that it is a useful instrument and that both schemes have done right by trying to tie currency down to some fixed standard which is intelligible to the whole world and accepted by the world.
  Mr. A. Edwards: On the point of warning the anti-gold people, does not my hon. Friend think that there is enough gold in the world already for all practical purposes, and is it necessary to produce any more?
  Mr. Woodburn: It is not necessary to produce very much gold—
  The Deputy-Chairman (Mr. Charles Williams): I do not think we should take a financial Debate of this sort into the regions of the amount of gold that should be produced.
  Mr. Woodburn: I do not propose to get into the realms of the production of gold, but the question raises the rather important point that some people think that we must have the same amount of gold as there is currency. The world has developed its trade very largely, however, by the discovery by the banks that substitutes would do quite as well as gold in financial transactions. The greatest number of transactions to-day are carried through by

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  cheque. Many transactions are carried through by bank notes and very few by gold. To-day, the use of gold as money physically is practically non-existent. It only remains, so to speak, in the background as a measure. We have a yard measure somewhere about the House of Commons which is the guide to the yardsticks all over the country. Everybody does not carry that particular yardstick about; they have substitutes, and if we have the measurement of gold by the cost of its production in even one mine, that would give us the measure which we would require and we could even make it a symbolical measure, and it would work equally well. The quantity of gold is quite immaterial, and for my part America can have all the gold in the world provided we can get the typewriters, motor cars and other things which America can supply. If American wants to exchange typewriters for gold from the African mines I have not the slightest objection. It makes no difference to international trade at all.
  One of the main purposes of these schemes is to iron out unequal trade balances, and this of course brings them down to the fundamental difficulty. The League of Nations was good as a machine, but it could not function fully because the nations were using it for certain other things they wanted. In this trade balance arrangement we are up against the fundamental economic problem. It is true the scheme does not propose to deal with this but wants to leave it for a further investigation and for a secondary scheme, and I accept that as being the wisest thing to do, but it is necessary to say this. American manufacturers—I do not say America, because countries are not units in this case —are hoping to export machinery to every part of the world, and many people in different parts of the world are anxious to buy it, but the problem before this war, and it will be the problem after this war, is in what form these other countries will pay America. The Chancellor has been, accused of delivering a Liberal Free Trade speech to-day, and there is no doubt that the Liberal statements of olden days that you could only buy other goods from other countries by export of goods or services was fundamentally correct, and if America is sending out goods, the only way in which she can be paid is by goods.
  Mr. Loftus: Or gold.
  Mr. Woodburn: Well, gold is one type of goods. In any case America is exporting goods, and her manufacturers want payment in dollars. Whether dollars are printed on pieces of paper or on pieces of gold, they are fundamentally tickets which entitle the bearer to American goods. The only way in which the foreigner can get dollars or tickets for American goods is by selling goods to America and getting dollars in return. The problem for America is whether Americans are prepared to buy foreign goods to balance the goods she exports. Take the case of Argentina. The Argentine may want to buy American machinery, motor cars and other products. Can the Argentine sell to America meat, skins, and other products of the Argentine? Obviously the Middle West of America would be up in arms against' that suggestion, and in America the balance of power seems to be with those people who object to their internal markets being interfered with and who want to keep foreign goods out. America has a problem to face in that respect which is far greater than ours, and no amount of international currency manipulation will solve that fundamental economic problem of America. Nothing can make America buy goods if she does not want them. Therefore, America is certain to have an export balance—in other words, becomes a creditor nation. So long as she does not want payment, I agree with the hon. and gallant Member for North-West Hull (Sir A. Lambert Ward) that it does not matter. We can take all she gives us for nothing, and so can Russia and any other country. But obviously the Americans will not consent to that going on for ever. We are in a much more fortunate position, because we can eat Argentine beef if they will take our machinery. But the tangle arises when the Argentine wants to buy American machinery and America does not want to buy Argentine beef. We want to buy Argentine beef, but the Argentine may not want to buy our machinery. Here we get a triangle that cannot be solved even by this international currency scheme. Therefore, I suggest that all Governments —and I am satisfied that our Government are conscious of this—will have to solve the problem of ironing out their trade balances by trying to get countries to agree to trade with one another, and I am satisfied that the tendency before the war of making bilateral agreements, that is,

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  trading agreements between the manufacturing countries and the food producing countries, between ourselves and Argentina, between ourselves and Australia, between ourselves and New Zealand, will be resumed after the war and that that will be the fundamental basis on which we must build up international trade. I am however satisfied that in spite of that the exchange machinery which is proposed in these schemes is of extreme value.
  Mr. Montague (Islington, West): Why use the term "bilateral"? Are there no such things as triangular transactions?
  Mr. Woodburn: There may be, and as a matter of fact prior to the last war the whole scheme was multilateral, and the proposal of this International Clearing Union is to try to get back to the multilateral basis, and if a large number of nations come into the sterling clearing area or whatever clearing area is established, of course it automatically becomes multilateral, which is much more satisfactory, but I should imagine that it will start off in some cases from a bilateral position and move in the multilateral direction. In short, movements of money are the shadows, and the movement of goods in the world is the substance, and the only way we can get down to realities is to deal with the movement of goods.
  The British plan gives many constructive suggestions outside the scheme itself. It makes it clear that the world must plan or perish. We have got to have world economy, or some nations, and perhaps ourselves, will get into a worse difficulty. The British scheme postulates an international policy for war relief, reconstruction, etc. World international policy means that somebody is going to control it. One of the difficulties of our scheme, indeed of both schemes, will be the fear in countries that this world bank will interfere in domestic policy, that, for example, if this country should decide to adopt the Beveridge scheme or some other social reforms, this international bank will say, "You cannot afford it." In the machinery of the scheme that question is provided for because a country within its own borders can do what it likes, but when it comes into the world it must be world conscious and comply with world rules, and I think that is internationally sound. But it implies something which I
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  think was not quite clear from the Chancellor's speech. The Chancellor said a trader could go to the bank and get "foreign exchange." I am sure that he did not mean it, but that conveyed the impression that it would be the old way of getting foreign exchange. I understand from the scheme that all foreign exchange in the future will be in the terms of bancors or unitas, that no other exchange will be allowed inside any country. [HON. MEMBERS: "No."] Well, I think you are going to break down the fundamental basis of international money, if you are still going to allow other people to import international exchange into the country. The British scheme makes it clear that there is to be complete control within this country of all foreign exchange movement, and I think that is fundamentally sound, because unless we are going to control our own internal economy, we are going to allow world speculators to be able to upset it whenever it pleases them. The scheme also envisages a similar internal economy in other countries. Russia undoubtedly could come into the scheme easily, because the whole of her foreign trade is directed through one bottleneck, as it were, which is under definite control. Our own country also has a great deal of control, but of a more flexible character, which I frankly prefer. America, if it is to solve its problems, will have to formulate some scheme of fairly definite international currency control.
  The other point that the scheme proposes is financial pressure to supplement the international police force of some kind which will develop in other directions. I think that is also a most important factor. One thing which helped the League of Nations to break down—
  The Deputy-Chairman: We must leave the question of an international police force out of this Debate. If we were to develop that, it would spoil the chances for other people to make speeches.
  Mr. A. Hopkinson: May I suggest, Mr. Williams, that you should reconsider that decision? After all, the international police force is an essential condition of the success of this scheme, because there is no other way of making recalcitrant members obey the rules.
  The Deputy-Chairman: No, I cannot reconsider that decision.
  Mr. Woodburn: I did not intend to pursue the matter of an international police force, although it comes into the proposals of a more general character which are made in the British scheme, but there is no doubt that the breakdown of peace and the peace machinery was due to the fact that economic pressure could not be exercised in a sufficiently co-ordinated fashion during several crises through which we passed before the war. I welcome the possibility that after this war there may be machinery which can keep the peace by economic pressure rather than by armed pressure, although I quite agree that in the long run an international police force is an implication of the scheme.
  The other proposal is for an international investment board. I would suggest that this is a point which should be developed much further, and I understand the Americans may bring forward proposals dealing with it, since they will be doing a lot of the investing. The international investment board will be of extreme importance, because many wars in the past have arisen not because nations wanted them but because of the anarchy of investments which landed nations into international trouble.
  Another point is the use of currency as the managed governor of the trade cycle. The Exchange Equalisation Fund was a tremendous step forward from the point of view of checking and balancing foreign exchange movements. It acts very much as does a governor on a steam engine, keeping it going at a steady speed, and I welcome the idea that this scheme can be used for the same purpose. All these schemes presuppose that eventually there is going to be world government with the world as an economic unit, and I think it is fundamental to have some scheme for the distribution of the vital products of the world. The distribution of rubber, tin, coal, iron and perhaps gold even must be brought under some international control, because these fundamental primary products which contribute to the power of nations are going to be materials for which they will struggle, whatever framework is organised, and I think that at the earliest possible moment a similar proposal should be brought forward dealing with the economic side of international affairs, so that the world can get down to study the material basis
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  on which this financial superstructure is built.
  I would like to congratulate the Chancellor upon his exposition of these schemes, and both the American and our own financial experts who have got down to studying these matters in this advanced stage. It all gives me hope that after the war we are to pass into a world which will be at least guided more according to human will and human morality than according to the chance of economic fluctuations and speculative adventure. I welcome these schemes, and I hope that we shall be able to reconcile them both and build a world organisation upon them at the earliest possible moment.
  Sir Alfred Beit (St. Pancras, South-East): I do not suppose that I am the only Member on this side who enjoys speeches made by the hon. Member for West Stirling (Mr. Woodburn). Few Members of the party to which he belongs speak with greater force or interest on financial questions. I was particularly interested in his dissertation upon gold, which struck me as a very unusual one to come from that side of the House. At an appropriate part of my speech I hope to say a few words on the subject. I will only add this further word, as far as the hon. Member is concerned: He asked why the United States were interested in moving gold from one hole, say the mines in South Africa—the only country which the hon. Member omitted in his catalogue of gold producers but far and away the most important—to another hole in the ground, namely, the vaults in their treasuries. He had previously answered that question in his speech; the answer is that they were not prepared to take anything else. That is why they have that vast accumulation.
  In reply to a Question which I put to the Chancellor of the Exchequer not very long ago, the right hon. Gentleman stated categorically, as I felt certain that he would, that the British currency plan was not to be looked upon in any way as a rival to the American plan. In further response to Questions put by my hon. Friend the Member for Lowestoft (Mr. Loftus) and myself, he arranged, through the courtesy of the United States Government, for the publication over here of the American plan. It is worth noting that in the Appendix to that plan Mr.

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  Secretary Morgenthau states that he offers his scheme for study, and, acknowledging the fact that the British scheme was then to make its appearance, he was not putting forward his own scheme in opposition to it. So we can therefore say that both sides of the Atlantic set out wedded to the same ideal, and apparently with open minds, of how to prevent the recurrence of the financial and economic maelstroms of the period between the two wars. This is a great and welcome step forward, and I ask myself whether, had such a method been available in the 1920's and 1930's, the war would ever have taken place.
  The British Press welcomed both these plans and told us a great deal about their points of resemblance. In fact, one might have thought that an agreement had already been reached. I have read both documents, and I have found it difficult to see how two plans so fundamentally different could have been represented as only slight variations on the same theme. I would like to say that it is not blind patriotism which attracts me" to the British plan, but a realisation that it is a far-seeing State paper which breaks new ground and the authors of which seem to be gifted with as much political as economic perspicacity. I think it was best described, in a letter to "The Times," as "a lofty flight of thought." The American plan, on the other hand, appears to the ordinary reader as a more businesslike but less imaginative and more restricted approach to this great problem. At any rate, it may be said that they both have this characteristic in common, that each country, in preparing its plan, has not lost sight of its own interests. Both Treasuries seem to have been realist in drawing up these documents. In the few remarks I hope to make I will attempt to be the same.
  I think we ought to get it into our heads right away that after the war America will be, if she is not already, the dominating economic and financial power. It is no use making proposals to her which do not take her interests into account. At the same time, I am equally convinced that we have, in the present administration, a better prospect than for many years past of reaching genuine agreement on international matters, if only we are prepared to show
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  the right spirit of compromise and do not forget the limits beyond which no American, either from heredity or temperament, will go. I propose shortly to examine some of these points of resemblance and difference, and to suggest how a bridge between these plans might be built, or at any rate how the foundation for such a bridge might be laid. I am sorry if I have to repeat some of the observations of previous speakers, but it is rather difficult not to do so in a Debate on a subject so cut and dried as this.
  To take the similarities first, the plans clearly have as their principal objective the removal of foreign exchange barriers and the freeing of world trade, both in regard to goods and, to a lesser extent, in regard to capital movements. In this respect I do not think that it can be doubted that the British line of approach is the more positive. Our scheme of creating credits will give trade a chance of recovery after the war, with a minimum of restrictive influences, for no sanctions are proposed until the lapse of a reasonable time. The American plan proposes that sizeable sums in gold or dollars should be put up by each country at the outset, but that would be impossible for many, if not most, in view of the fact that dollars will continue in short supply throughout the world for many years to come. Then, again, both plans are definitely agreed, although undue haste is to be deprecated, that some agreements should be reached as soon as possible in order that the plan can be put into operation immediately after the war. They both deplore discriminatory foreign exchange practices and bilateral trade agreements.
  The British proposal for clearing, along the lines of banking practice, and by the use of a genuine international currency, seems to achieve this result more thoroughly than the elaborate arrangements, put forward under the American Stabilisation Fund, for settling manifold exchange accounts between individual countries in their own currencies. Then, again, both plans agree to levy interest charges on excess overdrafts, but the British plan emphasises the importance of similar action on excess credits. The most original part of the British plan, and the one most highly commended, is concerned with the methods to be adopted with persistent creditor countries. Even

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  so, I consider that the remedies proposed in that case are inadequate, because they are impossible to enforce—at least not to the extent of those proposed for debtor countries. This is doubtless done out of respect for national sovereignty, yet if we fail to tackle the question of national sovereignty, in spite of the lesson of the failure of the League of Nations, and persist in ignoring the need for a higher code, it is difficult to see how any international body will be able, in the long run, to weather the storms of conflicting sovereignties.
  The same arguments, or very similar arguments, apply to the right to resign, which, in my opinion, contrary to one or two other opinions expressed to-day, is too freely given in both plans. But let it be said that the authors of this plan have to take human society as they find it. Nevertheless, I would have preferred that countries should bind themselves not to resign for a much longer period than is proposed in either plan. And there I find myself in opposition to the remarks made by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence). One merit of the American plan in this respect is that a country which resigns will not recover any gold or foreign currency which it might have deposited with the Fund but only its contribution in its own currency after adjustments for its debts to the Fund. On the other hand, the British scheme calls for no collateral of any sort unless a country has a debit balance of half its overdraft quota. It seems to me that resignations will be tendered more frequently where a country can do so without loss to itself. I will therefore propose a compromise to cover this point later on. Finally, both plans are agreed that special measures should be taken to deal with abnormal war balances.
  On the other side, there seem to me to be six fundamental differences, differences in principle and not in detail. First, the British plan aims at expanding world trade and at smoothing out unevennesses, whereas the American plan gives no such direct encouragement. It seems to me vague on the subject of remedies to be applied to debtor countries to improve their position, and not unnaturally it is completely silent about creditors. It has limited itself to the curious suggestion that currencies in short supply, which I imagine
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  will be the dollar, should be rationed among debtors from the point of view of the general international economic situation, and I find it very difficult to understand the meaning of that proposal or to see how it would work. Again, the cure for the early stages of excess debit balances, namely, the devaluation of a country's currency, can under our scheme be imposed upon itself up to a stated limit by a country without asking permission from anybody. Under the American plan it requires a four-fifths vote of the governing body, on which, as has already been said, the United States and the British Empire are both likely to have a veto. The Stabilisation Fund, unlike the Clearing Union, makes no attempt to counteract undue expansionist or contractionist tendencies in world trade by the use of the financial weapon. On the contrary, the Stabilisation Fund, it seems to me, will sterilise a considerable volume of wealth, whereas the British plan will create wealth in much the same way as a bank creates wealth by making credit. Secondly, the British plan is
  "fully international and not based on a multiplicity of bilateral arrangements."
  In other words, one country does not have to consider its balance with another but only with all countries. For instance, Britain's debit of trade with the United States would be largely offset by our trading credit with Europe. The Stabilisation Fund, which operates on different principles, calls for many more individual transactions which will be made in national currencies.
  Thirdly, America wants to eliminate foreign exchange controls, whereas we envisage their retention, though I think it is only fair to add that both countries recognise the need of control of capital movements, and it is difficult to see how such control could be effective if transfers in respect of trade were completely freed. Fourthly, overdrafts allowed by.the Clearing Union are vastly in excess of the proposed contributions to the Stabilisation Fund. For instance, I calculate that Great Britain's quota under the British plan would be approximately £950,000,000, according to the formula given in the White Paper, which represents three-quarters of the Stabilisation Fund proposed by the United States. Therefore, while again recognising the difficulty which many countries would have in finding their con-

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  tributions to the Stabilisation Fund, I very much doubt whether it is big enough. Fifthly, I must emphasise the difference in the method of determining the quota for each country. According to the United States plan, that is based on gold holdings and national income. According to ours, it is based on total volume of trade. I think it is quite clear that here is a matter in which both countries have obviously paid some attention to their own position in both those respects, in which I do not suppose there would be much difficulty in reaching a compromise. Sixthly, and last, the Treasury has indicated how the Clearing Union could be used directly or indirectly in the service of post-war reconstruction and relief, how in fact some new and living world organism might grow out of it. The American Treasury, on the other hand, believes that such duties would impede the functioning of the Stabilisation Fund and should be entrusted to other bodies. Their whole outlook, in brief, is more restricted.
  Therefore, the question which has to be answered is this: How can a workable and effective scheme be evolved from such differences as these? The short answer probably is by the maximum amount of contact between officials of the two Treasuries and the minimum of public discussion. Without wishing to go into any details, I think I can suggest certain reconciliations. I have already said that recognition must be paid to the dominant position of the United States and to the fact that she holds the world's largest stock of gold—at the present time nearly £4,000,000,000, and furthermore constantly increasing. It would be folly not to secure her position in this respect, and it seems to me essential therefore that the bancor, like the unitas, should be fixed in terms of gold and, to use the American method, only alterable by a four-fifths vote. At the same time it is very important to emphasise that for the reasons very well explained in paragraph 10, page 9, of the British White Paper it could only be freely convertible one way, namely, gold into bancor, and not vice versa, for if an international currency means anything at all, it means that it is acceptable to all countries for the settlement of outstanding balances, whereas a two-way convertibility merely means reversion to the old form of gold standard. My proposal would have the merit that
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  America would never be confronted with the risk of her gold holding being devalued or revalued against her will. Furthermore, the fixing of the gold value of the bancor would make it easier to determine the initial values of the different members' currencies, for any problem is easier to solve when you have only one variable instead of two. For her part the United States should be seriously invited to acknowledge the duties of a creditor so clearly set out in the British White Paper. The onus of putting world trade right cannot lie exclusively on the shoulders of the debtor, and the part to be played in the future by tariff revision and properly co-ordinated international lending must be recognised. As against that, I would like to say that the British plan does envisage the creation of large credits, which will be entirely unsecured. I have already referred to the risk of default to which such a state of affairs might lead. This is a serious matter for any creditor nation. Consequently, I propose that we combine both plans, to the extent of collecting some collateral, on an equality to all participating countries, in order to build up an adequate reserve against default.
  Having made these suggestions, may I remind the Committee that the two plans are based on methods introduced after the 1931 slump, the British plan on exchange clearing and the American on exchange equalisation? According to the City Editor of "The Times," neither of these devices succeeded, exchange clearings because they are bilateral by character, whereby international exchange is multilateral, and exchange equalisation because the scale of capital movements, as distinct from trade movements, was too great. It is perfectly true that both plans recognise these shortcomings and attempt to overcome them. Indeed, the Chancellor of the Exchequer in his opening speech described the German method of clearings, and pointed out the faults of that system. But we must realise that no scheme can achieve this object if it is destined to witness the financial transactions to which so many nations resorted between the wars. I would like to illustrate that point with a quotation from the "Economist" of l0th April:
  "In the world before the great depression, when sterling was deliberately over-valued, when the franc was deliberately undervalued, when this country lent long and

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  borrowed short, and when the U.S. first invested regardless of the productivity of its investments, then withdrew into its shell, and finally drastically increased its tariffs against the goods of its debtors, no system could have worked."
  These happenings are within the memory of all, and the warning is clear. The fact that these two plans have been published shows that the two greatest financial and commercial countries in the world recognise the warning. That, in my opinion, represents a world event of the first magnitude.
  Mr. Stephen (Glasgow, Camlachie): This is a Debate of very great interest. When I heard the Chancellor of the Exchequer reading his statement, I thought it a pity that he had not published it as a White Paper. If we had had it before the Debate took place, it would have been more helpful. As I listened, it seemed to me' that at the basis of those two documents there is the question whether the future world firm will be America-Britain Limited or Britain-America Limited. They are designed for a future seeking to realise the dominance either of Wall Street or of the City of London. Those two documents show that our financial experts and the Governments do not yet realise what has been happening in the world and that the old financial and commercial structure has gone. The two papers concern themselves with the setting up of financial machinery for exchange, but they do so without any relation to the realities of the situation. What is going to be the relationship between the different countries in the post-war years with regard, for example, to tariff barriers and the form of economic system dominating the different countries? Those matters are disregarded. The people responsible for these documents seem to think that if only they can get agreement on an international money, everything will be all right in future.
  Events have shown that past difficulties with regard to international exchange have been due to economic problems, which have been fundamental and underlying. A few years ago an International Economic Conference was held. I forget the number of countries which were represented—over 6o, I think. Many speeches were made such as have been made to-day. There was the best will in the world to set up machinery that would enable all
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  the countries to prosper. The various delegates discussed their fiscal relationships. They all deplored the high tariff walls that were being built in all the countries, and the fact that the different currencies gave no promise of stability. They agreed that they would all go back to their own countries and try to put the collective view of the Conference into effect in securing better relations. What really happened after they got back to their different countries was that each country decided how many more bricks were to be put on the top of its tariff walls. The walls between the various countries were not considered high enough. They had to protect their home markets, and in order to do that they were willing to go to any length in increasing the tariffs. So the world drifted on, until the problems underlying these currencies going wrong and the building up of those tariff walls led to an endeavour being made to solve them through the explosion of war. I think that the Government and the American Government are adopting an entirely wrong attitude to the problems which face us. As I see it, what we have to do is to think not that we will be able to solve those problems by trying to create an international money order, but to get down to the root of the economic problems which underlie all these difficulties.
  I notice that it is hoped that if the British plan is carried through and the various countries come into this equalisation scheme, credits will be given based on the pre-war exports and imports of the countries. Hon. Members have expressed the view that this will result in an expansionist policy with regard to trade. I am not so sure. What is contemplated in those credits of 75 per cent. of pre-war imports and exports will be the amount of international trade that is to take place. We shall be faced with 75 per cent, of our pre-war trade. It will not mean an addition of 75 per cent, to the former 100 per cent, in each case. There will not be an expension of trade but a less amount of trade than took place in pre-war years.
  It is hoped that there will be the avoidance of bilateral agreements. What caused bilateral agreements in the past? Why did two countries, instead of being content to trade and enjoy their share in the world markets, come to bilateral agreements? Because the Governments of each country were faced with problems

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  which drew them into bilateral agreements. There was so much unemployment in the respective countries, and there was the difficulty of their being able to find a place in world markets for their exports, they practically came to the conclusion that the only way out for them was a bilateral agreement, a certain amount of bargaining—" You take so many of our goods, and we will take a certain amount of your goods." If economic circumstances are the same in the future as they have been in the past, then I have no doubt, whatever agreements Governments may come to, whether they become members of either the British Clearing House or the American Stabilisation Fund, they will be driven by their circumstances to the barter business again. I have intervened in the Debate to ask whether the Chancellor of the Exchequer will try to realise that the difficulties with which the world is faced are inherent in the present economic order and that what is necessary, rather than the attempt to devise a new international monetary machine, is to try to make international agreements so that the world resources shall be available on a just basis of distribution and that the plenty that can be produced in the world will flow into the homes of the people in the different countries of the world.
  I notice also, with regard to the White Paper, that arrangements are contemplated which rule out all except the Allied nations for the time being. It is just madness to think that we are going to get anything like stability and prosperity in the world on such a basis. We have to plan for the whole world, taking in all the nations, and until we are willing to accept the principles of economic and social justice for all, then it is absolute moonshine to talk about realisinc, a stable international market. It simply cannot be done. I have no doubt that we shall find that this Government and the American Government and other Governments still continue to play about with paper schemes with regard to trying to secure a stable international market. It will only be when we get a world federation of Socialist States, through the social and economic security that only such a federation can give, that we shall find the real medium through which we shall have free exchange and social and economic justice for all.
  Mr. Boothby (Aberdeen and Kincardine, Eastern): He is a brave layman who intervenes in this Debate; but I think that, although I agree with a large part of the speech of the hon. Member for Camlachie (Mr. Stephen)—and I do not always agree with him—it is not a bad plan to ask ourselves at this stage what in fact we are talking about. We are talking about the mechanism of currency and exchange. That is all. We are not talking about commercial policy, or the production and distribution of primary commodities all over the world, or loans or investments or lend-lease to countries in need of economic development. Yet all these things are much more important than the mechanism of currency and exchange; and, to that extent, I agree with a great deal of what the hon. Member for Camlachie has said. We ought not to lose sight of the main economic objective set before us by the Atlantic Charter, which, I would remind the Committee, is the enjoyment by all States, great or small, victor or vanquished, of access to the trade and to the raw materials of the world which are needed for their economic prosperity. That is the fundamental objective set before us in the Atlantic Charter and we must never forget it, either here or on the other side of the Atlantic.
  I doubt myself whether it is possible to work out a monetary framework until we know a great deal more than we know at present about the picture which is to be fitted into it; until some kind of trade and investment policy has been evolved. We are dealing to-day with tokens, of which gold is one—and whatever hon. Members may say to the contrary, gold is merely a token—rather than with realities. What are the realities? It is as well to remind ourselves of them, otherwise we may get enmeshed in the details of technical formulae which will carry us far from the main issue. A nation can only buy the goods and services of another nation to the extent that it can pay for them with goods and services of its own or persuade someone else to lend or give it the means of payment. Often it benefits a creditor nation to make the means of payment available to a debtor nation, rather than to accept the whole payment in the form of goods. This, in the old days, used to be called foreign investment; nowadays it is called Lend-Lease.

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  But it does not really much matter what it is called. It means, in practice, that the creditor nations of the world will have to give a lot away, if a balanced world economy is to be achieved.
  As my right hon. and gallant Friend the Member for Kelvingrove (Lieut.-Colonel Elliot) pointed out in a very brilliant and characteristic article in "The Times" the other day, the industrial revolution is now spreading all over the world, and it is not possible for one portion of this planet, namely, ourselves and America, to take a permanent mortgage on the rest for showing it the way how. No currency plan will work unless countries with strong currencies are prepared either to buy and accept goods from countries with weak currencies, or to lend-lease those goods to other countries which stand in need of economic development. It will pay creditor countries to do this. That we proved in the 19th century. It would pay a creditor country to-day, because of the aggregate increase in world trade and, therefore, of its own production for export. But it is really an illusion to suppose that the money lent or given for this purpose will necessarily return in its original form to those who lend or give it.
  A large part of the foreign investments which built up the commercial supremacy of this country in the past has never come back in the form of direct interest to the people who made those investments. The way we benefited was by increased export trade, and that is the way benefits will come in the future. For the rest, the trade of the world, as opposed to the development of the world, which is another question altogether, will surely be conducted for some considerable time on the basis of bartering goods and services for goods and services; and the actual production of the goods and services, and the type to be produced, must be decided, without external pressure or interference, by the individual nations concerned. These are fundamental economic truths, in my view, although I think they may be unpalatable to some people who are reluctant to face their implications. We cannot escape from them. And any currency plan, however good it looks on paper, which fails to reflect them, will come to grief in the long run. It is of the utmost importance to realise that no inter-
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  national clearing scheme, however ingenious, can absolve us from the necessity of evolving a trade policy which, in the words of a recent leading article in "The Times," will have to be drafted not in terms of tariffs, preferences, subsidies and quotas, but in terms of food, raw materials, clothing, machines, plastics and electric equipment. There is a great deal of truth in that.
  I would now like to turn for a few moments to the Keynes plan. It is based on two major assumptions. First, that a policy aiming at full employment will be adopted by the participating countries; and second, that investment aid of some kind or another is to be provided for countries which require it for their own internal economic development. I will content myself by saying at this juncture that these are two tremendous assumptions. I think these things will have to be done if we are to achieve the kind of world which we all want to see; but they are assumptions as great as the assumption which underlies the Beveridge Plan, namely, something like full employment in this country. The plan itself does not claim to be more than a book-keeping system for the conduct of international trade, but, as such, it could be made to fulfil a role of great international importance. The objects of the plan are well set out on page 5, but one is so important that I would like to remind the Committee of it. It is paragraph (c) which states:
  "We need a quantum of international currency, which is neither determined in an unpredictable and irrelevant manner as, for example, by the technical progress of the gold industry, nor subject to large variations depending on the gold reserve policies of individual countries; but is governed by the actual current requirements of world commerce, and is also capable of deliberate expansion and contraction to offset deflationary and inflationary tendencies in effective world demand."
  By extending the modern conception of internal banking theory and practice to the international field, I think we must all agree that Lord Keynes has rendered yet another signal service to humanity. What is that concept? It is that governments can, in fact, create the money required to bring the productive resources of their countries into full use. It is, as Dr. Einzig has pointed out, a logical step to carry the scientific monetary evolution of the twentieth century this further stage. Under the Keynes plan, the International Clearing Union would begin its activities

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  penniless; but would use the modern credit mechanism to create immense wealth. The proposed currency would be provided by making use of the surpluses of those countries with credit balances, in order to finance those whose purchases, for the time being, exceeded their sales. There is nothing inherently inflationary about this. It is common banking practice. In the words of the Keynes paper:
  "No depositor in a local bank suffers because the balances which he leaves idle are employed to finance the business of someone else. … The substitution of a credit mechanism in place of hoarding would have repeated in the international field the same miracle already performed in the domestic field of turning a stone into bread."
  The supreme merits of the Keynes plan are five: First, it recognises quite clearly that the old pre-war system was quite incapable of coping with the vast increase in the productive capacity of the world; second, it is flexible; third, it interferes to the minimum possible extent with the sovereign rights of nations; fourth, it aims, in its own words, at the substitution of an expansionist in place of a contractionist pressure on world trade; and fifth, it appreciates that creditor countries have international obligations at least as great as debtor countries, and perhaps greater.
  Contrast the White plan. I do not want to argue with the Chancellor of the Exchequer, whose opening statement was of such enormous interest, and was the most encouraging statement any Chancellor has made since I have been in this House. But it is no good glossing over the fundamental differences between these two plans. The White plan, in effect, involves a return to the old gold standard. As a matter of fact, it does not even go as far as the Genoa currency resolutions of 1922, which recommended not only the practice of continuous co-operation between central banks of issue, but the regulation of credit with a view to preventing undue fluctuations in the purchasing power of gold. Under the American plan, currencies would be fixed on gold, exchange restrictions would be discouraged, national economic policies would be interfered with, and the creditor countries would, once again, be landed either with unwanted gold or with large amounts of claims in weak currencies which would ultimately become frozen. These are the very things that smashed the world economic system which prevailed before the war. Whereas the Keynes plan
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  aims at achieving a balance at the highest possible level, by providing that sufficient international currency shall be available to meet the current requirements of world trade, the White plan would force the whole world to keep step with any country or countries driven into a deflationary policy through lack of it. We should be back, in no time, in that old, bad, mad world of "laissez faire" capitalism, with its vicious circle of falling prices, profits and purchasing power; its competitive tariffs, subsidies and devaluations.
  There are two things to be said about the White plan. The first is that we can never go back to the gold standard; and the second is that we can never tolerate any outside interference with our inalienable right to impose such restrictions on the export of capital from this country as we wish. As the Keynes paper says, there is no country which can, in the future, safely allow the flight of funds for political reasons, or to evade domestic taxation, or in anticipation of the owner turning refugee. Equally, there is no country which can safely receive refugee funds which constitute an unwanted import of capital, and cannot safely be used for fixed investments. On these two points—full convertibility into gold as is proposed by the American plan, and interference with the right to impose such exchange restrictions as we wish—there can and must be no compromise. It is better to face this issue right away. I have some claim to speak on this subject. From 1922 onwards the monetary policy of this country was absolutely disastrous. The return to the gold standard, and the deflation which it involved, brought ruin to our basic industries and our agriculture, and in the end brought us to within an ace of destruction. I was opposed to the whole business from start to finish. I deplored our return to the gold standard. I welcomed our enforced abandonment of it. And I equally deplored the second deflation which began in 1937, and which finally landed us in this war without stores, equipment, or arms. If we do this again, it will be the end. The end of all our hopes of an expansionist policy, and of social advance. It will be the end of the Beveridge plan, of improved education, of housing reconstruction, the end of the new Britain that we are fighting to rebuild. It will lead once again to world depression, to chaos, and, ultimately, to war.

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  We must make these facts quite plain to the United States now, before we get embroiled in what may otherwise be a quite unnecessary quarrel. We have to tell the United States that unless they, as the principal creditor nation of the world are prepared to accept payment in goods and services for the goods and services they export, there is no hope for any international currency plan; and that unless they are prepared to continue Lend-Lease on a very considerable scale, there will be no ultimate hope for their gold. It may be possible to meet them on the question of gold. An hon. Member opposite pointed out that they have £4,000,000,000 of gold as a reserve, and they are, naturally, concerned about what is to happen to it. We may be able to meet them along the lines suggested in the Keynes plan.
  Mr. Magnay: The United States are themselves to blame.
  The Deputy-Chairman: This is really going right back into the past.
  Major Sir Cyril Entwistle: My hon. Friend says we must not return to the gold standard. Will he point out the difference between returning to the gold standard on the old parity and returning to it on some other parity?
  Mr. Boothby: It might have been better, if you had had real co-operation between the central banks, if we had gone back on a different parity; but on the whole our experience shows that it would be inadvisable to-day to go back to a gold standard on any parity at all. Let us face it, the only value of gold in the modern world is psychological. It has, admittedly enormous psychological importance. It is embedded in the subconscious mind of humanity. It is trusted. It may be unreasonable to trust it, but it is in fact trusted and for that reason it has great value. We in the British Empire have a vested interest in gold. So has the United States. So, to a lesser degree, has Soviet Russia. From a practical point of view there is a great deal to be said for trying to fit gold into the picture somehow. But it is difficult to see what other value it has beyond the psychological. The question imposes itself, and must impose itself in the future; how long is the world to go on paying the
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  enormous sum of 1,500,000,000 dollars every year to the producers of gold, for digging up the metal in order instantly to rebury it? In 1938 the value of the gold mined was equivalent to the whole of the silver, copper, lead, tin, zinc and aluminium produced in the world. Immediately it was dug up it was hurried into ships, bustled across the Atlantic, and immediately buried again. No one except the porters ever saw it. It is difficult to resist the conclusion that all this was something of a waste of effort, to put it mildly.
  I suppose it is a good thing that these currency plans have been given an airing, but I cannot help feeling that they are a bit premature, and I am glad the Chancellor of the Exchequer made it plain that he was not going to push any plan at present. If we cannot come to an agreement with the United States just now, it would be much better to let the whole thing drop for the time being, because it is not worth having a quarrel about it. In any event, I think we ought to consider all these matters—commercial policy, investment policy, and monetary policy—from an Imperial point of view first. In order to meet the requirements of the modern age, from the social point of view and the point of view of defence, we have to evolve a constructive policy sooner or later for the British Empire. Unless and until we can do this, there is no very great chance for a wider international agreement. The mere removal of trade barriers is no longer adequate to the theme. We want a positive, concrete policy of deliberately-planned expansion. The absence of unified buying and selling before the war was a great obstacle to the formulation of any such policy; but military considerations coupled with the new mechanism of credit, enable Governments to exercise a far greater measure of control to-day over the type and flow of imports and exports than ever they did in the past.
  After the last war we forgot the British Empire, and in the League of Nations we attempted to bite off a bit more than we could chew. That is a mistake that we need not repeat. Let us try to walk before we run. If we can achieve, first, an Imperial agreement about commercial and monetary policy, we shall have taken a big step forward. Nor must we forget that we shall emerge from the war the

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  only victorious European Power; the only Power in Europe with the exception of Spain, Portugal, Switzerland and Sweden, whose territory has not been either conquered or occupied. This surely means that we shall be the only European Power at the Peace Conference Table which will be able to speak on equal terms with the Soviet Union, China and the United States, and that to that extent we shall be the spokesman of Europe. I do not think we ought to make any binding commitments with America until we have consulted with the governments of Europe, as well as with the governments of the British Empire. The solution, it seems to me, may well prove to lie in the creation of a sterling area—which was being built up before the outbreak of this war—and a dollar area, followed, not preceded, by an agreement between ourselves and the United States. There might well be a rouble area as well; but it is in the area agreements which are contemplated in the Keynes paper, that the best hope of immediate advance will probably be found.
  One final point. I confess that I share the apprehensions expressed in a recent Debate by my noble Friend the Member for Horsham (Earl Winterton) regarding the political dangers of a bilateral tie-up between this country and the United States, in which we might find ourselves fettered in a strait-jacket of gold, and involved as junior partner in a gigantic attempt to exploit the rest of the world. For us, the Soviet Union and China are just as important, from an economic point of view, as the United States. We should do well to begin to study the requirements of these tremendous potential markets without delay. I am not sure that our future role in world economy may not be to act as a bridge between the West and the East, between the United States on the one hand, and Soviet Russia and China on the other. I am certain that we should be ill-advised to enter into any international agreement or commitments outside the Empire which do not include the Soviet Union and China. I am equally certain that we should commit economic suicide if we entered into any agreement which deprived us of our ultimate right to control both the import of goods and the export of money.
  Mr. Summers: A noted economist who might as well be nameless
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  was once asked whether he could explain how it was that economists were never able to produce a similar solution to a problem which was confronting them and that invariably their answers were different. His reply is not without interest to those who approach this subject with some trepidation, for he said, "The economic mind is a rare gift, and those of us who are fortunate enough to possess it are able to move freely in media of thought which are incomprehensible to the ordinary mortal." If any excuse is needed, that is sufficient to justify me in taking up only a few minutes of the time of the Committee. It is not very long since we spent three days debating the Beveridge Report. That was apparently because it had assumed widespread interest and was associated with what has become known as social security. I suggest that the problems behind the two plans which we are debating to-day have really a far greater significance for social security and for everybody in this country than the Beveridge plan itself. If, therefore, one of the results of this Debate is to increase the interest in the positive measures which are needed for trading generally and the creation of jobs and of wealth, it will have done considerable good.
  It seems to me that nowadays, largely as a result of the acceleration which the war has brought to the development of science, it is no longer production which is one of the problems of the modern age; rather it is distribution and consumption. In connection with that, finance is inextricably mixed up One of the problems with which we shall be faced after the war is the restoration of damage, and however much the productive resources of the world may have been destroyed by war, a far greater increase in production will be made possible by the development of science and the skill of the individual which is inevitably increased during a war. Then there is the widespread determination that by some means or other we may succeed in increasing the general standard of living not only in backward countries but all over the world. Such a conception of the future and such an effect from the war cannot surely be brought about without a genuine expansionist policy to which reference has already been made. In the 18th and the 19th centuries science was beginning to

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  have more widespread application. It is difficult to believe that what has become recognised as modern production could ever have been made possible without the mechanism of the domestic banking system which provided the credit and finance for that expansionist policy to take place. To my mind, therefore, the very simplicity of the conception of applying in the international sphere benefits which we have found from experience to have worked satisfactorily in the domestic sphere is a conception which makes the Keynes plan very attractive. It is true that there is all the difference in the world between a machine handled by nationals of one country and a machine handled by nationals and institutions of a variety of countries. Nevertheless, the principles are the same, and if only it is found possible to create the same confidence between the nations and those associated with that mechanism as has been found possible in the domestic sphere, I cannot see that there is any serious need for apprehension on that account.
  The Chancellor of the Exchequer had something to say about the need to eliminate speculation in exchanges. Anyone who has been associated with the export trade must have realised how essential it is that there should be some degree of continuity in the exchange values if the exporter is to be able to plan ahead and know what he will get for his goods. That cannot be possible if it is open to the speculator to take a view regardless of its effect and to interfere with the general stability of the exchanges. It is not unnatural that any attempt to prevent that, namely, through the control of the movement of capital, should cause some apprehension to be felt at the possibly restrictive measures for ordinary trading work. I cannot believe that it is possible effectively to control the movement of capital unless there are at any rate the means available for regulating the use of exchanges for ordinary trading purposes. In war-time great experience has been obtained of the mechanism of exchange control. It seems to me that the principle that has been found satisfactory in application is that of decentralisation and not attempting to bring every transaction to the scrutiny of some central office. If that principle of decentralisation based on integrity and faith can be applied now
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  surely it would be practicable to apply it equally in peace-time to the general trading considerations that will apply.
  Reference has already been made to the new ground that has been broken in the Keynes plan by introducing into the banking system a penalty on an excess of creditor funds. That introduces a feature which has no place in the ordinary domestic system. It seems to me essential that there should be some public recognition, such as is there found, of the obligation of the creditor country to bring itself nearer to the quota or parity—call it what you like—which is inevitable if we are not to stifle the activities of debtor nations and force them to take unsatisfactory self-protective measures.
  There is one feature of the Keynes plan which has been but little referred to, if at all, and that is the position which a country, whether it be a debtor or creditor country, will find itself under this plan, not as facing one other creditor or debtor country, but in its relations to all other countries taken together. It is said there will be difficulties of national prestige because of the way in which economic and political considerations overlap. It strikes me there is a far better prospect of being able to bring about remedial measures if a country's position is dealt with in relation to all other countries taken together rather than to one particular country. That should give a better prospect than could ever be found, politically at any rate, by any series of bilateral or multilateral agreements, which appear to be the only alternative.
  The only other point I wish to make is this: Were the nations of the world fearful that in a very short time war on a major scale might come about, any scheme such as is here contemplated would be faced with difficulties vastly greater than are inherent in the scheme itself. Therefore, if after this war we may look with a measure of confidence on the absence of war for a considerable time, that would be the most appropriate moment to introduce a scheme of this kind; such a scheme should help to establish mutual confidence—indeed it is indispensable—so that if the effect were to defer still longer a repetition of war, those two considerations would be mutually advantageous. It follows that now is the best time to prepare a scheme for successful application when the war is finished.
  Mr. Richards (Wrexham): I notice that recent speeches have naturally enough gravitated in the direction of considering problems other than those we are supposed to be considering to-day. One hon. Member has pointed out that we are discussing merely the problems and mechanism of currency and exchange, and that we ought to keep to that, but the tone of one or two other speeches has been that we ought to go on to more fundamental questions such as the kind of trade we are to do after the war is over. I think it is only fair to the Keynes plan—and I think the American plan makes the same point—to point out that this question is not considered entirely in isolation. The Keynes plan deals with a number of problems that must be considered alongside this problem of currency mechanism and exchange, and it is important that we should remember this fundamental fact—it is the assumption, I think, on which the Keynes plan is built—that unless nations in the future do determine to trade with one another without introducing the barriers to which we have been accustomed in recent times no plan can hope to work. But we have to recognise that there is a real problem of exchange apart from the problem of trade. It is true that in theory and in practice what we export pays for what we import, but at the same time payments between individual dealers have to be in the form of the, currency they are accustomed to. Americans must be paid in dollars, and we must be paid in pounds, and that, and the fact that we have no international currency, but that each nation has its own specific currency, has given rise to extraordinary difficulties.
  The object of the plan is to remove difficulties that are associated with payments in international trade as it is carried on at the present time. For example, we must all agree that it is grossly unfair that a manufacturer in this country who is selling goods to, say, America, has really no idea of the value of what he will be paid for those goods when it has been converted from dollars to pounds. That is the fundamental problem we are discussing. Can we do something to reduce, or to stabilise to some extent, the fluctuations of the foreign exchanges? It is true to say that this country is probably more interested in this problem than is any other country. Reference has already
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  been made to the predominant place that America will inevitably occupy in the economic life of the world in future. I do not think there will be two opinions about that. With her tremendous natural resources, with the opportunities she has had to accumulate gold which, as we have heard from several speakers, is still very much required by nations, and with her productive activity expanding tremendously as the result of the war, just as our own is, it follows that the future as far as economics are concerned probably lies with the great republic of the West, if not also with Russia, which is on the other side of Europe. We are only beginning to realise what the economic potentialities of Russia amount to. They have astounded the world. In view of this and in view of the predominant place that we occupied in international trade before the war, and particularly before the earlier war, it is most important that we should do everything possible to ease the position as far as the future development of international trade by this country is concerned.
  There are one or two questions to which I should like to refer. The plan is one for reducing the fluctuations in the international exchange market. In this country we have had some experience of attempting to do that by the Exchange Equalisation Account. It is also important that we should remember that this kind of activity has altered very considerably in recent years. The equalisation used to be carried on by brokers in the City, who were chiefly engaged in buying and selling bills and accommodating merchants from the two countries. That trade has by this time really passed almost completely over to the banks. The way it is done nowadays is that various banks in the financial centres of the world have accumulated considerable balances which they, as dealers, use for this purpose.
  It seems to me that the Keynes plan extends the practice of the dealers, that is, of the merchants, as carried on at the present time. If we can get nations to agree to do something to reduce the fluctuations, which are so serious and which are such an impediment to international trade, we shall have taken at any rate the first step, in this time of a common understanding between the nations, to a better relationship in the world of trade in the future. We all recognise that it

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  is only a first step, but it is said that it is the first step that counts. We have realised already that it is not an easy step. There are considerable differences in the two plans, and they were pointed out by an hon. Member on the other side. I hope that the Chancellor and his advisers will proceed to consider and compare the two plans and to evolve out of them, if possible, a system that will relieve the great commercial nations from the unnecessary anxiety that exists at present concerning exchange fluctuations.
  Mr. Brooke (Lewisham, West): I am glad that my hon. Friend the Member for South-East St. Pancras (Sir A. Beit) is in his place, because I want to add my congratulations upon his remarkable speech, which the Committee so much enjoyed. I hope it will be read both at home and abroad as widely as the very interesting exposition with which the Chancellor of the Exchequer opened the Debate. I thought that the hon. Baronet made one small slip, when he suggested that all countries entering the Stabilisation Fund under the American plan would be required to deposit gold and dollars. That is not so. They would be required to deposit a small proportion of gold and the rest in their own local currency and their own Government securities. That would ease the position for them, but I agree with the hon. Baronet in his general criticism of that deposit method. He suggested, as a means of reconciling the two plans, that it would be desirable to withdraw the suggestion from the British plan that the value of bancor could be altered in terms of gold. The Committee ought to consider very carefully before agreeing to that suggestion. I do not see how Britain could accept a proposal like that, unless there were some previous international agreement about the production and supply of gold. That, however, is a subject which your predecessor in the Chair, Major Milner, warned us to keep off.
  The hon. Baronet gave the Committee an admirable analysis of the economic aspects of the two plans; I should like to add a few observations on the political side. This is a subject on which not only are the nations of the world closely bound together, but politics and economics are also linked very closely, and it will be no good if we achieve an economic solution
  712
  that will not win political agreement, or vice versa. The most important feature of both papers is the clear, unequivocal statement that the two plans are provisional and tentative. There have been suggestions in America that that is not the way the American plan should be regarded, and that other nations of the world should look at it as a final, cut-and-dried scheme, on a take-it-or-leave-it basis. It should go on record in this Committee that that was not the view taken by the American authors of the scheme, who said explicitly:
  "The provisions of the proposal are in every sense tentative, intended as a basis for discussion and exchange of views."
  Exactly the same attitude has been adopted by the British Government towards its scheme. That is the only understanding on which we can make progress—on which all the nations who are interested can make progress—in trying to come closer together on the single problem to which dual solutions are offered.
  It is a key matter, on which sovereign Powers have to make up their mind, how much of their national economic sovereignty they are willing to surrender to some international body. That is what this sovereign body, our British Parliament, is discussing to-day. It is one of the hardest things to ask any Parliament or country to agree to—specific surrender of rights of decision. We are all at one in recognising that widely fluctuating exchanges are the enemy of the welfare of the whole world. To avoid them, if we cannot find a satisfactory governor in some metallic instrument, such as gold, we must look for a human governor, an international governor consisting of human beings, to which national sovereign bodies are prepared to delegate some of their functions, in order thus to create an alternative means of controlling exchange fluctuations.
  My hon. Friend the Member for East Aberdeen (Mr. Boothby), whose speech held the attention of the whole Committee, suggested that it was premature to embark, at this stage, on an examination of monetary solutions. I disagree with him there. He is perfectly right in pointing out that the movement of goods is the thing that really matters, but I submit that there is not the slightest chance of our achieving any degree of international agreement on tariffs, commercial policies

  713
  and the like, so long as the nations of the world are exposed to unilateral depreciation of each other's currencies. To see whether we can obtain some safeguards against that, we must discuss, at this early stage, the possibility of international monetary arrangements.
  We have to invent a new machine, and it must be one which will necessitate the smallest possible interference with national sovereign rights, if we are ever to establish it. Both the schemes before us interfere with national sovereign rights, but the American scheme seems to involve the greater surrender. The American scheme lays it down that the value of national currencies shall be determined at the outset, not by each nation itself but by the Fund, a radical difference from the British proposal, which is that at the beginning each nation will be free to determine the exchange value of its own currency in terms of bancor. Secondly, the American scheme, in the form of the offer it makes for the continuance of the control of capital transfers, would, it seems to me, render any kind of exchange control impossible. I fail to see that it recognises the insuperable difficulty of achieving any effective means of controlling capital exchange transactions without including a right of control over ordinary commercial exchange transactions. Thirdly, though I do not want to labour the point now, it is true that the American scheme, by its insistence on the consent of four-fifths of the votes, gives much greater power in determining policy to one or two great countries of the world. Every country except one knows that, in every matter for decision coming before the international body, what it wants may be vetoed by the vote of one, and that is a tremendous surrender of sovereignty asked for from every country.
  The British plan to a very large degree avoids these obstacles. It also, I submit, renders possible much greater elasticity. Of course, the elasticity of the American plan could be enormously enlarged by an adjustment of the quota system. It might be better to have a less satisfactorily constructed plan, with larger quotas in terms of money, than a more satisfactory plan which, in fact, was going to give a smaller degree of elasticity through overdraft facilities being more restricted. But as the plans stand, in terms of elasticity, the British plan is the winner on both counts.
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  I look at it in this way. In the history of the world we have advanced from the barter of commodities, through the invention of money and markets, to the development of a highly intricate banking system. If, for a moment, we think of national currencies as commodities, it seems to me that the American plan corresponds roughly to the stage of the invention of money and markets to ease the difficulties of barter, whereas the British plan corresponds rather to the invention of banking and the use of the cheque. It carries us farther. It provides all that greater degree of elasticity.
  I am not at all sure whether either of the plans includes sufficient safeguards against withdrawal combined with default, and I suggest that that is a matter which should be looked at very carefully by all the nations studying these proposals. My other big difficulty about the British plan, indeed about any plan which is brought forward at this stage, is that we cannot tell when or on what terms, the present enemy countries could or should be brought within it; and so long as large territories of the world are outside an international Currency Union, that necessarily makes it easier, it may indeed make it more tempting, for a single country, annoyed by a decision of the Union, to withdraw and decide to play on the other side. The British plan, however—and this is fundamental—is undoubtedly far kinder to the weaker countries, and that is what the world is going to need in the years immediately following the war. It is kinder in helping their recovery, and it does not require, as the American plan does, the initial surrender of some of their precious assets.
  The British plan also recognises, as has been pointed out by several speakers to-day, that the welfare of the world is unattainable if any country or countries pile up credit balances which they do not use. It would be disastrous if these or any monetary plans were thought of in any quarter, as an insurance so sound that it did not matter whether an individual country took all kinds of risks in its own behaviour, and acted in as arbitrary a manner as it cared. No international monetary plan can stand up to that. It has to be said, perfectly plainly, that the greatest single cause of the economic troubles of the 1930's, economic troubles which affected America as bitterly as they

  715
  affected the rest of the world, was the refusal of the Americans to buy adequately from the rest of the world in exchange for what they wished to sell to the rest of the world. If that attitude persists on the part of America or any other creditor country, nothing can avert the disaster which will overwhelm the world and that country with it. I, for one, cannot believe that that is going to be the attitude of the United States after this war. The wide-mindedness which the American nation has shown towards other countries in the last three years seems to me overwhelming evidence in support of a reasonable belief that it will not. We need not so terribly fear that America is going back to sheer economic narrowness. There is evidence, too, in the American plan itself, because in that plan there are intricate suggestions—better worked out, in a sense, than our suggestions have been—for dealing with the temporary problem of the abnormal balances which certain countries will have accumulated as a result of the war.
  We have reached a point where America and Britain can now talk openly about international economic co-operation, where they can talk in terms of joint organisation, not only for international currency, but for other essential needs too, such as the rehabilitation of the weak nations needing relief, international capital lending, international commodity control, and, I would add—because I believe this must come at the very start—an international agency for the collection, the authoritative and speedy collection, of facts and statistics. Much of the trouble between the two wars was that countries were determining their economic behaviour without adequate agreed knowledge of the real facts of the situation for which they were prescribing. If all these various organisations can be brought into being, including an international monetary machine, that, in itself, I submit, will help with regard to one of the points about which the hon. Baronet was troubled. It will help as a safeguard against the risk of individual withdrawal and default, because the sanctions that can be applied against individual defaulters, international sanctions, will be far more powerful, if there is not merely one international body but many international bodies, from most of which the weaker nations will sincerely desire to benefit.
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  It is not the business of the Committee to examine critically every economic detail of the two plans. We are not economic experts; we would not make a success of it. It is our duty to pass broad judgments, and to consider the political possibilities and difficulties which arise out of planning any international machinery of this kind. I should like a message to go out from this Committee to-day that the British House of Commons welcomes further discussion on international monetary planning, and that it is anxious to smooth rather than to accentuate the economic and political frictions in the way.
  Sir George Schuster (Walsall): When my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) followed the Chancellor's most lucid speech, he said that he had never spoken in this House with a greater sense of responsibility, because it fell upon him to make the first unofficial statement on these two proposals. I could not help thinking, as my right hon. Friend proceeded, that it was very fortunate that that responsibility had fallen upon him, because I think his speech, if I may say so, was a most admirable introduction to this Debate. It put the whole of these problems into their right perspective. I agree particularly with him that we must be frank on this matter. It would be a poor service both to the Chancellor and to our American friends if we did not speak with complete frankness. I want myself to make some points very frankly in a moment, but before doing that I want to say that the impression made upon me is that the discussion to-day has tended, if anything, to exaggerate the differences between the two plans. There is another point I would like to mention as a preliminary. I listened with great enjoyment to the speech of my hon. Friend the Member for East Aberdeen (Mr. Boothby), and I entirely agree with him that we must approach these matters in no attitude of subservience or of dependence on others' help. But let us not go too far in what we say to emphasise this. Personally I cannot see how there can possibly be any satisfactory economic set-up for the world which does not include co-operation between the United States of America and the British Commonwealth. We may have to go our own way, but before we do that on any matter let us make every possible effort to reach agreement. I see

  717
  no difficulty, in the present mood of the United States, about reaching agreement.
  Personally, I greatly welcome both proposals, and I would like to say much more than there will be time to say about them. I welcome the brilliant lucidity and ingenuity of the British paper. And there are many points too that I welcome in the American paper, particularly one passage in the introduction:
  "The people must know that we at last recognise the fundamental truth that prosperity, like peace, is indivisible."
  I venture in that connection to call attention to something that was said by my hon. Friend the Member for South-East St. Pancras (Sir A. Beit). I enjoyed his very lucid speech, but I suggest that he did not do good service by emphasising at the beginning the influence on the two proposals of the "interests" of the two countries. I do not believe that either country has approached this problem or framed its solution with an eye to favouring specially its own interests—whether it be on the questions of voting rights or other matters. I think this question of interests has been wrongly put. No Government of any country can be expected to propose a plan which is not consistent with the interests of that country. But what we have to realise is that our interests all hang together, and that we must not take narrow views about what are our interests. If that is the spirit, we shall have no difficulty in reaching agreement. That is one of the things I think that the world has begun to learn.
  I have two other preliminary considerations to raise. First, it is very important that we should not approach this Debate as though we are discussing two rival plans, between which we have to make a choice. What we have got to do is to evolve the best plan taking features from all. I would myself like to see a plan put forward by the governments of the other United Nations. Let us have as many proposals as possible, and try to reach agreement on the best plan. Secondly, we must recognise the limitations of what we are discussing to-day. There can be no successful or useful currency plan which is not based on wide economic understanding and there can he no wide economic understanding which is not based on political understanding. Both papers recognise the limitations. Both
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  plans recognise that, even in the monetary field, this is only one feature of what the American paper describes as the instrumentalities required for dealing with the situation after the war. That paper makes clear that there must be agencies for dealing with long-term capital loans, there must be agencies for dealing with the abnormal situation left at the end of the war, there must be agencies for stabilising raw material prices.
  One of the chief points that I want to make is that we cannot possibly commit ourselves to any currency plan, we can enter no union, unless there are satisfactory arrangements under those three major heads. The Union would break down; and it would be worse not to start it at all, than to start and have it fail at once. I do not put that forward as excusing delay, since I think this matter is most urgent. Indeed, it is almost "now or never," if we are to come to any reasonable agreement. I put it forward, on the contrary, as an argument for getting on as quickly as possible with all those other measures. Therefore, I am glad to see that in the American paper a promise is made of an early statement on a plan for international capital loans
  Now, when we come to the matters which we have to discuss to-day we must stick to broad points. Much of the ground has already been covered by other speakers. I have found it of value for clear thinking on this matter to distinguish between two separate aspects of the duty of this international institution which it is proposed to set up The first is that of securing reasonable and orderly stability of exchange rates, and the second is that of providing supplies of foreign currency to the member countries that need them, in a way which will lubricate the flow of international trade. These purposes are closely interconnected, but they are two distinct aspects. It has been recognised in most of the speeches to-day that reasonable currency stability is an essential if we are to have full development of international trade. We have to consider how far we are prepared to go to obtain this. Although we are not asked to approve any detailed plan to-day, there are certain principles to which this Committee ought to commit itself, which have, perhaps, been obscured by some of the discussion which has taken place. I should like to have it declared, with no

  719
  possibility of doubt, that this British Parliament absolutely sets its face against anything like competitive currency depreciation, currency depreciation adopted as a means of securing a temporary, unjustified advantage in international trade. Let us declare our belief in that principle without any possible doubt.
  We have to answer another question. As we have lost—and that has been well pointed out by a number of speakers—the automatic regulator which under British guidance worked through the nineteenth century, and as we have to replace it with some personal regulator, and as we have to recognise that we must work together in this, are we prepared to say that we abandon the right to be, ourselves, the sole judge of whether a variation in our exchange rates is justified? That is a question from which we cannot run away. Personally, I agree with what was said by the Home Secretary in a speech on Sunday, that if we talk about international solidarity or international cooperation, and mean those to be something more than nice after-dinner phrases, we have to give an affirmative answer to that question. We must in fact be prepared to accept some judgment other than our own sole judgment as to whether a variation in our exchange rate is justified. But we must be satisfied as to the tribunal.
  There we come to one of the important questions in this scheme. I want to say a word about that later, but I must say at this stage that the American plan, so far as one can interpret it in the matter of voting rights and the absolute veto which a one-fifth vote would have and in the possible restriction which that would impose on a country's power to get a variation in its exchange rate, seems to me to be utterly inacceptable. It is indeed very unfortunate that there should have been any discussion of this matter in terms of voting rights or powers of absolute veto. In my own view, if ever we get to the stage of questions having to be decided by majority vote on that international board, that will mean that the scheme will have broken down. Therefore, I hope there will be a further discussion of that question of majority voting and of the way in which these matters are to be regulated.
  I do not propose to say anything except a few words about the link with gold.
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  I personally think in much that has been said to-day there has been considerable exaggeration on this matter. I cannot believe that, with the present stocks and production of gold in the world and after all that we have learned in the last 25 years, gold will again be allowed in any country to behave stupidly as a regulator of currency. I am certainly riot afraid of American policy in this matter. If the power to regulate the relation of gold to currency rests with the United States, as it would under their scheme—since it would be the dollar-gold rate which would virtually control the position—I am not afraid since I do not see any prospect of the United States wishing to pursue a contractionist or deflationary policy. Therefore, I think that the fears that have been expressed about the link with gold have been exaggerated.
  I want to turn to the second of the main aspects I mentioned—the aspect of this international institution, as a lubricating agency supplying its members' needs for foreign currency. It has been represented that on this matter there are vital differences between the two plans. It is true that the British plan is to be on a credit basis and that overdrafts are allowed, whereas, according to the American plan, countries are allowed to take out nothing which is not covered by what they have put in. Personally I feel that there is considerable value in having to put something in. That may be quite a useful sanction, and to that extent I consider that is some advantage in the American scheme. This does not mean that I want a permanent contractionist scheme. But if one studies the two papers again more carefully, one can find that there is not really such an essential difference as has been represented. The difference rather lies in the focus of attention. The British plan represents rather the ideal plan that would be suitable for a group of nations in the sort of circumstances that will follow this war, whereas the American plan has been considering it rather in the terms of nations A, B, C, D in the actual conditions that will supervene when the war is over. One perhaps tends to be narrow because it is a little too realistic and the other perhaps tends to be unrealistic because it casts its vision forward into conditions which will not be immediately realised. One particular difference illustrates this point. The American plan includes among its funda-

  721
  mental purposes that there should be machinery for dealing with the abnormal war currency balances, while the British plan merely recognises that as a problem but makes no specific proposals. But the real point which emerges if one studies the two plans carefully—and I want to put this point to the Committee which has not yet been made—is brought out in the important paragraphs dealing with the "transitional arrangements" at the end of the British paper. In paragraphs 41 and 42 it is recognised that the opening of the full credit facilities included in the British plan would, in the conditions which will immediately succeed the war lead to undesirable consequences. It contemplates that for the transitional period—probably at least the first two years after the war—countries shall not be allowed their rights of overdraft, and that the amount of Bancor balances they may be able to get will have to be balanced against gold that they put in or be given as part of special arrangements for international lending on a long-term basis. I put it to the Committee, that if the American plan is regarded rather as a plan covering the transitional arrangements, and if the wider vision in the British plan is adopted as applicable to later conditions when a reasonable measure of stability has been established, that offers a basis for the fitting in of the two plans together.
  There is one other word I should like to say about the British plan with its overdraft facilities. I think that Lord Keynes has made an immense contribution in his conception of bringing the fruitful methods of domestic banking into the sphere of international financial relations. But we must not stretch this idea too far. We must not be blinded to realities by the brilliance of the plan. I think there is some departure from reality when, in paragraph 12, the White Paper says that "the analogy with banking is complete." It goes on to say:
  "No depositor in a local bank suffers because the balances which he leaves idle are employed to finance the business of someone else."
  But the ordinary bank with its thousands of accounts and thousands of depositors is in a very different position from this international Clearing Union, whose accounts will he numbered by tens and where it is pretty clear that there will be one depositor of preponderant importance. Nor is it true to say that the
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  depositor is entirely unconcerned with the way in which a banker utilises his deposits to finance other business. If the bank grants overdrafts to none but uncreditworthy customers, the bank will go bust, and the depositor will lose his money. That is a situation which might conceivably occur in regard to this international Clearing Union. We do no good by ignoring the probability that if such a Union is to be set up and operated in the manner proposed in the British plan, the United States would become the preponderant depositor and would be closely concerned with the manner in which balances which stood to its credit were used. Let us face up to that fact. But let us also hope that the United States will realise that almost any use will be better in their own interests, than to leave their deposits lying idle. Subject to this, I fully realise the value of the conception put forward in the British paper, and the advantage of the "anonymous" or "impersonal" facilities that might be allowed.
  Now I want to say a word about the working of the Board. Those of us who have had practical experience in dealing with difficult exchange situations in between the two wars must be very concerned in considering just how this machinery is going to work. I venture to put certain considerations to the Committee. An international board is an extremely cumbersome instrument. There has been put upon the Board, with particular clarity in Section III of the American plan, and also to some extent by implication in the more general provisions of the British plan, a number of duties which really will make it necessary for the Board to take executive decisions from day to day of great complication and of wide economic and political significance. I doubt very much whether an international board can properly perform those functions. What does one suggest? It is not for me now to suggest definite plans, but I want to put this idea to my right hon. Friend. If the International Board—the board of the Clearing Union, or the Fund or whatever you like to call it—comes to be regarded by the world not as a number of men representing their various Governments but as a body of experts who will study every problem in a scientific and objective way so that when a country gets into foreign exchange difficulties there will be a really impartial

  723
  expert tribunal, which would analyse and diagnose the cause of these difficulties, I believe that that might prove to be a factor of incalculable value in the world. I would like to see a Board assume not so much the character of an executive responsible for complete and widely important decisions but rather the character of a judicial tribunal in relation to the Executive. If its functions are the functions of a judicial authority, I believe that they may become not of less but of much greater value. I fully recognise the difficulty of weaving that idea into the texture of these particular proposals, but I commend it to the attention of the Committee if we want this scheme to be a success.
  There are a number of other points that I would like to bring forward, but this is not the time to do it. I welcome the Chancellor's assurance that this will not be the last Debate on the subject, and I think we ought to express our gratitude to him for giving us the chance of discussing the matter at this stage. This is something like a new experiment in democracy. A plan has been put forward for our opinion before it has been settled by the two Governments. That is of the greatest value, and I hope the Chancellor himself will gain something from this Debate. But there are difficulties in getting to close grips with the practical features in a Debate of this kind, and I wonder whether it would be possible to have something like a Joint Select Committee to examine the proposals in greater detail. A Joint Select Committee of both Houses of Parliament might perhaps be an instrument of great value at a certain stage. Finally, I want to impress upon the Committee the urgency of getting on with this matter and of taking advantage of this occasion when the affairs of the United States and ourselves are more than ordinarily mixed together and when our recent military successes have enabled both official and unofficial speakers to testify to a spirit of co-operation and joint action for which there has been no parallel between two Allied countries. This surely is the time to get together with realistic frankness and complete honesty in order to evolve a practical scheme which will benefit not only our two nations, but the whole world.
  Sir Cyril Entwistle: I propose to make only a short speech on this tech-
  724
  nical and complicated subject. First of all, I would like to congratulate the Chancellor of the Exchequer on the issue of this White Paper, which I consider to be one of the most important State documents which has ever been issued and one which, in its way, will play a bigger part in the future prosperity of the world which we are hoping for so much and which we all sincerely hope will be realised. We understand that the main author of this White Paper is Lord Keynes. Certainly the diction and phraseology bear the imprint of his handiwork and brainwork, and I should like to congratulate the Chancellor on his judgment and wisdom in having persuaded Lord Keynes some time ago to be one of the economic advisers to the Government. I think it is of great advantage to the country that it should have at its service the fertile and imaginative brain of Lord Keynes. Among world economists his intellectual ability is certainly outstanding.
  There are only two aspects of this White Paper on which I want to trouble the Committee for a few minutes. The first point I want to make is to draw attention to the preface to the White Paper, where it says:
  "In the field of national activity there are, four main lines of approach. First, the mechanism of currency; second, the framework of commercial policy; third, the orderly conduct of production, distribution and prices of primary products; fourth, investment aid."
  It is on the second and third of these points that I want to lay emphasis. It seems to me that the White Paper, like the Beveridge Report, is based on certain assumptions. We know what these assumptions are, the most important of which is not more than a certain degree of unemployment. Similarly, it seems to me that Lord Keynes, or the authors of this White Paper, recognise that this currency plan by itself is not sufficient, that we shall need a framework of commercial policy and the orderly conduct of production, distribution and prices of primary products. I submit that the only satisfactory commercial policy for post-war years will be the recognition that foreign trade in the future will have to be carried out by international agreement on quantitative lines, that is to say, quantitative exchange of products by international agreement. There are certain definite proposals which have been put forward under the name of a world trade alliance, and I hope the Chancellor

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  and his economic advisers will carefully study those proposals, because they amount in their main feature to an extension of the principles which have been adopted and laid clown in the International Wheat Agreement.
  I attach most profound importance to that Agreement as a model, but only if it is a model for similar agreements being arrived at with regard to the main products that enter into international trade—and I include not only primary products, but manufactured products. Our troubles of exchange depreciation, tariffs, exchange restrictions and all the rest of it will become unimportant if the future export trade of the world as a whole is carried out by international agreements through the mechanism of production committees, a separate committee for each of the products which are the main products that enter into international trade. The International Wheat Agreement has nearly all the provisions, both immediate and provisional, which are necessary to regulate the future foreign trade of the world.
  Mr. MacLaren: It is not in the Report.
  Sir C. Entwistle: It is one of the assumptions made by this White Paper of the other measures which will be necessary in addition to the currency measures, but I do not propose to say anything more about it, because we have to realise that we are dealing mainly with the currency side of the post-war proposals. The other aspect I want to emphasise is in the preface of the plan, which says:
  "Member States shall agree to accept payments of currency balances due to them from other members by transfer of bancor to their credit in the bank of the Clearing Union."
  There is a corollary to that in paragraph to, which says:
  "No State is entitled to demand gold from the Union accounts to balance the bancor since such balance is available only for transfer to another clearing account."
  I consider those two matters by far the most important of all the proposals laid down in the White Paper. It means that if a creditor country insists on maintaining permanent balances, those balances will really only remain as book-keeping credits in the books of the International Clearing Union. The only way they will be able to cash in those credits or take advantage of them will be by taking either goods or
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  services, because there will be no means of the credit being taken advantage of by the creditor nation, for it is clearly said that they will have to accept payment of balances in their favour by the transfer of corresponding debits in the books of the Clearing Union. In effect that means that if this provision is accepted, every country realises that it can only accept payment for its own exports from the world as a whole by accepting a corresponding amount of imports in goods or services from the world as a whole I think that is the most important difference between the proposals of our own White Paper and the American White plan.
  A lot has been said about the differences between the two plans. Some hon. Members have exaggerated them, and some have been inclined to minimise them, but I regard this as an important difference, and I hope if we are going to insist on our own plan on any fundamental points, we shall regard this as the most fundamental, because, in my view, it there is one solvent for the future troubles of the world and one means of obtaining trade prosperity in the world, it will be the recognition as a general rule among nations that in the long run a nation must buy as much as it wants to sell. The one obstacle and stumbling block to the recognition of this general rule is the United States, because of the extra export surplus she has enjoyed now for so many years, but one finds it very difficult to believe that this can be a permanent obstacle to any rational solution of the problem, because it is not a matter of prejudice or of interest. It is actually a fundamental, logical fact that in the long run a country cannot be paid for its exports in any other way than by imports of goods or services. It is true that in the past they have been able to obtain payment temporarily in the form of gold, but what is the good of gold if it is not going to be ultimately used for purchasing goods and services? That fundamental point is recognised fully in the Keynes plan. It is a most important provision. It involves the recognition of this general rule, which is most important for the future prosperity of the world, and I hope the Chancellor, in his negotiations with the United States Government, will lay the strongest emphasis on that part of the Keynes proposals.
  Mr. Hammersley: There are two ways in which we have to look at these proposals for an improved international monetary mechanism. One is to examine them, to note the differences between them and it may be exaggerate those differences. We can raise up the old bogy about the gold standard and we can produce a lot of fundamental statements which will lead to the final conclusion that we ought not even to consider the American plan. The other way is to look at the proposals from the point of view of finding similarities, bearing in mind that we and the United States have to get together in this matter, in the hope of finding some via media on which both countries can agree. I think the latter method is the more desirable in the national interest.
  Both plans will increase the quantum of international trade by increasing the amount of world purchasing power. Both plans make it possible to achieve a balance of international payment at a higher level of production and exchange than would be possible without them and therefore both propose to do something that is beneficent to the world. I have heard the criticism put forward that there ought not to have been two plans, because, by their publication, the two countries only advertise their differences. If only one plan had been put forward, it would have been criticised on all sides and no one would have known in which direction a compromise was finally to be achieved, whereas now we know where the United States stands and we know where this country stands; thus we know that some kind of compromise, if it is achieved, will be found between the two plans. Many speakers have emphasised the essential fact that these two plans have to be given a sense of proportion and that a number of plans will be necessary to rehabilitate the post-war world. A proper commercial world policy and the control of basic imports and exports both in price and quantity have been referred to by my hon. and learned Friend the Member for Bolton (Sir C. Entwistle) and a long-term investment policy has also been mentioned. Therefore, in whatever way we look at these two plans we must realise that neither is intended to be a complete panacea.
  When I read them, I tried to put the proposals as I had understood them in
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  some simple form and this is the conclusion that I arrived at. Each plan sets up a shop in which exchange can be bought and sold at fixed rates. In order to do business with the new shop set up under the British plan, you have to be either one of the original founder members or you have to receive a card of invitation. In order to deal with the shop set up under the American plan, you have to pay an entry fee. In either shop, members may buy other members' currencies to the extent of their resources, that is to the extent of their holding of exchange and gold plus something more—and the vital factor about the plans is this "plus-something-more." In respect of the British plan, this "plus-something-more" in the first year is a quarter of the country's quota and in respect of the American plan it is the full quota. Thus there is set up a shop where countries who trade, can obtain an overdraft of a fixed amount and in which the goods that are on sale—foreign exchange—are marked up in plain terms. In the Keynes plan, of course, there is only one quarter of the quota overdraft allowed. In the White plan you can have the full quota in the first year, but each country has to make a contribution of its own currency, or its own securities, or gold, and in respect of gold the least proportion would be 5 per cent.
  This proposal—to provide facilities for an overdraft—is extremely valuable whether we find it in the one plan or the other. It does give to the world the ability to finance trade, which, otherwise, might not be done. This is important. I do not think it has been appreciated or brought out in the course of this Debate that normal trade, the ordinary kind of trade which balances, is not necessarily dealt with through either plan. It is true that under the Keynes plan it is desirable that foreign exchange transactions should be centralised through the Clearing Union, but there is nothing in either plan to make it necessary that the total volume of foreign trade should be conducted through either the Clearing Union or the Stabilisation Fund. In other words, these proposals provide means whereby marginal trade or trade which would not otherwise be done can be financed internationally. It provides a means of reaching our objective, which is full exploitation of world resources. The Keynes plan is more expansionist and from that point of view it

  729
  is much more desirable in the world interest.
  I will deal with one or two of the points of each plan. I do not think the methods proposed for fixing the quota are irreconcilable. In the British plan we propose that the quota should be decided by reference to the imports and exports of the various nations. In the United States proposal, it is to be by references to the gold holding, the foreign exchange holdings and the fluctuation of the balance of international payments. As against relating the quota to the total volume of trade, I think there is something to be said for relating the quota to the fluctuations in the amount of the balance of payment because it is those marginal transactions, the extra transactions, which the new monetary institution is intended to finance.
  I do not think there is any doubt that the American plan is much too rigid. Twenty per cent, of the votes would give an absolute veto over any modification of the arrangements. I do not agree that the plan puts us back on to the gold standard. If it does I support those speakers who have said that we in this Committee cannot agree to any plan which puts us back on to a fixed gold standard. In respect of the treatment of gold, I observe that on page 7, paragraph 8, of the White plan it is proposed that each member country should agree that it will offer to sell to the fund, all the foreign exchange and gold it acquires in excess of the amount it possessed immediately after joining the Fund. In other words, the White plan proposes that America, which has nine-tenths of the gold should keep her gold, and that all other nations which may become possessed of gold after the plan comes into operation, will have to sell it to the Stabilisation Fund. That seems to me eminently unfair.
  Then there is a proposal about the freedom of the control of foreign exchanges by the nations after the war. It has been pointed out by many speakers that if you completely free the control of foreign exchanges, we cannot control the export of capital. We have only to consider what happened in Germany after the last war to realise the grave danger in that. I do not think we should agree to a proposal of that kind. It was held by the hon. Member for South East St. Pancras (Sir A. Beit) that unitas were completely convertible into gold. I do not think that is
  730
  entirely true. It is only true to the extent that gold is put into the Stabilisation Fund. It is a reasonable expectation that, if you put in gold, in excess of the amount required to cover your quota, you should be able to get back unitas. The reference is on page 9, paragraph 3 of the American plan.
  I agree that if you wanted to look at the White proposals in a critical spirit, you might say that the American plan envisages a new kind of régime of monetary Imperialism. I do not think that is either the intention, or the way in which the proposal will work out. The United States has given us magnificent help in the war. There are certain characteristics of the plan to which we should not agree but, on the whole, if people will not read into either plan more than tentative proposals and will not say that mutual agreement on certain points is impossible, then we may find a solution which is agreeable to both countries and is for the benefit of the whole world.
  Mr. Benson (Chesterfield): There has been extraordinary unanimity in the Committee upon the aims and objects a these two proposals. All the discussion has taken place on the relative merits of the methods. I wish, however, to raise the question whether the objects of the two proposals are really desirable. When one has authorities like Lord Keynes and the British Treasury united with the American Treasury to say they desire a specific object, it requires a certain amount of temerity to differ from such a massing of authorities. I do, however, want to challenge the whole question whether fixed exchanges are desirable. The Chancellor of the Exchequer referred to reasonably stable exchanges. He referred another time to the relative stability of the exchanges. The hon. Member for Walsall (Sir G. Schuster) referred to reasonable and orderly exchanges. Neither the American nor the British plan proposes relatively stable exchanges, nor reasonably stable exchanges. They propose fixed exchanges which shall only be altered by permission. It is that type of exchange that I regard as of doubtful advantage. The object of our exchange control should not be fixity but, on the contrary, should be of a reasonable stability. A number of Members have spoken as though there were no alternative to fixed exchanges between countries

  731
  other than complete chaos. That is entirely wrong. We must certainly have a very great amount of control not only of currency but of various economic factors that go to make those enormous swings and changes in the value of currency; but that is not fixity.
  In view of the fact that both the American plan and the British plan definitely aim at fixity of the exchanges, I think it is very desirable that we should examine what that will involve. There are three pre-requisites to the possibility of fixed exchanges. The first is that there should be an unvarying ratio between international price levels and international production costs; the second is that there should be an equation of imports and exports on current account, including of course invisible exports; and the third is that so far as capital movements are concerned financial movements should actually represent and equate with material movements. Those three prerequisites, or some intercompensating amalgam of the three, are essentially the basis upon which fixity of exchanges must be based, and fixity of exchanges cannot be achieved otherwise. I put it to the Committee, When can we expect any possibility of these three criteria being fulfilled? Certainly not in the first chaotic period that will follow the war, and how long that chaotic period will last I do not know, and I do not think anybody else knows. I would remind the Committee that 11 years after the last war this country was driven off gold, and 13 years after the last war the great American nation was driven off gold, so one cannot expect even reasonable stability to come very rapidly after the present war. But I assume that sooner or later we shall arrive at stability, and it is during the stable period when fixed exchanges would be possible that I question very seriously whether they would be desirable. The Keynes plan, your American plan, will not and cannot produce fixity of exchanges in the first period of chaos. They can only produce it when we have achieved reasonable stability, and it is with that period of stability that I wish to deal.
  If we are to have fixed exchanges, we must have rigid control of exchange dealings. We shall have to have the whole mechanism of the present war-time ex-
  732
  change control in operation. It means a Government permit for every import and for every export. It means a Government permit for every transmission of cash abroad or every receipt of cash into this country. I hope hon. Members recognise that. It means, moreover, a very rigid postal censorship, because otherwise you cannot prevent leakages of currency. The alternative to a very rigid control of currency is a black market. We had very considerable difficulty in preventing the black market in dollars and sterling even during wartime conditions, when trade was at a minimum and when practically everything was controlled. A return to normal conditions, and to a vastly greater world trade than we had in 1940–41, will mean that to control exchanges in such a way as to avoid black market currencies the mechanism will have to be overwhelming and appallingly cumbersome. Indeed I doubt if you can get rid of the black market in currency. We 'may get rid of the black market in this country, because we have a highly efficient mechanism of exchange, and we may get rid of it in the United States, but the absence of a black market in currency depends upon the efficiency of the financial organisation, and that means that in less efficient countries, and in less scrupulous countries, you are going to create a flourishing black market. It is far more profitable and far more advantageous for a country normally to trade on a currency which is correctly valued than on a currency which is over valued, and that means that the countries which allow a black market, or which cannot prevent a black market, will have considerable advantages in world trade which will be denied to the English manufacturer because of the efficiency of our system in preventing a black market. The black market is going to work against the honest and efficient country every time, and you will not be able to exclude the black market if you have fixed exchanges.
  I said one of the three prerequisites of fixed exchanges was a constant ratio between the production costs of the various countries and world prices. What does that mean to labour? I hope hon. Members on this side of the Committee will take account of what it will mean. The prerequisite is a constant ratio between production costs in a country and world prices. That exists only theoretically at any given time. It may average itself out, it must average itself out in the long

  733
  run, but at any given time it is only approximately true, and when it is approximately true there is a pressure on the exchanges, in fact, the fluctuations in the exchanges take up the variations between your production costs and world prices. But if you are going to have rigid exchanges then the impact of the variations in world prices is transmitted through your rigid exchanges directly on to your production costs. I hope hon. Members on this side will recognise that a major factor in production costs are wages. The impact of varying world prices will be felt upon wages, just as they were felt by the miners' wages in 1926–31 when we went on to the Gold Standard at far too high a rate. Unfortunately prices in the twentieth century have shown a far greater instability than in the nineteenth century, when we were on the Gold Standard, and I do not see any reason why we can look forward to greater stability, or much greater stability, of prices in future than we have had in the past. We are bound to have very great fluctuations in prices, and that means great impacts upon our wage structure. There is another thing which has changed since the nineteenth century, and that is that our wage structure is far more rigid than it was 40 or 50 years ago. I hope that hon. Members realise that we have to accept either fluctuating exchanges or fluctuating wages. Of the two, I prefer that we should have the exchanges fluctuating than to have the continuous disorganisation and trouble of fluctuations in our wages structure.
  Hon. Members may say that I have been drawing too black a picture and that although both schemes propose that there should be temporary fixity of rates, there is an escape because any country can go either to the Fund or to the Board, according to whichever scheme is adopted, and ask for permission to reduce the rate of exchange or increase it. That means that our rate of exchange will alter by jumps. The British proposal suggests permission to vary the rate by 5 per cent, within a given period, but after that 5 per cent, any further variation can take place only by permission. I think there is very little question that, were we to adopt either the English or the American scheme, such variations in the exchanges would be rather larger than 5 per cent. We can look forward to rather larger variations in our rates of exchange by permission.
  734
  What is going to happen under those circumstances? There will be a very large amount of intelligent anticipation when a rate of exchange is likely to be altered. It will not merely be the people sitting behind the doors of the central authority who will realise that there is international tension and a likelihood of depreciation in some particular exchange; that knowledge will be world-wide. As the pressure grows upon a particular exchange and it becomes more and more patent that depreciation is likely to take place, what will happen? Buyers know that a very large depreciation in the rate of exchange means a large drop in the prices of exports to that country, and nobody will be, willing to buy the goods of that country until the depreciation has taken place. Variations that take place in exchanges can now be dealt with by the forward market, but under the system of fixed currencies no forward market will be possible. We have to face the fact that fixed exchanges, altered by large jerks and jumps which can be foreseen by intelligent anticipation, will involve enormous interference with international trade whenever there is a possibility that these changes are likely to take place.
  When a rumour gets about that any country is in difficulties and its currency is bound to depreciate sooner or later, purchasers of that country's goods immediately hold off until the depreciation shall have taken place. Even though the depreciation would not have been necessary under reasonably free exchanges, under the fixed, jerky system of exchange control the depreciation becomes absolutely inevitable. But the time between the anticipatory realisation that there may be a depreciation and the actual depreciation itself, creates a period of severe unemployment in the exporting industries of that country.
  There may be theoretical advantages in fixed exchanges, but they are merely theoretical, and the objections and difficulties which will be involved are going to be a far heavier price than any theoretical advantages we can get. I do not want hon. Gentlemen to believe that I am pleading for anarchy. There is a very big difference between a reasonable flexibility of exchange rates and the catastrophic changes which have produced so much trouble in the past. I suggest that exchanges ought to be to world trade

  735
  something like what a universal joint is in the transmission of power.
  Mr. A. Bevan: If the fiscal position of a country is being revealed in the accounts of the Clearance Union long before it approaches the critical stage, could not the adjustments in its fiscal policy be made long before such a big change in the rate of exchange would be necessary?
  Mr. Benson: What the hon. Member is now suggesting is that the exchanges should be regularly, continuously and freely moved.
  Mr. Bevan: Surely if the action is going to be artificial if it is going to be taken by the Clearance Union, it might be a small adjustment long before the position becomes critical?
  Mr. Benson: If every exchange rate is to be changed continuously to keep it in step with the real situation, with real parity, then all the hon. Gentleman is asking for is all that I am asking for, not fixed exchanges, but stable exchanges. I suggest that you cannot get rid of rigidity if a country has to go and ask permission and show reasonable cause for the changing of its exchange if the rate of exchange needing regulation is a 1 per cent, change to get it into step with reality. It will be told by the board, "We cannot be continually chopping and changing rates." The whole point of the Keynes scheme and the other scheme is that there shall be fairly continual fixity. Why not have a system of stable exchanges which will from day to day represent the actual situation? All I am suggesting is that the rigidity of exchanges outlined in the suggestions of the Keynes proposals and the American proposals are likely to produce far more trouble than they would save.
  Sir A. Belt: Is the hon. Member prepared to take the risk of reproducing the chaos in the exchanges which we saw after the last war?
  Mr. Benson: I thought I had tried to explain that. I pointed out that you could not get even fixed exchanges until you have produced a very great deal of order and stability into the economic world.
  Mr. Bevan: Is not my hon. Friend making this mistake of thinking that you
  736
  change the temperature of a room by altering the thermometer?
  The Deputy-Chairman (Mr. Charles Williams): Thermometers are outside the scope of the Debate.
  Mr. Benson: I suggested that no stability of the exchanges is possible until we have got rid of the underlying causes of the vast fluctuations to which the hon. Gentleman referred. I said that I was not dealing with a state of affairs in which the world conditions were so unsuitable as to make exchange stability impossible. I suggested further that when we have the complete economic international stability which makes the fixing of exchanges possible, the exchanges would be so stable that they would not require the fixing which both these schemes propose. You cannot fix exchanges until the condition of the world is such that it really is not necessary to fix exchanges. It is because everyone has accepted without question the whole idea that you must have fixed exchanges that I have challenged the proposals. I suggest that that is a far more realistic attitude than merely to accept those proposals, which when we examine them will, I think, so far as the actual fixing of exchanges is concerned, cost a far higher price than the value of the benefits they will confer.
  The Financial Secretary to the Treasury (Mr. Assheton): There are very few matters of public policy which the ordinary man or woman finds it more difficult to understand than questions affecting currency. I have taken an interest in these questions for a very long time, and I agree with my hon. Friend the Member for Northampton (Mr. Summers), who made an interesting speech, that in these realms of thought one is able only partially to understand the problem. One seems to get glimpses of the truth from time to time, and then again the truth is obscured in darkness. Some hon. Members have by their contributions made those glimpses of the truth rather larger, while others have tended to obscure them in greater darkness. It is certainly very helpful to have public discussion and debate on these matters, and I am sure that the Debate to-day, during which we have had many valuable contributions, will prove of great advantage. As well as thanking hon. Members who have spoken to-day, and to some of whose

  737
  points I should like to refer later, I would like to thank very much those newspapers which in their financial columns have given a good deal of thought and study to this matter in recent weeks. It has been a help to hon. Members to have had some of these matters analysed for them and put clearly in front of them. We are also, of course, greatly indebted to the officials of the American Treasury for the contribution of thought that they have made in their plan, some features of which are certainly attractive. There have been some criticisms of the American plan to-day, but I am sure the Committee will appreciate that it is obviously unsuitable for me to comment on those criticisms.
  Many of the problems which have been discussed are, of course, of a highly technical nature, and deal with matters of which few people have experience. There are some problems with which all business men are familiar, but the problem of foreign exchange is an unknown field to many men who have had quite wide experience of business, and these problems are often outside the experience also of men who spend their lives in finance. Even in the City, there are many experienced merchants and bankers, who have not had occasion to give particular thought to the technical problems of foreign exchange. But there are, of course, certain very broad aspects of this matter which we, as Members of Parliament, must study and try to understand if we are properly to fulfil our duties to our constituents.
  There are two points which I should like to suggest that hon. Members should bear in mind. In the first place, it is clear, as my right hon. Friend the Chancellor of the Exchequer told us, and as more than one hon. Member has stressed in the course of the Debate, that no monetary mechanism will be of the slightest value in helping goods and services to move freely about the world if, at the same time, nations erect unnecessary barriers to check that movement and flow. That is a fundamental fact, which, I am sure, the Committee appreciate, but it is a fundamental fact which we must keep firmly in mind throughout all the discussions on this matter both to-day and in the future. The second point I should like to make is that while finance is, certainly, rightly described as our servant, rather than our master—and that is a point which has often been stressed by
  738
  hon. Members opposite—nevertheless we must not forget the fact that money has, as one of its principal functions, that of being a measuring rod of goods and services. That point has also been brought out by more than one hon. Member in contributions to the Debate to-day. Just as it is one of the functions of Governments to see that weights and measures are kept honest, so it is the duty of Governments to see that money is kept honest.
  There is the dilemma to which reference has been made between stable prices and stable exchanges. Both are, in themselves, desirable, but in certain circumstances it may be necessary to choose between them. It would be ideal if we could so arrange matters that the dilemma did not arise and if the nations, avoiding both inflation and deflation, were able to maintain reasonably stable price levels and exchanges. I am afraid that the history of Governments in relation to currency is not as encouraging as it might be. From the days of ancient Rome until now, the pages of history are full of examples of behaviour on the part of Governments which cannot really be called creditable. But we must hope for an improvement in this sphere of government as in other spheres, and to this end, it is most desirable that there should be as wide a knowledge and understanding as possible of the main principles which are involved in these matters, even if the technical problems are rather beyond the reach of those of us who are not especially expert in these matters.
  The discussions which we have had to-day about the Clearing Union scheme have necessarily been somewhat restricted and limited in their scope, since both these plans exclude from the main discussion the much wider and, in a sense, more important matters, of commercial policy and post-war long-term international investment. Those subjects have been largely excluded from the Debate. Some hon. Members have discussed the difference between the scheme drawn up here and the scheme prepared by officials of the United States Treasury, and I am sure the Committee is most indebted to my hon. Friend the Member for South-East St. Pancras (Sir A. Beit) for his extremely valuable contribution to the Debate and also to the hon. Member for Walsall (Sir G. Schuster) who also made a very constructive speech. Beside

  739
  these differences being stressed, attention has also been drawn to the similarities, and, as my right hon. Friend the Chancellor of the Exchequer said in opening the Debate, I am quite certain it would be entirely wrong to emphasise the differences. Although the differences, I quite agree, are not unimportant, the two plans are closer to one another than they might at first appear. No one doubts, for example, that both proposals have the same fundamental aim and that both plans have been devised to deal with exactly the same problems, namely, how countries are to settle their balances which are outstanding and arise from their trade with one another and how to increase the purchasing power of those countries which may be short of foreign exchange. Both proposals seek to create an international monetary system which would make international payment as easy as possible in order to encourage intercourse between the nations and multilateral trade.
  But it is in their approach to the problems that there are differences, and these differences have been noticed by the Committee. I have no doubt that these differences can be elucidated and in many cases reconciled as a result of further discussion. Let us look at some of the similarities between the two plans. There will be many countries after the war which will have for some years unfavourable balances of payment, and in the absence of some scheme it would seem that those countries would be forced to impose restrictions on their purchases with a view to reaching exact balances of payment, and that would start all over again that vicious spiral of restricting trade, from which we suffered so much before. Both plans recognise that it is not enough to provide means for relieving the needs of deficit countries; there must be some means by which equilibrium can be restored. My right hon. Friend the Chancellor, the hon. Member for East Birkenhead (Mr. Graham White) and others reminded us of our economic failures in the period between the two wars, and it would not be out of place for the Committee to remember that in the period before 1914—which the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) described as a period when there was benevolent currency despotism on the part of this country—we had in the gold stan-
  740
  dard an instrument which did succeed very largely in preventing violent fluctuations of the trade cycle and of unemployment. I suggest that a monetary system can very largely be tested by its success in preventing such fluctuations.
  We must not think that the gold standard is an age-long principle upon which nations have conducted their trade and industry from time immemorial. In point of fact, this country did not adopt the gold standard until 1816, although I admit that during the previous century we had been gradually slipping on to that standard owing to an error made by one of my right hon. Friend's predecessors, as Master of the Mint, Sir Isaac Newton. Sir Isaac was a member of the same distinguished college as the right hon. Member for East Edinburgh, and in spite of being a great mathematician, he made an error in his calculations which resulted in this country finding itself, before the end of the century, for all practical purposes, on the gold standard. We were, of course, originally a silver and not a gold standard country. It was not until the 13th century that any gold coins were minted here at all, and the sovereign did not make its appearance until the time of the Tudors. In the early part of the Middle Ages there was an international currency. There was an international coin called the besant, issued by the Emperors in Byzantium, and that was one of the interesting survivals of the unity of Christendom. It was not until Constantinople had been sacked and the prestige of that centre somewhat lowered that monarchs in the West decided to start issuing a gold currency, infringing, as he no doubt thought, the sovereign rights of the Emperor. The besant was the coin which had served a purpose which some Members might well have been searching for. It would be interesting to speculate what would have happened if that had been preserved throughout the ages, but we have not time now. There was an attempt in the last century to introduce such a coin, but Napoleon III insisted on having his own face put upon it, so the scheme broke down.
  The gold standard meant fixed rates of exchange with other countries on the gold standard. That was a fixity which was absolute and unqualified. That was a feature which we came to dislike, and I want to ask the Committee to consider why it was that we disliked it. First of

  741
  all, the rates of exchange might be out of relation to the underlying facts. They might be out of relation to money incomes and costs of production in different countries. In our case, for example, in the 1920's there was some reason to think that the £ was over-valued and that that was proving a serious obstacle in our export trade. If a country has a currency which is over-valued, it has sooner or later to choose between two remedies. It has either to reduce the exchange value of the currency or force down the money level of its costs of production by a process of deflation. Under the gold standard the former remedy was not available and the latter only was left, and we learned how extremely disagreeable that process of deflation is. Another reason became apparent in the 1930's. We were pursuing as one of our main instruments a policy of cheap money. It might have been impossible to maintain that policy under the conditions then prevailing if we had still been obliged to maintain a fixed parity of exchange. One of those prevailing conditions was that everyone was perfectly free to put his money abroad if he chose and, when foreign centres offered somewhat higher rates of interest for money than the cheap rates we were trying to maintain, money might have flowed out on a very large and disastrous scale, particularly if those who put their money abroad had been sure that they could bring it back without risking anything on the deal. In other words, absolute fixity of exchange rates, coupled with complete freedom of foreign exchange transactions, might limit unduly our freedom to pursue the financial and monetary policy that trade and industry required.
  Mr. Benson: I am not sure whether the hon. Gentleman is on my side or not.
  Mr. Assheton: I am coming to discuss the question of exchange control in a few moments. In both the plans it is realised that it is impossible to have any international system which does not place some obligations and constraints upon the nations which belong to it, although in both schemes every effort has been made to reduce the interference with the freedom of each nation's internal policy.
  Some hon. Members, including my right hon. Friend the Member for East Edinburgh, have expressed some anxiety as to whether we shall in effect be tied to gold, and be unable to adjust our ex-
  742
  change rate if adjustment is necessary, and my hon. Friend the Member for East Aberdeen (Mr. Boothby) made it clear that in his view we never wanted to be tied to gold again. I do not think this idea need exist so far as the British plan is concerned. The essence of the plan is that no change should be made in the exchange rate between countries except under well-defined conditions. Under the British plan, when a country has a debit balance on the books of the Clearing Union exceeding a certain amount it will be entitled to reduce the value of its currency by 5 per cent. without permission and to a larger extent with permission. If the debit balance exceeds one-half the quota, the Clearing Union may, as a condition of further overdraft, call upon it to reduce the value of its currency. On the other hand, if there is a country with a credit balance exceeding one-half its quota, the Clearing Union can recommend that country to permit its currency to appreciate, though the country cannot be compelled to follow the re commendation. My right hon. Friend the Member for East Edinburgh will, perhaps, agree that the marriage with gold, so far as the British plan is concerned, is more in the nature of a companionate marriage than an indisoluble union. There is latitude for change, but it must not be overlooked that the rules will also be applied to other members than ourselves. It is important that we should be protected from the actions of others which might damage us just as much as they should be protected from actions of ours which might damage them.
  In spite of all that my hon. Friend the Member for Chesterfield (Mr. Benson) said, surely it is a merit rather than a demerit of the Clearing Union scheme that it aims at a considerable measure of exchange stability and tries to ensure that changes in exchange rates are not made without good reason. I agree with my hon. Friend the Member for West Stirling (Mr. Woodburn) that we must not let the revulsion against the gold standard blind us to the serious disadvantages of exchange fluctuation. International trade cannot prosper in exchange chaos. As the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) once said, it is like playing billiards on an Atlantic liner. Nor could anything be more dangerous than to treat exchange depreciation as a sort of tonic of which

  743
  we should take a dose whenever we felt rather out of sorts with our economic life. On that road there really might be a real danger of a disastrous process of competitive exchange depreciation. The problem is to reconcile a reasonable degree of exchange stability with a reasonable degree of flexibility. I ought to make it clear that in this scheme there is no surrender of sovereignty any more than in the making of a commercial treaty. Both are limited in time, and notice can be given to bring the arrangement to an end. Though for practical purposes we may make surrender for a time, there is no surrender of sovereignty.
  There are many Other similarities in the two plans, both of which are really devised to remove excessive trade restrictions and obstructions, and both the plans, I think, recognise the need to restrict at any rate the movement of liquid capital. The flight of capital in the period between the two wars was due primarily to international instability, and this can only be overcome fundamentally by creating a stable international situation. It is necessary, however, in a period of international instability, to make provisions of this sort, because there is no doubt whatever that in the period between the two wars large speculative flights of capital, whether due to political anxieties or to the desire to make a profit in disturbed conditions, did increase our difficulties, and after the war some restraints will have to be accepted. In spite of all the difficulties mentioned by my hon. and gallant Friend the Member for North-West Hull (Sir A. Lambert Ward) and by my hon. Friend the Member for Chesterfield, I fear that it is likely that we shall have to control foreign exchange transactions for some time after the war to ensure that our resources are devoted primarily to imports which this country principally needs, and it is not impossible that such control may have to extend to speculative movements of capital for an even longer period.
  The British scheme has three or four main features. First of all, the countries agree to pass their payments of international balances through the Clearing Union. Secondly, there should be a unit of account to which the par value of these other exchanges is related. Thirdly, the rates of exchange have to be fixed and unfixed by agreement. Fourthly, each coun-
  744
  try is provided with some resources of foreign exchange to enable it to import goods from those countries of whose currencies it has not a supply. Criticism has been offered here to-day, and also in America and in the Press, of the proposal in the Clearing Union plan to make available unsecured overdrafts to deficit countries. Possibly these initial facilities should rather be regarded, as credits, for the idea of unsecured overdrafts may be an invitation to abuse of the facilities. I think it may be worth further consideration whether some form of security for these initial credits is practicable without imposing undue restrictions upon the value of these facilities. In the post-war period there is no doubt that some elbow room will be needed, and if we are to get trade moving again, we shall have to find some means of providing that elbow room. No scheme which aims at reviving world trade can avoid the necessity of some element of risk. These parts of the scheme will undoubtedly have to be examined very carefully by the experts, and I am certain that due note will be taken by them of the valuable contributions which have been made in this Committee to the problem we are discussing, and I think that for the time being we may be well advised to leave these matters in their care, well knowing that the best brains here, in America, and among the United Nations will be devoted to that task.
  Much will depend for the success of this scheme upon the skill and integrity of the central monetary authorities of the countries concerned, but we can approach this matter in a spirit of hopefulness and confidence that those who have suffered so much from the errors and follies of the past will have learned something from their experience, and that they will be prepared to do everything in their power to make the scheme a success.
  In spite of all the criticisms that have been offered—and so far as detail goes I am prepared to offer as many criticisms of both plans as is any other hon. Member—I am convinced that some international mechanism is necessary for the future of the world and that unless we take our courage in both hands and determine to build up some such system, the future which faces us will be very grim. As has already been stressed in this Debate, we are discussing to-day only the machinery; much bigger issues underlie

  745
  all these problems. The time will come when we shall have to discuss those issues, but without a good, sound, financial machine, the best laid plans will go wrong. We need a sound machine, and if we can build one, let us do so. Let us go forward therefore with hope and confidence and try to build up some system, if we can, which combines the wisdom of the ages with the greater technical knowledge with which our experts have been able to equip themselves. Perchance this is
  "a tide in the affairs of men
  Which, taken at the flood, leads on to fortune."
  Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," [Major Sir James Edmondson] put, and agreed to.
  Committee report Progress; to sit again upon the next Sitting Day.

  ARMY LECTURES, IPSWICH (CANCELLATION)
  Motion made, and Question proposed, "That this House do now adjourn."—(Major Sir James Edmondson.)
  Mr. Stokes (Ipswich): I wish to raise a question with the Secretary of State for War upon a matter which I brought to his notice at Question time yesterday. On that occasion I asked him:
  "for what reason, on or about 4th April, 1943, Mr. John White, of 20, Fonnereau Road, Ipswich, was stopped from continuing a series of lectures on land and monetary reform at the British Legion Hall, to soldiers of the Royal Electrical and Mechanical Engineers sub-workshops units stationed in the district?"—[OFFICIAL REPORT, 11th May, 1943; col. 455, Vol. 389.]
  I received an unsatisfactory reply, which is of course not entirely unusual. The Secretary of State explained in his reply that the lectures had not been conducted with the necessary prior approval and had been stopped for what he described as "good and sufficient reasons." He did not state the reasons, even though I asked him to do so. When I suggested that one of the reasons for stopping the lectures was that Mr. White was not on the panel and therefore was not entitled to speak, but that, Mr. White having given long service, his position should be regularised by being given an opportunity to come on the panel, I merely got an abrupt "No, Sir."
  746
  The lectures were all given voluntarily by Mr. White. So far as I know, he is a reputable citizen. He is chairman of the Anglo-Polish Committee and a member of the Rotary Club. He is interested particularly in monetary reform, and perhaps I can say with some gratitude that since my contact with him he has shown a greater interest still in the more fundamental question of the land. He gave the lectures voluntarily at the request of the commanding officer of the district. He has been giving Sunday morning lectures on general economics, covering questions connected with the land, the Beveridge Report and so on. These lectures started in November of last year and continued till March of this year, and they number about 11 in all. Suddenly the commanding officer gave him notice, regretfully from his own point of view, that the lectures must no longer go on, as he had received instructions to stop them. No reasons were given—I emphasise that. The officer said he had had instructions from a higher authority. The lectures had gone on for a period of over five months.
  It being the hour appointed for the interruption of Business, the Motion for the Adjournment of the House lapsed, without Question put.
  Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Beechman.]
  Mr. Stokes: If there was something very terrible about the lectures, surely something is lacking on the part of the authorities in not having discovered it before? It seems to me that to stop a series of lectures of this kind for apparently no reason except red tape is most unfair and disadvantageous to the troops, and likely to cast a stigma on a well-known member of my constituency.
  Mr. Butcher (Holland-with-Boston): Is attendance at these lectures voluntary or compulsory?
  Mr. Stokes: These lectures were attended by about 150 people. Great interest was shown. The men stayed on to discuss and argue out the points made during the lecture for as much as three-quarters of an hour on a fine Sunday morning. The questions I want to put to the Secretary of State are these: Why stop the lectures when they were going so well? If it was purely a matter of red tape, the situation could surely have been

  747
  regularised. Mr. White could have been given an opportunity to apply for enrolment on the panel. When I asked whether, if he made such an application it would be granted, I got a negative answer. This is all over my constituency, and Mr. White naturally feels that there must be something more behind this, as indeed I do. I suggest to the Secretary of State for War that it was probably because Mr. White was making some very unfortunate—from the bankers' point of view—attacks on the monetary system, which I consistently make whenever opportunity offers. No complaint was made to him. The lectures were well appreciated, unlike so many I have heard of in many places where official lecturers are sent and bore the troops absolutely stiff, and when men ask questions they are told, "We do not know that" or that they have no right to ask that question. What a miserable way! I would sooner answer questions than make a speech. If I cannot do that, I would sooner ask them.
  I have asked the Secretary of State why the lectures have been stopped, and he has said he has examined the reasons and that they are good and sufficient. I suggest he tells the House what they are. I should like to know. I should like to emphasise the desirability of having stimulating lectures for the troops and particularly to ask how, and under what regulations, these speakers are selected who may address the troops. Who decides, and on what grounds is it decided? Is it purely the political caucus in power for the time being which regulates the thing, or is it completely unpolitical and open to all kinds of competent speakers, not merely people who like hearing their own voices, but people who can be stimulating?
  Sir Patrick Hannon: How did this course of lectures start, in the first place? How was Mr. John White brought in to become a lecturer to the troops?
  Mr. Stokes: Mr. John White is a well-known man in my constituency—
  Sir P. Hannon: Is that the real reason?
  Mr. Stokes: Oh no. [Interruption.] This is quite a serious matter. I am not trying to be facetious. He was brought in to lecture to the troops, and not to bore
  748
  them, as so many lecturers do. He was invited by the commanding officer to give his lectures.
  Sir P. Hannon: On a point of Order. Is the hon. Member entitled to say that Members do bore the House?
  Mr. Speaker: The hon. Member did not say that Members bored the House.
  Mr. Beverley Baxter (Wood Green): How did the commanding officer know of the existence of Mr. White?
  Mr. Stokes: I cannot go into the historical record of everybody connected with the matter. I personally did not know that the lectures were going on until seven or eight had taken place. Mr. White is well known. Many of the soldiers go to meetings that I address, and they may have got his name there. But he was invited by the commanding officer to stimulate the interest of the troops in various matters, and he gladly gave his services for nothing, although he is a busy man. I want to know who empanels the speakers; why is Mr. White not entitled to speak; if he asks to be put on the panel, will he be refused; and, finally, for what reasons, other than red tape, were the lectures stopped, although they had been running for five months? The most desirable thing we can do at present is to afford the troops every possible opportunity of having stimulating lectures, which will make them au fait with the problems confronting the nation at present and arm them well to face their responsibilities when they come out of the Army.
  Major Petherick: The hon. Member for Ipswich (Mr. Stokes) has made a very strong speech in favour of his constituent, but not nearly so strong as he usually does. He is fond of posing in this House as the enfant terrible, with the accent rather on the infant than on the terrible, in the sense that the late Ivan, Ruler of all the Russias, was. I think that there is more in this matter than appears on the surface. There are Members of this House, not many, I am glad to say, and many more people in the country, who are anxious to turn this A.B.C.A. into a political bureau for spreading doctrines, and doctrines which are not always desirable.
  Mr. Stokes: This is not a party matter. I think I am right in saying that until

  749
  three weeks ago this gentleman belonged to no political party at all. At present he belongs to the Labour Party.
  Major Petherick: Whether he belongs to the Labour Party or not, he appears, oddly enough, to be particularly interested in the sort of subjects which the hon. Member himself is anxious to propagate, notably monetary reform, and probably taxation of land values and that sort of thing. In fact, I fear that the hon. Member and some of his friends are really anxious to turn this A.B.C.A. into something rather different, so that the letters will stand for the Advertising Bureau for Crankish Activities.
  Mr. A. Bevan (Ebbw Vale): The hon. Member for Ipswich (Mr. Stokes) is using the Adjournment to raise an individual case. What is under consideration at the moment is not the general education of the Army, but a particular case. Ought the hon. and gallant Member to be allowed to do a little stonewalling for the Minister before he replies?
  Mr. Speaker: Under the Rules of Order I cannot interfere. Anything is in Order on the Adjournment unless it involves legislation. I think it is desirable, however, to stick to the subject raised in a short Adjournment Debate as closely as possible.
  Mr. Driberg: I do not think that these are A.B.C.A. lectures. The hon. Member for Ipswich (Mr. Stokes) did not say that they were.
  Major Petherick: The hon. Member said in his speech that Mr. White should be recognised. [HON. MEMBERS: "No."] That is what I understood him to say. Surely this matter of one individual raises the whole issue. It is an issue about which some of us are rather perturbed and anxious. There are a good many persons in this country who are trying—and I say it with some force—to use the Army Bureau of Current Affairs to propagate not only political but peculiar doctrines.
  Mr. J. J. Davidson: Who are they?
  Major Petherick: I have several names, but I shall not publish them now. I will give them to any hon. Member who chooses to ask me privately afterwards.
  Mr. Driberg: But this is nothing to do with A.B.C.A. It comes under the Army Education Scheme, which is quite different.
  Major Petherick: I think I am entitled to continue my theme in spite of the fact that some hon. Members do not approve of that which I am saying. I believe that certain persons in this country are doing their utmost to use this Army Bureau for the propagation of doctrines of a particular nature, some of them subversive and some of them honest political views, but which I claim ought not to be put to the Army through the Army Bureau of Current Affairs. We have had many occasions in the history of this country alone when the Government have endeavoured to instil into the Army, always with unhappy results, purely political views. It was done during the Covenanting days in Scotland, and it has been done in other countries, as in the recent case of Russia. For a long time political commissars were part of each unit and used to lecture to the troops, but Russia found it was a highly unsatisfactory method, with the result that the commissars were removed. I ask the Secretary of State for War, when he replies, whether he can possibly give some data about the number of persons who are employed in this A.B.C.A. force. Personally, I think there are too many camp followers in the Army at the present time. The duty surely of the Army is to fight. Since the beginning of the war far too much attention has been paid to education of all kinds in the Army. The primary duty of the Army is to fight the enemy, and I have always been nervous of this Army Bureau of Current Affairs, because I feared that it took the attention of the Army away from their primary duty. But it exists, and the fact is that we should all of us try to use it for the best purposes. I was asked, and I accepted, an invitation to go and give lectures on behalf of A.B.C.A. I asked whether they would be kind enough to give me some suggested subjects, and they gave me some, including the Beveridge Report and other subjects of a political nature, and I absolutely refused to discuss them at all.
  Mr. Silverman: On a point of Order. Does there not come a point where the strict exercise of an hon. Member's right can become an abuse of

  751
  the procedure of the House, and have we not reached it? The hon. Member for Ipswich (Mr. Stokes) has raised a particular question and asked the Minister to give an answer to that question, and if the hon. and gallant Member for Penryn and Falmouth (Major Petherick) has a number of other questions to ask, ought he not to ask his own questions in his own time and not prevent the Minister replying to my hon. Friend?
  Mr. Speaker: I am afraid that the Ruling is as it stood before. I gave a broad hint to the hon. and gallant Member, and I can do no more.
  Major Petherick: I propose to give the Secretary of State plenty of time in which to reply, and I am going to sit down in two or three minutes, when I have finished my speech.
  Mr. Sloan (South Ayrshire): On a point of Order. Is not this designed to stop the Minister replying?
  Mr. Silverman: How far is the Minister responsible?
  Major Petherick: I was saying that I was asked to give these lectures and that I lectured only on entirely non-political subjects. If at the end of my lectures on the war, I was asked questions of a political nature, I gave a fair answer, giving both sides of the question. That is the only way in which these Army lectures should be conducted. They ought to be strictly non-political, because there are innumerable subjects which are of interest to the Army at the present time, quite apart from political subjects. It is most important in every case that speakers should be chosen, even if they are politicians, who will treat their lectures as lectures of a non-political nature. I therefore ask for an assurance from the Minister that persons not associated with any political party, and who are chosen to lecture to troops, will have explained to them the fact that they must not give political lectures and that if politicians are chosen, they, too, will have it clearly explained to them that in no circumstances must they talk about political matters. I ask for acceptance of the views I have put forward.
  Mr. Hubert Beaumont (Batley and Morley): Among the lectures which the
  752
  hon. and gallant Member gave did he give a lecture on the Catering Wages Bill?
  Major Petherick: I certainly did not, and as apparently the hon. Member wishes to give the Minister even less time in which to reply I would like to urge upon my right hon. Friend again the necessity of seeing that lectures on matters connected directly with the war are given and that politics are carefully eschewed.
  The Secretary of State for War (Sir James Grigg): Let me start by clearing up a slight misapprehension which seems to have arisen with regard to the particular kind of lectures now in question. Hon. Members opposite are quite right: these lectures are not delivered under the aegis of the Army Bureau of Current Affairs. The Bureau is entirely an Army internal affair. A brief is supplied by the Bureau once a week, and a platoon officer is supposed to give a preliminary talk to the troops from this brief and then encourage a discussion upon it afterwards. That is a compulsory parade, and it is conducted entirely by the unit officers themselves. What is in question now are the lectures delivered by civilians under the aegis of the Army Educational Department. I was asked by my hon. and gallant Friend the Member for Penryn and Falmouth (Major Petherick) how many lectures were being given. I cannot answer that without notice, but I do know that thousands of lectures are delivered to troops every year.
  Now perhaps I had better go through, the procedure for becoming a lecturer. One of the points that was raised by the hon. Member for Ipswich (Mr. Stokes) was the general principle governing the employment of lecturers in the Army. It is a very simple one. The responsible military authorities are the Army district and corps commanders, who have the final voice as regards who shall and who shall not lecture to the troops. I do not think anybody would query the reasonableness of that principle. At the same time the choice is not exercised capriciously, and I can give the hon. Member for Ipswich an absolutely categorical assurance that there is no political caucus sitting in the War Office or anywhere else exercising a veto upon the kind of people he wishes to have appointed to the panel. I will set out for the information of the

  753
  House the procedure in rather more detail.
  There are two main classes into which these lecturers fall. There are lecturers, or teachers, who have a certificate issued by a Regional Committee of the Central Advisory Council for Adult Education in the Forces. This certificate, before it is valid, has to be countersigned by the Service authorities concerned, on behalf of one of the formation commanders that I mentioned just now. Then these lecturers, who are nominated by the Regional Committees and countersigned by the Service authorities concerned, are placed on a panel from which units can freely obtain their services. This means, in effect, that if their lectures are dull or otherwise unwanted, the units will not ask them. There is a second category into which the lecturers fall. Local commanding officers of single units are entitled to ask a local lecturer who is not on the panel, of Whose suitability they are satisfied, to give a single lecture. If it is a case of a series of lectures, the authority of the Command or district headquarters must be obtained. Thus, in all cases, whether it is a single lecturer or one from a panel, the ultimate control is 'in the hands of the responsible military authorities. I submit that that is the right principle, because the people who command the Army are entitled to exercise discretion in this matter.
  As regards what my hon. and gallant Friend the Member for Penryn and Falmouth said about trying to prevent them becoming hyper-political or otherwise improper, the Central Advisory Council for Adult Education issues to its lecturers a set of confidential instructions giving them guidance as to the limits within which they will be allowed a free hand, which are pretty broad limits, but they are supposed to exercise discretion and in the main they do. Incidentally also I think the lectures are normally attended by officers who, if there are any improprieties or indiscretions, will naturally report them to the commanding officer. The commanding officer of the unit to which the hon. Member for Ipswich has referred, for reasons which I do not at present know, did not observe the rules. He invited this local lecturer, who was not on any panel, to give a whole series of lectures. When this came to the notice of the higher military authorities they decided that the lecturer in question was not a
  754
  suitable person to give a series of lectures or to be included on the panel. I should have been very 10th anyhow to interfere with the discretion of the formation concerned, but, when the hon. Member for Ipswich asked a Question, I took the trouble—I paid that attention to his views; rather more than usual—
  Mr. Stokes: I do not think that is at all funny.
  Sir J. Grigg: I certainly did not intend it to be serious. I did take the trouble to examine the reasons for their action. I hope the House will take it from me that I do not think it will be fair to anybody concerned to give these reasons in detail, and I do not propose to do so. I am asking the House to accept my assurance that I have seen the reasons and that I regard them as good and sufficient reasons.
  Mr. Stokes: That is the Gestapo.
  Sir J. Grigg: I have seen the reasons which the local military authorities had before them when they decided that they would not give a permit for this gentleman to continue his lectures.
  Mr. Davidson: Why cannot the reasons be given here?
  Sir J. Grigg: The House will not be surprised to hear me say that when it is a question of deciding between the opinion on this subject of the hon. Member for Ipswich and that of the local military authorities concerned as to the suitability of a lecturer I should tend to be predisposed in favour of the military authorities.
  Mr. Bevan: Why should not the House have an opportunity of judging the matter?
  Sir J. Grigg: Because it is my responsibility.
  Mr. Bevan: But the right hon. Gentleman is responsible to us.
  Sir J. Grigg: I should take the same view having examined the reasons, even apart from my natural inclination to disagree with the hon. Member for Ipswich.
  Mr. Bevan: Are we not entitled to find out whether the right hon. Gentleman has behaved intelligently, because on the surface of it he really has not? We would like to know the evidence.
  Sir J. Grigg: That is what I have to say about this particular case.
  Mr. Stokes: That means that the right hon. Gentleman now leaves my constituent in this position. Having served his country well and given his services to the Forces for five months, he now goes before the whole constituency as a man who is not a proper person to address the troops. It is intolerable.
  Sir J. Grigg: The hon. Member is free to think what he likes. I am sure that he will be well advised not to pursue this matter.
  Mr. Silverman: Why should not the right hon. Gentleman who is responsible to this House give the House the opportunity of judging whether the military authorities have good and sufficient reasons? His ipse dixit is not good enough. He is responsible in the exercise of the duties placed on him to this House, and he is not entitled to say, "I am satisfied."
  Sir J. Grigg: There are certain circumstances in which I have to take the responsibility of giving an opinion without disclosing my reasons, and this is one of them. On the general question of lectures to the Army, I think I can fairly claim that my sincere endeavour has been to impose the fewest possible restrictions on the education and recreation of the troops. From time to time—and we have heard one hon. Member do it to-day—I have been accused of giving too free a range
  756
  to lecturers and have been told that some of them run their particular nostrums much too hard. The hon. and gallant Member for Penryn and Falmouth took that point of view to-day. He has stated the same point of view to me in private before, and on the whole I think I would answer him by saying that, generally speaking, I would prefer to trust to the common sense and judgment of this very remarkable Army of ours. Hon. Members may remember a Postscript the other evening given by Mr. Herbert Agar, the well-known American publicist, and the praise he gave the Army for what they are doing in the matter of education and recreation and for the broadmindedness they are showing in the freedom of discussion they allow. In parenthesis, I would like to say that this freedom of discussion has not from recent events affected the fighting value of the Army deleteriously. The line must be drawn somewhere, and I think it has been fairly drawn in the present instance.
  Mr. Davidson: The right hon. Gentleman says so.
  Sir J. Grigg: I say so, and I am prepared' to take the responsibility. Now I believe that the House as a whole will be willing to agree with me that discretion in this matter may be left—
  It being the hour appointed for the Adjournment of the House, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.

FUEL AND POWER
  Coal Output (Miners' Diet)
  Coal Output (Miners' Diet)
  Clinic, Kirkby Colliery
  Clinic, Kirkby Colliery
  Miners(Release From Forces)
  Miners(Release From Forces)
  Open-Cast Workings (Output)
  Open-Cast Workings (Output)
  Safety Measures (Orders of Exemption)
  Safety Measures (Orders of Exemption)
  Coal Mines (Nationalisation)
  Coal Mines (Nationalisation)
  Coal Mines (Inspection)
  Coal Mines (Inspection)
  STATUTORY RULES AND ORDERS
  STATUTORY RULES AND ORDERS
  HOLIDAYS AT HOME (ROYAL PARKS)
  HOLIDAYS AT HOME (ROYAL PARKS)
  CLOTHS AND TOWELS (DAIRY FARMERS)
  CLOTHS AND TOWELS (DAIRY FARMERS)
  ELECTORAL MACHINERY (COMMITTEE'S REPORT)
  ELECTORAL MACHINERY (COMMITTEE'S REPORT)
  ARMED FORCES (PENSIONS AND GRANTS)
  ARMED FORCES (PENSIONS AND GRANTS)
  >ECCLESIASTICAL COMMISSIONERS'ESTATES (SUB-LETTING)
  >ECCLESIASTICAL COMMISSIONERS'ESTATES (SUB-LETTING)
  CINEMATOGRAPH FILM, "VIA PERSIA"
  CINEMATOGRAPH FILM, "VIA PERSIA"
  ARMED FORCES, MIDDLE EAST (NEWSPAPERS)
  ARMED FORCES, MIDDLE EAST (NEWSPAPERS)
  MINISTRY OF SUPPLY (MEDICAL SERVICE)
  MINISTRY OF SUPPLY (MEDICAL SERVICE)
  MERCHANT SHIPBUILDING (RESEARCH ORGANISATION)
  MERCHANT SHIPBUILDING (RESEARCH ORGANISATION)
ROYAL NAVY
  Barge Sinkings, Welsh Coast
  Barge Sinkings, Welsh Coast
  Personnel
  Personnel
  U.S.A. AMBASSADOR TO UNITED NATIONS (DIPLOMATIC IMMUNITY)
  U.S.A. AMBASSADOR TO UNITED NATIONS (DIPLOMATIC IMMUNITY)
  POST-WAR ECONOMIC RECONSTRUCTION
  POST-WAR ECONOMIC RECONSTRUCTION
  COURT AWARDS (INCOME TAX DEDUCTION)
  COURT AWARDS (INCOME TAX DEDUCTION)
  NATIONAL BREAD
  NATIONAL BREAD
  LAUNDRY ZONING SCHEME, OXFORD
  LAUNDRY ZONING SCHEME, OXFORD
  GIRL GUIDES RALLY, HUNTINGDON (TRANSPORT)
  GIRL GUIDES RALLY, HUNTINGDON (TRANSPORT)
  WIFE'S HOUSEKEEPING ALLOWANCE (COURT DECISION)
  WIFE'S HOUSEKEEPING ALLOWANCE (COURT DECISION)
  BRITISH SOMALILAND (SOIL CONSERVATION)
  BRITISH SOMALILAND (SOIL CONSERVATION)

Preamble
The House met, The LORD CHANCELLOR on the Woolsack.
The Lord Wigan (E. Crawford)—Sat first in Parliament after the death of his father.

WAR DAMAGE BILL. [H.L.]
Returned from the Commons, agreed to.

BRITISH OVERSEAS AIRWAYS CORPORATION.
VISCOUNT ROTHERMERE VISCOUNT ROTHERMERE rose to ask His Majesty's Government to explain their policy for the development of civil aviation and to inform the House of the reasons governing the selection of directors of the B.O.A.C.; and to move for Papers. The noble Viscount said: My Lords, a month has passed since the last debate, in your Lordships' House, on this question. We were told in that debate by the Under-Secretary of State for Air that the appointment of Sir Harold Howitt as Chairman would be a temporary one, and that the Secretary of State would not be hurried in his search for a new man to hold the office. To-day, I do not wish to hurry the Secretary of State, or to press unduly the Under-Secretary of State to announce a name. I feel that the office is so important that time should be taken in order to find the right man. So I shall not be surprised if, to-day, Lord Sherwood tells us that he has no news to give as yet upon this point. I hope, however, that the delay will mean that when the appointments which have to be made are announced they will find satisfaction in your Lordships' House. I feel that the men to be chosen should be men of vision and resolution, men of experience, men of energy, men who can be relied upon to drive the Corporation forward upon its appointed task and can be expected to enable the Corporation to fulfil the great destiny for which it was conceived. There is, however, another point, which is that not only have you to find the right men but
472
you have also to persuade them to accept the offices. I feel that, as the situation is at the moment, it will be easier to find such men than to persuade them to accept the offices. I feel that as the situation is at the moment, with the publication of the second White Paper, the position has deteriorated, and that it is unlikely that any man or men of the quality that we hope to see in those occupying these positions will accept readily the positions that they are offered.
I should like to point out that in our last debate a statement was made by the noble Lord, Lord Sherwood, which I venture to suggest was not entirely in accordance with the facts. Lord Sherwood said:
"A very important decision was taken by the directors of the British Overseas Airways Corporation when they decided to resign, but I think it would he wrong to say, as has been represented I think by the noble Lord, Lord Reith, and by some other noble Lords, that something more than what was said by Mr. Clive Pearson in his letter to the Secretary of State was behind these resignations. I think there has been a certain amount of confusion in regard to this."
When we turn to the second White Paper and read the letters written by Mr. Clive Pearson on February 22 and March 10, we see that already there was great dissatisfaction and great irritation, and that the point of resignation was rapidly being reached. Although technically the resignations took place upon the issue of the Transport Command, in fact the issues on which the resignation took place date much further back; and, as there was no answer at any time to the letter of February 22, the decision must be related to that letter. I imagine that the noble Lord, Lord Sherwood, when he made that statement, was not himself fully informed of the whole correspondence; I am quite sure that he did not mean to mislead the House.
This raises the question of whether the resignations took place owing to the formation of Transport Command, or owing to disagreement upon matters affecting civil aviation both during and after the war. If they took place upon the question of the formation of the Transport Command, as was supposed by most of your Lordships at the time of the last debate, they obviously took place through pique, or from a realization on the part of the directors that a great deal of their power was being taken from them. I suggest to

473
your Lordships that those resignations took place for no such reason, but took place because those directors felt that they had the responsibility of being, in a way, the guardians and custodians of the future of civil aviation, and they felt that they could not maintain themselves in that position, vis-à-vis the Secretary of State and the country, unless they were given more responsibility, and not less.
The resignations, we are told, came as a surprise to the Secretary of State. I suggest that resignations always come as a surprise to a Secretary of State. Resignations are not in the usual run of politics; they do not materialize very often. No doubt the Secretary of State thought that, when the time came, the directors would be willing to forgo some of their demands, and to adapt themselves to his will. I do not blame the Secretary of State in the least, therefore, for being surprised at the resignations, because I am sure that most people in political life are surprised at such an occurrence. Sometimes, however, resignations are not quite all that they seem to be; sometimes resignations are really in the nature of a very polite way of being removed from office. These resignations were not of that kind; they were voluntarily decided upon by the directors, and the Secretary of State was, I understand, loath to see them go. I am sure your Lordships will understand what I mean when I say that the position remains the same although these directors have gone. The position is in. no way clear. Any new directors who take office will take on their office at the point at which the other directors left. They will be faced with the same problems, and will have to ask the Secretary of State the same questions. We hope, that in this case they have had an answer, because the old directors never received an answer, and it will be within your recollection that we have received very few answers in your Lordships' House.
I should like to raise one or two of the points which were raised in the letter of February 22, because if we can get an answer to those questions—which the directors failed to get—I think it would clear the situation. One of the questions, and a very fundamental one, which was asked in that letter was as follows:
"Can we be informed whether it is intended that the Corporation should remain the sole
474
British instrument for overseas air transport, or, if not, then what limitations are intended? "
The noble Lord, Lord Sherwood, replied to that question in the last debate, and he said this:
"Another question which has been asked is: Will the Secretary of State hand back to the Corporation the powers that he has taken under Section 32 of the British Overseas Airways Corporation Act at the end of the war? Of course it would be logical to suppose that after the emergency which led the Secretary of State to take this action has passed away, the Secretary of State would hand back the powers he has assumed, unless Parliament in its wisdom has meanwhile legislated otherwise. In any case the validity of the action taken under Section 32 does not extend beyond a ' time of war, whether actual or imminent, or of great national emergency.' As I say, it seems natural and logical therefore that these powers should lapse at the end of the war."
If you study that answer for a moment, you will see that it means precisely nothing. It simply means that the situation will remain the same, provided that it is not altered. We have not had a single word as to what the view of the Government on that question is. It was unnecessary to ask that question to get that answer, because any noble Lord in any part of the House could have given that answer. We know that if the law is not altered the Corporation will have its powers handed back, and will remain the chosen instrument; but what we should like to know is whether the British Government favour the continuance of the Corporation after the war, or whether they have any idea that they would like to alter the legislation with regard to it; because I am sure that Parliament, in its wisdom, would take cognizance of the view which the Government might express.
The letter of February 22, which was addressed to the Secretary of State, raises very many important questions. I do not want to weary the House by reading it fully, but I should like to read part of it. It says:
"The Corporation, as it appears to us, if they can be given full information regarding the intentions and requirements of the Government,"—
you see, they have no information at all—
"can in the light of such information make their plans and be responsible for putting them into execution."

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Well, that is quite a fundamental matter, which you would think that anybody conducting any enterprise would like to know before it proceeded. I know that in your Lordships' House information cannot always be given because of questions of security, but I should have thought that in a matter of the relationship between the Ministry and the Corporation, the directors could have been taken into the confidence of the Government. Apparently, they were not at all. They say:
"We feel that we are not in either of the above positions and that as your appointed members we are in an anomalous situation. Moreover, not being an independent concern, we have not the discretion in directing policy such as would rest with a commercial undertaking; whilst, on the other hand, not being a branch of the public service, we have not the defined and regulated authority of a Service of the Crown.
"We are responsible to you, furthermore, as your appointed members under the Act, for securing the fullest development of overseas air transport services."
Later on the letter says:
"The board of members should be strengthened, and in particular the Chairman should be one who at least informally would have access to the Ministers of the many Government Departments with which the activities of the Corporation are concerned."
And it suggests that
"The functions of the department of Civil Aviation other than those on the regulatory and financial side should be transferred to the Corporation."
Those are matters on which, I think, we should have a reply from the Government. I imagine that this Corporation is to remain the chosen instrument of the Government. I imagine it is very unlikely that the future can hold anything else after the war. I think it is very unlikely that the financial side and the organizing side and the research side are possible for any different organization than a Government organization. Therefore at least I think the Government should give their reply upon that matter. If they are going to give that reply I would suggest that the B.O.A.C., if it is to be the instrument of civil aviation after the war, should be given a great measure of independence. When I say that I do not mean only independence in running their own service; I think they should have their own research department. Pan-American Airways and practically all the big lines in America have large research
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departments of their own, and I do not think it possible that the B.O.A.C. should rely entirely upon the Research Department of the Air Ministry. The Research Department of the Air Ministry is, very naturally, concerned primarily with the R.A.F. and the requirements of a fighting service are entirely and absolutely different from the requirements of a civil service. In the R.A.F., after all, the main requirements are for a fighting aeroplane or for a bombing aeroplane. Both those instruments are absolutely different from a transport aeroplane which is expected to take large numbers of passengers from one place to another. The safety of the passengers must always be the paramount consideration of those who are directing a civil air service, but that is not a requirement that is considered in relation to the R.A.F., which has to measure the objective that it is desired to obtain by the sacrifice necessary to obtain it.
I say that the B.O.A.C. after the war should have a large organization, should be as far as possible self-contained. It cannot be self-contained as far as politics are concerned, as far as international regulations are concerned, but as far as operations are concerned it should be as self-contained as possible. I would urge the Minister most seriously to consider how necessary it is to encourage the enthusiasm for civil aviation in this country. Practically all the suggestions and all the enthusiasm and keenness for civil aviation have come from Back Benchers in this House and from the Back Benchers in another place. All that we get from the Government is either obstruction or apathy or inertia, and I think it is the Government's duty to lead the country in these matters. The Government's duty is to harness the enthusiasm which we hope will be generated throughout the country. I do hope that they will alter their opinion in these matters, and try to encourage those who, after all, are only working to see that this country shall not be left out of its rightful place after the war.
I would even encourage those who might have a financial interest—who certainly will have an indirect financial interest—in aviation I refer to the shipping companies. I do not think it is possible to have private enterprise running civil aviation after the war. I do not think it can be done on a big enough scale by private enterprise, but I think that

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private enterprise should be encouraged to help, and I understand that the shipping companies are prepared to put up large sums of money, which may or may not be needed. They are prepared, which is far more important, to put at the disposal of the Government their experience in running what is, after all, the most magnificent service which this country possesses, and a world-wide organization which could be of tremendous help in establishing civil aviation after the war. How that can be done I do not know. As the noble Viscount, Lord Bennett, pointed out in this House, it probably would be a great mistake to have any representative of the shipping companies on the board, but it could easily be arranged in subsidiary companies; that is to say, the control could still remain with the parent company, but the shipping companies could have perhaps either a financial interest or—if that is considered not to be wise—at any rate some sort of partnership in the formation of air transport after the war.
I hope that to-day the Minister will be able to give us a little more information about what is happening in relation to consultation with the Dominions. So far that has been almost as vague as everything else. I understand that there have been communications, but of course it all depends on what is the form of the communications. I fear in this matter that if the British Government approach the Dominions to ask their views on civil aviation—thereby trying to get them to make up their own minds for them—and if the Dominions then reply (as they will reply) in a perfectly non-committal sense, you will have a sort of game of Box and Cox going on between Great Britain and the various Dominions and you will never get a decision of any kind before the end of the war. I should think it is not impracticable to have a conference of the Dominions and ourselves. Summon a conference in London, and have representatives of all the Dominions here, or, if it is considered more practical, have it in Canada. It does not matter where the conference takes place, so that the representatives can sit down and decide on some form of agreed policy for air transport after the war. I feel that a decision on that is absolutely fundamental. Unless a decision is come to with the Dominions it will be impossible to organize air transport after the war.
We have to recollect that this country in civil aviation can only take its rightful place if the Empire is considered as a whole. If you are going merely to consider this country's share in civil aviation as being confined to these islands, it will be a very, very small share; it will hardly be a greater share than that of some of the smallest nations of Europe. This country is only great because it is the centre of great Imperial communications, and if those Imperial communications, which stretch across the seas, are not going to stretch across the skies, this country must gradually descend to the position of a second-rate Power. I would urge your Lordships to thrust aside this question which crops up from time to time, especially in the minds of Government Departments, that the air transport service after the war will be an international one. Of course it will not be an international one. It is perfectly useless trying to imagine you can run an international air service. If you did attempt to run an international air service it would have to be divided up into sections, and each section would have to be run nationally. That is to say, if you had a national headquarters for air transport (and there would be a great deal of coming and going before it was decided where that centre would be; I presume it would be Geneva or some place of that kind) the first thing the international board set up to conduct an international air service would do would be to divide the world up into spheres of influence, and decide on various countries to conduct the air transport within those spheres. So you would get back in the end to exactly the same thing.
You could not possibly—it is not conceivable at this stage of our development—have an international transport system in which you had every nation in the world engaged, without a common language and with no possibility of conducting it efficiently. But to those people who believe it is possible I say it does not alter the circumstances at all, because if you were to have an international air service formed at the end of the war there is not the slightest doubt as to which country would conduct it and which country would provide the transport planes. It would not be Great Britain. Great Britain will have at the end of this war an organization for conducting civil aviation that is minute, and will have absolutely no transport planes with which

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to conduct it, so that if there is an international air service our part in that service will be very small indeed.
I do no wish to weary your Lordships by going over the same ground as has been covered in previous debates, but I do feel that the war has reached a stage—none of us wishes to indulge in overoptimism of any sort or kind—at which this Tunisian victory gives us the right to consider our material future. The moment has come, in my opinion, when men and money can be found to safeguard our future in aviation. This country was built up by what is known as the command of the sea. It was built up by the fact that our ships sailed throughout the length and breadth of the oceans of the world. I say that the same must happen in the skies. I ask the Minister that at some not too far distant date he will announce that there has been appointed an efficient Director-General and a firm and resolute Chairman. At the same time I say that there are many other facets of our aerial future which we cannot afford to ignore if this country is to remain the corner-stone of the Commonwealth of Nations. I beg to move for Papers.
THE MARQUESS OF LONDONDERRY: My Lords, we owe a deep debt of gratitude to the noble Viscount for again raising this question in your Lordships' House. 1 may be allowed to congratulate him on a very far-reaching, comprehensive, and interesting speech delivered in a very short space of time. The noble Viscount has touched an immense question, and we owe him, as we also owe to his predecessor, a debt of gratitude for the contributions they both have made to aviation not only in this country but all over the world. In raising this subject again—I have already done it twice in your Lordships' House—there are certain drawbacks. Reports of the debates which we have in this country are sent all over the world in different forms. Some of the reports go to foreign countries, and also to the Dominions, in so compressed a form as to lead people to believe that there is a vital point of difference between those of us who raise the question and the Government. There really is no fundamental difference of opinion between any of us. We are only too anxious to assist the Government in carrying out all their duties, and we are pressing the Government to announce their policy in regard to this great idea.
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As I have said, I have raised this question already on two occasions, and each time the reply we have received from the Government has been of so inadequate a character that we feel it is our duty to go on pressing the Government to enunciate a definite policy. We feel that the whole of our ideas as to the development of the future is based on the enunciation of a definite, far-reaching, progressive policy by the Government. I am afraid that if we do not on this occasion receive a statement of definite policy from the Government, my noble friend and I, and our friends, will only have to raise this question again because we are determined, in the views which we hold, to carry the Government with us, even though they appear to be, as the noble Viscount puts it, lacking in energy and rather apathetic in regard to the question of the air. The noble Viscount stated very clearly—and I fully agree with him—that the whole position of this country as a world Power depends on the position we are going to occupy in the air. The only manner in which we can proceed is that we should tell the world and our people here and in the Dominions the position we are going to occupy and how we are going to occupy it. We have for centuries exercised great influence throughout the world, and we are determined to go on doing it, but if other nations are far in front of us in their comprehension of the air we shall find that the influence which we want to exercise will not be so great as it would otherwise be.
In the newspapers we read various extracts from speeches by leading members of the Government. I do not know whether it is owing to the restriction on space in these newspapers, but your Lordships will find that there is hardly ever a reference to the air in any one of the speeches. On Sunday I read a speech delivered by the Home Secretary. As far as I was able to read the report of that speech, there was no reference in it to the air. I expect your Lordships will think that the subject-matter of that speech was of a highly controversial character. The right honourable gentleman made statements which I expect most of your Lordships are anxious on some future occasion, when it is proper to do so, to refute; but that was a speech by the Home Secretary, a leading member of the War Cabinet. I am certainly not

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going into the details of that speech, but I do hope in future that members of the Government placed in a high position in the War Cabinet will give some idea to the country and the world that air-mindedness is one of the objects they have in view. I read speeches by the Minister of Education. I have never heard from him one single word of the development of air-mindedness in this country. In America every newspaper report which we read shows that all the education authorities, including the universities, are taking tremendous interest in this subject. I do riot know what is going on in this country, but I do know that in the schools of America the children are being taught geography of the air, not geography across the seas and across the lands. Children there are being impregnated with the knowledge of the air and what it means and what the developments are likely to be.
There is one word I would like to say about the difficulty which we have in what I would call getting this subject across to our high authorities. I return here to a subject I have already raised in your Lordships' House in relation to the War Cabinet. My own idea of a War Cabinet is a certain number of high Ministers who are not trammelled by the burdens of office, and I should like to see a member of the War Cabinet whose special responsibility was this tremendous question of the air. The noble Viscount the Leader of the House, who has spoken in debates on the air on more occasions than one, seeks to give us solace and comfort by telling us there is access to the War Cabinet. I personally attach very little importance to access to the War Cabinet. What we want is that the Minister dealing with this matter should be put on a much higher level than that, and should be able to go into all these matters and put forward a policy to the War Cabinet with the object of solving many of the problems with which we are faced.
I was listening to the B.B.C. this morning and we were told that the Prime Minister had gone to America and that the staffs he had taken with him were naval and military. I am wondering why there was no mention of an air representative. I have no doubt that he has taken an air representative with him but that
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was not stated; and this illustrates the whole attitude of mind of the Government and the angle from which they approach this great subject of the air apart from the tremendous deeds that the Royal Air Force has performed. The whole science of the air is omitted from these official statements. In contrast there is a statement to-day emanating from President Roosevelt in America. He gives figures which are very interesting and astonishing as to the measurements of American air production. In 1941 it was 87,000,000 lb. This was increased to 291,000,000 lb. in the following year and is to reach 911,000,000 lb. this year. Those are pounds weight. The estimates for 1944 are 1,417,000,000 lb.
We never hear in propaganda from official circles anything in relation to the air, or as to our plans, or what we are doing, and so far as the general public are concerned they get no guidance upon this question and no propaganda from any official sources. I do not know what importance the Government attach to what we call air-mindedness. Those of us who have been engaged in air activities in all branches over a great number of years can remember that before the war there was no air-mindedness in this country whatsoever, but we are hoping to develop it now by means of education and propaganda. We see that America, quite rightly, has taken this subject up and that it is dealt with by their propaganda, and that the basis of their education is bringing to the knowledge of the rising generation the tremendous possibilities of the air. We, who are in an independent position, naturally have to be careful and temporate in what we say, but when I have had the honour of addressing your Lordships I have always stressed co-operation between this country and America in the air. We all realize that the future depends on cooperation in peace of the Allied Nations just as their co-operation has been so far, and will be in the future, successful in war. Co-operation is the reverse of cutthroat competition, and I am quite sure that if this subject is properly approached we shall have no great difficulties in making those who are responsible for the government of their countries realize the tremendous duty which is in front of them in the development of co-operation for the benefit of humanity all over the world.

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Your Lordships know that I have had a certain amount of experience in these Matters, and I have always felt that one of the greatest difficulties and drawbacks which Governments have met and made for themselves has been, as a rule, their timorous approach to all these great questions. There is an abiding fear that the Government will say something which will offend somebody else and the result is that nothing is clone. We need only to think of the timorous approach which was made by this country to France and Italy and the world in general in the years before the war, to come to the conclusion that that probably was one of the main reasons for the war. If, during the remaining stages of this war, we are going to make the approach to peace in the same timorous attitude of mind, it seems to me that instead of Great Britain enunciating the great policy which it is fully entitled to enunciate, her policy will be enunciated for her by other people and we shall be called upon to fall into line with or confirm what they decide. The thought in all your Lordships' minds in this connexion is of the British Empire. The noble Lord emphasized that particular point. We are a very small country but, as the British Empire, we are entitled to put forward a bold policy and I am sure that the bolder the policy we proclaim the more likely are we to be successful.
VISCOUNT BENNETT: My Lords, I do not propose to reiterate what I said to your Lordships a few weeks ago but to direct attention to two points that were misunderstood. I refer to the purchase of the three machines from the Pan-American Company. It was suggested to me that I indicated that we paid twice as much for them as we should have done. What I did say was that we paid twice as much for them as they could be bought for at a different time. That is a widely different thing. As a matter of fact the machines were bought from Pan-America, who in turn had bought them from a manufacturing firm in the United States. As we had to buy them from people to whom they had been sold, we had to pay those people a profit, and when the matter was investigated in Congress, the profit they obtained was found to be, as your Lordships will recall, a profit that was not regarded as unreasonable. I say that
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in fairness to the Department responsible for the purchase of those machines during the war.
The second point is one that I cannot yet quite understand. It arose I think out of observations of the Under-Secretary for Air who said that because the directors of the B.O.A.C. were doing a good job it was not important that we should analyse their relations to the policy of the enterprise. I pointed out that this being a Government-owned enterprise the Government had very properly provided that, if anyone serving as a director in that enterprise should have what might be a reasonably likely interest in conflict with the interests of the owners, he should be debarred from serving as a director. I pointed out that one could not serve two masters. The noble Viscount, Lord Rothermere, has just pointed out that no man can serve who has shipping interests nor anyone who has railway interests, and the Statute definitely provides that if anyone has any interest that is reasonably likely to conflict with his interest as a director of this enterprise he should cease to be a director.
I rise, however, to-day to draw your Lordships' attention to another phase of this situation. First, let it be distinctly understood that the people of this country own the present British Overseas Airways Corporation. It is theirs by Statute. The price has been paid to the two companies that sold to the Corporation. The country itself as such cannot serve as directors. It is essential that it should have someone to represent it, and power is given to the Secretary of State to name the directors. Obviously those directors must, like directors in other enterprises, give effect to the policy of the shareholders. That is their job. We have no right to complain about them if as directors they carry into effect the policy, the purpose and the intention of the shareholders, that is of the people of this country, which means for this purpose the Government. Therefore, so far as policy is concerned, it must be the policy of the Government that rules and determines the action of the directors. In Canada where the country owns its transcontinental air service, the Prime Minister has said that it is not proposed to grant to private interests the right to cross the boundary or to cross the seas for the moment. There is a State-owned service

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and the Canadian Government appoint the directors of it. The directors are carrying into effect the policy of the Ministry of Transport, that is of the Government of the country.
I conceive the directors of this enterprise, appointed for the purpose of giving effect to the policy of the Government, to be the administrators of this vast enterprise. That is their job. They are there to give effect to the policy of the Government. My contention is that the Government should declare a policy with respect to several matters that I shall mention, because otherwise the directors cannot carry it into effect. I am not complaining because the directors do not make a declaration. I am complaining because the Government have not told the directors what is their policy. That is an entirely different thing. You have to con-skier this matter from the domestic, the Empire and international angles. I will not touch upon the domestic angle to-day, nor will I do more than say with regard to the international side that it is idle to ask the Government to make a declaration of their international policy at the present moment. Why? Because until such time as hostilities cease you cannot possibly have a declaration of international policy. There must be discussions that may take weeks or months with respect to matters of that sort, and to declare our policy in the absence of any understanding with respect to other peoples' policy, might engender strife and difficulties which need not come into being. But with respect to the Empire there is no reason why the Government of this country should not take a decision and call together a conference of the Dominions for the purpose of dealing with that.
I put this to your Lordships. There is no reason why we should not have an Empire Air Service. We can create such an air service without impinging on the territory of any country in the world. That service, subject to international regulations which all countries use, would be free from international criticism. That is what I suggest we should carry into effect at once. Then we should be in a position to talk internationally when the time comes to talk. In addition we should have established for ourselves lines of communication between every part of the Dominions and this country, which for the purpose of the Statute of Westminster stands in the same position as a Dominion
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though its importance of course is very much greater than that of other Dominions from the standpoint of geographical location, traditions and history and all that goes to make it the great country it, is. How is its prestige to be maintained if there is no line of communication with other parts of the Commonwealth? I plead for a family air service, a family air transport, in order that we may be not only independent of others but able to go our own way without finding ourselves in difficulties with respect to international conditions. I see no reason why' it should not be done, and certainly Canada is the key point as far as air transport is concerned because of those vast areas that lay round about the North Pole.
We know that before the war the only people who took an interest in giving effect to the physical fact that the journey round the world by the North Pole is much shorter than the journey by the Equator were the Russians. They, as your Lordships know, sent a great expedition over that area. You can leave San Francisco, for instance, cross Canada and fly over the Pole areas, traversing a distance many hundreds of miles shorter than if you crossed the American Continent. That is because the world is round. We have been accustomed too often to look at the world from the standpoint of Mercator's Projection which has left upon us an entirely erroneous view about the whore situation of air transport. When we go round the world and lose a day one time and gain a day another time, we begin to realize that the world is round, but we have been too much influenced, and particularly children in schools are largely influenced, by Mercator's Projection. We have a conception of the world as being round because it has an axis above and an axis below round which it spins, when of course in fact there is no axis because the world revolves in space. The result is that we have approached the problem from a wrong angle.
Why should we not have an Empire air service? There is every reason which should operate to induce us to establish one. There are two great facts that should be in our minds in considering this problem. One has to do with passengers by air. Much can be done as far as the carriage of mails is concerned by the use of converted bombers. It is perfectly obvious that we can make some trans-

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formation in bombers and carry on a mail service. Something can be done in that way also in the case of certain types of freight. As was pointed out during the week-end by a very distinguished member of the Government, that is feasible and possible. But it is not feasible to carry passengers in a converted bomber with any degree of success. You must have for the conveyance of passengers proper machines designed for the purpose for which they are to be used. It is quite easy, we know, to cross from Canada or the United States in a bomber, because we know that every day our friends are doing this, but it cannot be suggested that that is the type of machine that can be used to invite passenger traffic after the war. Therefore I suggest that we should take steps at once to that end.
I am not for one moment suggesting that we should lessen our war effort, as was said by the Minister of Aircraft Production, but in view of what was said by the President of the United States last week that that country is now making as many planes as all the rest of the Allied Powers together, I think we might be able to spare a designer for the purpose of designing machines that will be adequate for air service and air transport in the future. The Minister, I am bound to say, did suggest that the supreme purpose should be the winning of the war, with which I agree, but he also, I think, held out some hopes that we might be able to spare a designer or so for the purpose of providing us with the best machines possible to carry on an Empire air service, an air transport service. Secondly, there is the matter of the engines. We are making experiments every day, but I do suggest that the Government might be able to add to our research personnel in order that we may be able better to meet the requirements of the future with respect to the types of engines and planes which we shall utilize.
Frankly, I have nothing further to add to the discussion than merely to make this suggestion and to indicate why I do so. I feel very strongly about this, and I agree with my noble friend Lord Rothermere that unless we do this we are going to lose our place, lose our prestige and sink to the level of a second-rate Power. That sounds extravagant, and I doubt not that many of your Lordships will think
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that it is an unduly strong statement, perhaps an exaggerated statement. Well, my Lords, I should have thought that was so myself until I began, some years ago, to study this question with more care. The greatness of this Kingdom as the centre of the Commonwealth of Nations arises from the fact that, in the past, the sea has been dominated by our influence. We established ourselves as a great trading country. We are what we are partly by reason of the geographical position of these islands and largely by our mastery of the sea. Our seamen, the type of men they were, the kind of ships we built and the service they gave—all these things have determined the position of these islands in relation to the world's trade and commerce. But I invite your Lordships to study statistics, and to note the falling position with respect to our sea-borne trade before the war. The figures, I think you will find, are rather startling.
I recall noting, when I was in South Africa, the subsidizing by the Government of an Italian shipping firm. That firm was subsidized because the Government of South Africa was unable to get from a British concern an undertaking to convey highly perishable commodities within a certain specified time to markets over here. But the Italians were willing to give that undertaking. I saw German companies offering quicker voyages to this country than one was able to get from a British company, and the result was that the Germans got control of the passenger traffic between South Africa and Southampton. They built new ships, they increased their speed, and so they went ahead. At the end of the last war the North German Lloyd and the Hamburg-Amerika lined had practically no ships. They had scarcely a tug boat between them. Their ships had all been handed over to us. Yet within a reasonable time—some people suggest that it was done with our money—they had acquired a very great part of the carrying trade of the Atlantic. Off went the "Berengaria," off went the "Majestic," off went the "Mauretania," off went the "Homeric." One by one they went, and, as they went, the "Bremen," the "Europa" and the "Deutschland" were taking their places and carrying the trade. Now we have remedied that by giving the world the "Queen Mary" and the "Queen Elizabeth." But in view of the

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effect that air-borne traffic must have upon the world these ships will not dominate passenger traffic as was intended. It cannot be so. We are taught to believe now that it is important to cut time taken in travelling between two points to the last possible minute, and so we must realize that in the future the place of sea-going ships will be taken largely by great ships of the air.
The important problem that has to be considered is the extent of the power which is needed and which can be created reasonably to lift a given load from the ground and to carry it through the air. Every day we are making improvements. Only the other day I read that we had created a new plane, the Mosquito, which had attained a higher rate of speed than any other and so was now announced to the world as the greatest plane which man had ever built. Is there any reason why the genius of the people who created that plane should not be used to create passenger ships of the air? They must be ships which will ensure, first of all, safety, for that is the great thing which has to be considered. The second point to be kept in view is carrying power. That is purely a question for the technical men. Given the necessary opportunities to carry on research, they will in the end achieve results in this sphere comparable with those which they have already achieved in others. Take the history of the Spitfire and bring it down to date with the last modern machine which we have produced. When one does this one realizes that there are certain fundamental principles that cannot be departed from. It may be possible to make improvement with respect to the application of these principles, but that is something which is constantly being done, and is going on very rapidly.
Now that, I suggest, is the reason why before we have to deal with the complex international problems that will arise later, we should now establish, without impinging on anyone else's power or territory, our own air service. I suggested not long since a conference. I realize the difficulties connected with Imperial Conferences in the sense in which that term is generally used, and yet as long ago as 1902 our statesmen realized that, while we could not have Imperial Conferences continually, continuous consultation was highly desirable. Therefore, at the time of the Coronation of King Edward VII,
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the Empire Conference of that day passed a resolution for subsidiary meetings to deal with problems such as this. It was realized that the Prime Ministers might not be able to attend, but that they might name delegates, specially qualified, men with special knowledge of technical subjects such as air services and well able to deal with these problems. That resolution is still important and the words of it are these:
"That upon matters of importance requiring consultation between two or more Governments which cannot conveniently be postponed until the next Conference or involving subjects of a minor character or such as call for detailed consideration, subsidiary conferences should be held between representatives of the Governments concerned specially chosen for the purpose."
That was the resolution passed at the Imperial Conference of 1902 and it has been acted upon frequently since with regard, for example, to the highly complicated question of copyright and highly complicated problems concerning Empire patents, forestry, mycology, education and agricultural research. These were made the subject matter of subsidiary conferences.
Canada has already made a declaration as to policy which will govern for the moment with respect to air services abroad and across the Atlantic. It is also known to many of your Lordships that the pressure which is being exercised in Australia with regard to their air service is such that immediate action should be taken, or arrangements will be made with some other service, and we shall not be connected directly with the service which they themselves control. With New Zealand the difficulties are not great. With regard to South Africa declarations have been made by the Prime Minister from time to time, and the actions taken indicate that there is a desire that we should have a unified service round the Empire.
I am not a prophet, but I say with great frankness that my study of the situation induces me to believe that, unless this country recognizes the importance of air, largely as a substitute for sea, with respect to our prestige and importance and place in the world, we shall cease to be a first-class Power. That is a terrible statement to make, but I believe it, and I believe it strongly. I therefore urge once more that we ask the Government to direct their directors as to policy, themselves announc-

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ing the policy so that the directors may carry it out. And I ask your Lordships to consider this matter just as though we were shareholders in a company, for that is what we are. For the moment we represent the shareholders of this great enterprise, which was created in 1939, and I should like to ask this question: Would any body of shareholders permit their directors to fail to announce their policy with respect to a matter of such importance without protest? Would not they avail themselves of the opportunities afforded by the articles of association, and insist upon the directors stating their policy? Would not they call a special general meeting for the purpose of insisting on a declaration of policy being made? It is because I believe that to be so that I do trust that the Government will lose no time in making a declaration of their policy with regard to the Empire; for I know that I am correct in saying that, unless we tie up with the Dominions now, we may not have an opportunity to do so later. That is the position, and that is why I respectfully, earnestly and with all the force at my command plead that without delay we should take steps to organize and put into operation an Empire air transport service.
LORD SEMPILL: My Lords, I feel sure, if I may say so, that your Lordships were greatly impressed, as most certainly I was, by the remarkable speech to which we have just listened from the noble Viscount, Lord Bennett. He and the noble Marquess who preceded him have added important considerations to the Motion now before your Lordships' House. As they have pointed out, the noble Viscount who moved this Motion comes from a family which has always been set on a course of pioneering, and he is showing now how truly he belongs to the family of those two great predecessors who were members of your Lordships' House, and who did so much for the cause of the air on the civil and on the military side. The noble Viscount, Lord Rothermere, has certainly enabled us to see more clearly exactly what the situation was between His Majesty's Government and the former board of British Overseas Airways. He has explained the situation very clearly, and it is much more clear to me now, having heard his speech, than it was from reading the White Papers and the letters
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in the Press. I agree entirely with what the noble Viscount has said, with one exception. If I understood him aright, he argued that it was desirable that there should be one chosen instrument of His Majesty's Government to carry out the air transport plan. If that is a right interpretation of the noble Viscount's views, I would suggest to him that it is not desirable to confine these activities to one chosen instrument; the problem is too big for that. There could, and should, be a number of instruments. That the majority of them should work in collaboration with shipping interests is, I think, absolutely right, and I strongly support that idea.
I should like, if I may, to submit a few suggestions on the vital question of policy in regard to air transport which arises from the Motion now before your Lordships. I suggest that His Majesty's Government should decide as soon as possible to set up a separate Air Transport Authority to deal with the commercial and civil aspects of this all-important branch of transportation, that separate Air Authority, of course, being free from the control of the Air Ministry and of the Air Ministry's source of supply, the Ministry of Aircraft Production. I think your Lordships will agree that experience over a number of years has shown very clearly that the primary functions of such Ministries do not allow them to handle and to advance in the most rapid and effective manner air transport, which is so vital a question from the Empire standpoint, as the noble Viscount, Lord Bennett, has just pointed out. I think that many of your Lordships will remember a Committee, presided over by a member of your Lordships' House, Lord Gorell, a few years ago. This Committee made a very useful Report; but, if I may say so, the kernel of the Committee's work lay in the minority section of that Report, which was signed by Lord Brabazon of Tara and Mr. Gordon England, and in which they recommended the freeing of air transport from Air Ministry control.
The setting up of a new Ministry will take time, but I hope that the time will not be spun out too long, and I suggest that, in order to bridge the gap, a separate Air Transport Department of the Ministry of Aircraft Production should be set up to study these technical matters and to plan the development of types and of equipment required to meet future develop-

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ments. In previous debates, I have already submitted certain suggestions as to the names of people who are particularly competent in the different fields for consideration in such a development. But making plans will not be enough in itself; His Majesty's Government must agree to set aside a certain measure of design activity and manufacturing activity for the development of air transports and the engines therefor. I suggest now that 5 per cent. of the design staff capacity of those pioneering firms who have a record of achievement in the design and construction of air transports should be set aside to develop designs of air transports and also suitable engines therefor.
That deals only with the design side of the question. Then comes the manufacturing side, and I suggest for that purpose that one per cent. of the capacity of the aircraft industry should be set aside to build the prototypes that will be designed, so that these may be tested out and proven, so that everything may be ready for an advanced programme of manufacture as soon as the time is ripe. I think that that is a very important matter indeed, and, as my noble friend Lord Sherwood will reply in part no doubt on behalf of the Secretary of State for Air, and in part on behalf of the Minister for Aircraft Production, I hope he will give some indication of whether something on those lines will be possible.
As I see it, the most vital aspect of the whole question is that of effectively planning the programme for world air transport with the United States of America. That has already been referred to by the noble Marquess, who had such a distinguished record as Secretary of State for Air, and also by the noble Viscount, Lord Bennett, but, as your Lordships will realize, the bulk of the operating experience and the manufacturing experience available in the world is in the hands of the United States of America, and it is very desirable indeed that with them we should collaborate on this world programme of air transport. The information that the United States of America have already available is being rapidly increased in the cause of the United Nations by the development of new types of transport and by their use for war purposes to-day. Great Britain
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and the Empire, as the noble Viscount, Lord Bennett, has pointed out, have important contributions to make both technically and, particularly, territorially. I suggest that together the United States and the British Empire could create and operate in their respective spheres in various parts of the world a really first-class world air transport network.
Your Lordships will have noticed that there was a debate on air transport in another place yesterday, and some interesting speeches were made. The Minister of Aircraft Production said:
" I hope the world will look upon them—"
that is, aeroplanes—
" as engines of help and progress and advancement in the years that are to come."
The Minister also referred to the desirability of close co-operation with our friends in the United States of America. There are so many aspects in the field of air transport in which co-operation is essential that there surely should be no delay at all in getting down to discussions in which each country may expose its views the one to the other, and from such exposure an agreement and a plan will emerge.
In my remarks to your Lordships I have stressed the aspects of design, manufacture and operation. These are all important, but there are other aspects of this picture: for example, the provision of the necessary supplies of fuel. This situation is one of immense importance, as the sources of supply of petroleum, as your Lordships will be aware, are not inexhaustible, and in any case the pronounced technical development in aircraft engines of to-day calls for more and more highly specialized fuel; so much so that ordinary straight-run products of petroleum are used in fuels to-day only to the extent of about 30 per cent., and as time goes on the light fuels, the aviation spirit as it is called, of the future will primarily be produced synthetically. Therefore those technical problems should be studied. Nobody has done more advanced work thereon than the United States of America, and problems of that kind should be gone into so that a plan may be devised for the use of the best process for the creation of this synthetic fuel. Plans should also be made so that these plants may be stationed at the strategic points which are suited to the scheme of world operation in view.

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The Minister of Aircraft Production very rightly stressed the importance of cooperation with the United States of America, but I might draw your Lordships' attention to the fact that in the field of aeronautical science and engineering that co-operation has always existed. The brothers Wright made their great contribution, the greatest of its kind, to the development of mechanical flight, and that work was taken up and marked in a very special way in this country. The Royal Aeronautical Society, now in its 77th year, following on the death of Mr. Wilbur Wright in 1912, instituted a lecture in his memory, which was given each year—on one occasion by a United States citizen, and the next year by a British citizen, but always in London; and when the 31st commemoration of Mr. Wilbur Wright's work falls to be held on the 27th May, Dr. Edward Warner, the Deputy Chairman of the Civil Aeronautics Board in Washington, will come over here specially to deliver that address, which will be entitled "Performance and economy in transport aircraft." Can we not follow in a political sense the example that the world of aeronautical science and engineering has already given us since its beginning and march together with the United States of America in the field of air transport to the good of humanity?
LORD BARNBY: My Lords, I rise just to ask my noble friend before he replies if he will bear in mind the suggestion put forward in the first debate on this subject raised by the noble Marquess, Lord Londonderry, on February 10. It was a suggestion put forward by the Federation of British industries, the Association of British Chambers of Commerce and the London Chamber of Commerce, who are all, naturally, vitally interested in the commercial side of this question—a suggestion that the Government would look with favour to the establishment of a joint Committee of both Houses, which would be charged particularly with attention to this matter, and which it is thought might result in giving to the Government the stimulus which has been so eloquently, so temperately and yet so resolutely urged by my noble friend Lord Londonderry, on this the third occasion on which he has spoken on this subject. I would like to associate myself entirely with the recommendations and
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the hopes put forward by my noble friend who moved this Resolution.
LORD GIFFORD: My Lords, I would like to congratulate the noble Viscount, Lord Rothermere, on raising this vitally important subject to-day, and, as one who has taken a great and practical interest in civil aviation for some years, I feel that we owe him a debt of gratitude. As some indication of the interest that I have taken in civil aviation, I may say that I have flown five times to Australia, with the R.A.F., with Imperial Airways and with the K.L.M., and made a report to Imperial Airways on the experience gained in those early trips. The Imperial aspect of civil aviation referred to by the noble Viscount, Lord Bennett, is the vitally important one. We in this country cannot run these air-lines on our own. It must be done by the Empire as a whole, and I think the sooner we get a conference of all parts of the Empire together, the better it will be. Surely we have learnt a lesson in that respect from what happened before. Possibly some of your Lordships may recollect that the air-line to Australia was held up for, I think, nearly a year because an agreement could not be reached with the Australian Government for it to go through. Now is the time to settle all those fundamental questions with the Empire.
We had in the early days of civil aviation a great figure, I refer to Sir Sefton Brancker. He was the ambassador of British civil aviation. Whenever there was a difficulty in civil aviation, Sir Sefton Brancker got into an aeroplane and was on the spot within a few hours or a few days. Since his death we have had no ambassador of civil aviation, and I feel that careful search should be made for a man of his type who after the formal conference would get round the Empire and round the world and see that there were no misunderstandings about the policy to be pursued, such as arose in the period between the two wars. The noble Marquess, Lord Londonderry, referred to the necessity of developing air-mindedness. I quite agree with him, but I do not think he sufficiently distinguished between military air-mindedness and civil air-mindedness. I think the population to-day has military air-mindedness. Every schoolboy knows every type of aircraft that flies

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overhead. But I do not think the average person, when he is going to travel, thinks first of the aeroplane and afterwards of the train, boat, or 'bus. That is the spirit we want to get so that when someone wants to travel he asks, "Where and when is the next aeroplane? "
As an illustration of the lack of general air-mindedness in this country, there was actually in one of our daily newspapers not long ago a serious discussion as to whether flying should be abolished altogether after this war. That is laughable, but it is actually true. In order that the reputation of British civil aviation may be kept up I do think that the few services which we are at present able to run should be absolutely above criticism. It is no secret—it has been announced in the Press—that we are running services to Portugal and Sweden. I recently met an Englishman who is in an official position in Sweden, and he told me that the reputation of our air service in Sweden was not all it should be. I ask His Majesty's Government to do all they can to see that these two services are above reproach, because they are a tremendous advertisement, or alternatively a lack of it—possibly in Sweden one of the few we have left. That is all I wish to say, except that this civil aviation question must be an Empire one, and, I hope that will be realized by everyone.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR AIR (LORD SHERWOOD): My Lords, the debate we have had this afternoon is the fourth within the last few months on civil aviation. This proves how strong the feeling is both in your Lordships' House and outside on this very important question. I have to ask your indulgence for being the Government spokesman on each occasion. I know I shall receive it, because, after all, the main reason for the difficulties and criticisms which have arisen on this question, and one which I cannot stress too strongly, is that, in spite of the great successes we have had, in spite of all that has happened in Tunisia and elsewhere, we are, after all, a long way from the end of this war, and every effort in any direction other than towards winning the war tends to lengthen it. While therefore His Majesty's Government are quite aware of, and in sympathy with, the feeling in your Lordships' House, the paramount consideration in their minds
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must be to win the war. I am grateful to the noble Viscount, Lord Rothermere, for the way he presented his case to-day and to the other noble Lords who have spoken. In reply I will try to state the facts and to describe the Government's policy as far as it is possible to do so at the present time.
This debate, as far as I see, falls into two parts. The first is concerned with the future of civil aviation, and the second, and much narrower one, is concerned with the position of the British Overseas Airways Corporation. On the question of civil aviation generally, I must tell your Lordships quite frankly I have got nothing new to say to you to-day. The noble Viscount, the Leader of the House, made a statement on behalf of the Government on March 11 last, and a statement in similar terms was also made by another member of the Government, the Minister Without Portfolio, in another place, on April 20. He then said:
" I think it is essential that we should ascertain what measure of international cooperation can be arrived at in regard to civil aviation before attempting to commit ourselves as to the best form of national set-up. As a first step, and before making our proposals in regard to international co-operation, we desire to have the fullest consultation "—
and here is the point made by my noble friend Lord Bennett—
" with the Dominions and Indian Governments to see if we can agree upon a common policy. These discussions are now actually proceeding. We hope on their conclusion to be in a position to formulate our proposals to other members of the United Nations."
That is all that can be said on the policy of the Government at the present time. I cannot elaborate it to-day, nor would your Lordships expect me to do so, but I would add, as the representative of the Air Ministry, that as a Department we are determined, as, indeed all of us are, that civil aviation shall get the greatest support and the squarest deal possible at the present time. Noble Lords must not think that the Air Ministry are trying to keep down civil aviation.
Now I should like to deal with the question of the British Overseas Airways Corporation. It is held in some quarters that the Air Ministry interfered unduly with the Corporation's work, and that we have been reluctant to give the Corporation the aircraft supplies and equipment which it needs. That is not correct. When at the outbreak of war the Secretary of State,

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acting under Section 32 of the British Overseas Airways Act, required the Corporation to place itself at his disposal, the direction of the policy of the Corporation became his responsibility. There seems to be confusion in some people's minds as to the provisions of Section 32 of the British Overseas Airways Act. I should like to read the section to your Lordships. It is as follows:
" (1) An order made under Section seven of the Air Navigation Act, 1920 (which authorizes the Secretary of State to make orders in time of war, whether actual or imminent, or of great national emergency) may require that the whole or any part of the undertaking of, or of any property and rights of, or under the control of, the Corporation shall be placed at the disposal of the Secretary of State, or of such persons as may be provided by the order.
(2) So long as any such order is in force, the Corporation shall comply with any directions which may be given to them by or under the direction of the Secretary of State."
Let us be quite clear on the meaning of this section. The impression seems to be that the Secretary of State is trying to encroach on the proper functions of B.O.A.C., but surely a man cannot poach on his own preserves.
The direction of policy, at the moment, belongs to the Secretary of State. There has been a good deal of misunderstanding on this point and it has been suggested that the Secretary of State has been going further than he is permitted to go under Section 32. But I would point out that under that section the whole of the Corporation's undertaking was transferred to the control of the Secretary of State and, as I say, he cannot poach on his own preserves. But while the Secretary of State is responsible for policy, management and staff questions remain entirely with the Corporation. I can recall an occasion when in another place my right honourable friend Captain Balfour was criticized because he would not take action on an individual case concerning a member of the staff of B.O.A.C. In spite of strong Parliamentary pressure he refused to interfere in staff questions and there has been no interference on those or any other questions of management.
I regret that Lord Reith is not here to-day because he raised a great many questions of detail on the last occasion we debated this matter and was unable to remain while I answered them. I think
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a number of them are also relevant to this debate. He accused us, for instance, of starving civil aviation of suitable aeroplanes. I can assure your Lordships that the B.O.A.C. have been given the best aircraft which could be made available having regard to our other needs, by which I mean the national needs for defeating the Germans. The situation in this respect is now better and this year we have made definite allocations of first-class aircraft to the Corporation. Lord Reith also referred to the question of spares. I am not going into the question of spares in detail. I want merely to point out that it is not only the B.O.A.C. who have anxieties about spares. There have been shortages of spares all round and we have had to ration them. Complaints have been made from every quarter wherever aircraft are used of the shortage of spares, but there is no reason to believe that B.O.A.C. have not received a fair allocation in relation to other requirements.
May I return to the question of the control of B.O.A.C.? The point is made in the White Paper, in the letters of Mr. Runciman, that the board were not free agents. Let us examine that point for a minute. After all, the shipping companies and the railway companies are not free agents; it has not been found possible for them to remain free agents. The policy of the Government towards them has been exactly the same in the case of B.O.A.C. Then the question of man-power has been raised. Here the position in regard to B.O.A.C. has been the same as that of other people. The Ministry of Labour, to meet the requirements of the forces, has had to make claims on war factories, on Government Departments and upon all kinds of undertakings, and it cannot be expected that the B.O.A.C. should enjoy a privileged position by comparison with these other undertakings. Everyone must contribute to the nation's man-power needs in the manner prescribed by the Minister of Labour.
To turn now to the correspondence in the White Paper and in particular to the letter of February 22. This raises a number of comparatively small issues. Some of them are general points common to shipping companies, railway companies and almost every industry. I do not believe, nor do I think any fair-minded

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person can believe, that these points are relevant to the directors' subsequent resignations. I do not pretend that everything was perfect; of course it was not. Perhaps even the board of directors of B.O.A.C. were not perfect and I say that in spite of the laudatory comments which have been showered upon them since they resigned. I must say that those comments are very different from what was said about them when they were in office. We then had to face in another place a good many adverse comments on the direction of B.O.A.C. The laudatory comments which are now heard are slightly divergent from the attacks that were made upon the board by many people in other places.
I was told by my noble friend Lord Rothermere that I was wrong when I said that the resignation of these directors was a surprise when it came. I repeat that it was a surprise; I withdraw nothing from my former statement on this matter. The question of principle on which the members resigned and in regard to which my right honourable friend the Secretary of State for Air could not agree with them-was their desire to operate all regular trunk services and that alone. Mr. Runciman's memorandum of March 8 suggests that the Corporation should conduct all regular strategic services along all routes where such services are required. That was the crux of the question and my right honourable friend tried to meet it. He could not, however, wholly meet the directors on it for the reasons explained in his letter of March 20, and I have not seen it said anywhere flat he was wrong in his decision.
Now we have a new board. Its members have been described in this House as a motley crew. Everything that could be slung at them has been slung at them. But for all that they are men of public experience, they have taken up this work at short notice and they are giving unremitting attention to it. I can assure your Lordships that they have found plenty to do and they have done it well. The question of the appointment of the remaining members is, as my noble friend Lord Rothermere has said, a very big matter and I am not in a position to-day to make any announcement on it. I must ask your Lordships to wait a little while—it will not be long—and then you will be able to see the picture
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as a whole. I think you will find a well balanced board. In the meantime the present board is carrying on and is working in harmony and in close co-operation with Transport Command.
There were many points in the last debate, including some put by the noble Lord, Lord Reith, which I must say I think were petty points; in fact, pettifogging points. There were, for instance, questions about advertising and complaints from the Post Office. What is advertising in this war? Winning it is the best advertising we can get. And of course there are complaints on the question of mails. There are difficulties in transport all over the world. I do not agree with the line which was taken by my noble friend Lord Reith, that all these little points contributed to make it impossible for the board of the British Overseas Airways Corporation to continue their duties. It was a fundamental difference on which they went out.
My noble friend Lord Rothermere said that no notice was taken of a letter which was written on February 22. But on February 27 there was an answer from the Secretary of State for Air which is published in the new White Paper. My right honourable friend, as you will see, took the natural line of asking the board to come and see him. Mr. Clive Pearson went to see him. These matters were discussed orally, so the answers cannot be printed in the form of a letter. But I do not think it is fair comment to suggest, as Lord Rothermere has done, that the letter of February 22 went unanswered. If he will look at the letter of February 27, he will see that the Secretary of State said:
"Meanwhile, I should like to tell you personally a little more than I have written in this letter, and I should be grateful if you would come and see me at some convenient time next week—if possible, on Monday."
VISCOUNT ROTHERMERE: May I be allowed to interrupt? The noble Lord, the Under-Secretary, has quoted from a letter of February 27, but if your Lordships look at the letter dated March 10, you will see that in the last paragraph Mr. Pearson says:
"Upon other matters, particularly the responsibility for the development of overseas air transport, we have addressed the Secretary of State by my letter of February 22."
The inference is that there had been no reply.
LORD SHERWOOD: A great deal was said in the interview which cannot be dealt with in writing. There are many points such as have been brought up in this debate, questions such as "Can we be informed whether it is intended that the Corporation should remain the British instrument for overseas transport?" That is a thing which the Secretary of State cannot answer by letter. It is a matter of War Cabinet policy and the Secretary of State told Mr. Pearson how the matter stood. Briefly, I do not think there is anything in this further correspondence which make it necessary for me to retract from what I have already said—namely, that the reason for their resignations was made perfectly clear in the correspondence published in the first White Paper and that there was nothing more to it than that. The noble Marquess, Lord Londonderry, dealt with various points, and no one knows more than I do the immense interest which he takes and has always taken in this subject. I do not think, however, that some of his remarks were quite fair. He said that the Air Ministry lacked energy, and that there was apathy on matters concerning the air. I do not think that is a fair comment. As I said at the beginning of my speech this afternoon, there is no lack of energy and no apathy on air questions in the Ministry to-day.
THE MARQUESS OF LONDONDERRY: The noble Lord is confusing the issue. I was talking about the policy of the Government. They have been lacking in energy and have shown apathy. It is their policy which we want to hear.
LORD SHERWOOD: I think the noble Marquess said the Air Ministry. That is a question for the Government to decide in collaboration with the Defence Departments and the United Nations. There is no question of apathy or lack of energy in the Air Ministry. He pointed out that in the announcement of the Prime Minister's arrival in Washington only two Services were mentioned. This announcement was issued from the White House, and the absence of a reference to an Air Force representative can, no doubt, be explained quite simply by the fact that in America the Air Force is military. I can assure the noble Lord that of course all the Services are represented, not merely the Army and the Navy.
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Lord Barnby asked me—and this is a question which was brought up in the previous debate—whether there could be a Standing Committee of both Houses to deal with civil aviation. That is a question which has been brought before my right honourable friend, but such a Committee would surely be premature until the broad lines of Government policy have been laid down.
I have welcomed this debate. No doubt there will be many others on the subject of civil aviation, for of course there exists a strong feeling that we must be looking ahead. On this point, however, I would draw attention to what was said in another place by the Minister of Aircraft Production. He said:
"We are not prepared to sacrifice war necessities to any advantage we might gain after the war. We regard the war purpose of victory as the first and over-riding purpose for the present."
That is the policy of the Government, and I can assure your Lordships that if we departed from it we should lengthen the war. We are fully aware of the vitally important part civil aviation must play after the war, but let us never forget that, although we have had these recent victories, we have a very long way to go before we can really enjoy the benefits of civil aviation.
THE MARQUESS OF LONDONDERRY: My Lords, before the noble Lord sits down may I ask whether words which he has just used include the enunciation of an Empire policy regarding post-war aviation?
LORD SHERWOOD: The policy was laid down by the Leader of the House.
THE MARQUESS OF LONDONDERRY: There is no policy.
LORD SHERWOOD: I have made it clear that consultations are now going on with the Dominions and that later there will be consultations with the United Nations in order to formulate an agreed policy.
VISCOUNT ROTHERMERE: My Lords, if I may comment upon the last statement of my noble friend Lord Sherwood, I would say that the announcement made on behalf of the Government merely emphasized that after the war this country was going to be interested in civil aviation. It went no further than that. There was no policy laid down. Had

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there been a policy laid down in that declaration, these debates either would not have taken place at all or they would have followed entirely different lines. The Government must not imagine that we are demanding a policy which already exists. There is no policy and certainly there is not any more policy as the result of these debates than there was before. In fact, I think there is rather less. I suggest that it is no use lecturing your Lordships about the impossibility of winning the war if the war effort is interfered with. Your Lordships, I am quite certain, realize that; it is not a very complicated point of view to understand. Clearly there are great difficulties in the situation which we all realize.
We know that the production of aircraft is limited. We know that we were not as forward in the matter of the production of aircraft as we should have been when the war started. We know that a Transport Command has only been formed three-and-a-half years after the outbreak of the war. We know all these facts, but still we wish for a declaration of policy—not for the production of aeroplanes to implement a policy. We know perfectly well that the necessary machines cannot be designed and produced immediately. It may be that they can be designed, but it is unlikely that they can be produced until the end of the war. Nevertheless, there is nothing in the world to stop a policy being formulated, nor is there anything in the world to stop an Empire air scheme being arranged so that when the time comes we can go straight ahead. As things are at present, if the war were to end at any given moment, there would be no policy of any sort or kind to act upon, and we should have to start right at the beginning. We should have to decide whether we were going to have an Empire policy with regard to the air or not, and what form that Empire policy would take. It is that consideration which led me to suggest that we should have an Empire Conference.
THE LORD PRIVY SEAL (VISCOUNT CRANBORNE): My Lords, may I be allowed to say one word, for I think the noble Lord is misrepresenting the Government, though I am sure he is doing so quite unintentionally? If he would read the speech to which the noble Lord, Lord Sherwood, has referred he would see that the declaration states that:
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"The Government are also giving close attention to the organization of civil air transpart on the international plane after the war. … Our exploratory work is in fact in hand and we are now in preliminary consultation with the Dominions and India. Consultation with other members of the United Nations will follow."
I made it absolutely clear in my speech, as any noble Lord who was here at the time will recall, that it was both undesirable and impossible for the Government to make a public declaration of policy pending these international negotiations. I went into it at great length. I remember recalling to the noble Marquess, Lord Londonderry, his past experiences at Geneva and elsewhere. I pointed out how impossible it would be to go into negotiations if the Government were to take up a rigid attitude in advance.
The noble Lord, Lord Rothermere, will appreciate, I trust, that if we have not given a declaration of policy in detail in this matter, neither have other great nations which are concerned. But that does not mean that a policy is not being formulated. It is being formulated properly. Discussions with the Dominions and India are taking place, and discussions with other members of the United Nations will follow. I do not think that that is the impression which the House gained from the speech which my noble friend Viscount Rothermere has just made.
VISCOUNT ROTHERMERE: I do not think that that is the impression which in fact the House has. I knew that the noble Viscount formulated a policy of consultation with the Dominions and stated that after that there was to be consultation with other nations, but I would suggest to him that from that date we have heard absolutely nothing. I am sure it would be wrong to give information of anything that was happening in the midst of negotiations, for to do so might interefere with those negotiations. But I do think that from time to time we might perhaps be told that something is happening, that we are getting along and that everything is progressing favourably. Some suggestion might be given that action is being taken, because since that declaration we have had no sustenance to keep us going, and no suggestion that anything further is being done. If I am to take it from the statement which we have just heard

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that that is entirely untrue, that action is in fact being taken, that conversations are going on and are progressing extremely favourably, and that at some time in the not too far-distant future we shall have the privilege of hearing something further on the matter, then that is the best statement that this House has heard on the subject since the noble Viscount made his original statement, and I am more satisfied with that interpolation in this debate than with anything else I have heard. I hope that I can take it that that is so.
With regard to the speech of the noble Lord, Lord Sherwood, I do not wish to go over all the old points regarding British Overseas Airways Corporation and its relations with the Secretary of State and so on. I thought, however, that the noble Lord did not give a very fair statement of the position of the ex-directors. They have gone now, and they do not come into the present problem. They will not affect the future of civil aviation, and therefore in this debate they have ceased to be important. I do not wish to carry the matter further than need be; but I do hope that those who will follow them in the B.O.A.C. will be given more chance than they had. I do not like the noble Lord's statement that the Secretary of State has a perfect right to poach on his own preserves, because I think that that can be overdone. First of all the noble Lord said that the Secre-
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tary of State did not interfere, and then he said that the Secretary of State had a perfect right to poach on his own preserves, and therefore a perfect right to interfere if he wished. I think that too much interference is not the best way to conduct an enterprise where you can rely on responsible people.
We have not got a great deal further to-day, but I hope that we are progressing slowly. I can assure my noble friend that we shall continue to have these debates. I can assure him that until we get something moving we shall continue to try to push the Government. If he is in his place in a month or so's time, I am sure he will be replying to a further debate. I should like to suggest however, to my noble friend the Leader of the House that, if something could be done to reassure noble Lords and the country generally, it would be something which the Government would find well worth doing and for which we should be extremely thankful. It would give confidence to those who look to the future. I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

CARDIFF CORPORATION BILL [H.L.]
Reported from the Select Committee, with Amendments.
House adjourned.