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Defence Loans

Volume 320: debated on Monday 22 February 1937

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Resolution reported,

"That it is expedient—

(1) to authorise the Treasury, during the five years ending on the thirty-first day of March, nineteen hundred and forty-two, to issue out of the Consolidated Fund seems not exceeding in the aggregate four hundred million pounds to be applied as appropriations in aid of the moneys provided by Parliament for the Navy, Army (including Royal Ordnance Factories) and Air services for those years:

Provided that the amount so issued in respect of any service for any year shall not at any date exceed the aggregate of the amounts proposed to be so issued in respect of that service by the estimates upon which this House has, before that date, resolved to grant sums to His Majesty to defray expenses for that service for that year;

(2) to authorise the Treasury, for the purpose of providing money for the issue of sums as aforesaid or for replacing sums so issued, to raise money in any manner in which they are authorised to raise money under and for the purposes of subsection (1) of section one of the War Loan Act, 1919, and to provide that any securities created and issued accordingly shall be deemed for all purposes to have been created and issued under the said subsection (1);

(3) to authorise the old sinking fund to be used in the said five years for providing money for the issue of sums as aforesaid instead of being issued to the National Debt Commissioners;

(4) to provide for the repayment to the Exchequer, out of moneys provided by Parliament for the said services in such proportions as the Treasury may direct, of the sums issued as aforesaid with interest at the rate of three per cent. per annum as follows:

  • (a) until the expiration of the said five years interest only shall be payable;
  • (b) thereafter the sums so issued shall be repaid, together with interest, by means of thirty equal annual instalments of principal and interest combined;
  • (5) to provide for the application of sums paid into the Exchequer under the last foregoing paragraph, so far as they represent principal, in redeeming or paying off debt, and, so far as they represent interest, in paying interest otherwise payable out of the permanent annual charge for the National Debt."

    Resolution read a Second time.

    Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

    11.25 p.m.

    Before authority is given to borrow this money I think it is expedient to raise, very briefly, a vital and important principle which is embodied in this Resolution. I have two questions to put to the Chancellor, and I am emboldened to put them because I know that he had one great struggle in his existence in which he succeeded with the bank interests of this country. He achieved a municipal bank in Birmingham only after a long and arduous struggle with the banking interests. I am, therefore, emboldened to put my questions to him because I know that he is au fait with the subject, and, I believe, is capable of facing up squarely to a new departure which must be taken sooner or later if we are to escape the great burden of usury which threatens to crush us all. I am putting my questions rather from an individual point of view, and I do not pretend that I am representing every hon. Member on this side of the House.

    The Macmillan Committee, so called because it was presided over by Lord Macmillan, had among its members eminent figures in the banking world, including Mr. Reginald McKenna, Lord Bradbury and Mr. Brand, and it explained to us clearly and at length precisely how credits for lending purposes are raised. I am not going to quote the report in detail, because the right hon. Gentleman is well aware of the unanimous conclusion of the committee on this point, but for every £100 of deposits, cash in a bank, that bank is permitted to raise credits and lend to the extend of nine times, or thereby, the amount of cash and deposits in its possession. These credits the banks create and they lend at interest, and what is happening here, as I understand it, is that the Government are proposing to borrow £400,000,000 of credit created in that manner. The Chancellor proposes to pay an interest of 3 per cent. per annum for five years on that credit of £400,000,000 created by the banking interests on the basis of the cash and deposits in their banks.

    In 1927 another Government committee was appointed. There was one eminent banker on it and other two gentlemen well versed in financial affairs. This committee dealt with the problem of the Post Office Savings Bank, and inquired whether it was advisable that it should be placed in the same competitive position as the private banks. Every private bank has the right to give its depositors a cheque book, but the Post Office Savings Bank has no such right. The Post Office Savings Bank is therefore very heavily handicapped in competition with the private profit-making banks.

    This committee, by two to one, decided against the Continental system of issuing to depositors in the Government Post Office Savings Bank cheques for fixed amounts which would be redeemable against the deposits in their accounts. The other member of the committee boldly recommended that the Post Office Savings Bank Department should give to its depositors the liberty accorded to the depositors in any private bank. Nothing has been done with either the majority or the minority reports of that committee. I want to ask the Chancellor of the Exchequer whether, in view of the grave financial emergency that is now upon us, he would consider the advisability of giving to Post Office depositors a cheque book. If they had that cheque book—

    I have been waiting to see how the right hon. Gentleman would relate the report of the committee to this Resolution. I do not sec how he can discuss the reform of the Post Office Savings Bank system on the Report stage of this Resolution.

    I am going to do it very briefly, with your permission, by showing that if the Post Office Savings Bank depositors were brought into this system, large sums of money—many millions of pounds—would be transferred from the private banking system, as it is now in operation, to the Post Office Savings Bank. If the Chancellor of the Exchequer could get £500.000,000 or £1,000,000,000 more into the Post Office Savings Bank, as I believe he could if he introduced a cheque book system, he could have his own cash basis there, and could find, by credits created on that cash basis, which the Chancellor could realise, without the necessity to pay—

    I am sorry. The right hon. Gentleman is out of order in proposing methods of that kind on the Report stage Dl this Resolution.

    With very great deference, I would remind you that we are being asked to authorise the borrowing of £400,000,000 at interest. I am seeking to ask the Chancellor of the Exchequer whether he will consider carefully an alternative method which will avoid the necessity of paying interest upon this money. I bow to your Ruling, and if you say that we cannot ask the Chancellor of the Exchequer to consider any such proposal I will, of course, sit down; but I submit, in the national interest—this is not the first loan to be borrowed, or the last—that we must face this usury system. I could give, if I had time, and this was the appropriate occasion, instances in British history where we have escaped the toll of the usurer. I am asking the Chancellor, before it is too late, to consider afresh the report of this Committee and to see whether it is possible, even now, to avoid interest going to the private banking system and paying interest upon credits which have accrued, and upon which the banks are going to reap something in the neighbourhood of £12,000,000 per annum. I submit that it is our bounden duty to see whether we can escape that toll.

    11.35 p.m.

    On the Committee stage I put a question to the Chancellor of the Exchequer, but I did not get an answer. I would like to repeat that question, which is as to the amount of money that is to be spent by this country, and the comparative amounts spent by other countries, since the War. I asked for the figure since the last War till 1933. The case made all along with regard to the need for this loan has been that other countries have spent so much more than this country on their defences. I questioned that statement, and I thought that, since the Government are taking responsibility in this matter, and are basing their case so much on what has been spent by other countries, they would be able to give us some comparative figures. I have gathered from private conversation that those figures could not be obtained—that this Government cannot tell what other countries have spent; but I thought that at least they might be able to give some indication, and I believe it is a matter of great importance that we should have some indication of these comparative figures when the country is being launched into this expenditure.

    An appeal was made for national unity with regard to the scheme of defence for which this loan is to be raised. I want to-night to say again that this idea of national unity appears to me to be quite an absurd proposal when one thinks of how the present National Government came into office, of their general attitude to the working class, and of how they have treated the working class. I would also point out that it is hoped that when the bosses in this country fall out with the bosses in another country, the workers in this country will be prepared to go and give their lives in the quarrel which the bosses of this country have with the bosses of another country. All this money is being asked for from the workers of this country in order to put the bosses here in a position to carry on when they come into conflict with the bosses of another country. I believe that the workers here should find their function, not in alliances with the bosses of this country, but with the workers of other countries. I protest against this tremendous expenditure upon the instruments of death, and hope that the workers here and the workers in other lands will see to it that this wasteful expenditure is stopped in each of the countries, and that there will be a programme of peace based upon an international working-class movement.

    11.39 p.m.

    After what you have said, Mr. Deputy-Speaker, with reference to the matter raised by the right hon. Gentleman the Member for West Stirling (Mr. Johnston), the House will have seen that it is not one concerned solely with the proposal that is before the House at the present time. No doubt the right hon. Gentleman will have further opportunities of putting forward the view which he has expressed. With regard to the hon. Member for Camlachie (Mr. Stephen), I would point out that the question he put to me was not based on anything that I said in defending or advocating the proposal before the House. I never mentioned the argument he has used. He seems to have based his remarks rather on what he thought I was going to say than on what I actually did say. As a matter of fact, in my speech on this proposal I never mentioned the armaments of other countries. But, whatever may be said, it is obvious and well known to everyone that armaments have been proceeding in other countries at a very great pace, and the Government's proposals are based on that fact, and not on the fact that they know what has been spent in the past. As for the figures for which he asked, he knows very well that many countries do not publish figures. It is impossible to get them.

    11.41 p.m.

    The Chancellor swept aside the questions of my right hon. Friend, but I do not think the Deputy-Speaker ruled that the question was out of order. He was perfectly entitled to ask a question as to whether the Chancellor had considered a certain method of financing the loan. Mr. Deputy-Speaker did not suggest that that was out of order. What he suggested was out of order was discussion and a long argument relating to it. However, the Chancellor swept it aside and, no doubt, if he had set himself to answer it, he would have explained that it was unorthodox finance, and in that explanation he would have convicted himself on the larger issue which he discussed the other day. He was content to sweep on one side the argument as to orthodox finance as being theoretical. He was content to sweep aside the view, which large numbers of people who know what they are talking about hold, as being merely economists' chatter, pretending not to understand the point and making light of it. The Chancellor can do that if he likes, and he can go on doing it as long as he likes, but he cannot sweep aside facts.

    Division No. 88.]

    AYES.

    [11.45 p.m.

    Acland-Troyte, Lt.-Col. G. J.Bull, B. B.Emery, J, F.
    Agnew, Lieut.-Comdr. P. G.Cary, R. A.Entwistle, Sir C. F.
    Albery, Sir IrvingCastlereagh, ViscountEverard, W. L.
    Allen, Lt.-Col. J. Sandeman (B'kn'hd)Chamberlain, Rt. Hn. N. (Edgb't'n)Findlay, Sir E.
    Anderson, Sir A. Garrett (C. of Ldn.)Channon, H.Fox, Sir G. W. G.
    Anstruther-Gray, W. J.Clarke, Lt.-Col. R. S. (E, Grinstead)Fremantle, Sir F. E.
    Aske, Sir R. W.Clydesdale, Marquess ofFurness, S. N.
    Assheton, R.Cobb, Captain E. C. (Preston)Fyfe, D. P. M.
    Astor, Hon. W. W. (Fulham, E.)Colville, Lt.-Col. Rt. Hon. D. J.Ganzoni, Sir J.
    Balfour, Capt. H. H. (Isle of Thanet)Cooke, J. D. (Hammersmith, S.)Gluckstein, L. H.
    Barclay-Harvey, Sir C. M.Courtauld, Major J. S.Goldie, N. B.
    Beamish, Rear-Admiral T. P. H.Crookshank, Capt. H. F. C.Grant-Ferris, R.
    Beaumont, M. W. (Aylesbury)Culverwell, C. T.Granville, E. L.
    Beaumont, Hon. R. E. B. (Portsm'h)Davidson, Rt. Hon. Sir J. C. C.Gretton, Col. Rt. Hon. J.
    Beit, Sir A. L.Davies, Major Sir G. F. (Yeovil)Gridley, Sir A. B.
    Blindell, Sir J.Dorman-Smith, Major R. HGrimston, R. V.
    Bossom, A. C.Duckworth, G. A. V. (Salop)Gritten, W. G. Howard
    Bower, Comdr. R. T.Duckworth, W. R. (Moss Side)Guest, Hon. I. (Brecon and Radnor)
    Bowyer, Capt. Sir G. E. W.Dugdale, Major T. L.Guy, J. C. M.
    Boyce, H. LeslieDuggan, H. J.Hannah, I. C.
    Briscoe, Capt. R. G.Duncan, J. A. L.Haslam, H. C. (Horncastle)
    Brown, Brig.-Gen. H. C. (Newbury)Elliston, Capt. G. S.Heilgers, Captain F. F. A.

    There is one question on which we shall see in a very short time who is going to be right. Are commodity prices going to rise or are they going to remain stationary or to go down? That will be found out in the course of time, and we shall see who is right. There is another matter on which we have already had a practical test. The effect of the Chancellor's announcement has certainly been to depress the Funds. He cannot call that a theoretical argument, because it surprised every Member of the House, and I think the right hon. Gentleman must have been surprised at the extent to which the Funds have gone down since his proposals have been known to the country. I shall not be so foolish as to prophesy as to the future, but it is perfectly clear that for a moment the proposals have had a most depressing effect. If the right hon. Gentleman goes on pursuing similar methods the arguments against which he thinks are merely theoretical, he will find that the depressing effect on the credit of the country will continue. We shall certainly oppose the Vote.

    11.45 p.m.

    The right hon. Gentleman has been asking for information about the effect of the Chancellor's statement and the White Paper on prices. If he refers to the evening paper to-night, he will find that tin, copper and zinc soared up to famine prices, and that, in the financial columns, it was attributed to the White Paper of the right hon. Gentleman.

    Question put, "That this House doth agree with the Committee in the said Resolution."

    The House divided: Ayes, 154; Noes, 87.

    Heneage, Lieut.-Colonel A. P.Maitland, A.Remer, J. R.
    Herbert, Major J. A. (Monmouth)Makins, Brig-Gen. E.Rickards, G. W. (Skipton)
    Holmes, J. S.Margesson, Capt. Rt. Hon. H. D. R.Robinson, J. R. (Blackpool)
    Hope, Captain Hon. A. O. J.Mayhew, Lt.-Col. J.Ropner, Colonel L.
    Hopkinson, A.Meller, Sir R. J. (Mitcham)Russell, S. H. M. (Darwen)
    Horsbrugh, FlorenceMellor, Sir J. S. P. (Tamworth)Selley, H. R.
    Hudson, Capt. A. U. M. (Hack., N.)Mills, Sir F. (Leyton, E.)Shaw, Major P. S. (Wavertree)
    Hulbert, N. J.Mills, Major J. D. (New Forest)Shepperson, Sir E. W.
    Hunter, T.Mitchell, H. (Brentford and Chiswick)Simon, Rt. Hon. Sir J. A.
    Jackson, Sir H.Morris-Jones, Sir HenrySinclair, Col. T. (Queen's U. B'lf'st)
    James, Wing-Commander A. W. H.Morrison, G. A. (Scottish Univ's.)Southby, Commander A. R. J.
    Jones, L. (Swansea W.)Morrison, Rt. Hon. W. S. (Cirencester)Stewart, J. Henderson (Fife, E.)
    Keeling, E. H.Muirhead. Lt.-Col. A. J.Strauss, H. G. (Norwich)
    Kerr, Colonel C. I. (Montrose)O'Neill, Major Rt. Hon. Sir HughSutcliffe, H.
    Kerr, J. Graham (Scottish Univs.)Orr-Ewing, I. L.Tate, Mavis C.
    Lamb, Sir J. Q.Palmer, G. E, H.Tufnell, Lieut.-Commander R. L.
    Law, R. K. (Hull, S.W.)Patrick, C. M.Walker-Smith, Sir J.
    Leckie, J. A.Peake, O.Ward, Lieut.-Col. Sir A. L. (Hull)
    Liddall, W. S.Penny, Sir G.Ward, Irene M. B. (Wallsend)
    Llewellin, Lieut.-Col. J. J.Perkins, W. R. D.Waterhouse, Captain C.
    Locker-Lampson, Comdr. O. S.Petherick, M.Wedderburn, H. J. S.
    Loftus, P. C.Ponsonby, Col. C. E.Williams, H. G. (Croydon, S.)
    Lumley, Capt. L. R.Radford, E. A.Willoughby de Eresby, Lord
    Mabane, W. (Huddersfield)Raikes, H. V. A. M.Wilson, Lt.-Col. Sir A. T. (Hitchin)
    McCorquodale, M. S.Ramsay, Captain A. H. M.Wise, A. R.
    Macdonald, Capt. P. (Isle of Wight)Ramsbotham, H.Womersley, Sir W. J.
    McEwen, Capt. J. H. F.Rathbone, J. R. (Bodmin)Wragg, H.
    McKie, J. H.Rayner, Major R. H.Young, A. S. L. (Partick)
    Macmillan, H. (Stockton-on-Tees)Reed, A. C. (Exeter)
    Macnamara, Capt. J. R. J.Reid, W. Allan (Derby)TELLERS FOR THE AYES.—
    Mr. James Stuart and Mr. Cross.

    NOES.

    Acland, Rt. Hon. Sir F. DykeGroves, T. E.Pethick-Lawrence, F. W.
    Adams, D. (Consett)Hall, J. H. (Whitechapel)Potts, J.
    Adams, D. M. (Poplar, S.)Hardie, G. D.Price, M. P.
    Adamson, W. M.Harris, Sir P. A.Pritt, D. N.
    Alexander, Rt. Hon. A. V. (H'lsbr.)Henderson, J. (Ardwick)Richards, R. (Wrexham)
    Anderson, F. (Whitehaven)Henderson, T. (Tradeston)Ridley, G.
    Attlee, Rt. Hon. C. R.Jagger, J.Ritson, J.
    Banfield, J. W.Johnston, Rt. Hon. T.Roberts, W. (Cumberland N.)
    Barnes, A. J.Jones, A. C. (Shipley)Rowson, G.
    Bellenger, F. J.Jones, H. Haydn (Merioneth)Seely, Sir H. M.
    Bonn, Rt. Hon. W. W.Jones, Morgan (Caerphilly)Sexton, T. M.
    Benson, G.Kelly, W. T.Silkin, L.
    Broad, F. A.Lathan, G.Simpson, F. B.
    Brornfield, W.Lawson, J. J.Smith, Ben (Rotherhithe)
    Brooke, W.Logan, D. G.Smith, E. (Stoke)
    Burke, W. A.Lunn, W.Sorensen, R. W.
    Chater, D.Macdonald, G. (Ince)Stephen, C.
    Cove, W. G.McEntee, V. La T.Strauss, G. R. (Lambeth, N.)
    Dobbie, W.McGhee, H. G.Taylor, R. J. (Morpeth)
    Dunn, E. (Rather Valley)MacLaren, A.Tinker, J. J.
    Ede, J. C.Mainwaring, W. H.Watson, W. McL.
    Fletcher, Lt.-Comdr. R. T. H.Marshall, F.Williams, E. J. (Ogmore)
    Frankel, D.Maxton, J.Williams, T. (Don Valley)
    Garro Jones, G. M.Messer, F.Windsor, W. (Hull, C.)
    George, Major G. Lloyd (Pembroke)Milner, Major J.Woods, G. S. (Finsbury)
    Gibbins, J.Morrison, Rt. Hon. H. (Hackney, S.)Young, Sir R. (Newton)
    Greenwood, Rt. Hon. A.Oliver, G. H.
    Grenfell, D. R.MacMillan, M. (Western Isles)TELLERS FOR THE NOES.—
    Griffith, F. Kingsley (M'ddl'sbro, W.)Paling, W.Mr. Charleton and Mr. Mathers.
    Griffiths, J. (Llanelly)Parker, J.

    Bill ordered to be brought in upon the said Resolution by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Duff Cooper, Sir Samuel Hoare, Sir Thomas Inskip, Lieut.-Colonel Colville, and Sir Philip Sassoon.