I regret on the last day of the Session having to call the attention of the House to the question of the taxation of unemployment grants in certain cases by the Revenue authorities. Hon. Members will agree that since there have been so many conflicting opinions and impressions about this matter, and since the Revenue statements are so technical in character that it is often difficult for the ordinary citizen as well as the ordinary Member of this House really to understand the actual meaning of a word which may have a technical meaning, it is desirable that the facts which some of us have had brought before us should be cleared up and that we should get a plain statement from the Treasury as to the view, not only of the Treasury, but of the Government, as to grants made to local authorities for the purpose of accelerating employment. First of all, while I have had a number of complaints made to me, I realise that for the moment the authorities do not universally apply the taxation of grants to all cases. But since there has been a certain judgment, which I must not discuss, it is obvious that the issue may be so potentially big that if what I think is the interpretation of what has happened in certain cases of small local authorities in Scotland is right, we may find an entire revolution in the proceedings of the Revenue, after proceedings in the Appeal Court, with regard to the imposition of Income Tax on these grants, and a procedure may be carried out which was far from the mind of any hon. Member of this House.

The answers that I have received from the Chancellor of the Exchequer and the Financial Secretary to the Treasury seem to me to be somewhat inconsistent, and at the moment, as far as my knowledge is concerned, it is mainly, but not altogether, the smaller authorities that are involved. Let me come to another statement of facts. I think the whole House will agree that Parliament never intended that these grants should be taxed. It was never intended that money paid to local authorities for assistance towards work being carried out, should have 20 per cent. paid back to the Income Tax authorities. I know that there is a dispute as to whether this is being done or not. I am not assuming that it is so. I am only putting it that there is that impression amongst certain authorities. If it is so, I contend that it ought not to be so. If it is not so, we shall be very glad to have the position stated clearly and simply, so that the whole country may know that it is not the policy of the Government to tax these grants.

The demands vary in character. In one case at least they affect undertakings of a non-revenue producing character—only in one case. In all the other cases they affect undertakings of a revenue-producing character. That is a technical description. As far as I have been able to sift the matter there is no statutory authority whatever for the distinction drawn between non-revenue producing undertakings and revenue producing works. The matter seems to rest either upon a, Treasury rule or a Treasury minute, and has the effect of preventing certain authorities from doing works. It is obvious that if a Treasury grant is given to those who are undertaking works of a non-revenue producing character on what are better terms than grants to undertakings of a revenue producing character, it is easier to do the one than the other. It is in the main undertakings of a revenue producing character that are affected by these demands.

In addition to this distinction between revenue producing and non-revenue producing works, there is another distinction. There is a distinction drawn between grants made by the Unemployment Grants Committee which are of a capital nature and those which are by way of a calculation of interest paid annually, and it is in the latter case that the difficulty arises. Although interest is paid annually, the gift is really understood by the Unemployment Grants Committee to be of a capital nature. It is only a method of calculation whereby the interest is paid annually. There is a variegated nature in the Revenue demands. In some cases they demand, as they are entitled, a return of Income Tax on interest which has been deducted by them when they are paying stockholders the annual returns on their loans. In same cases this is done with a distinction. It may mean trouble, as in the case where the authorities argue that a tax is levied on the actual grant paid in the shape of annual interest towards the scheme. Let me read to the House one or two extracts to show what confusion arises from the answers that I have received from Ministers. On 23rd June the Chancellor of the Exchequer said:

"Income Tax law requires that annual grants of a revenue character made to local authorities or other bodies for the purposes of their trading undertakings should be taken into account in the same way as other revenue receipts in computing the profits of those undertakings for Income Tax purposes. This question in relation to unemployment grants has been before the Board of Inland Revenue on several occasions from 1923 onwards and they have always taken this view which is based on judicial decisions of long standing."

There were certain supplementary questions. The Minister admitted that there had been some difficulty about it. He went on to say what appeared to me to be inconsistent:

"I may say that the point at issue is this, that upon the whole interest of the loan the Income Tax is deducted, but it is not the Income Tax of the local authorities but the Income Tax of the stockholders. What the right hon. Gentleman appears to have in his mind is this, that the local authority, having deducted the whole of the Income Tax upon the interest paid to these stockholders, should be able to keep that part which is due to the Inland Revenue, and, instead of the local authority getting less Income Tax, if they were permitted to keep that part they would be getting considerably more than 20 per cent."—[OFFICIAL REPORT, 23rd June, 1930; cols. 799 and 800; Vol. 240.]

I have no complaint if and when such demands are made. It must be obvious that if the local authority does deduct Income Tax from interest paid to stockholders, that is the property of the Inland Revenue and ought to be returned. My complaint is that in certain cases the tax is actually being levied on the grant. Whatever legal decision may be given in favour of the Treasury in the matter, the House, I am sure, never meant that to take place. By way of proof, may I be allowed to refer to an answer given to me by the Minister of Labour? I asked for a return of all the circulars issued in relation to unemployment grants. I have received them all. I then asked whether in the negotiations with local authorities it had been made clear that there would be a deduction of Income Tax on these grants. The Minister of Labour replied that the answer to the question was in the negative.

So we have it from the Ministry itself that it was not intended by the Unemployment Grants Committee that Income Tax should be deducted. That is common ground between the Minister and myself. With regard to the big undertakings there had been a certain understanding arrived at between the municipal treasurers and the Treasury. I refer only to the third part of that. The grants are paid in three ways:—

(i) A percentage of the wages bill connected with either revenue producing or non-revenue producing schemes.

(ii) A percentage of the loan charges in respect of schemes of a non-revenue producing character.

(iii) A percentage of the interest charges only where the scheme is revenue producing.

The agreement arrived at is set out in the following terms:

"Authorities will be called upon to account for tax on an amount of interest equal to the amount of the grant, the balance of interest paid being dealt with in the general interest settlement. As a general rule the grants will be included as a trading receipt of the undertaking for which they are made when calculating the liability to Income Tax in respect of the profits of the undertaking."

The decision of the Board was influenced by a certain case into the details of which I need not enter now. I asked the Scottish Office whether they had received any complaints from authorities in Scotland and the Under-Secretary of State for Scotland informed me that he had received complaints from Alva, Ayr, the county of Lanark, the Water Board of Airdrie and the Convention of Royal Burghs—which is an organisation representing all the burghs of Scotland. I may add that recently when there was a meeting between the heads of the Government and the representatives of the local authorities in the Guildhall, London, Sir Henry Keith, a very important officer of the Convention of Royal Burghs, raised this point. This is not a matter affecting only one small authority. In some cases it affects large undertakings of a statutory character such as Dundee Harbour as well as smaller ones like Fraserburgh. English members must not however regard this as purely a Scottish question. It so happens that the case which is now being fought out and which is under notice of appeal, is the case of the Seaham Harbour Dock Company—an English case arising in the Prime Minister's own constituency, so that this really is a matter of great importance for Members from all parts of Great Britain.

My argument is that if the particular grants to revenue producing undertakings were not paid as they are now paid, by way of percentage on interest annually, this question would not arise. Obviously a lump sum would go into the capital account of the undertaking and could not be reckoned as annual profit for the purposes of Income Tax. In my researches into Unemployment Grants circulars I have found, from Circular 16 that there are cases where the period of assistance does not exceed seven years and where the Committee may, at their discretion, if so desired, commute the annual interest payments for a single lump sum representing the present value of the whole of the interest payments. It is actually contemplated in the circular of the Unemployment Grants Committee that some of these grants which, according to our contention, are in the nature of capital grants may be commuted in the way I have described. Therefore it seems to me that we are on strong ground in arguing that these grants should not be reckoned as annual payments at all. This is simply a method of calculating the lump sum and for convenience the payments are made by way of annual percentage.

I put these five questions to the Minister. First, are the revenue departments construing the Acts in these cases in the manner which Parliament designed? Second, is it the Inland Revenue contention that all unemployment grants are taxable on the standard rate? Third, do the demands impose tax on the grants, or on the moneys deducted by the authorities for Income Tax from sums paid to stockholders? Fourth, was it ever contemplated by those who negotiated the unemployment grants that they were liable to Income Tax? Fifth, is it the policy of the Government and of this House that such grants should be taxed? These are questions which go to the root of the matter and I hope that we shall be able to get a clear answer to them. As regards actual cases, perhaps the House will allow me to read a sentence from the Secretary of the Seaham Harbour Dock Company which puts the matter very clearly.

"The outstanding fact is that the Government asked the Dock Company and other bodies of the same character to proceed with work before it was absolutely necessary in order to relieve unemployment, and they made a grant towards expenditure to be used for purposes of wages. The Seaham Harbour Dock Company received £7,500 against an expenditure of about £155,000. Having spent this sum upon wages another Government Department comes forward and demands £1,500 out of the grant on the ground that it is income and is subject to tax."

I have already given the Financial Secretary the names of other authorities concerned and he will have had time to go into the details from the Scottish point of view. The burgh of Alva received an unemployment grant with regard to a certain gasworks which is a revenue-producing undertaking and they complain that they are actually being taxed not on the sums of money which they retained as Income Tax deduction when paying interest to stockholders but on the grant itself. They say,

"The town council received some years ago an unemployment grant in connection with the erection of vertical retorts at their gasworks. The grant was 50 per cent. for 15 years of the interest on the expenditure. This was agreed to as being £9,261 13s. 2d. and the grant was fixed at the yearly sum of £221 7s."

May I again point out here that if the sum had been paid as a capital sum this question could never arise. Their statement proceeds:

"The Inspector of Taxes at Dunfermline District has now made a claim for Income Tax at 4s. in the £ on the grant of £221 for the years 1928–29 and 1929–30 and appeals have been lodged against these assessments."

The statement goes on:

"The loan that was got to meet the cost of erecting retorts was £9,500, and that sum is being repaid by 20 yearly instalments of £475 each."

When the Minister gave me the answer that they were not taxing the grants, but the income on stockholders' interest, I wired the Town Clerk, as I thought I would have to raise the matter on the Adjournment, in the following terms:

"Are revenue authorities deducting tax at the full rate on grants paid you by grants committed or on amount deducted by you as tax from payments to stockholders."

I received the following answer:

"Wire received. Revenue authorities seek to deduct tax at full rates an sums received from grants committee."

I have since received from the Town Clerk an abstract of the accounts and I find on page 25 the following figures:

	£	s.	d.
"Balance brought down from Revenue Account for current year	2,534	8	10½
Bad Debts recovered during year	28	12	9
Unemployment Grant (including sum due at 15th May, 1929)	221	7	0
Showroom	18	10	7½
Total receipts	2,802	19	3

It is on that sum of £2,802 that tax is being levied, and my contention is that these figures prove clearly that the tax is not being levied, as was suggested, on the sums deducted from the payments to the stockholders, but is actually being levied on these grants, which are being treated as profits of the year to the undertaking. Let me turn to another case of an undertaking which is of a non-revenue-producing character. The Financial Secretary may not be aware that statutory water boards in Scotland have their grants given to them by the Unemployment Grants Committee not as revenue-producing undertakings, but as non-revenue-producing undertakings, and the complaint of the Water Board of Airdrie to which I would draw attention is as follows:

"My Board have been objecting to the claims made by the Inland Revenue for some time and we obtained the assistance of Sir Henry Keith to call attention to the subject at the Conference in the Guildhall on 17th inst. In our case the grants were for the years 1924–5 to 1926–7, and the claim was not made or intimation received until the 17th December, 1929,"

which is, of course, nearly five years after the original grant was made. I will read a copy of a letter sent to the inspector of taxes:

"I beg to enclose herewith the undermentioned assessment notices dated 17th ultimo (C2) for Income Tax in respect of interest paid out of Unemployment Grants:

(1)…. on £402, £90 9s.;

(2)…. on £1,222, £244 8s.;

(3)…. on £688, £138 12s."

The total is £473 9s. In that case it seems obvious that the demand is being made for a tax on the actual grant and not, as suggested by the Treasury, for the Treasury's own money. My hon. Friend the Member for East Fife (Mr. Millar) put a question on Wednesday asking the Chancellor of the Exchequer

"whether some decision will be announced soon; and whether, in view of the uncertainty prevailing as to whether future grants will be made subject to such deduction, he is in a position to make any further statement on the subject?"

The answer was as follows:

"Mr. Pethick-Lawrence: As the hon. Member is no doubt aware, I have explained in previous answers what I am advised, is the liability under the Income Tax law in this respect, and I see no ground for proposing any modification of the existing statutory provisions. This view of the legal position has recently been confirmed by the High Court in a case which is now under appeal to the Court of Appeal."—[OFFICIAL REPORT, 30th July, 1930; col. 523; Vol. 242.]

That seems as if the Treasury were taking a purely legalistic view of the matter, and I raise it so that the Minister may have a full chance of making this perfectly clear to Members, to the authorities and to the country. Only this week I have received a batch of figures and facts, which I have not yet had time thoroughly to analyse, from a certain company in the North of Scotland. I have also received letters from other authorities since I first raised this question in the House, so that it shows there is at least very grave misunderstanding on the part of the smaller authorities, and the reason why the larger authorities are not clamant is because, in making up their accounts, they have a very different way of showing these sums, into which I need not go.

May I once more say that if the Treasury hold that the actual grants given are liable to Income Tax, they may be legally right—that remains to be proved—but I am quite sure they are morally wrong, because it was never understood, either by the Unemployment Grants Committee, by the Department of the Minister, by the local authorities, or by anybody else, when they entered into negotiations to accelerate works in order that the unemployed might get work, that such a deduction would be made. I shall be very happy if, when the Financial Secretary has concluded his statement in reply, it is shown that these authorities are under a complete misapprehension and that it is not the policy of the Government to levy the full rate of Income Tax on unemployment grants.

May I refer to the case of the Dundee Harbour Trust, which on a former occasion I submitted in question form to the Minister? The situation there in my view, with a Trust like the Dundee Harbour Trust, is on the basis of a non-profit making concern, and it should come within the category of those concerns to which the Secretary of State for Scotland made reference at his Conference concerning unemployment in Edinburgh. He there made the statement that these non-profit making concerns would be entirely immune from having Income Tax imposed upon such grants.

That is entirely inaccurate.

I cannot settle that point for the present, but I submit that, like the water board to which the hon. Member for Leith (Mr. E. Brown) has referred, the harbour trust at Dundee is not a profit-making concern. They have had a very strong plea put forward by their clerk, in detailed form, to the Treasury, and they are anxiously awaiting the decision concerning this question. They would not, of course, make any protest on the score of any Income Tax required on interest derived from money provided by loan, but they are concerned about this deduction of Income Tax upon that which ought to be exclusively provided for the great purpose of the Government in regard to aiding unemployment, and on their behalf I feel anxious that we should get the matter cleared up satisfactorily for all concerned.

I hope the Financial Secretary to the Treasury will be able to reassure my hon. Friend that his apprehensions on this question are not founded in fact. It is a fact that the Revenue are charging tax on these accounts, and I submit that it is entirely wrong, because it is not in accordance with the promise made to the local authorities. Last year, the present Secretary of State for the Dominions, when he was Lord Privy Seal, received a deputation from the local authorities dealing with the question of these works for the relief of unemployment, and he was specially questioned with regard to the percentage that would be allowed. He gave figures of the capital value of the grants that would be made. Alderman Davy, ex-Lord Mayor of Manchester, who was a member of the deputation, which I attended myself, said to the right hon. Gentleman:

"I am not quite clear with regard to the 62 per cent. and the 48 per cent."

The right hon. Gentleman, in speaking to this deputation had remarked that the grants, so far as non-revenue earning schemes were concerned, worked out on a capital basis at 62 per cent., and at 48 per cent. for another kind of grant. The right hon. Gentleman said:

"You may take it that it works out as follows: Non-revenue producing schemes involving the employment of transferred labour, approximately 62 per cent. of the entire cost."

Now we come to revenue-earning concerns, with which we are specially dealing this morning, and this is what the right hon. Gentleman said:

"Revenue producing schemes, whether involving the employment of transferred labour or not, about 25 per cent. of the cost; and wages schemes, whether involving the employment of transferred labour or not, in the best circumstances about 60 per cent. of the cost. That is really reducing to a capital figure the amounts allocated covering the whole period. That is the object of reducing it."

I take it that the right hon. Gentleman meant to show to the local authorities, if they brought forward their schemes, how much actually they would receive by way of capital grant. If we turn to the terms and conditions laid down for these grants, we find that in the case of public utility companies they have to show to the Committee that they are not earning a dividend higher than a certain percentage. That was put in so that there would not be any profiteering out of any grants given for the employment of persons out of work: In the conditions under which grants may be made, it is stated:

"In cases where dividends are not already limited by statute the Undertaking will normally be required to submit to such limitations as to the distribution of profits etc., during the period of assistance as may be necessary to secure in the opinion of the committee that no undue advantage is taken of such assistance. Each case will in this respect be considered separately upon its merits."

If there have been the deductions to which my hon. Friend has referred, I hope that this is not the method the revenue authorities are employing where these undertakings are earning more than would be a statutory profit if they were subject to Parliament in that matter. The proper way for that to be done would be by the Unemployment Grants Committee when making the grant to put this stipulation into any grant agreement they might make and thus see that there was no such thing as profiteering at the expense of the taxpayer. I do not think any hon. Member in this House would desire that any undertaking, whether municipally owned or a public utility undertaking, should get a profit out of this matter.

It must be borne in mind that these grants were made for two specific purposes: one, so that works which otherwise would not have been undertaken would be put into operation at once and thus provide relief for the unemployment problem, and the other and very important one for people having to manage these schemes of relief, to make up for a certain amount of inefficiency in the labour that is employed. We all realise that it is necessary, when you take men who have been engaged in other occupations to do work in which they are not usually employed, to recognise that they cannot be as efficient as men regularly carrying on that work. That was an argument put forward by a deputation with which I attended to the Lord Privy Seal, and it was made quite clear that it would be impossible for these works to be carried out on an economic basis. I maintain that the grant was made, not with the idea of giving profits to any one, but to balance what otherwise would be a loss to those authorities. If it is a fact that these deductions are being made, let me say to the Financial Secretary that he is going to strike a very heavy blow at anything being done on anything like a large scale for the relief of unemployment by local authorities and public utility concerns.

These revenue-earning projects are to my mind the schemes that should be encouraged more than any other. Non-revenue-earning schemes are absolutely hopeless compared with those of revenue-earning concerns because they will not find continuing employment once they are completed. Anything that may be done in this way by any Departments of the Government will be striking at the efforts which are being put forward to try and reduce the unemployment figures, and, if it is a fact that these deductions have been made, either by someone in the Department who has not had proper instructions or by direct instructions from the Treasury, I hope the hon. Gentleman will consult with the Chancellor of the Exchequer and see that it is stopped at once, for if it is carried on it will dishearten every local authority and public utility concern from undertaking any work whatever.

I certainly do not complain that my hon. Friends opposite and my hon. Friend on this side have raised this this question. It certainly is very important that the matter should be made quite plain. It is naturally complicated and in my opinion it is its complication that has given rise to the misunderstanding which seems to prevail in all sections of the House. The hon. Member for Leith (Mr. E. Brown) who raised this question told us that the larger authorities as far as he could make out have made no complaint, because, he said, they have a different way of making up their books. I should have thought that probably suggested the answer to the whole of his complaint—that this is really a book-keeping trouble. When an authority makes up its books in one way the action of the Treasury becomes perfectly intelligible and easily understood. If it makes up its books in another way then the action, which is a perfectly reasonable one, appears to be unsound. The hon. Member for Leith told us that if the concerns were simply handing over to the Inland Revenue a deduction which was made to the stockholders he would be perfectly satisfied. I suggest that this is in fact what is being done.

rose—

Let me develop my argument.

I want to make it clear that I do not accept that statement. I should want more evidence.

The hon. Member does not accept my version of what he said.

I do not accept the statement that that is what is being done.

What is the position? I will deal first with Dundee. The hon. Member for Dundee (Mr. Scrymgeour) did not give me notice he was going to raise the case of Dundee to-day and therefore I have not gone with meticulous care into the facts. I understand that the Dundee authorities have put up to the Treasury the facts of the case and that the Treasury is investigating these facts and according to what they find they will act when the time comes. Hon. Members in all parts of the House must realise that the Treasury is bound to carry out the law, and if according to the law as we interpret it the case of Dundee comes on one side we shall act in that way. If it appears to come on the other side we shall act in that way. If the local authorities are dissatisfied with the Treasury interpretation of the law they can take it to court as I understand is the case in which one particular matter owing to appeal is sub judice.

Now let us take the case of the three revenue-producing undertakings to which the hon. Member for Leith referred. He was good enough to give me notice so I have had opportunity of investigating them—the Burgh of Alva, Airdrie Water Board and Fraserburgh Harbour Board. In all these cases the undertaking is borrowing money from stockholders and paying them interest on that borrowed money. In the case of two of them I think it is the Alva Burgh and Fraser-burgh, the Treasury had undertaken to pay 50 per cent. of these interest charges. In the case of the Airdrie Water Board the grant is 65 per cent. Is it suggested that the grant from the Exchequer shall be 50 per cent. and 65 per cent. of the gross interest, or 50 per cent. and 65 per cent. of the interest less tax? I should have thought it was perfectly clear that when the Treasury undertakes to pay 50 per cent. of the interest charge it will be 50 per cent. of the interest less tax; otherwise, the local authority is relieved, not of the 50 per cent. and 65 per cent., but of a very much greater proportion. Let us take an imaginary case. Supposing the Treasury were to have said—and I believe there are such cases—it would pay 100 per cent. of the interest charge. What does the hon. Member suggest there? Supposing the actual gross interest is £1,000 a year. The local authority does not pay £1,000 a year to the stockholders; with Income Tax at 4s. in the pound, it pays £800. Does the hon. Member seriously suggest that the Treasury, having agreed to pay 100 per cent., will hand to the local authority £1,000 and allow it to keep £200 as a special bonus for the local authority?

Is not the right method for that £200 to be paid as Income Tax to be deducted, and not for the Treasury to take it from the amount they pay to the local authority?

It does not seem to matter very much what you call it, so long as the £200, which is the tax on the £1,000 paid to the stockholders, in some way or another finds its way into the Inland Revenue. That is all that we are saying; but owing to the method of book-keeping adopted it appears as if it were a deduction from the grant. If hon. Members will go into the matter they will find that is the case, and they will find, according to the contention they are making, that if the Treasury were to undertake to give a grant of 100 per cent. the local authority would actually be pocketing the tax which it deducts. There are no other means by which the tax deducted from the stockholders' interest shall find its way into the revenue, unless the Treasury, in providing the grant, deducts Income Tax upon it. When the hon. Member asks me whether the House of Commons intended that Income Tax should be deducted from grants I can only say that the House of Commons intended that the Income Tax law should be carried out, and when grants are made in relief of interest to be paid, quite clearly the local authority cannot make a profit out of the Income Tax deducted from the amount paid.

I have no doubt that I have not succeeded in convincing the hon. Member, because it is difficult to carry through an argument based on figures across the Floor of the House, but I am quite sure that if he will sit down with an accountant and work it out, and if the smaller local authorities who have made this complaint will also go into it with accountants, they will find the position to be as I have stated. The position is this, that where a grant is made it cannot be used as a means for the local authority to obtain the tax for their own benefit. The tax deducted from the money paid to the stockholders should find its way into the Inland Revenue, and that is the intention and effect of this method which the Treasury employs. As I say, it is difficult to have an argument based on figures across the Floor, but let me give a hypothetical ease which the hon. Member can follow, and which he will be able to read afterwards in the Official Report. Let us take the case of a local authority with a revenue-producing concern. It obtains from the Government a grant of £1,000, representing 50 per cent. of the interest which it has to pay, the total amount of She interest being £2,000. Let us suppose that, apart from the £1,000 which it receives from the Government, it has trading receipts of £10,000 and that its trading expenses amount to £7,500. Its total receipts will be: trading receipts £10,000, Government grant £1,000; total £11,000. Its trading expenses are £7,500 and the interest on the loan £2,000. These last two items together make £9,500, leaving a net profit of £1,500. If, as is done, the Government grant of £1,000 is included in the receipts, tax is paid on £3,500. This represents the tax on £2,000 which is collected by deduction from the interest, plus the tax on £1,500, which is the net profit on the undertaking. If, however, the grant were not to be included the tax would be paid on £2,500 only. The tax on £2,000 is recovered by the local authority, and is borne by the recipients of the interest, leaving the undertaking to bear interest on £500 only, although its net profit is £1,500. This is a very complicated matter, but the point I would try to leave with the House is this: In all these matters the Treasury is merely endeavouring to carry out the law. The hon. Member said it was not the business of the Treasury to be legalistic. If he means by that that we are endeavouring to press She law unfairly and improperly, I deny that that is the case.

I meant legalistic in this sense—putting an interpretation on things which was not put when the Act was passed and has not been put in the courts, but which is put because it occurs to some very clever man in the Revenue Department that a certain interpretation can be read into a word, although it was never intended by Parliament when it passed the word.

I do not think I have attempted to misrepresent the use of the word "legalistic" by the hon. Member, but I think I ought to tell him that the Treasury, in taking this view, feel that they are taking what is the common-sense view when once the full implication of the Income Tax law is understood. It is perfectly clear that if the Treasury were to take a different view the local authority would be obtaining the tax collected from the stockholders, which tax was deducted on the assumption that it was tax to be handed over—

May I explain—

No, I cannot give way any more. I have given way a great many times.

I am very sorry to worry the hon. Member, but really this is our only chance. He must realise that Members have to take the chances they get. When they cannot get answers they really must ask for this courtesy. I have given the hon. Member every courtesy in the matter. Six weeks ago I sent him particular cases, and in return he puts to us a certain number of hypothetical cases, of which we have never before heard. What is wanted is to get the Government to agree that in no case are grants to he included in the estimate of profits for assessment to Income Tax. This would not interfere with the rules which is presently acted on, and is quite a proper one, that the Government gets at least all Income Tax deducted from interest on loans. If the profits apart from grants exceed the amount of the gross interest paid, Income Tax is payable on the amount of the profits. That also is quite proper. The object is to grants being included in profits and Income Tax paid in respect thereof.

I am endeavouring to give an interpretation of what is taking place. If the Govern- ment were to forego this claim it would mean that we should not get Income Tax on the net profits of the undertaking and we should only get a part of it. I am sorry I cannot make it any plainer, but I hope if there is any other point in doubt, it may be dealt with by carefully examining the situation in view of all the facts.

I understand the answer given by the Financial Secretary to mean that the Inland Revenue do not require any more from the, undertakers than they have deducted from the stockholders.

That is so.

May I point out that the Secretary of State for Scotland has not made any statement in regard to the classes of grants referred to at the Conference in Edinburgh.

So far as I am concerned I cannot give any undertaking, but I promised to convey to the Treasury what was said at the Conference.

Then you made no definite statement on the subject.

No, I did not make a definite statement.

I wish to raise the question of the Amendments which have been suggested to the Covenant of the League of Nations. I am very sorry to have to raise this question on the last day of the session in what is practically an empty House, but I feel that the consideration should be given to this matter which it deserves. The only reason why I am raising this question on the last day of the session is that during the last forty-eight hours the Government, in this House and in another place, have made it quite clear that they are not going to confront Parliament before they come to a final decision in regard to these suggested Amendments to the Covenant. It was stated that we should have an opportunity of debate after ratification, but when that debate takes place, the international agreement in regard to the Covenant of the League will have been signed, and it will be impossible to go back upon it. I certainly do not suggest that the terms of every international agreement and treaty should be submitted beforehand to Parliament, but I do say that this question is so serious that Parliament ought to be consulted beforehand. It is very serious because under the suggested amendments the commitments of this country are going to be very largely extended. Only the other day we were told that there was going to be an extension of Article 16, and the Government began bi-lateral negotiations with France, but fortunately the matter was raised in this House. The Government agreed to a meeting of the leaders of the different parties with the result that those negotiations were dropped.

We are now confronted with a much more serious situation. This House will not be sitting for a couple of months, and the Government propose in the meantime to bring forward these Amendments and make them a subject to be considered at an international conference. To my mind the intention of the Government is quite clear, and it has been clear for a considerable time. The Government are trying to reintroduce by a side wind what is known as the Geneva Protocol. That Protocol was rejected by this country in 1921 when the late Government took office, and it was rejected because it extended most dangerously the commitments of this country without any compensatory advantages. The Optional Clause was part of those proposals and the Government have now signed it. A great extension of our liability was another part of the same proposals, and the Government now proposes to take over the larger part of those liabilities.

What are the proposals of the Government in this matter—I am only going to deal specially with one point. Article 15 of the Covenant lays down that, if a dispute arises that is likely to lead to a rupture—a dispute, that is to say, which is not subject to arbitration or judicial settlement—it is to be submitted to the Council of the League. If the Council are unanimously agreed upon the Report, the members of the League are debarred from going to war with any party which complies with the recommendations of the report. That is when the report is unanimous. If the report is not unanimous, then the members of the League have the right to take such action as they consider necessary. At the present moment, the unanimous recommendations of the Council under Article 15 do not have the effect of any binding decision whatsoever, and do not enforce any action whatsoever. Under the present Article they do not compel any member of the League of Nations to enforce the Council's recommendations against any other member of the League; the Article merely says that, where the report is unanimous, the parties concerned shall not resort to war.

What is it that the Government now propose? They propose by these suggested Amendments that, if the Council unanimously agree about a dispute of serious political import, the members of the League are obliged to comply with their recommendations; that is to say, every member of the League in future will be bound to adopt such coercive action as the Council recommend in order to compel the submission of any other member of the League, and, if any member of the League refuses, the sanctions of Article 16 immediately take effect. I submit that this completely alters some of the most important Articles of the Covenant of the League of Nations, and immensely extends the power of the Council of the League, turning it into a sort of super-State. It also very largely extends the liabilities into which this country may be drawn.

This House, as I said before, has no power, unfortunately, at the moment to prevent the Government from agreeing to an alteration of this character. The Amendments, presumably, are going to be passed during the Recess, and an agreement is going to be signed by the Government. The only privilege that we are going to have is that, when it is all through, when the Treaty has been signed, when there has been an international agreement, we are going to go through the farce of merely discussing the ratification. Hon. Members know perfectly well that, once the agreement is signed, a debate on ratification is really futile and a waste of time. I do submit that, in a serious case of this kind, the matter should be laid before Parliament. The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) took a very strong line the other day, when a bilateral negotiation with France was threatened in regard to the interpretation of Article 16 of the Covenant and the possible increase of our commitments; and I hope that the hon. Member for East Wolverhampton (Mr. Mander), who, I understand, is going to speak this afternoon, will take an equally strong line, because there is absolutely no doubt in this case that our commitments are going to be increased.

Under these Amendments, we are committing ourselves in any part of the world against any member of the League; we are committing ourselves to inflict sanctions against any country; and certainly, in view of the fact that certain very powerful States are not members of the League at all, such a step seems to be of vital importance. I know that the Government argue that they only want to bring the Covenant into line with the Pact of Paris; but these Amendments go far further than merely bringing it into line with the Pact of Paris. They bring in an entirely new principle. Moreover, no sanctions were attached to the Pact of Paris. They were deliberately excluded. The United States, who were the initiators of the Pact of Paris, expressly refused to attach sanctions to that Pact. The whole world signed the Pact of Paris without any sanctions being attached to it. Why should we in this country go out of our way to create further responsibilities and liabilities for ourselves in cases where we may have no direct concern whatsoever?

I have no doubt at all that other countries would be delighted that the British Navy should go to their help in order to enforce awards in their behalf, but I submit that that is not what the British Navy was built for, and it is not what the British tapayers pay for. Our Navy was built for our defence; it was not built for the purpose of engaging in the quarrels of other people. I realise, and this is my last word, that it is too late to take this matter to a Division. We have now to wait till the autumn. But, if these Amendments are carried, as I am afraid they will be, and incorporated in an international agreement, I hope that Parliament will insist on going into the matter very carefully when it comes before this House, and will not hesitate to refuse ratification if the Amendments are agreed upon in their present form. Meanwhile, the only thing that I can do is to record a very strong protest against the way in which the Government have treated this House.

I desire to say a few words on this concluding day of the Session with reference to he policy to be pursued by His Majesty's Government at the Assembly of the League of Nations at Geneva this year, covering the point with which the right hon. Gentleman the Member for Wood Green (Mr. G. Locker-Lampson) has just dealt, but a number of other points as well. It seems to me that, however disappointing in many respects the policy of His Majesty's Government has been at home, when their foreign policy is regarded there can be no doubt that they have achieved a very great success, and have raised the international position and prestige of this country to a level that it has not occupied for a great many years past. I have been privileged to attend the last four Assemblies of the League of Nations, and nowhere was the position and prestige of this country more emphatically raised and placed in its proper position than by the action of the Government at Geneva last year. I very much hope that they will have ample opportunities of continuing this policy for some years to come, so as to cover the whole ground of peaceful advance. Suggestions have been made in one or two quarters from time to time. The right hon. Gentleman the Leader of the Opposition said something the other day about a General Election being imminent. I do not know where he gets his information, but, personally, I see no reason to suppose that this Government will not continue for another three years or so, and I very much hope that they may so shape their policy and so control their own followers on the back benches as to make possible co-operation along lines of progressive advance, both at home and abroad, for the normal period of Parliament.

With regard to the questions that are likely to come before the Assembly of the League this year, I would like to say, first of all, a word with regard to the proposals of M. Briand for a United States of Europe. I think that the Memorandum submitted by His Majesty's Government is very sound in its criticism of those proposals, and I hope that, if the French Government do not themselves bring this matter by their own motion before the Assembly, the British Government will do so, in order that the whole matter may be thoroughly discussed in the light of day in the Assembly itself. One criticism that we have to make is that there is a danger of setting up an entirely independent body, with a separate secretariat, working separately from the League, and to a certain extent conflicting with the work that it is doing. If anything of the kind is desirable for a certain section for Europe, it ought to be incorporated in the League itself. It ought to sit at Geneva and the work ought to be part and parcel of the Secretariat of the League of Nations. That would prevent any possible harm arising from the development of the group system, which would be disastrous to the work of the League.

There is the point I raised at Question Time to-day in which the Chancellor of the Exchequer gave me what seemed a very unsatisfactory answer. That is the position of the Bank of International Settlements. In one of the debates in Committee at Geneva last year there was great anxiety expressed by one small country after another that steps should be taken to bring the International Bank and the League of Nations into touch in liaison work of some kind. Nothing was done, owing to the fear that the Americans might be kept out if there were any talk of the League being associated with the Bank. That danger has now passed, and it would be a most serious thing if a great international combine of banks, subject to no sort of public control, and subject in no way to public, opinion, were allowed to grow into a dominating position. They might control the economic life of the world to a great extent, and not in accordance the desires of the peoples of the world. I hope the Government, either publicly in the Assembly or by private conversations, will take such steps as they can to arrange that, either in the annual Report of the Bank or in some other way, its work may be brought before the Assembly or the appropriate organ of the League in discussion each year. I ask that the hon. Gentleman will give us some assurance that the Government will not overlook that question when it comes up before the League. One of the most important questions that will arise this year, as it has arisen every year, is undoubtedly international disarmament. The position is most serious. The League has so far failed to carry out its obligations, and the various States of the world, particularly the ex-Allies, have failed to carry out their four-fold pledge to reduce armaments to a proper level, and unless something is soon done on a practicable basis it will be impossible to prevent Germany and the other ex-enemy States from arming themselves. If the pledges made to them, that their disarmament was a preliminary to general disarmament, are not carried out, what right have we to say they shall disarm? There is great danger if steps are not taken to deal with disarmament on a proper basis. No settlement will be arrived at until there has been some accommodation between what one might call the Continental and the Anglo-Saxon point of view; the Continental point of view, rigid, based on juridical principles, wanting to know exactly what is going to happen in all conceivable circumstances, and the Anglo-Saxon point of view wishing to deal with a question on its merits as it arises, not to commit itself beforehand, to look not merely at the legal position but at the equities. It is the conflict between those two outlooks which is holding up advance. I think the Continental people have got to be content with something a little less rigid than they would like, and we have got to go somewhat further than we have gone at present in making it clear that we intend to carry out our obligations under the Covenant of the League of Nations, and that, when the time comes for it to be put into operation, we shall do all we can reasonably be expected to do.

There have been a number of speeches made and articles published in the last few months which seem to suggest that we have no sort of international obligations at all in the matter, and that we can remain isolated. From what the hon. Gentleman has said, it might be inferred that we were not bound by the Covenant. We have the most solemn obligations, out of which it is impossible to get. If hon. Members wish to maintain their point of view of isolation, there is only one honourable course to take, either to propose an Amendment to the Covenant which will relieve us of our obligations, and if those cannot be passed, to give the necessary two years notice to leave the League of Nations altogether. If that is not done, we must carry out to the full the obligations that we have taken, and not suggest that our pledged word can be treated in any way as a scrap of paper. May I remind the House of the obligations that we have at present. Article 16 says:

"Should any member of the League resort to war, in disregard of its covenants under Article 12, 13 or 15, it shall, ipso facto, be deemed to have committed an act of war against all other members of the League, which hereby undertakes immediately to subject itself to the severance of all trade or financial relations, the prohibition of all intercourse between their nationals and the nationals of the covenant-breaking State, and the prevention of all financial, commercial or personal intercourse between the nationals of the covenant-breaking State and the nationals of any other State, whether a member of the League or not. It shall be the duty of the Council in such cases to recommend to the several governments concerned what effective military, naval or Air Force the members of the League shall severally contribute to the armed forces to be used to protect the covenants of the League."

The question has been raised by France in the recent London Naval Treaty as to what those words meant, and what we were really prepared to do. I wish the Government were prepared to state exactly what the formula understood to have been arrived at with M. Briand was. The last speaker referred to it, but I understand the whole of the negotiations were confidential and I have no information on the subject. But the relevant document with regard to Article 16 is Annex F. of the Treaty of Locarno. That lays down clearly how we interpret our obligation. It says:

"In accordance with that interpretation the obligations resulting from the said Article on the members of the League must he understood to mean that each State member of the League is bound to co-operate loyally and effectively in support of the Covenant, and in resistance to any act of aggression to an extent which is compatible with its military situation and takes its geographical position into account."

I think that makes quite clear what our position is, and if the Under-Secretary can give me any information as to the negotiations with the French Govern- went, whether they were based on that, it is information that the House and the country ought to have. I should like to quote one Resolution to show how we are bound and that nations are supposed to rely on pooled armaments and not on their own national defences. That is the unanimous resolution of the Eighth Assembly of the League of Nations, September 26th, 1927, that the principal condition of success in the reduction of armaments is

"that every State should be sure of not having to provide unaided for its security by means of its own armaments and should be able to rely also on organised collective action which should aim chiefly at forestalling or arresting any risk of war and, if need be, at effectively protecting any State the victim of aggression."

I understand the French point of view is, "Give us an assurance that we shall have that full security when the time comes and, if you will make it sufficiently definite, we are willing to give up our own national armaments." There is a great deal in that position, and I hope the Government at Geneva will have no hesitation in making it clear that this country intends to honour its word and to specify, as far as it possibly can, in what manner it intends to honour its word if the time should ever arise.

The suggestion that we can do without sanctions at all is entirely out of touch with the facts of the world, human nature being what. it is. You might as well suggest that inside a country you can do without police, and you could rely on the kindness and good will and high moral tone of burglars not to offend against the laws of the country. Exactly the same point of view with regard to police applies to world affairs. We want to regard the work of armies in the future more as police work and to change the name of military forces of a certain kind in order to make it clear that what they are intended for is not war in the ordinary old world sense—that is outlawed—but international police work subject to control and under the mandate of the League of Nations.

I would like to make reference to a point concerning the Kellogg Pact. During the debates on the London Naval Treaty it was suggested that there might be drawn up, in connection with the Pact, a consultative pact so that when trouble was likely to arise consultation could take place with the United States of America. It was understood that, subject to certain conditions, and not as the price of anything, the Government of the United States were ready to consider a proposal of that kind. I submit that that really is not necessary. Mr. Kellogg has said that the right of consultation is inherent in the Pact itself. Not only is it inherent, but it has been used by the United States on two occasions already, in the case of the differences between Bolivia and Paraguay, and between China and Russia. The United States, on its own motion, consulted all, or many of, the other signatories in order to consider what action they might usefully take. That is a very significant precedent, and I hope that the Government will feel free, if such a situation should arise in future, to, if necessary, take the initiative and consult with the United States and other Governments in a way which it is clear is open to them without offence to America or to any other country. I hope that the Under-Secretary of State, in replying, will say that he agrees with the view, that the right of consultation is plainly inherent in the Kellogg Pact itself.

The late Under-Secretary of State for Foreign Affairs dealt with the question of the Amendments of the Covenant. It is a very technical matter and I do not propose to go into the details of it. But it is one thing to have outlawed war in the Kellogg Pact and another thing to have done so in the Covenant of the League of Nations, because there is a gap in the Covenant and private war is allowed in certain circumstances. The Kellogg Pact fills up that gap. There are certain States in the world who, probably, would feel under a much greater moral obligation if they were bound by the whole of the machinery of the Covenant of the League of Nations rather than merely by the Kellogg Pact. As the Government have taken the initiative in this matter I do not see that they can possibly refrain from going forward on the lines which they initiated last year. I hope that they will go forward.

I do not think that there are any serious extensions of our obligations, and if there are risks, I venture to think that they will apply to all advances in a peaceful direction. There are risks on both sides. If we take a little extra risk in doing this, we may thereby avoid much greater risks than if we stumble along in the same old world way in regard to force and armaments and things of that kind. I strongly support the proposal of the Government, if their proposal is to go forward with the Amendments to the Covenant, if they are satisfied that they can safely be entered into on behalf of the country. I trust that the Government may be able this year to do what they so successfully did last year, namely, to carry all the Dominions with them in the various actions they take. No doubt they are consulting with them at the present time. I hope that they will manage to do what they did on the Optional Clause last year and bring them in altogether.

But it is not essential that we should necessarily act as a United Empire on these matters. The late Government did not do it. When they agreed to the Locarno Treaty they did not bring in a single Dominion. They acted alone without the support of a single Dominion. I do not say that they were wrong, but it does not lie in their mouth to criticise the present Government for not, on every occasion, carrying with them every single one of the Dominions, though I hope that they may be successful again this year in doing so.

I am very glad that they have not confined the delegation entirely to members of one party and that they have incorporated into it again one of the most distinguished living members of the Conservative party and a man who in these matters occupies a position of very great influence not only in all parties in this country but throughout the whole world. Just as the Government last year signed the Optional Clause on behalf of this country, I trust that they will take the necessary further step and sign the general act of arbitration, conciliation and judicial settlement. Their action last year merely covered legal disputes. If they go further they will be covering the whole ground, disputes of a political nature as well. I strongly urge them to accede to that pact without the slightest hesitation when the time comes.

May I ask the hon. Member if the gentleman to whom he refers is a Conservative?

Probably the hon. Gentleman has better information with regard to that matter than I possess, but I should have thought that the Conservative party would have been extremely proud to have such a well-known man in their ranks. Certainly any other party would be proud to include in their ranks one of the greatest international statesmen of the day. I am surprised to hear the repudiation of Lord Cecil from the front bench above the Gangway.

I did not repudiate him. The hon. Member definitely stated that he was a Conservative and I questioned it.

If the hon. Member says that he is not a Conservative and he does not repudiate him, what on earth does he mean?

He is rather like the Liberal party. We do not know whether he is.

I think that we can leave Lord Cecil and his reputation to look after themselves amongst the people of this country. There are one or two other points which I should like to mention with reference to the policy at Geneva. I trust that the Government are going to give their adhesion to the proposal for financial assistance to States likely to be the subject of aggression. I believe that that will place a powerful weapon in the hands of the Council to prevent wars breaking out. We should be involved in no risk because no decision could be taken without its being unanimous. We should be a member of the Council, and therefore it would rest entirely with us whether we should make use of that weapon or not. I think that it would be a very valuable thing to do.

I hope that the Government will follow up the speech which was made by the Prime Minister last year with reference to the question of minorities. There are a number of people in different parts of Europe who have treaties which give them certain rights as a result of the War. There is no doubt at all on the part of anybody who has gone into the question and satisfied himself, that those minorities are extremely dissatisfied with their condition at the present time, and minorities in other countries which have no minority treaties to protect them are also extremely dissatisfied. The machinery of the League for dealing with these minority questions does not seem to be working satisfactorily or smoothly at all. I hope that the Government will raise the matter and have the question considered as to whether some more appropriate and fitting machinery could not be devised. I know that a suggestion has been made that there, should be a permanent Minorities Commission. Personally, I think that that would be a mistake because you do not want to encourage in anyone's mind the idea that this is going to be a permanent sore in the life of tile world.

We hope that other countries will come to realise that the right and fair thing to do is to deal with minorities in the same way as the British Empire have dealt with their minorities in Canada, South Africa and in other places, and in the same way as they have been dealt with in Switzerland also where you have three peoples living in perfect amity with each other. The attempt to suppress personality and culture is hopeless. The only way to deal with the question is on the lines on which we in this country have settled the question. I suggest that some machinery of a conciliatory nature should be set up and that you should have a permanent body of experts at Geneva always available and ready to be sent out into any area from whence complaints were being received, and, in a private way and in a spirit of good will and conciliation, get into touch with both sides, and, from their knowledge and experience of similar difficulties, try and persuade the Governments and people concerned to come to some satisfactory settlement of their difficulty. Probably that would settle most cases but failing that there should be some more suitable machinery for appeal to the Council of the League.

The last point that I would like to make is, that there is and there can be no conflict of loyalty between the League of Nations and the British Empire. We are all proud, in our different ways, of representing various constituencies and living in certain places, but that does not prevent us from being equally proud of being Englishmen, Scotsmen or Welshmen, nor does it prevent us from being exceedingly proud of being members of the great British Empire, and I suggest that the highest patriotism for all of us would be to desire to see our country taking the lead in the League of Nations and using its immense influence in the world to bring all the forces of mankind along the paths of peaceful progress.

It is hardly necessary for me to say how warmly I agree with practically every word that has fallen from the hon. Member for East Wolverhampton (Mr. Mander). In his admirable speech he covered a great deal of ground, but since I desire to be brief I will not follow him in all his points. I should, however, like to say how important I thought his argument with regard to the Covenant and the sanctions which it contains. I am afraid that hon. and right hon. Gentlemen opposite have only too often forgotten the Pact of Locarno, which they concluded, and which was founded upon the acceptance of the words that we

"shall loyally and effectively carry out the obligations of the Covenant in regard to the restraint of war,"

and that those words were taken from the Geneva Protocol, to which they object so much. These words were the only additional military obligations that the Geneva Protocol contains. It has been shown on many occasions in recent months that right hon. and hon. Members opposite have now become so frightened of the obligations of the Covenant in this matter that they are doing very much, by their speeches and by their letters to the "Times"—I allude particularly to the letter sent to the "Times" by the right hon. Member for West Birmingham (Sir A. Chamberlain)—to make foreign nations believe that we attach no importance whatever to the obligations that we have undertaken, and that we in no way regard the Covenant of the League as being an instrument for the maintenance of the security of nations. I know that is not what is intended but it is the result of what they do, and they have only to ask anyone who is conversant with public opinion in the European countries to know that that is what is happening to-day.

As I do not propose to follow the points of the speech of the hon. Member for East Wolverhampton, I want to deal with the observations of the right hon. Member for Wood Green (Mr. G. Locker-Lampson) with regard to the Amendments of the Covenant, and particularly in two aspects—what he said in regard to the procedure as to the acceptance of the Amendments, and what he said about the increase of commitments which the Amendments involve. If we were to accept what the right hon. Gentleman said about the procedure, it would involve every Government in this country in consequences of a grievous kind, consequences which his own Government would never for one moment have accepted. I do not want to argue the constitutional provision, but the fact is that action is taken on the prerogative of the Crown, that it is an executive action, that they then report their action to this House and, under the procedure which we have initiated that no obligation shall be undertaken without the consent of the House of Commons, that report will require the consent of the House of Commons before ratification takes place. It is perfectly open to the House to refuse that consent and to forbid ratification by the Government of the day.

The Secretary of State for Foreign Affairs has told us repeatedly that in this matter of the amendment of the Covenant he would never dream of committing the country until this House had had an opportunity of pronouncing its opinion. What is the procedure that he proposes? That our delegation should go to Geneva, that they should agree with the other nations what is desirable in regard to amendment, that they should then report to this House, that there should be a debate and that if the House approves we should ratify what they have done. The right hon. Member for Wood Green says that the debate is useless, and that it is impossible to go back upon any international agreement made with the Assembly or in any international conference. Why did his own Government destroy the Geneva Protocol, if that is so? Of course, it is not so. If it is as serious a matter as the right hon. Gentleman thinks, it would be open to the Opposition to turn us out of office, and if the majority of the House are against us on this matter I hope that they will turn us out of office on this issue alone.

2.0 p.m.

The right hon. Member wants us to go very much further. He wants the Secretary of State to say: "I am going to Geneva, but I will not agree to anything. I asked the Assembly a year ago to set up a Committee to discuss these Amendments. It was my own proposal. The Committee has met and reported, and I am now going to the Assembly to say that it must reach no conclusion, because my opponents in the House of Commons have not used their opportunities during the last year to have a debate, and therefore I must wait until November to have that debate. Perhaps at the Assembly in 1931 we may be able to do some business." I submit to the House that such a course is contrary to the whole theory of the British constitution and that it would make international action absolutely impossible. If we sent plenipotentiaries to an international conference they would not be able to work with any value if they were so hampered, no Government would be able to carry out a policy and, most important in this connection, it would make the Assembly and the general machinery of the League absolutely unworkable. During the last year the Opposition have had a great many opportunities to raise this matter and to find out what we meant to do.

It was our proposal. The Secretary of State put it forward himself. Is it likely that, having put forward such a proposal, he is not going to endeavour to carry it through? He put it forward last September, without a ripple of opposition from the other side. At the Council in January of this year a Committee was set up to draw up the detailed Amendments and the Secretary of State again declared his policy in the matter. That Committee reported in March. The report was laid upon the Table of this House. In May the Secretary of State at Geneva again said that he approved the general policy of the report and that he hoped the Assembly would adopt the Amendments as they were put forward. There have been dozens of opportunities, including the Foreign Office Vote only a few days ago, when we might have discussed this matter instead of discussing Russia, to which this House has devoted a great deal of attention in the last few months. The Secretary of State has given the Opposition every opportunity to express their views. The Opposition may be perfectly certain that the Assembly will not adopt any proposals which are not in agreement with the principles which the Secretary of State has already put forward. That is absolutely certain. There can be no sudden turn or twist in the negotiations which would vitiate the whole matter. Therefore, the situation remains that the party opposite have had every chance to discuss what we are going to do and they have not taken that opportunity.

I should like to point out to hon. Members opposite that we have a number of precedents for what we are doing. The Conservative Government have more than once agreed to Amendments of the Covenant. They may say that the Amendments were not important. They were certainly not so important as these, but they were important. On another occasion they have put through a policy of much more importance in the matter of commitments—I mean the Locarno Treaty. The Locarno Treaty involves the question of commitments, the most dangerous military commitments this country has ever undertaken. It was not a renunciation of the right of war, for although France and Germany accepted that, we refused. It was not a policy of arbitration, for although France and Germany accepted that, we refused. It was not a policy of disarmament, for we made no conditions with France and Germany that they must accept disarmament before we can go to war. It was nothing but a treaty. It was the most dangerous guarantee we could have given, for we undertook to give support to two nations, one of which had been disarmed by the Versailles Treaty and the other was the strongest military nation of the world. Therefore, the commitments which Members opposite made were the most dangerous military commitments ever made.

They were approved by the Opposition of that day.

Yes, they were approved, but with certain reservations. We pointed out that it would be a far better policy if there had been conditions for disarmament or if other measures had been taken dealing with compulsory arbitration. But that is not the point I am seeking to make. The point I wish to make is this, that that policy of military commitments was accepted by the same procedure which we now propose. There was no vote taken here before it was accepted. The right hon. Member for West Birmingham, by a process which was described as the making of the Locarno Pact, initialed it at Geneva, and when he came back here he had committed the Government. He accepted the Pact, and then he came here and said, "It is here for ratification." That is what we are doing. I submit that there is no case on the question of procedure.

I pass to the second point, that of the extension of commitments, what the right hon. Gentleman called "a large extension of our commitments under the Covenant." As to Paragraph 6, Article 14, he said that under what was now proposed, members of the League would be obliged to accept the representation of the Council given in the case of disputes under Paragraph 6. He said that if they refused to accept such a representation, sanctions would be applied against them. I submit that the difficulty of the right hon. Gentleman with regard to these Amendments is due to the fact that he was not interpreting the Amendments as it is necessary to interpret them. We should not accept the view he put forward. All that the Amendment does is to extend to the representation of the Council the procedure laid down for arbitration under Paragraph 4 of Article 13.

I would call attention to the fact that the general Act would be accepted, and all disputes would go to arbitration and not to the Council. But in those cases is it really true that if the representation is not accepted by one of the parties, then the Council is obliged to apply sanctions? I submit that the Amendment means nothing of the kind. I would point out that last year the Assembly laid down, under Paragraph 4, Article 13, that the Council could not use the means of war to secure the acceptance of a verdict or of an award. Not only does that representation hold good and apply to the new Paragraph 6 of Article 13, but I submit that under the Covenant, if the Council did any such thing it would be asking members of the League to violate their own obligations not to go to war.

But there is a more important question, whether these Amendments really add in any way to the commitments which we have undertaken. What is the purpose of the Secretary of State in moving these Amendments? The right hon. Gentleman said it was in order to reintroduce the Geneva Protocol. I submit that the Kellogg Pact was the result of the Geneva Pact; I submit also that the purpose of the Secretary of State was simply this, to bring into harmony with the Kellogg Pact the Covenant as it stands. Under the existing situation we, like other Members, have two kinds of obligations, not to go to war with another State, which leaves us in certain theoretical cases the right to resort to war for national needs; that is the covenant as it stands, including the gap. The second is the Kellogg Pact, which imposes certain obligations which are absolute, and leaves us no right of war on behalf of our national policy in any circumstances whatever. In other words, the Covenant leaves the initiative of private war which the Kellogg Pact takes away. The Secretary of State said that if the Kellogg Pact was seriously intended and Governments meant business, then it was obviously necessary that its terms must be incorporated in the Covenant, which is the basis on which the League is founded.

There is the further point, the extension of further disputes, of other matters which we are not bound to take into account now, but we would have to do if this formed part of it.

I do not follow the hon. and gallant Gentleman.

Our contention is, not only the defence of our position, but defence regarding other States with which we would be automatically involved.

If I have understood the hon. and gallant Gentleman, then that is the point to which I am coming. As I understand the argument put forward this morning—and it has been put forward in recent months in debate—the opponents of these Amendments say that in certain cases under the Covenant Las it stands, the right of war arising under Article 16 does not apply, and we shall be free of the obligation to take part in sanctions. Under the Amendments these theoretical cases are swept away. There is no case in which the right of war can arise. If there should ever be hostilities, in every case of aggression we should be obliged to take part in the sanctions for its restraint, and therefore, as in some cases sanctions apply hereafter, there must be an extension of which they speak.

I do not want to deal with the use of the word "commitments" by hon. Members opposite, who seem very ready to contemplate wars of the old kind. The right hon. Gentleman said that our Navy was for the defence of ourselves, not for the defence of other people. I want to submit to him that it is not right to use the word "commitments" in a sinister sense in respect of an undertaking to co-operate with the rest of the world in the restraint of international wars. Our real defence, and our only defence, against the horrors which he and every other hon. Member desires to defend us, is the prevention of all international wars by means of the machinery of the League, and, therefore, we in common with other nations use those powers which we retain for the prevention of war. That is our defence in the truest possible sense of the word; and it is not fair to use the word "commitments" in a sinister sense in that connection.

I want to say a word about the conception which has given rise to this alleged extension of commitments. I submit that it arises from a militarist conception which is no longer true. Hon. Members opposite say that there are going to be more cases in which sanctions will have to be applied. That assumes that there is a fixed number of wars which are certain to happen in years to come and that the effect of the Covenant of the League is merely to make these wars universal instead of leaving them national as they might otherwise be. That is a fantastic assumption. I submit that the whole conception of a fixed number of future wars is false and wrong. Wars are of two kinds. They are small or great, between small Powers or between great Powers. If a war between small Powers should break out we know that the League of Nations machinery as it stands is perfectly equal to the task of stopping it. The right hon. Member for West Birmingham (Sir A. Chamberlain) stopped a war between Bulgaria and Greece in 1925 and, therefore, that hypothetical small war can be ruled out.

There remains a war between great Powers, and in such a war many people believe that we shall be in it whether there is a Covenant or not. Is it really possible to think that there is going to be a large number of such wars? Surely not. There will be one such war, if there is any, and that war will either destroy the League altogether or else it will lead to a drastic revision of the Covenant upon which the League is founded. Therefore, the whole question is how to make that one war less likely to break out, how to prevent aggression. If we can prevent the risk of aggression we are reducing the risk of Article XVI ever being applied, and reducing the burden of what are called commitments. We believe that the risk will certainly be reduced by the policy of the Government. The argument of the right hon. Member opposite would strike at the root of the Kellogg Pact, because it would leave this distinction between some wars which are absolutely illegitimate and some which are relatively legitimate, whereas the whole basis of the Kellogg Pact is the outlawry of war of every kind. We believe that these Amendments will greatly strengthen the moral power of the Kellogg Pact. We believe that they would make nations much more ready to disarm if this risk of war was wiped out of their calculations. We believe that a continuance of the risk of legitimate war leaves them with what we may call the war mind. Therefore, we hope that the Assembly will accept these Amendments.

We refuse the case put forward by hon. Members opposite, partly because it is contrary to constitutional practice, it would render international action impossible and the League of Nations unworkable, and because we have a precedent from the Conservative Government for what we propose to do. The Amendments are desirable in themselves because they will diminish the risk of war and therefore the burden of commitments; and by abolishing the right to make war we shall get both governments and peoples out of the war mind. I want to suggest to the right hon. Member opposite that the difference between us and his side of the House is simple but fundamental. We believe that war can be got rid of in our own day and generation. He would like to think it was possible. He still thinks, as Lord Cushenden thought when he came away from signing the Kellogg Pact in Paris and said to the journalists that it was important to remember that the Kellogg Pact did not abolish war because if it was thought it did it would lead to a great disappointment when the next war broke out. We believe that we can abolish war in our day and generation, and it is precisely because we think these Amendments are going to help in that task that we hope we shall soon be able to bring them into force.

It must be very welcome to the Government to receive the eloquent eulogy of the hon. Member for East Wolverhampton (Mr. Mander) in the last hours of a Session which has not been marked by the amount of praise the Government have received from their own supporters. It must have been very welcome to have bouquets thrown at them by hon. Members below the Gangway. As I listened to the hon. Member for East Wolverhampton propounding a policy diametrically opposed to what his own leader has so often denounced, I could not help recalling how in the early days of this Session the Liberal party was going to hold the balance of power and to reflect how sad it was, on the last day of the Session, to find the Liberal party being dragged ignominiously at the tail of the chariot of a Government so discredited as the present administration. Hon. and right hon. Members on the Front Government Bench, if they have lost millions of supporters in the country, have found one supporter at least on the Liberal benches. I cannot follow the very interesting speech just delivered by the hon. Member for Coventry (Mr. Noel Baker), who is always so lucid on these occasions, nor can I follow him in his eloquent peroration in the cause of international peace. The matter with which we have to deal does not require an eloquent peroration, but some close examination in detail. It is admittedly a matter of detail; but very important detail.

What is our case against the Government to-day? It is really a very simple one. The hon. Member for Coventry tried to defend the procedure of the Government in this instance. What is our charge against the Government? Some of us on this side of the House have asked the Foreign Secretary whether he would give us an opportunity of discussing the question of these Amendments, and we were told that they would be discussed at Geneva, and that we should have an opportunity of debating them before ratification. We were all fully aware of that, but that is not our case at all. The right hon. Member for Wood Green (Mr. G. Locker-Lampson) has put the point that a debate previous to ratification is of no value on such an issue as this. Once the Amendments have been decided upon at Geneva we shall have no alternative but to approve or deny. We may not want to deny all these Amendments, and, indeed, we do not; with some of them we agree. What we ask is that we should have an opportunity of debating them, to suggest amendments, before we are faced with an agreement which we can only approve or refuse. The Prime Minister has appealed for a Council of State. What has happened to it? I can hardly imagine the Council of State having more useful work than this to do. The Foreign Secretary's attitude has been somewhat remarkable. He has told us that if the House was going to discuss these Amendments he did not know into what sort of confusion we might get. I do not agree with that doctrine. I do not agree with the proposition that this House is not competent to discuss matters of this kind. It is as fully competent to discuss them as it is to debate Amendments to any Bill, and it is not treating the matter properly to ask the House to accept the decision of the Government and tell us that we should be graciously pleased and content.

What are our most important criticisms of these Amendments? Briefly they are these. The most serious criticism is against the Amendment to Article XIV. As I see it, that means that whereas at present the Council, following on the unanimous decision of a political issue—I ask the House to note that it is almost bound to be a political issue of first-class importance which comes up, as there is a separate machinery for legal disputes—the Council to-day is in the position of an advisory authority, but this Amendment will put it into the position of a super-sovereign state provided that the Council can reach a unanimous decision. If that be true, it is a very serious case against these Amendments. I find myself in disagreement with the hon. Member for Coventry in the way in which he dealt with the Amendments, and also in disagreement with the hon. Member for East Wolverhampton, who told us that he had been at Geneva for the last four years and was enormously impressed with the added prestige of this country, and said that he thought our foreign policy must be a very good one if everyone at Geneva thought it excellent from their point of view.

There is another point of view from which British policy should be examined. There is something infinitely more important even than receiving the cheers of the Assembly at Geneva. Anyone who has been to the Assembly knows how cheers can be got if only you make concessions which please the Assembly. But the British Government has other things to do. It has to look after the interests of our own country, even though these may not always mean commitments to which Geneva would like us to put our signature. I take the strongest exception to a foreign policy which is exclusively guided by foreign plaudits. It is suggested that we ought to view in an impartial frame of mind the use to which, under these commitments, the British Navy might be put. The last speaker seemed to reiterate what we have always suspected, that here is our old friend the Protocol up again in a different disguise. That is what we have always thought. As I listened to the hon. Member I thought that here we had again the plea that Great Britain should act as the special constable of the world, and that the British fleet should be available for this, that or the other at the unanimous decision of the Council of the League.

All I said was that the principle with regard to military commitments contained in the Protocol was accepted by the hon. and gallant Member's own government in Annexe F. an interpretation which is of general application and was adopted by the right hon. Member for West Birmingham (Sir A. Chamberlain).

I accept that application, but that is not the point with which I am dealing now. My point is that under Article 15, at the command of the Council, we might be placed under an obligation where previously there lay no obligation upon us. Previously the Council had simply authority to give advice, and now it is to have authority to command action. That is the difference which we think we see in these commitments, and it is an important difference. It places the British Navy in the position of special constable, to act in various parts of the world. Indeed, it must be apparent that some new commitment of this kind is included, from the enthusiasm with which other countries are prepared to endorse these Amendments. Other countries are always anxious to take on new commitments because it, is the British Navy which would have to carry them out. Those countries are not in much distress at seeing new commitments undertaken which can be fulfilled only by naval action. It is a little paradoxical that while we exclaim against the expenditure of money on armaments we are continually adopting extra commitments which can only be fulfilled by the action of the British Navy.

The more I examine these particular Amendments the more reluctant I am to see this country put its signature to them without first allowing Parliament to speak of them and judge them. The last speaker referred at some length to the Conservative party not taking seriously its obligations under the League. On the contrary we do accept our obligations seriously. When in office we proved ourselves good members of the League, and it is precisely because we take our obligations seriously that we are not prepared to add to them hurriedly, or to extend them without the most careful examination of what they mean. I do not think it unreasonable that we should ask the Government to take that point of view also. We have had the Locarno precedent quoted. It is not really very impressive. No one could tell before the Locarno negotiations what the terms of the Treaty might be. You must give to your representatives negotiating a Treaty of that kind the freest hand. Here the Amendments are available to us all, and we can all discuss them before Geneva. At this eleventh hour I can hardly hope to weaken the firm front of the Government on this issue, however much it may wobble on others, but I ask the Under-Secretary for Foreign Affairs to exercise the greatest discretion in negotiating these Amendments at Geneva, and to re- member that a new commitment for this country may have reactions down the generations far more serious than we may realise when we put our name to it now, and that it is just because the word of the British Empire has never been broken that this matter is so important.

The right hon. Gentleman who opened the debate complained that this matter was being discussed only on the last day of the Session. That is not our fault. We had a debate on the Foreign Office Vote only a few days ago, and if the Leaders of the party opposite had attached to this subject the great importance which the right hon. Gentleman himself appears to attach to it, it could easily have been arranged that a considerable part of that Supply day could have been devoted to a discussion of this matter. The fact that it was not then discussed seems to indicate that the party opposite are not united in thinking that the country is imperilled by these Amendments. Moreover, apart from the way in which a Supply day might have been occupied, my right hon. Friend the Foreign Secretary last May, in answer to the right hon. Member for West Birmingham (Sir A. Chamberlain), stated that if the party opposite desired a discussion on these Amendments in the course of the Session, and if they made a request through the usual channels, they would of course he met. Such a request was never made. It is for that reason that the matter is left to the last day of the Session.

Apart from these Amendments, the hon. Member for East Wolverhampton (Mr. Mander) dealt with various wider issues connected with the, work of the League of Nations and the prospects of the next Assembly. It would be most convenient, perhaps, if first of all I said something about the Amendments to the Covenant, and then passed to that wider ground. The Amendments to the Covenant are designed to complete, so far as members of the League of Nations are concerned, the outlawry of war to which we and practically all other States of the world with a few exceptions are committed through having signed the Kellogg Pact. That is the general principle underlying the Amendments. There are several al- ternative ways in which that object might be achieved. Last September the British Delegation made certain proposals of a definite kind at Geneva, for giving effect to that general principle. That was, as it were, the first version of the Amendments to the Covenant from the British side. That version has been somewhat modified as a result of the meeting of the Committee of 13 on which Lord Cecil has sat.

It is still possible—and this is relevant to the line of argument developed by the hon. and gallant Gentleman who spoke last—that at the next Assembly the amendments as they now stand will be still further modified. That, in itself, shows that detailed discussions in this House upon precise forms of words may not be really satisfactory if it is desired, as the right hon. Gentleman says it was desired in the case of Locarno, to leave the British Government reasonable freedom to negotiate on the spot regarding the various proposals which may be brought up. I repeat that these amendments, embodying this principle, have already passed through two stages and may yet pass into the third, but I certainly say that we must have the same freedom to go out to Geneva and negotiate with a view to carrying out the principles which we have laid down, and securing the agreement of other nations thereto, as any other Government which has represented this country in past years, either at Geneva or at any other international conference. We ought not to be tied up in advance to certain fixed formulas from which no departure is possible.

I am sorry that several hon. Gentlemen opposite and indeed the right hon. Gentleman himself expressed the view that debates in this House on foreign policy before acts of ratification were a farce. I am sorry that that should be said. Perhaps the prevalence of that view explains the fact that our predecessors did not commit themselves, as we have committed ourselves, not to take any important step of this kind without first securing the support of the House of Commons. We do not regard these debates as a farce; we regard them as a very essential part of the control, I will not say by Parliament because that is an ambiguous word, but the control by the House of Commons and the elected representatives al the people, of the foreign policy pursued by the Government of the day. [Interruption.] Yes, these matters may be debated in another place, but the Government will not be deflected from its policy by any hostile votes which may be given in another place. We are committed, however, to securing the sanction of the House of Commons for any important departure in foreign affairs.

With regard to the substance of the Amendments, I should dispute the interpretation which has been put upon them, although I admit that there may be something to be said for that interpretation, unless we remove any possibility of ambiguity. I dispute the interpretation placed upon the proposed Amendment to Article 15 to the effect that it contemplates that acts of war should become permissible against States which have not themselves committed any act of war. I should dispute the proposition that it will become legitimate under this Amendment to pot any sitting rabbit. There may be some ambiguity in the form of words. If so, by all means let us seek to remove that ambiguity. I have been reading the terms of a very interesting resolution recently carried by the League of Nations Union Executive. The hon. and gallant Member for Kelvingrove (Major Elliot) who is, I understand, to reply to me is a member of that body and is a party to this Resolution:

"That the League of Nations Union Executive Committee are of opinion that it is desirable so to amend the Covenant as to bring it into harmony with the Pact of Paris. They recognise that this can only be done by international agreement and they support the proposed Amendment."

Their support is subject to two qualifications which I shall mention. But that. I understand to be the view of the hon. and gallant Gentleman opposite—that he supports the proposed Amendments subject to qualifications. That was not the view of the right hon. Gentleman who opened this debate nor was it the view of the hon. and gallant Member for Warwick (Captain Eden). They did not support the proposed Amendments subject only to the two qualifications which I am now going to mention. They opposed them. The qualifications were, first, that these Amendments of the Covenant should not come into effect until a disarmament treaty had been carried through, and, second, that it should be made quite clear that while the Council must have discretion as to how it should exercise its powers under Articles 11, 13 and 15, it should be understood that they would not recommend measures involving acts of war, except against a party which had itself resorted to war. Having stated that second qualification, I may say that I am in complete agreement with it and I think that in saying this I can speak on behalf of the Government. I do not think we should ever lend ourselves to an interpretation of this Amendment by which we might be required to commit acts of war against a State which, although recalcitrant, although unreasonable, although, perhaps, occupying an unjustifiable position, was still keeping the peace and not breaking it.

On the other hand, as regards the question of postponing the operation of these Amendments until after disarmament has come into effect—there is something to be said for that proposition and something against it, and I am not able here and now to say that the Government either will or will not accept that view. It will have to be considered in relation to the whole problem as it presents itself at Geneva. I would emphasise the fact that the Conservative party is not united upon this matter. We have here the view of the League of Nations Union Executive Committee upon which Conservative and Liberal Members serve, sometimes in predominant numbers compared with the members of our party, and it is evident that the Conservative party is not united in support of the view expressed by the right hon. Gentleman the Member for Wood Green (Mr. G. Locker-Lampson). That perhaps accounts for the fact that it has been left to the last day of the Session for him to launch his attack upon us in this respect. With regard to the alleged extension of sanctions, I refer once more to the resolution of the League of Nations Union because it exactly represents the point of view of the Government:

"If these conditions are fulfilled the Executive Committee, while recognising that the ambit of Article 16 will be, in principle, extended, yet are of opinion that the guarantees of peace will on the whole be increased."

That, I take it, is the view of the hon. and gallant Member for Kelvingrove and that is our View and that is the whole case for these Amendments in a nutshell. We believe that they will, on the whole, increase the guarantees of peace. Because we believed that we took the initiative last year in proposing the principle which they embody, and we shall take the initiative again this year in seeking to get them accepted by the Assembly.

I turn to the other questions which have been raised in the debate. The hon. Member for East Wolverhampton (Mr. Mander) said some very kind things about our Government.

About its foreign policy.

He said some very kind things about the Government's foreign policy which I appreciate very much. I sincerely recognise that there has been no great divergence, hitherto, between the foreign policy which the Government have pursued, and the views of the hon. Gentlemen who sit below the Gangway opposite. I hope that that concord and co-operation in the great cause of the peace of the world may continue. The hon. Member raised a number of points on items which will come up at the Assembly this year. Many of these are at present under discussion between us and the Dominion Governments. We hope to be able to do what he suggested. We hope to be able, as a result of discussion with the Dominion Governments, to present a united front at Geneva on these various questions, as we were able to do with regard to the Optional Clause last year. Obviously, however, while these discussions with the Dominion Governments are still proceeding, it would not be right for me to go into any great detail about these different problems.

But we are hopeful of making progress with the General Act, with the Treaty of Financial Assistance, with the discussion by the Assembly of Monsieur Briand's Memorandum, with regard to which, as the hon. Member said, the Government have expressed their views very clearly. We. are hopeful, although this will not come up at the Assembly, that something may be done, if only by the creation of a friendly and helpful atmosphere, to speed forward the work of disarmament. I entirely agree with what he said—and he said what I have often heard the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) say—that we cannot go on year after year talking about disarmament and having one group of States compulsorily disarmed under the peace treaties and the others doing nothing but talk about disarmament. I entirely agree with that point of view, and I can assure the hon. Member that the Government will do everything they possibly can to speed up the process of disarmament and encourage the will to disarm, and to disarm quickly, among the various nations assembled at Geneva.

It has been a terribly slow rate of progress. We are very disappointed, looking back over the years since the end of the War, that there has been so much talk and so little action in regard to disarmament, whether on land, in the air, or at sea, and, so far as our influence is concerned, it will be an influence entirely in favour of a vigorous policy of disarmament. My hon. Friend behind me said that our party had not been in power for a very large fraction of that time, and that is true, but I do not propose to pursue that point any further. I would like rather to turn to the future and suggest to the House that these are formative years at Geneva and in the whole sphere of international relationships. We did, I think, take a step forward last year. We did, I think, give an illustration of the old truth, which has often been enunciated by those who are acquainted with the work at Geneva, that when England goes forward the whole League of Nations goes forward, and when England stands still the whole League of Nations stands still.

We passed out last year from a period of stagnation into a period of progress. Some foreign observers who had been accustomed to delegations of another kind said, "Ah, these Labour people come here this year and make their speeches and their proposals, but they will go away, and in a few months they will crash to the ground, and there will be another General Election, and then we shall get back to the old familiar faces once again." It is quite evident now that that will not happen before the next Assembly meets. We shall, for the second year, go back there and seek to gather the harvest which was sown last year. A number of these items referred to by the hon. Member are items which arise naturally as a result of initiatives taken by the British delegation last year, and we hope to push these through and complete the work in the coming Assembly. I hope I have sufficiently answered the points which were put to me from below the Gangway opposite.

Can the hon. Gentleman give us a word about the International Bank and about minorities?

With regard to the International Bank, there was some discussion last year in the Fourth Commission at the Assembly. The International Bank was then not in existence, as the hon. Member knows, and expression was given in the Fourth Commission to the view that while not wishing in any way to interfere with the constitution and the proper functions of the Bank, it was very desirable that some contact, some liaison, should be kept between the Bank and the League. That was said in a quite general way, and this year, now that the Bank is in existence and has begun to operate no doubt the matter will be raised again in the Fourth Commission, which deals with financial questions, and we may have an opportunity of considering how far it is possible to apply those general ideas that were thrown out in last year's discussion.

With regard to minorities, it is quite true that there have been many complaints of the working of the present system, which has only been in operation for just over a year. It was invented at the Madrid Council, held just before the present Government came into office, and there have been a number of complaints about it from many quarters. As my right hon. Friend stated, in reply to questions the other day, we are very carefully going into the question of this machinery. We have, in fact, a small committee of members of the British delegation examining the matter, and we shall have to consider what action to take in the event of the minorities question being raised, as it probably will be raised, by some other State at Geneva. The part which this country has taken, having been able to deal with minority questions of its own very satisfactorily, has been that of an honest broker, and I hope we shall continue to take that part, not leaning too much either to the extreme exponents of the claims of the minorities or to the extreme exponents of the other view, by which such claims have been in danger of being whittled away. I hope we shall be able, if the question comes up, to make a useful contribution and to secure proper attention for all definite and reasonable claims that may be put up by the minorities, while not encouraging certain rather fantastic over-emphases of the minority position which are sometimes put forward.

In general terms, I can say that we are considering that subject very carefully, and we are anxious to make a helpful contribution to the discussion which will almost certainly arise this year. We have not yet precisely defined our attitude on the matter, and between now and the discussion at Geneva we shall no doubt carry our inquiries further. I hope that when we return and meet the House next Session, and when what, we have done at Geneva is brought up for discussion, and particularly any question of ratifying Amendments to the Covenant, our action will commend itself on careful consideration to the majority of the House. It is only on condition that it does commend itself to the majority of the House that we shall carry into effect any of those projects, requiring ratification, that we shall put forward during the meeting of the Assembly.