New Clause. — (Annual account of exchange equalisation account.)

Orders of the Day — Finance Bill. – in the House of Commons on 1st July 1935.

Alert me about debates like this

Section twenty-four of the Finance Act, 1932 (which deals with the establishment of an exchange equalisation account) shall be read as if after Sub-section (7) there were inserted the following Sub-section: (8) As soon as may be after the end of each financial year the Treasury shall prepare an abstract of the transactions covered by the said account during the preceding year and shall cause the same, together with a report thereon by the Comptroller and Auditor-General, to be laid upon the Table of the House of Commons.—[Mr. D. Mason.]

Brought up, and read the First time.

5.55 p.m.

Photo of Mr David Mason Mr David Mason , Edinburgh East

I beg to move, "That the Clause be read a Second time."

The Clause involves a proposal which will appeal to all sections of the House. Some reference has been made to certain questions not being party questions; this is essentially a non-party Clause, because it advocates control by the House of Commons of its own finances. In 1932, the House voted £150,000,000, to which was added in the subsequent year £200,000,000, making in all £350,000,000 that has been placed to the credit of the Exchange Equalisation Fund. It was agreed at the time not to insist upon an account, although some of us protested against there being no provision for an abstract of the account to be submitted to the House. I hope I do not misrepresent the situation, but many Members felt misgivings. It is extraordinary that the House of Commons should vote £350,000,000 and not insist upon an abstract at the end of the financial year. It was argued that the operations of the Fund could not be carried on if they were made public.

I am asking for an abstract at the end of the financial year, and I appeal to all hon. Members, irrespective of Party, not to allow this occasion to go by without raising their voice against the establishment of a principle which would enable this or any other Government to spend continuously without submitting an abstract of the expenditure to the House. I have protested about this over and over again. We cannot tell what Government may succeed this Government. It is an unsound principle to lay down. I am asking for an abstract of the transactions of the Exchange Equalisation Account. The exchanges are indicators of the trade that has been conducted in this country. They are the best friends of the trader, because they are the only indicators to him of the trade of the country. One of the occasions on which we have an adverse exchange is when we have what is called an adverse balance of payments, and I have often argued that there is seldom if ever an adverse balance of payments in this country, because we are a creditor country. The Board of Trade issue from time to time estimates of what they call this adverse balance, but we have no means of checking it. The Exchange Equalisation Account, of which we get no abstract, is a machinery for interfering with the exchanges, and the exchanges are the only indicators by which a trader can gauge what the condition of the trade of the country is.

It is almost as though I were to offer to the Chancellor of the Exchequer some mechanism by which the weather-glass was always kept at "Set Fair." If I were to offer him such a mechanism, that would not necessarily mean that we should always have good weather. The same thing applies to the Exchange Equalisation Account, which uses the credit of this country to the tune of £350,000,000 for interfering with the movement of the exchanges, that is to say, with the only known means by which the trader can find out whether there is over-trading or an excess of speculation, or whether an artificial or unsound state of affairs exists in the City of London or throughout the country. When we had freedom of the exchanges, what happened? When there was excessive trading or over-importation or speculation, the exchange became adverse, and there was an efflux of gold from the Bank of England. When the gold reserve fell to a certain point, the Directors of the Bank of England put up the rate of discount. That tended to stop the over-importation and correct the exchange so that gold again flowed back to this country, and we went on with our trade as before. That, however, has been destroyed, and not only has it been destroyed by this most unsound system, but the National Government, which is suppose to have all the talents, comes to this House and has the audacity to ask it to give practically a blank cheque, without even asking for an abstract, and is able to get away with £350,000,000 for the purpose of interfering with the exchanges. Hon. Members above the Gangway appear to think that that is a matter for humour, but it is a very serious and grave situation.

We are told that the Government have boasted of the fact that they have perpetually given us cheap money, which is, of course, the result of this Fund, which has stopped the correction of the excessive cheapness of money. Under the old system, when there was excessive trading—as there may be now for all that we know; we have no means of checking it—there was an outflow of bullion, and, as I have explained, a rise in the Bank Rate acted as a corrective. That corrective has now been destroyed. My object is, as a result of publicity, to bring us nearer to the day which is provided for in Section 24 of the Act itself, where Sub-section (2) states that the Account may be wound up. The Chancellor of the Exchequer has always been susceptible to argument, and I hope that arguments on this matter will be addressed to him from all parts of the House, because this is not a party matter. I am sure the right hon. Gentleman will appreciate that I am putting the case, moderately as I hope, with no desire to score any party point, but only as a sincere seeker after truth.

Our foreign trade can only be restored through a restoration of the exchanges, which again depends upon stabilisation, but that is destroyed by this Equalisation Account. Apparently it is not necessary to have stability of exchanges, or stabilisation. All that you have to do is to vote further millions, and these gentlemen will then be able to regulate our exchanges. As I have said, however, it is not necessary to regulate our exchanges. They are regulated by our trade, and, if the regulator is destroyed, we shall not get a sound state of finance or a sound state of trade. When the right hon. Gentleman boasts about being able to do everything as a result of cheap money, does he suggest that we are to have cheap money for all time? Does he think he can go beyond the laws of the Creator and provide a new economic world in which there will always be cheap money? Where did he find this wonderful brain that can guarantee to this country, and possibly to the world, that there is no need for an abstract such as I am pleading for, or for abolishing control of the exchanges? Words fail me to do justice to the matter, because I feel so strongly about it. Sub-section (2) of Section 24 of the original Act says: The Treasury may, if at any time they think it expedient to do so, cause the Exchange Equalisation Account … to be wound up forthwith, and the Account shall in any event be wound up not later than six months after the date on which the Commons House of Parliament resolve that the Account is no longer required for the purpose for which it was established. The responsibility is ours, and we cannot absolve ourselves from responsibility by blaming the Government. It is true that they are supposed to lead us, but we cannot go away and say we have no responsibility; each one of us has an individual responsibility. The Act throws the responsibility upon us. There is no precedent for this Account in the history of any nation in the world. We were the first to establish it, though it is true that the Americans followed suit. But have we got rid of our 2,000,000 unemployed? Has our foreign trade been restored? How can traders go into big adventures, as they used to do, when this machinery has destroyed the one indicator of the character of our trade which showed them whether they ought to engage in these large ventures?

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

Surely the hon. Member will agree that a substantial increase in our foreign trade has taken place in the last five or six months?

Photo of Mr David Mason Mr David Mason , Edinburgh East

It is true that we have not altogether stood still, but does the hon. Member himself subscribe to this most artificial interference, in view of the knowledge which I have no doubt he has of entering into large transactions involving huge trade relations with the rest of the world and involving large capital expenditure, when no abstract is provided of the transactions of this Account which pledges the credit of this country to the amount of £350,000,000 for the purpose of interfering with the only guide that he can get as to how he should conduct his trade? You might as well appoint a Minister to control the winds and say when we should or should not have rain. It is impossible. The Chancellor of the Exchequer told us that the object of this fund was due to "iron out" the exchanges without interfering with the general trend, but, as I ventured to point out, the general trend of exchange has been steadily downwards; the pound is now at a discount of about 42 per cent.

Photo of Mr David Mason Mr David Mason , Edinburgh East

Against gold. All that this system has done is to facilitate this facilis descensus Averni, this descent into hell, this use of our own credit for the purpose of depreciating our own sterling pound. It sounds incredible, but it is true. If any hon. Member can offer a defence of it, I am sure the House will be glad to hear it. I have tried—and I have said time and again that we are here for no other purpose—to pursue a consistent, straightforward and honest course, and, while hon. Members do not agree with my views, I hope they will agree that I always try to be honest and sincere in laying my opinions before the House. I do not set myself up as a supreme authority on these matters. Although I have given a lifetime to the study of these problems, I am willing to learn; I am still a student; but none of the great authorities—Ricardo, Adam Smith, Robbins, Gregory, Cannan—

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

Can the hon. Member quote a single leader in industry, or a single leader of finance, or a single economist of his own school, in this country who would support the views that he is expressing?

Photo of Mr David Mason Mr David Mason , Edinburgh East

Certainly; I have just been doing so. Professor Robbins and Dr. Gregory are economists of to-day, and Professor Cannan, whose lamented death occurred only recently, was perhaps one of our most distinguished economists. There are many others. I hope that other Members of the House will have something to say in protest against the continuation of this, as I think, unsound system of carrying on our finances. The right hon. Gentleman on one occasion came down to the House in a very complacent frame of mind and told us that the Account showed a profit. I ventured to point out that that was very interesting, but that, after all, it was not a question whether the Account showed a profit, but whether it realised a profit. The real test of whether there is a profit or not is in its final condition. While I do not doubt that the Account may, for all I know, show a profit, it is monstrous that we should vote measures for the amelioration and extension of our trade and subscribe to a system operated by the Treasury which interferes with the only known indicator which will show us how that trade is progressing. I hope I have said enough to recommend the Clause to the consideration of the House. I believe it raises a question of the most supreme importance. If there is any fault in my argument, I shall be glad to have it pointed out. I have no desire to score over the right hon. Gentleman. If the House will have the courage to protest against these rights being infringed, I have every confidence that the Clause will be carried.

6.16 p.m.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

I intervene not to discuss the wisdom or unwisdom of establishing this Fund. That is not dealt with in the Clause. It recognises the existence of a colossal fund and suggests that, as it has been provided at the expense and risk of the taxpayers, we are entitled to an account. It seems to me that that is a very elementary request. I was not a Member of the House when it was overcome by the platitudes or the conjuring, or whatever it may be, of the right hon. Gentleman, but I have been surprised ever since, and am no less surprised now that Parliament gave to the Treasury, with its collaborators in the City, credit to the extent of £350,000,000 for an unspecified purpose, except within broad limits, without Parliament being provided at any time with an account of their stewardship until such time as the Treasury informs the House that there is no longer any use for the Fund, and it may be wound up. I hope the House has seen what the Auditor-General has said about the Fund in his Annual Report. He gives it a perfunctory acknowledgement in three lines, and that is all.

I ask myself what would be the attitude of the right hon. Gentleman and the distinguished business men that I see before me if a Government of which I was a Member asked for £350,000,000 and no account to be rendered? I do not wonder that the right hon. Gentleman laughs. He sees it now, for once, as I see it. He thinks it would be an outrageous proposal. I agree with him. It is. But a power that is vested in this Government may be vested in any other Government. It is a precedent of an extraordinarily dangerous kind and, although the right hon. Gentleman and others may feel that if a Socialist Government were to make a proposal of this kind it would be a subject for derision, yet I can quite see that it may easily happen that a Socialist Government may come along and say, "We have had this example set up by the apostles of high finance and sound business principles—by the National Government—and we may as well set about imitating them and gambling with the nation's millions without rendering any account of our stewardship," because that it is what is happening.

While I have no doubt that the gentlemen who are operating this fund do their best, I have not that reverence for their wisdom and sagacity which some people seem to have. I do not think that the reputation for discretion of some of those who are operating this fund is so high within recent history that we ought to give them a blank cheque and not expect an account. They are the same men who advised the right hon. Gentleman the Member for Epping (Mr. Churchill), when he was Chancellor of the Exchequer, that we ought to restore the Gold Standard.

They gave that advice with the most disastrous consequences to the trade of the country. It is all very well for the Chancellor to be scornful and to laugh, but that is a true statement. These men committed one of the biggest blunders that have been made for a long time, and here they are operating this fund. It was only four or five years ago that they told us that, if this country went off the Gold Standard, it would be an indescribable disaster, and I believe they believed it. They did not know any better. That was the tragic part of it. They told us a few weeks afterwards that if we could obtain a foreign loan, it would save us going off the Gold Standard. On their advice we obtained the loan and in six weeks we were off the Gold Standard all the same. They were wrong both times. It is clear that as long as you have a fund of this kind, those in charge of it must be able to operate it as funds of this sort can only be operated, but it is constitutionally wrong that we should vote immense sums of this kind and be content that Parliament should be provided with no sort of account. Moreover, those who are in charge of it are not justified in being allowed to play about with this vast amount of British credit. For these reasons it is necessary and right that in some appropriate form an account of the operations of the fund should be provided. How it is being operated, to what extent it is responsible for what the mover thought it might be, I do not know. No one knows.

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

There is one fact that is known to all of us. Our credit abroad is higher than that of any other country in the world.

Photo of Dr Christopher Addison Dr Christopher Addison , Swindon

I have no quarrel with that. I am glad to hear it. But, if that is so, it will be to the advantage of everyone that the House should have some information as to how these desirable results are obtained. At all events, it does not obviate the desirability and necessity of the House being provided with some account. The hon. Member said that the Chancellor got away with £350,000,000. So he has. He is the most modest man in British history who ever hoisted the Jolly Roger. It is a dangerous principle, and it is wrong. We only ask that a summary account should be provided at the appropriate time. That is an entirely reasonable request, and I hope that hon. Members will support the Clause.

6.27 p.m.

Photo of Sir Richard Denman Sir Richard Denman , Leeds Central

I rise only to call attention to the odd nature of the speech to which we have just listened. It really is remarkable the way the Front Bench rejects every opportunity that is afforded to it of any kind of enjoyment, and insists upon dwelling in a gloom of its own creation. One might have expected that, when the National Government adopted Socialist principles by withdrawing transactions in the exchange market from the operations of private profit and subjected them to Government control, the front Opposition Bench would derive some satisfaction from the process. On the contrary, they have got so accustomed to condemning everything that they cannot recognise when their principles are fruitfully adopted.

I wish to ask the right hon. Gentleman a question about this fund. We have several times discussed this matter of publicity of the accounts and the House has on every occasion come to what I believe to be the inevitable conclusion, that publicity is impossible. But there is one point on which, perhaps, the Chancellor might give us information, and that is whether the fund is contributing to the expense of its own finance. Apparently we lend the fund £350,000,000, and I am wholly unable to discover from the public accounts any payment in respect of the money that the fund is using. I should have thought that it would not be unreasonable if, say, 2½ or 3 per cent. was paid for the money advanced, and, if that was utilised in the revenue of the year, it would be extremely useful to the Chancellor. It is conceivable that some of this appears in miscellaneous receipts, and that we are told nothing about it, but I have been so far quite unable to discover any trace of payment by the fund for its own finance. The Chancellor might tell us whether any payment is, in fact, being made. I am sure the House will reject the Clause as it stands. There can be no question of revealing to the public the operations of the fund, and I am sure the whole House is very well content to leave in the hands of the Chancellor the operations of a fund which has been so beneficial to the exchange, and to the trade of the country.

6.30 p.m.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I hope that the House will forgive me for saying a few words upon the matter from an angle which is not precisely the same as that of my right hon. Friend the Member for Swindon (Dr. Addison), but from a personal point of view. As many Members of the House know, I have the honour of being the Chairman of the Public Accounts Committee of this House, and they will also, no doubt, remember that some three years or so ago we had a very lively discussion upon the creation of this Fund, and later upon the extension of the Fund. It was in connection with the extension of the Fund that we brought some pressure to bear upon the right hon. Gentleman the Chancellor of the Exchequer with a view to extending to some degree the measure of information which might be made available to the Public Accounts Committee of this House. We have had something like two years' experience of that system. I am not committing any of my colleagues on the Public Accounts Committee with regard to what I have to say; I am merely giving my own view as a Member of the Committee and not committing anyone else to my judgment on the matter. To the best of my knowledge and belief, the Comptroller and Auditor-General has only limited power imposed by the law in relation to taking the Public Accounts Committee into his confidence. My right hon. Friend used the phrase "perfunctory review," and I am sure we all appreciate that he used the word "perfunctory" in the sense of being a somewhat abbreviated review, and was not in any way making a disparaging reference to the work of the Auditor-General.

It has been my privilege for two years to sit upon this matter as Chairman of the Public Accounts Committee and to cross-examine the chief accounting officer of each Department. In the course of my occupancy of the chair we have spent a little amount of time in inquiring how a given sum of money has been spent, or, on occasion, have even inquired how it seemed to us to have been misspent. It may have been a small sum of money, but the Committee regarded it as their duty to inquire into the application of money voted by this House. That is the point. The Public Accounts Committee are there for that purpose; that is their function. They have to see to it that money voted by this House is properly applied. A sum of £350,000,000 has been voted by this House to make up this Fund. I do not complain of that in the least, but this, in general terms, is what happens. An hon. Member of the Committee inquires of the Accountant-General whether he can show the state of the Fund. He may tell us what the state of the Fund is. But when? He gives us the state of the Fund at the end of the year of account. The year of account which we are now reviewing is not the year ended 31st March, 1935, but the year ended 31st March, 1934.

Photo of Sir Patrick Hannon Sir Patrick Hannon , Birmingham Moseley

On a point of Order. How far is it proper in this House to reveal the proceedings of the Public Accounts Committee, upon matters discussed in the Committee which are not the subject of a public report issued by the Committee?

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I have not revealed a single thing of this year's proceedings.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

Before you give a Ruling, Mr. Speaker, may I say that all I have disclosed so far is what is known to everybody in the published accounts of the Public Accounts Committee for last year?

Photo of Lieut-General Edward Fitzroy Lieut-General Edward Fitzroy , Daventry

There is really nothing upon which to give a Ruling. I understood the hon. Member for Caerphilly (Mr. Morgan Jones) was giving a general review of the procedure of the Public Accounts Committee, but not of what was disclosed before that Committee.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I will confine my remarks to the point I wish to make. We thought that we were getting a very substantial concession from the Chancellor of the Exchequer when he made the particular concession to which I have referred, and I have no doubt that he did it in good faith in order to meet the demand of the House at that time that there would be some sort of report, however short or formal, so as to satisfy the high standard of rectitude entertained by this House. We have had the experience of a year or two of the system, and, frankly, I am bound to confess that I am a little disappointed in it. It is a terrible thing that a big sum such as this can be operated, even for 12 months, without the House of Commons being assured with greater particularity and detail than is now the case as to how precisely the fund has been operated. I know—and I concede it readily—that there are arguments against undue publicity. But what, in fact, happens? To begin with, the Chancellor of the Exchequer himself must know. There must be certain officials at the Treasury who know, and there must be the Auditor-General who knows later, and so in the aggregate, however much you limit it, there would be a certain number of people anyway who would necessarily know the state of the account. I do not ask even for the same measure of detailed knowledge which is usually given to the Public Accounts Committee, but I submit with great respect that the Public Accounts Committee have to examine all sorts of private accounts in the course of their year's work. There are accounts which are not available to the public. For instance, there are certain dockyard and Admiralty accounts and various other accounts with which Members of the Committee become acquainted, and, as far as I know, not one word of suspicion has ever been uttered concerning any Member of the Public Accounts Committee. If it is proper and necessary in the public interest that permanent officials—and I repeat that I do not complain of this—should know in detail the state of the funds, should not the Public Accounts Committee of this House, even in confidence, know rather more than they now know as to the state of the fund?

I hope that I have spoken with as much restraint as possible. I appreciate that one must preserve some sense of responsibility in this matter. I have tried not to exaggerate, but to give my experience as an individual member of the Public Accounts Committee of this House. I am bound to say that it is not an experience of which I feel particularly proud in the sense that it is not satisfactory to anyone to say, "I know that on such and such a date the sum was so much and nothing more." It gives you no information upon which you can give any judgment whatever, and from that point of view, without making reference to, or a reflection upon, anybody whatever, I feel that it is not treating quite fairly the Committee appointed by this House for the purpose of reviewing those financial concerns. I repeat that I admit the necessity for secrecy as to day-to-day transactions.

Lieut.-Colonel CHARLES KERR:

I suggest to the hon. Gentleman that that does not seem to be the point of the proposed new Clause. It says that an annual account should be laid upon the Table of the House of Commons, which it quite a different thing from that about which he is speaking.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I know, but the hon. and gallant Gentleman must know that it is possible for you to present a statement in a general form to be placed upon the Table of the House, and when it is presented to the House in that form and it comes to the Public Accounts Committee, you can, within the ambit of the statement presented, cross-examine the person who is authorised to answer in respect of it. If such an examination took place there would not be—and my experience justifies my saying this—any danger whatever of the disclosure of any information given to the Committee under a pledge of secrecy and confidence. I have tried not to speak as a party man upon this matter, but simply and solely as an hon. Member who, Along with others, is called upon to have regard to it from a House of Commons' point of view, and I hope that the House will acquit me, therefore, of desiring to make any point upon it beyond a proper and legitimate House of Commons' point.

6.43 p.m.


I am not surprised that from time to time the question of the conduct of the Exchange Equalisation Account should be brought up for discussion in the House. It really is a tremendous demonstration of confidence—I will not say confidence in the Government, but confidence in the way that our system is administered—that this House should be willing to entrust this vast sum of money through the operation of a number of persons whose names even are not known to them, and that they should be willing to abstain from the receipt of information as to what is exactly happening to that amount which they have granted. As I have said on previous occasions when we have discussed the matter, I do not think that it is possible to find any justification for such a remarkable action on the part of the House, except the one I put forward before, and which I put forward again, namely, that it is only under such conditions that the purpose of the fund can be effected at all.

What is the purpose of the Fund? The hon. Member who moved the Clause told us that he had made a lifelong study of finance. I am afraid that he must have stopped his study some years ago, and that he has failed to acquaint himself with the alteration in conditions which has arisen during recent years, because if he had not so failed, and if he had not shut his eyes, or at least ceased to watch what was going on, he would never have said that the exchange rates of today were the indicators, and the only indicators, of the operations of trade. Surely, no one with any acquaintance, however indirect, with trade conditions to-day can fail to realise that there has come into operation a new factor of overwhelming importance, and that is the enormous supply of loose and unanchored capital, which is free to move about rapidly from one capital to another, from one exchange to another, and which can be, and is, used by speculators to alter the rates of exchange, and therefore, utterly to destroy their value as an index of the state of trade. It is because exchange rates can be altered for the purpose of speculation by people who see that they can make money by using their knowledge and by using this loose and rapidly moving capital, and because the exchanges began to fluctuate rapidly and the operation of trade was hampered by the violent fluctuations of the exchange that the Exchange Equalisation Account was brought into existence.

It was made clear to the House at the time that the Fund was founded, that if the House wanted the Fund to be used for that purpose, it must be employed in secrecy, because if it is to defeat the operations of speculators it is essential that they should not know how it is being operated, and that they should not have before them information which would enable them to say that on such-and-such a date, when the exchange moved in this direction or that, the Fund was or was not operating. If they once got that information they could, of course, defeat the operations of the Fund. They could come in or not as they found it desirable. It is because it is not the slightest use to have a Fund of this kind unless you can work it in secrecy that we have been obliged to say to the House that they must either have no Fund at all or trust us to make the best use of it.

Photo of Mr David Mason Mr David Mason , Edinburgh East

Does the right hon. Gentleman suggest that this Fund is the sole means of correcting the exchanges? There are of course, various causes for exchange fluctuations. Surely, the right hon. Gentleman does not seriously suggest that the Exchange Equalisation Fund can correct the exchanges?


No, Sir, and the hon. Member has heard me say so dozens of times. He even stated in his speech that I had said dozens of times that we never attempt to correct the natural trend of the exchanges, because we know that our resources would not enable us to do that. The hon. Member himself has stated that there has been a definite move of the pound in relation to gold, although not in relation to commodities. He said that there has been a move. Therefore, he himself does not believe that the Exchange Equalisation Account is used for the purpose of trying to peg the exchange. It is not.


The hon. Member is in agreement with me, and yet he wants to alter the procedure. The fund did not begin with anything like so large a sum as the amount at present in the fund. It began with £150,000,000, and now it is £350,000,000. The House was induced to grant double the amount of money which it was ready to put in the fund at the beginning after a year's experience of the working of the fund. One could hardly have a greater tribute to their satisfaction at the way in which the fund had been worked than that they were ready to do that. [Interruption.] At any rate, the House were so satisfied with the results that without having been told how those results had been achieved they were willing to make the fund much larger than it was at the beginning. The hon. Member for the Moseley Division of Birmingham (Mr. Hannon) was correct in saying that one could not find any representative of industry, commerce or finance who holds any responsible position who would criticise the working of the fund, or who would not say that the fund has been of inestimable value to business since it was established.

The hon. Member for Central Leeds (Mr. Denman) asked me a specific question about the interest on the fund. This matter has been raised on a previous occasion. It never has been intended that interest should be paid to the Exchequer upon the amount of capital in the fund. If the hon. Member considers how the fund may be used in theory, he will see that a good deal of the fund cannot be earning interest. Some part of the fund may be earning interest, but it never has been contemplated that interest should be paid. On the other hand, if at the end of the life of the fund, when that great day happens to which the hon. Member for East Edinburgh (Mr. Mason) looks forward, and the fund is wound up, if there is a profit on the transactions, that profit will inure to the benefit of the State.

Now let me come to the speech of the hon. Member for Caerphilly (Mr. Morgan Jones), the Chairman of the Public Accounts Committee. I am grateful to him for explaining to the House that the Comptroller and Auditor-General does not carry out a perfunctory review of the transactions of the Fund. His audit is a complete one. I believe that he audits every transaction that has taken place although he has not a great deal to say about it because he is not required by the Act to do so. The Act says: The Account shall in every year until it is wound up be examined by the Comptroller and Auditor-General"— whose function is to certify to the Commons House of Parliament, whether— having regard to the result of his examination, the operations on and the transactions in connection with the Account have or have not been in accordance with the provisions of this Part of this Act. Therefore, he has to report whether the transactions have been in accordance with the provisions of the Act. As the hon. Member reminded us we had a discussion on this matter two years ago and there was a good deal of feeling then that if it were possible to give the Public Accounts Committee some further information without danger to the purpose of the Fund, that should be done. I had a conversation with the hon. Member at the time and with others who were interested in the subject and as a result a new arrangement was made. The amount of gold and foreign devisen held by the Account on the last day of each month was taken out and the average of the monthly figures for the year was given to the Public Accounts Committee by the Treasury Accounting Officer. That has been done. It is true that the monthly average which is given is, so to speak, out of date by the time the Public Accounts Committee get it, and the hon. Member now feels some disappointment about that, and asks whether they cannot have more up-to-date information without any risk to the operations of the Fund. Will the House consider the point? What would be the purpose of that information? Is it to find out, as the hon. Member said, and as the hon. Member for East Edinburgh said, whether the account was showing a profit at the moment or not? I have said that there was a profit at a certain time, but I recognise that that is not a realisable profit. There cannot be any realisable profit or loss until the Account is finally wound up. That will be the time when we shall know whether there has been a profit or a loss. In the meantime it is purely academic.

It is really of no particular importance unless there were going to be some interference with the operations of the account. If those who are operating the fund were to be told, "You are showing a loss and you must change your methods in order that you may make a profit," then I should say that that would be completely to destroy the usefulness of the fund. The fund is not there to make a profit or a loss. It is there to iron out the fluctuations of the exchange brought about by speculation or seasonal causes, and if all the time we have to consider whether we shall show a profit or a loss at a particular moment we cannot carry out the operations. Naturally, in conducting the operations it is not absent from the minds of those who are responsible that they must not do anything which might involve a terrific loss, and if they consider that by going too far in a particular direction they may be acting with undue risk, naturally that is taken into account. As to the competence of the persons who are engaged in this work, the right hon. Gentleman opposite does not know who they are and his remarks about their blunders in past days are beside the point. However, I will not pursue that matter. I can assure the House that they could not find any more competent body of men to deal with this technical matter than those whom we have at our disposal.

The hon. Member has asked for an abstract of the transactions. That would mean making available to the House of Commons and to the whole world, because it would not be confined to the House of Commons, the actual transactions which have taken place. The hon. Member for Central Edinburgh hates the fund and would like to see it wound up, and he is going about to destroy it. Therefore one can scarcely complain when he puts forward a proposal which would destroy the fund. That would be the result.


That is the hon. Member's object. But that is not the object of the hon. Member for Caerphilly. He is desirous of being able to discharge his responsibility to the House as Chairman of the Public Accounts Committee. Even if an abstract of the accounts were given to him, if an account of the transaction was rendered and even if we gave him that account lip to quite a recent date, so that he could know what had been happening the last week, it would not really be any help to him. He could not make it public to the House, he would not be able to say whether the operations had been conducted wisely or not. While I have complete confidence in the members of the Public Accounts Committee and in their ability to keep secrets, I would point out that these transactions are not like other transactions such as those that have been mentioned, and which are dealt with by the Public Accounts Committee, because these are transactions which, if made known, would give opportunities to make or unmake fortunes. If anything did leak out—not given away by the Members of the Committee at all, but if it were thought that information of this kind had leaked out and advantage were taken of that information by speculators to make profits at the expense of the public, I feel that Members of the Public Accounts Committee would be put in a most invidious and disagreeable position, and one in which they ought not to be placed.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

In practice we should never be in that position, and I rather fear that the right hon. Gentleman is unaware of the actual position. Let us take the year 1935. The financial year 1934–35 ended on 31st March. The Public Accounts Committee which will review the work of 1934–35 will not begin operations until February, 1936—at least nine months later. Consequently I cannot understand what is the objection to giving to the Public Accounts Committee, if you like, in confidence, an account of what happened up to the end of the financial year which closed nine months before the Committee began its operation and, in practice, actually 12 months before it begins to review the actual financial accounts.


I can only repeat what I said. Is that information to be made public or is it not? If it is to be made public, then you are giving away the very information you want to conceal. If it is not to be made public, I cannot conceive what use it can be to the Public Accounts Committee.

Photo of Mr Morgan Jones Mr Morgan Jones , Caerphilly

I do not see why there should be any difference drawn between this private, secret and confidential account and a private, secret and confidential account dealing with Admiralty accounts or anything of that sort, and we have discussed these and safeguarded the information as closely as possible.


Surely the hon. Gentleman must see that there is all the difference in the world between transactions of this kind, for this purpose, and the expenditure of money by the Admiralty in accordance with the votes of the House. Expenditure of money by the Admiralty has to be for purposes definitely and specifically approved by the House. The Estimates of the Admiralty are voted in detail by the House. The House knows exactly for what it has voted the money; but in this case it has not voted the money to be used in a way which has been specified beforehand. It has to trust to the special knowledge and the competence of a few people. Examination of details of an account of this kind is totally different from the examination of the ordinary expenditure of a Government Department. I cannot add anything to that. I feel just as much as any Member of this House that it is an altogether exceptional, abnormal, and, in ordinary circumstances, most undesirable thing that the House should part with its control over great sums of money. It is only the complete conviction I have that you cannot use a fund of this kind unless it is kept entirely secret, which induces me to resist the hon. Member's Clause and to ask the House to continue the confidence which it has given us in the past.

7.7 p.m.

Photo of Mr David Grenfell Mr David Grenfell , Gower

The House must regret the reticence of the right hon. Gentleman in this matter. He has certainly failed to give information which would satisfy us on this side of the House, and, I feel sure, a good many on the other side of the House. The Chancellor of the Exchequer said there were very good reasons why this Fund should be retained under secret control, and we are not to be told who are the people responsible, or the kind of operations they pursue. No information is vouchsafed to the House three years after the Fund came into operation. We are indebted to the hon. Member for East Edinburgh (Mr. Mason) for putting this matter down, and for the interesting speech he made. The hon. Member desires information, and is sceptical as to the value of this Fund. So are many Members of this House, and, for myself, I doubt the value of this Fund of £350,000,000, which is placed under the control of some body of people, yet unnamed, for a purpose not yet fully defined, and is to be retained simply on the bare word of the Chancellor of the Exchequer when he appears, all too infrequently, on this subject before the House.

The hon. Member for East Edinburgh thanked God that this country was in a position of prosperity compared with other countries. I think he should have transferred his thanks to the Government, because whoever is responsible it is certainly the Government that controls this Fund. If this Fund and the financial policy of the Government are at all responsible for the more fortunate position which the hon. Member holds we are in compared with other countries, then it is blasphemy to thank the Being he thanked in the presence of the right hon. Gentleman. He should transfer his thanks to the unknown gods, the unknown persons who preside over our financial destinies, who are unnamed and in whose presence we should stand trembling and with humility. I do not think there is any body of unknown people to whom we should render that homage.

It is unsafe, and contrary to constitutional practice, to allow any important function of the State to be carried on year after year in this way. It is a derogation of the dignity of the House, and of the constitutional respect in which this House is held. It is a very dangerous practice indeed. It is a form of dictatorship, not with the internal destinies of the people, but a form of dangerous interference with world affairs which expresses itself to-day in one form and tomorrow in another. I do not assess the value of this Fund year after year as the right hon. Gentleman would have us assess it by the amount of profit or the increase in the capital value, but by the effect of the Fund and the manipulation of this £350,000,000, or whatever proportion of that large sum of money is being used, in purchase and sales here and there. The value of the Fund must be judged by the effect on world trade and its interference with world currency. We are not content to retain the exchange value of our own country; we extend our buying and selling power beyond our own immediate circle to foreign exchanges and even foreign currencies for the purpose of trying to maintain a financial exchange equilibrium. This vitally affects the trading capacity of all countries in the world, whether they trade with us or not. This is a terrific power to be wielded by any nation. It is a very dangerous innovation in financial practice and it is not justified, especially without the knowledge of this House. The Chancellor of the Exchequer said that there would come the day of winding-up. When is that winding-up day to be? Will it be when our national loss has been so extreme that the effect on world trade will be damaging? When the day of reckoning comes, it will not, perhaps, be this Government but some other who will be responsible, but the damage by that time may be irretrievable. If this Government succeeds in deluding the electors of this country again, as it did a few years ago and brought into this House hon. Gentlemen who would never have been here but for that delusion—if that is repeated and a further term of five years is vouchsafed to the Government and the Exchange Equalisation Fund goes on in secret, nobody knows where or when it will end. If the year immediately following is too soon, why cannot we be told the year after? Why cannot responsibility be shared by us on this Bide of the House and by back benchers opposite, instead of resting on one right hon. Gentleman? No answer has been given to this Clause, and I think we shall be justified in voting for it, in view of the failure of the Chancellor of the Exchequer and those who support him

to give any information when this question is brought up, as it has been brought up time and again in past years. We shall be justified in voting to-night and on other occasions until this right has been given to the House.

Question put, "That the Clause be read a Second time."

The House divided: Ayes, 53; Noes, 207.

Division No. 254.]AYES.[7.12 p.m.
Acland, Rt. Hon. Sir Francis DykeGrenfell, David Rees (Glamorgan)Owen, Major Goronwy
Adams, D. M. (Poplar, South)Griffith, F. Kingsley (Middlesbro', W.)Parkinson, John Allen
Addison, Rt. Hon. Dr. ChristopherGriffiths, George A. (Yorks, W. Riding)Rathbone, Eleanor
Attlee, Rt. Hon. Clement R.Griffiths, T. (Monmouth, Pontypool)Rea, Sir Walter
Banfield, John WilliamGrundy, Thomas W.Roberts, Aled (Wrexham)
Cleary, J. J.Hall, George H. (Merthyr Tydvil)Salter, Dr. Alfred
Cripps, Sir StaffordHamilton, Sir R. W. (Orkney & Zetl'nd)Strauss, G. R. (Lambeth, North)
Curry, A. C.Harris, Sir PercyThorne, William James
Daggar, GeorgeJones, Henry Haydn (Merioneth)Tinker, John Joseph
Davies, David L. (Pontypridd)Jones, Morgan (Caerphilly)West, F. R.
Davies, Rhys John (Westhoughton)Lansbury, Rt. Hon. GeorgeWilliams, Edward John (Ogmore)
Dobbie, WilliamLawson, John JamesWilliams, Dr. John H. (Llanelly)
Edwards, Sir CharlesLeonard, WilliamWilliams, Thomas (York., Don Valley)
Evans, David Owen (Cardigan)Logan, David GilbertWilmot, John
Evans, R. T. (Carmarthen)Lunn, WilliamWood, Sir Murdoch McKenzie (Banff)
Foot, Isaac (Cornwall, Bodmin)Macdonald, Gordon (Ince)
Gardner, Benjamin WaiteMcEntee, Valentine L.TELLERS FOR THE AYES.
George, Major G. Lloyd (Pembroke)Maclean, Neil (Glasgow, Govan)Mr. Groves and Mr. T. Smith.
Greenwood, Rt. Hon. ArthurMason, David M. (Edinburgh, E.)
Acland-Troyte, Lieut.-ColonelCranborne, ViscountHills, Major Rt. Hon. John Waller
Adams, Samuel Vyvyan T. (Leeds, W.)Craven-Ellis, WilliamHope, Capt. Hon. A. O. J. (Aston)
Amery, Rt. Hon. Leopold C. M. S.Croft, Brigadier-General Sir H.Horobin, Ian M.
Aske, Sir Robert WilliamCrooke, J. SmedleyHoward, Tom Forrest
Astbury, Lieut.-Com. Frederick WolfeCrookshank, Col. C. de Windt (Bootle)Hudson, Capt. A. U. M. (Hackney, N.)
Balley, Eric Alfred GeorgeCrookshank, Capt. H. C. (Gainsb'ro)Hume, Sir George Hopwood
Baldwin, Rt. Hon. StanleyCroom-Johnson, R. P.Jamieson, Rt. Hon. Douglas
Balfour, George (Hampstead)Dalkeith, Earl ofJoel, Dudley J. Barnato
Barclay-Harvey, C. M.Davidson, Rt. Hon. Sir JohnJones, Sir G. W. H. (Stoke New'gton)
Beauchamp, Sir Brograve CampbellDavies, Maj. Geo. F. (Somerset, Yeovil)Jones, Lewis (Swansea, West)
Benn, Sir Arthur ShirleyDenman, Hon. R. D.Ker, J. Campbell
Boulton, W. W.Dickie, John P.Kerr, Lieut.-Col. Charles (Montrose)
Bower, Commander Robert TattonDixon, Captain Rt. Hon. HerbertKerr, Hamilton W.
Bowyer, Capt. Sir George E. W.Drewe, CedricKirkpatrick, William M.
Braithwaite, Maj. A. N. (Yorks, E. R.)Duckworth, George A. V.Knox, Sir Alfred
Brass, Captain Sir WilliamDugdale, Captain Thomas LionelLamb, Sir Joseph Quinton
Briscoe, Capt. Richard GeorgeEllis, Sir R. GeoffreyLambert, Rt. Hon. George
Broadbent, Colonel JohnElliston, Captain George SampsonLeckie, J. A.
Brocklebank, C. E. R.Elmley, ViscountLeech, Dr. J. W.
Brown, Rt. Hon. Ernest (Leith)Emmott, Charles E. G. C.Lees-Jones, John
Brown, Brig.-Gen. H. C. (Berks., Newb'y)Emrys-Evans, P. V.Leighton, Major B. E. P.
Burghley, LordEntwistle, Cyril FullardLewis, Oswald
Burgin, Dr. Edward LeslieEvans, Capt. Arthur (Cardiff, S.)Liddall, Walter S.
Burnett, John GeorgeEverard, W. LindsayLittle, Graham-, Sir Ernest
Burton, Colonel Henry WalterFielden, Edward BrocklehurstLockwood, John C. (Hackney, C.)
Butt, Sir AlfredFord, Sir Patrick J.Mabane, William
Campbell, Sir Edward Taswell (Brmly)Fox, Sir GiffordMacAndrew, Major J. O. (Ayr)
Campbell, Vice-Admiral G. (Burnley)Ganzoni, Sir JohnMcCorquodale, M. S.
Campbell-Johnston, MalcolmGoff, Sir ParkMacDonald, Rt. Hon. J. R. (Seaham)
Caporn, Arthur CecilGoodman, Colonel Albert W.MacDonald, Rt. Hon. M. (Bassetlaw)
Cayzer, Sir Charles (Chester, City)Gower, Sir RobertMacdonald, Sir Murdoch (Inverness)
Chamberlain, Rt. Hon. N. (Edgbaston)Grattan-Doyle, Sir NicholasMcEwen, Captain J. H. F.
Chapman, Sir Samuel (Edinburgh, S.)Gretton, Colonel Rt. Hon. JohnMcLean, Major Sir Alan
Chorlton, Alan Ernest LeofricGrimston, R. V.McLean, Dr. W. H. (Tradeston)
Clarke, FrankGunston, Captain D. W.Macmillan, Maurice Harold
Clarry, Reginald GeorgeHacking, Rt. Hon. Douglas H.Macquisten, Frederick Alexander
Clayton, Sir ChristopherHales, Harold K.Magnay, Thomas
Cobb, Sir CyrilHamilton, Sir George (Ilford)Margesson, Capt. Rt. Hon. H. D. R.
Cochrane, Commander Hon. A. D.Hannon, Patrick Joseph HenryMarsden, Commander Arthur
Conant, R. J. E.Harvey, George (Lambeth, Kenningt'n)Mayhew, Lieut.-Colonel John
Cook, Thomas A.Haslam, Sir John (Bolton)Meller, Sir Richard James (Mitcham)
Cooper, A. DuffHeligers, Captain F. F. A.Mellor, Sir J. S. P.
Courthope, Colonel Sir George L.Heneage, Lieut.-Colonel Arthur P.Mills, Major J. D. (New Forest)
Craddock, Sir Reginald HenryHerbert, Major J. A. (Monmouth)Mitchell, Sir W. Lane (Streatham)
Mitcheson, G. G.Ropner, Colonel L.Strauss, Edward A.
Moreing, Adrian C.Rosbotham, Sir ThomasSugden, Sir Wilfrid Hart
Morris-Jones, Dr. J. H. (Denbigh)Ross Taylor, Walter (Woodbridge)Sutcliffe, Harold
Morrison, G. A. (Scottish Univer'ties)Runciman, Rt. Hon. WalterThompson, Sir Luke
Morrison, William ShepherdRussell, R. J. (Eddisbury)Thorp, Linton Theodore
Moss, Captain H. J.Rutherford, Sir John Hugo (Liverp'l)Touche, Gordon Cosmo
Muirhead, Lieut.-Colonel A. J.Salmon, Sir IsidoreWallace, Captain D. E. (Hornsey)
North, Edward T.Salt, Edward W.Wallace, Sir John (Dunfermline)
O'Neill, Rt. Hon. Sir HughSamuel, M. R. A. (W'ds'wth, Putney).Ward, Lt.-Col. Sir A. L. (Hull)
Patrick, Colin M.Sandys, DuncanWard, Irene Mary Bewick (Wallsend)
Penny, Sir GeorgeSelley, Harry R.Wardlaw-Milne, Sir John S.
Percy, Lord EustaceShakespeare, Geoffrey H.Warrender, Sir Victor A. G.
Perkins, Walter R. D.Shaw, Helen B. (Lanark, Bothwell)Wayland, Sir William A.
Petherick, M.Shaw, Captain William T. (Forfar)Wedderburn, Henry James Scrymgeour
Peto, Geoffrey K. (W'verh'pt'n, Bilston)Simon, Rt. Hon. Sir JohnWilliams, Charles (Devon, Torquay)
Pickthorn, K. W. M.Smiles, Lieut.-Col. Sir Walter D.Williams, Herbert G. (Croydon, S.)
Power, Sir John CecilSmith, Sir Robert (Ab'd'n & K'dine, C.)Wilson, Lt.-Col. Sir Arnold (Hertf'd)
Radford, E. A.Smithers, Sir WaldronWinterton, Rt. Hon. Earl
Raikes, Henry V. A. M.Somerville, Annesley A. (Windsor)Wise, Alfred R.
Ramsay, T. B. W. (Western Isles)Southby, Commander Archibald R. J.Withers, Sir John James
Ramsbotham, HerwaldSpears, Brigadier-General Edward L.Welmer, Rt. Hon. Viscount
Reed, Arthur C. (Exeter)Spender-Clay, Rt. Hon. Herbert H.Womersley, Sir Walter
Reid, William Allan (Derby)Spens, William PatrickWood, Rt. Hon. Sir H. Kingsley
Remer, John R.Stones, James
Rickards, George WilliamStorey, SamuelTELLERS FOR THE NOES.
Robinson, John RolandStourton, Hon. John J.Mr. Blindell and Lieut.-Colonel

Question, "That the words proposed to be left out stand part of the Bill," put, and agreed to.