Exchange Equalisation Account [Money].

Part of the debate – in the House of Commons on 28th June 1937.

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Photo of Mr Arthur Henderson Mr Arthur Henderson , Kingswinford

I can assure the Chancellor of the Exchequer that I have no desire to criticise the proposal which he has made. I gladly welcome it in so far as it strengthens the Exchange Equalisation Fund because, like the hon. Member for Huddersfield (Mr. Mabane) I hope and believe that it will give an indirect measure of assistance to the franc. Unlike the hon. Member, however, I do not consider that the franc has been weakened as a result of any action taken by Socialist legislation in France. In so far as it has been weakened it is, according to his own argument, the direct result of anti-Socialists seeking to avoid their social and patriotic responsibilities by transferring their credits to another country. So far as the increase of this fund will assist and strengthen the franc, I am sure that hon. Members on this side of the Committee will be glad to support it.

I was also glad to hear the Chancellor of the Exchequer state that in future there will be a measure of publicity in respect of the fund. I gather that hon. Members who have spoken, and especially the hon. Member for Oxford University (Sir A. Salter) have had personal experience of the working of the fund. I had personal experience of its reactions in the United States of America during the 12 months following its establishment. It fell to my lot to be in New York about six months after the fund was established and quite a number of Wall Street financiers and other people interested in its working took the view, as expressed by the hon. Member for Oxford University, that the object of the fund was to enable the British Government to take a mean advantage of the American competitors of British exporters by pegging the pound at such a level as to permit or enable British exporters to have an advantage over American exporters. We know that to be unsound and untrue, but owing to the veil of secrecy that has been wrapped round the fund it was impossible for me to give any explanation of it at that time, because I knew nothing about it. I am sure from my own limited knowledge, however, that it had a very unfortunate effect on wide circles in the United States of America. It is to be hoped that as a result of the measure of publicity that will now be given to the fund that objection will no longer apply.

I was very interested also to listen to the Chancellor of the Exchequer expounding the historical background of this vexed question of exchange. He pointed out that before the War the principal cause of exchange fluctuation was economic, largely due to the desire to move balances from one country to another. He admitted, in reply to an interjection from these benches, that in the post-war years one of the principal causes had become political. I was very interested to hear that admission, because my mind went back to 1931. Whatever may be the differences of opinion in this House as to the financial and economic situation in which we found ourselves during that year, and whatever may be the differences of opinion as to the causes of that particular situation, I have never heard any responsible member of the Government admit that the causes of the immediate crisis in August or September, 1931, were due to causes over which the Labour Government at that time had no control.

We have been told that when there is a desire to remove short-term loans from one Capital to another, that is done through the medium of the gold exchange. That was exactly the position in 1931. Hon. Members will recollect that in June or July of that year there was a political unsettlement in Europe and as a result many people in France, Belgium, Holland and other European countries desired to withdraw their credits from this country. Many of the bankers in this country who had received those deposits from their foreign customers had in turn loaned the money to Germany on long-term credits at a higher rate of interest, and as a result it became necessary for them to meet their obligations by exporting gold, and that led to an outflow of large quantities of gold during those months. No Government under the present system of banking in this country can be held responsible for that particular chain of incidents. The Government of this country does not control the discount houses in the City, or the Bank of England, or the joint stock banks. Therefore, no Government under the present system can be held responsible, because it has not the control.

If that is the case under the present National Government it certainly was the case under the Labour Government of 1931. Therefore, I hope that in future, when the party on this side of the House have taken the places of right hon. Gentlemen on the other side and if we get into another financial crisis—[Laughter]—similar to the one that we are facing at the present moment; it is not the Labour Opposition which has come to the House and asked for another £200,000,000, it is the National Government who are asking for it. Therefore hon. Members laughed a little too early. They did not allow me to finish my sentence. When the next Labour Government find themselves in the same position as the National Government find themselves in at the present time and come to the House to ask for additional credits in order to permit them to deal with a problem such as we are facing to-day, I hope that the present Chancellor of the Exchequer, when he speaks from this side of the House, will adopt the same generous attitude as was adopted by the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence), who spoke to-day for the Opposition.

May I endorse what was said by an hon. Member who spoke earlier from this side as to the need for international cooperation on this question. The Chancellor of the Exchequer stated in reply to a question that his policy was in line with the policy of the United States. I understood him to say that he was following the line of policy which was taken by the United States Government. I should like him to explain that a little more fully. It is not merely a question of following the United States. I should like the Government to co-operate with the United States. It is common ground that the tripartite stabilisation agreement in September of last year between the British Government, the United States Government and the French Government was to some extent a success. It was only a partial success because it only dealt with the problem partially. Could not that co-operation be extended to cover the questions which are now beginning to obtrude themselves in the international and economic sphere?

I hope that the intention of the Government is not merely to obtain some sort of fixation of the price of gold. The only country in the world which at the present time has a fixed price of gold is the United States of America. The fact that we have this situation is clear evidence as to the lack of co-operation between the United States Government and our own Government on this particular matter. I hope the Chancellor of the Exchequer will assure the House that he will not only follow in the lines of United States policy but that he will enter into active co-operation with the United States Government in order to deal with this very vexed question. At the present time the United States, Great Britain and France own between them more than two-thirds of the gold supply of the world, and I should have thought that one solution would be to consider whether it is not possible, instead of sterilising gold, to make some use of it through an international bank. A very distinguished member or former member of the staff of the Treasury wrote a very interesting book some time ago on the best way of dealing with this question from the international point of view through an international bank. While that may seem idealistic in these days, I believe that in days to come we shall have to face up to some sort of an international bank superimposed over the various national banks, of the civilised world.

I hope that the Chancellor of the Exchequer will be able to give that assurance to the Committee, because some of us attach very great importance to the value of co-operating with the United States on this particular question. In so far as we on this side of the Committee have found it possible to give partial support to the proposal for which the right hon. Gentleman is responsible, I hope that in the spirit of generosity which characterises him he will be able to give that assurance to us.