§ 7.33 p.m.
§ Mr. David Eccles (Chippenham)
Largely owing to the efficiency of the Royal Air Force in the war, I am able to draw the attention of the House to one of the aspects of German reparations. The subject I want to raise is the serious failure on the part of the Treasury to stand up for the rights of British creditors against German debtors. I am grateful to the Economic Secretary for coming here this evening, but I do not think I need apologise to him for the short notice which he has had of my intention to raise this matter, since it is entirely the fault of the Treasury that the occasion is so urgent.
When the war ended, the representatives of the United Nations met in Paris to discuss the problem of German reparations, and in December, 1945, the Paris Reparations Agreement was published. 418 Article 6 of that Agreement deals with German External assets, and paragraph A of that Article says:Each Signatory Government shall, under such procedures as it may choose, hold or dispose of German enemy assets within its jurisdiction in manners designed to preclude their return to German ownership or control and shall charge against its reparation share such assets (net of accrued taxes, liens …There was apparently some doubt as to the precise meaning of that Article, and two months later, in January, 1946, Accounting Rules were published which defined beyond any shadow of dispute what was meant by the words which I have just read.
In Article 6 (D) of these Rules these words appear:In applying the provisions of paragraph A above, assets which were the property of a country which is a member of the United Nations or its nationals who were not nationals of Germany at the time of the occupation or annexation of this country by Germany, or of its entry into war, shall not be charged to its reparation account.The upshot of this is that each signatory to the Paris Agreement has the right to use German assets within its jurisdiction in the first place to satisfy the legal claims of its nationals against former German owners of those assets.
In other words, where a British bank had lent money to a German bank or a German firm, if the British bank possessed securities against its loan, under the Reparations Agreement it is open to His Majesty's Government to collect those German securities whose owners owe specific debts to British creditors, and out of them to satisfy the British creditors before putting into the general reparations pool what is left over after that procedure. I understand that the right to set off these German assets in this country against the claims of British creditors is an optional right, and the Government can choose whether to exercise it or not. I understand they must make up their minds by 24th January, 1949—next Monday. That is the last day when the Reparations Office in Brussels can, under these agreements, receive the decision of His Majesty's Government accompanied by the list of British claims.
Three years have gone by. Last May this subject was ventilated at considerable length in the Press. Articles appeared in the "Financial Times" pointing out the enormous advantage to Great 419 Britain if this right of satisfaction of our national creditors were exercised by His Majesty's Government. We now know that the Governments of the United States and the Netherlands, and, for all I know, other United Nations Governments, are availing themselves of this right. Any country which does not do so and puts into the general pool all the German assets which they have seized inside the territory under their jurisdiction, will only get back that proportion which is allotted to them in the final share out. In the case of Great Britain we will get back only 28 per cent. which is our share of the pool of German assets, so that for every £100 which His Majesty's Government put into this pool and which might have gone wholly to satisfy one of these British creditors, we shall lose £72.
To the astonishment of those who represent the British claims against German debtors a letter was received in December last giving the Treasury's decision not to avail themselves of the right of paragraph 6 (A) of the Paris Agreement to set off the German assets here against the British claims. I do not know what precisely was the reason behind this refusal. In the letter some very obscure words were used to the effect that it would favour one creditor against another if the right were exercised. If the right were exercised those creditors who have been prudent enough to secure some form of lien on German property against the loan they had advanced would get 100 per cent. repayment of their credit if the security is big enough, and there would therefore be less in the pool with which to satisfy other British creditors who never had any specific hold upon some German property.
The explanation given in the letter presupposes that His Majesty's Government were thinking only of the right to set off a specific piece of German property against the debt to which it had been attached. I understand that nothing of that kind is being done in the United States. What they are doing is to collect all the German assets and put them into a pool, and from that pool to satisfy all the claims of United States nationals whether those claims were tied up or not to any particular form of collateral security. Then, if there is any balance left over, the United States will put it into the general reparation pool out of which 420 they will get 28 per cent. and Great Britain will get 28 per cent.
This matter was raised in another place this week, when the answer of the Government spokesman was unsatisfactory. The same answer would have been given to my Question on today's Order Paper which was not reached. I have been courteously given a copy of the answer by the Treasury. The Treasury now say that they want all British creditors having these claims to put them in as quickly as possible before the last day, which is next Monday, which is three years after the time when the Treasury might have started this process, and that they are still considering whether or not to take any action under paragraph 6 (A). That is not good enough. The British creditors want a firm assurance now that the same procedure as is applied in the United States to protect United States creditors of Germany will be adopted here and that conditions at least as favourable will be given to British creditors. Why should we make a present to the rest of the United Nations in the way that is suggested?
I want a specific assurance that the method which the Treasury will adopt will be to aggregate all the German assets in this country into one fund out of which all British claims will be first settled before any balance at all is paid into the general reparations pool. I have read carefully the original Agreement and the accounting rules that were published afterwards. So far as I can understand those documents—and they seem to me perfectly plain—His Majesty's Government have the right to do that. I want the Economic Secretary to tell us when he replies whether he agrees that we have the right to do the same as is being done by the United States Government. That right seems explicit in these documents. We want an assurance that that is the Government's policy.
I must say in conclusion that for a Department like the Treasury to leave this matter till within four days of the final date, and after three years have gone by, implies either that they are not willing to take the trouble, or for some other reason which the Economic Secretary may give us, to save this country approximately 72 per cent. of £14 million. My information is that the proportion of the standstill credits given 421 by persons who are able to trace their debt through to a piece of German property to which it has been tied up is something in the neighbourhood of £12 million, to which another £2 million has to be added. We can get the whole of that £14 million for the British creditors, whereas if we put it into the pool we shall get only 28 per cent. of the £14 million. That is the situation and I hope very much that we shall have a clear answer about it from the Economic Secretary.
§ 7.46 p.m.
§ The Economic Secretary to the Treasury (Mr. Douglas Jay)
So far from complaining of the hon. Member for Chippenham (Mr. Eccles) for raising this matter at rather short notice, I would assure him that we are very grateful to him for this opportunity of giving publicity to the fact that claims should be put in, as he has said, before 24th January, in the case of those who think they have a claim on these assets.
The hon. Member rehearsed the main facts of the story—adequately, I think—but in one respect he went a little astray. He said that this was an issue between German debtors on the one hand and the claims of British creditors on the other. That really is not the main issue. What makes this a very difficult matter is that the main issue is between different classes of British creditors. There are two broad classes of British creditors who are concerned with the German assets now held by the Custodian of Enemy Property. First of all, there are those British creditors who have a claim on a German debtor who was the owner of some of the assets now held in this country. Those were British creditors who, as the hon. Member said, can trace their claims to a specific asset in this country. The other broad class consists of those who are not in that position and who cannot make a specific claim: for instance, there are the holders of the old Dawes and Young Bonds.
Broadly speaking, there are three courses which the British Government can adopt. First, they can do what the hon. Member was advising them to do—treat all German assets now held by the Custodian as a general fund out of which to pay all British creditors of Germany. That course would treat all creditors alike. The second possible course is to 422 regard those specific assets as a fund to be handed over to the creditors with specific claims upon it. According to the agreement, if we adopt the course, as the hon. Member wants us to, of offsetting these specific assets, against the amounts which we have to pay into the general reparations fund, we have to give preferential treatment to the specific creditors as compared with the general creditors.
§ Mr. Jay
It amounts to that, in effect. Thirdly, there is the method of taking the whole of the assets which are held into the Exchequer generally, on the ground that the country as a whole, and almost everybody in it, lost something by the war either in money or in other ways, and that the fairest course would be to share it out in that fashion.
One could argue a long time about those three possible courses of action. Against the first course it could be argued that to make a general division between the general creditors would be unfair to the specific creditors, who in that case would not get so much and feel they ought to be met out of the specific assets they claim. It might be argued that that would be unfair to the community as a whole. They would get no benefit from these assets for they would only go to the creditors of all kinds.
If we adopt the second course, which is most favourable to the creditors with specific claims—who are mainly the old short term creditors involved in the standstill debts in the 1930's—it would be argued by the other creditors that that was unfair to them. They would say that it was a pure accident of history that certain assets of prewar German owners in this country happened to be owned by the same German individuals who were the debtors to the corresponding creditors here. It could be argued that that was a matter of chance and therefore if we followed that course of action it would be unfair to other creditors.
Thirdly, if we adopted the rough justice of saying that these debts must be considered due to the whole British community and took the whole amount into the Exchequer, no doubt all the creditors would argue that that was unfair to them. I think there is no obvious and clearly 423 correct way out of this dilemma. Arguments can be put up for the three main alternatives—and indeed for variations of them—and tonight I cannot give a definite assurance that we will adopt any of those specific courses. We are still considering the alternatives in an attempt to discover which is the most fair to all the creditors concerned. While doing that, however, we want to give the utmost publicity to the fact that we wish these claims to be registered before 24th January, so that if we choose to adopt the alternative which depends on those claims being registered, it will be open for us to do so and the position will be entirely protected. In order to safeguard that, and to take the opportunity to give the widest possible publicity to this opportunity for registering claims, perhaps I might read the official announcement made by the Treasury a few days ago. Perhaps it did not receive quite as much publicity as we wished. The announcement was as follows:His Majesty's Government have arranged for the following procedure to be followed by United Kingdom creditors of persons in Germany who have reason to believe that their debtor had assets in the United Kingdom but have not hitherto claimed against assets of that debtor. The claims should be lodged without delay and, if possible, before 24th January; claims received on or after 24th January may be subject to different treatment from those received before. At the moment all that is required is simply notification of the debt (including the debtor's name and address) and of any assets believed to have been held by the debtor. The notification should be addressed to the Administration of Enemy Property Department (Branch X), 32, Warwick Street, Regent Street, W.1.United Kingdom creditors who have already claimed against the assets of their German debtor (including persons who have made claims to a Custodian of Enemy Property) should also write to the Administration of Enemy Property Department at an early date (but not necessarily during the week) giving particulars of the previous correspondence and of any assets they believe were held by their debtor at the outbreak of war.His Majesty's Government emphasises that the present action does no more than safeguard the position of creditors, should the eventual decision be that the United Kingdom should avail itself of its rights under Article 6 (a) of Part I of the Final Act of the Paris Conference on Reparation.
§ Mr. Jay
The date is 18th January. Having made that announcement we hope 424 that everything possible has been done to safeguard this situation and it will be entirely open to us, if on consideration that appears to be the fairest way, to make the type of distribution which the hon. Member advises. But in thanking him for giving us this chance to give publicity to the matter, I cannot say definitely which alternative we shall adopt.
§ Mr. Eccles
Will the hon. Gentleman say by which date His Majesty's Government have to make up their minds whether they put these British assets into the pool? Can he give an assurance that—whatever may be the decision about the ways in which they are shared in this country—in no circumstances will they be put into the general pool?
§ Mr. Jay
I cannot give an assurance that we shall in no circumstances put them into the general pool, but the significance of 24th January is that under the rules of the Inter-Allied Reparations Agency claims by specific creditors have to be registered with the British Government before 24th January if we are to avail ourselves of the rights under Article 6 (A).
§ 7.57 p.m.
§ Mr. Oliver Stanley (Bristol, West)
I must confess I cannot regard this as a satisfactory situation. We have here an option, which was posed to us as far back as 1945, nearly four years ago. We are now taking last-minute steps, four days before the expiry of the time limit in which on certain essential things we have to end that option, certain action to safeguard our position. I agree with the hon. Gentleman that the allocation of the assets among various classes of creditors in this country is difficult. I agree that there are arguments for and against all three of the alternatives he suggested, but the Government have had more than three years to consider the respective merits, and surely during that time they could have arrived at a decision.
It seems to me that as matters now stand there is grave risk that certain creditors may be gravely prejudiced. It is not very long for an announcement only made on 18th January to percolate to numerous people all over the country and enable them to register their claims by 24th January. I take it that any individual who has not registered his claims by then 425 will lose his right. The 24th is the date by which all claims have to be registered. I think it is quite intolerable and wholly unnecessary that any risk should have been run—if the Government finally decide to exercise their option—and that any individual who might have benefited from that option should be unable to do so. We unhesitatingly condemn the indecision in this case. I do not think it is even a humane indecision which has prevented the Government reaching any conclusion up to now.
I pass to the point my hon. Friend the Member for Chippenham (Mr. Eccles) made. Are we to understand that the Government are not bound, by 24th January, to have decided and to notify the authorities that they are going to exercise this option, and that if they do not take any steps before 24th January it will be none of these three difficult alternatives to which the hon. Gentleman has referred, but a fourth—that is of paying out all the assets we hold in this country into the general pool and trusting to luck as to the amount we shall get back?
Difficult as it may be to hold the scales fairly between different classes of creditors in this country, an even more overriding consideration is what the net benefit is to be to the nation. if by exercising the option, we are likely in the long run to get from the country as a whole a bigger share of reparations than by refusing to exercise that option, then we should exercise that option, even if it does lead to certain difficulties and perhaps certain grievances in the distribution within the country of the assets that are available.
We have to bear in mind what the country as a whole is to get out of it. I desire the assurance of the hon. Gentleman that a decision of a kind which may mean some millions to the finances of this country has not to be made by next Monday, because if that is so, it is tragic that a Minister should come here on a question of this importance on a Thursday evening and say that the Government cannot yet make up their minds upon a matter which they have finally to decide by Monday of next week. I hope it will be possible for that difficult process of coming to a decision soon to be completed. This matter has been drawn out beyond all possible apology. We have now had considerable experience of the Government. We 426 give them one year for consideration, we give them a second year for active consideration, we give them a third year for urgent consideration; but at the end of that period we think that a decision should be taken. They have had the whole of these three years. The time has now come when they should take the plunge.
§ 8.3 p.m.
§ Mr. Jay
If I may have the leave of the House, since the right hon. Gentleman asked me two questions, I will answer them. First, the right hon. Gentleman asked why this announcement was not made sooner. He may be partly under a misconception about the facts. The fact is that in any case the great majority of these creditors, and all who are concerned with any large sums, have registered their claims long ago, and have been continually in touch with the Treasury throughout recent months. The whole subject has been repeatedly discussed. It is certain that so far as any large sums are concerned, this action was quite unnecessary.
§ Mr. Jay
No. That is one of the reasons why I was about to say that we thought it necessary, as a final safeguard, to make a public statement in addition.
Secondly, the right hon. Gentleman asked me whether the British Government had to decide on their course of action on this point before 24th January. The answer is: No, we do not have to decide vis-à-vis the Inter-Allied Reparations Agency by 24th January, but we cannot decide in the particular fashion which the right hon. Gentleman has recommended, after that date unless these claims have been registered by 24th January. Therefore, we are entirely protected. It is perfectly free and open to us after 24th January, to choose whichever alternative seems the most equitable.
§ Mr. Eccles
May I, by leave of the House, ask the Economic Secretary how he can square what he has said with the facts which he knows? He knows that in December a letter signed by the Governor of the Bank of England went round saying the Treasury were not going to exercise their rights under Article 6 (A). This decision implied that none of this collection of information was to be under 427 taken. He knows the trouble that followed in the City of London, and that Lord Woolton raised the matter in another place last Tuesday. It was in answer to a question put in another place that the Government went back on their decision. They announced that they would collect the information which would not have been wanted if a decision had been taken once and for all not to exercise the right under Article 6 (A). The Economic Secretary cannot get away with the sort of explanation which we have just had.
§ Mr. Jay
I do not quite know what course the hon. Member wants us to adopt. If we are to adopt the course which I understand him to be recommending tonight, it is necessary for us to take the action which we have taken. I should have thought that to that extent the hon. Member would be grateful to be told that we do not close our minds against that alternative. That is as far as I can go in giving him an assurance tonight.
§ Mr. Eccles
I am grateful for the fact that the Treasury have reconsidered their decision, but I am not grateful when a Minister says that the only reason his Department have asked for this information late, was because they intended all the time to put in these claims on 24th January, when they had written round the City saying that they were not going to exercise the right. It is no use the Economic Secretary expressing dissent. He can see for himself a copy of the letter which stirred up all this trouble, a letter in which the Bank of England announced the decision of the Treasury.
I welcome the fact that some reconsideration is proceeding but I now want the assurance which we have not yet got tonight that these assets will not be put into the pool. If they are, Great Britain will get only 28 per cent. instead of the whole amount. I believe that the correct course is that all the creditors should be satisfied out of this pool but if some people have been prudent enough to tie up a specific debt against a specific piece of German property, why should they not be rewarded for their prudence by getting some priority? It seems common business sense that they should do.