either Britain or France. She is a prodigiously rich country in natural resources-about the richest country in the world in natural resources. Food, raw material-she produces practically every commodity. She has a great and growing population, a virile and industrious people. Her resources are overflowing and she has labor to develop them in abundance. By a stroke of the pen Russia has since the war began enormously increased her resources by suppressing the sale of all alcoholic liquors. [Cheers.] It can hardly be realized that by that means alone she has increased the productivity of her labor by something between 30 and 50 per cent., just as if she had added millions of laborers to the labor reserves of Russia without even increasing the expense of maintaining them, and whatever the devastation of the country may be Russia has more than anticipated its wastage by that great act of national heroism and sacrifice. [Cheers.] The great difficulty with Russia is that, although she has great natural resources, she has not yet been able to command the capital within her own dominions to develop those resources even during the times of peace. In time of war she has additional difficulties. She cannot sell her commodities for several reasons. One is that a good deal of what she depends upon for raising capital abroad will be absorbed by the exigencies of the war in her own country. Beyond that the yield of her minerals will not be quite as great, because the labor will be absorbed in her armies.

There is not the same access to her markets. She has difficulty in exporting her goods, and in addition to that her purchases abroad are enormously increased in consequence of the war. Russia, therefore, has special difficulty in the matter of financing outside purchases for the war. Those are some of the difficulties with which we were confronted.

France has also special difficulties. I am not sure that we quite realize the strain put upon that gallant country [cheers] up to the present moment. For the moment she bears far and away the greatest strain of the war in proportion

to her resources. She has the largest proportion of her men under arms. The enemy are in occupation of parts of her richest territory. They are within fiftyfive miles of her capital, exactly as if we had a huge German army at Oxford. It is only a few months since the bankers of Paris could hear the sound of the enemy's guns from their counting houses, and they can hear the same sound now, some of them, from their country houses. In those circumstances the money mar. kets of a country are not at their very best. That has been one of the difficulties with which France has been confronted in raising vast sums of money to carry on the war and helping to finance the allied States.

There is a wonderful confidence, notwithstanding these facts, possessing the whole nation. [Cheers.] Nothing strikes the visitor to Paris more than that. There is a calm, a serene confidence, which is supposed to be incompatible with the temperament of the Celt by those who do do not know it. [Laughter.] There is a general assurance that the Germans have lost their tide, and that now the German armies have as remote a chance of crushing France as they have of overrunning the planet Mars. [Cheers.] That is the feeling which pervades every class of the community, and that is reflected in the money market there. The difficulties of France in that respect are passing away, and the arrangement that has now been made in France for the purpose of raising sums of money to promote their military purposes will, I have not the faintest doubt, be crowned with the completest success. [Cheers.]

But we have a number of small States which are compelled to look to the greater countries in alliance for financial support. There is Belgium, which until recently was a very rich country, devastated, desolate, and almost entirely in the hands of the enemy, with an army and a civil government to maintain, but with no revenue. We have to see that she does not suffer [cheers] until the period of restoration comes to her, and compensation. [Cheers.] Then there is Serbia, with the population of Ireland-a

people of peasants maintaining an army of 500,000 and fighting her third great war within two years, and fighting that with great resource, great courage, and bravery. [Cheers.] But she had no reserve of wealth, and now no exports with which she can purchase munitions of war outside, and she has hardly any manufactures of her own. That is the position as far as the smaller States are concerned.

There are also other States preparing for war, and it is obviously our interest that they should be well equipped for that task. They can only borrow in the French and English markets.

But we had our own special difficulties, and I think I ought to mention those. Two-thirds of our food supplies are purchased abroad. The enormous quantities of raw materials for our manufactures and our industries are largely absorbed in war equipment, and our ships in war transport. We cannot pay as usual in exports, freights, and services; our savings for the moment are not what they would be in the case of peace. We cannot, therefore, pay for our imports in that way. We have to purchase abroad. We have to increase our purchases abroad for war purposes. In addition to that we have to create enormous credits to enable other countries to do the same thing. The balance is, therefore, heavily against us for the first time. There is no danger, but in a conference of the kind we had at Paris I could not overlook the fact that it was necessary for us to exercise great vigilance in regard to our gold.

These were the complex problems we had to discuss and adjust, and we had to determine how we could most effectually mobilize the financial resources of the Allies so as to be of the greatest help to the common cause. For the moment undoubtedly ours is still the best market in the world. An alliance in a great war to be effective needs that each country must bring all its resources, whatever they are, into the common stock. An alliance for war cannot be conducted on limited liability principles. If one country in the alliance has more trained and armed men ready with guns, rifles, and ammunition than another she must bring them all up

against the common enemy, without regard to the fact that the others cannot for the moment make a similar contribution. But it is equally true that the same principle applies to the country with the larger navy or the country with the greater resources in capital and credit. They must be made available to the utmost for the purpose of the alliance, whether the other countries make a similar contribution or not. That is the principle upon which the conference determined to recommend to their respective Governments a mobilization of our financial resources for the war.

The first practical suggestion we had to consider was the suggestion that has been debated very considerably in the press the suggestion of a joint loan. We discussed that very fully and we came to the conclusion that it was the very worst way of utilizing our resources. It would have frightened every Bourse and attracted none. It would have made the worst of every national credit and the best of none. Would the interest paid have been the interest upon which we could raise money, the rate at which France could have raised money, or the rate at which Russia could raise money? If we paid a high rate of interest we could never raise more money at low rates. If instead of raising £350,000,000 a few weeks ago for our own purposes we had floated a great joint loan of £1,000,000,000, the House can very well imagine what the result would have been. We decided after a good deal of discussion and reflection that each country should raise money for its own needs within its own markets in so far as their conditions allowed, but that if help were needed by any country for outside purchases then those who could best afford to render assistance for the time being should do so.

There was only one exception which we decided to recommend, and that was in the case of borrowings by small States. We decided that each of the great allied countries should contribute a portion of every loan made to the small States who were either in with us now or prepared to come in later on, that the responsibility should be divided between the three coun

tries, and that at an opportune moment a joint loan should be floated to cover the advances either already made, or to be made, to these countries outside the three great allied countries. That was the only exception we made in respect of joint loans. Up to the present very considerable advances have been made by Russia, by France, and by ourselves to other countries. It is proposed that, if there is an opportune moment on the market, these should be consolidated at some time or other into one loan, that they should be placed upon the markets of Russia, France, and Great Britain, but that the liability shall be divided into three equal parts.

With regard to Russia, we have already advanced £32,000,000 for purchases here and elsewhere outside the Russian Empire. Russia has also shipped £8,000,000 of gold to this country, so that we have established credits in this country for Russia to the extent of £40,000,000 already. France has also made advances in respect of purchases in that country. Russia estimates that she will still require to establish considerable credits for purchases made outside her own country between now and the end of the year. I am not sure for the moment that it would be desirable for me to give the exact figure; I think it would be better not, because it would give an idea of the extent to which purchases are to be made outside by Russia. But for that purpose she must borrow. The amount of her borrowing depends upon what Russia can spare of her produce to sell in outside markets and also on the access to those markets.

If Russia is able within the course of the next few weeks or few months to export a considerable quantity of her grain, as I hope she will be, as in fact we have made arrangements that she should, [cheers,] then there will not be the same need to borrow for purchases either in this country or outside, because she can do her own financing to that extent.

The two Governments decided to raise the first £50,000,000 in equal sums on the French and British markets respectively.

That will satisfy Russian requirements for a considerable time. As to further advances, the allied countries will consider when the time arrives how the

money should raised according to the position of the money markets at that time. I have said that we gave a guarantee to Russia that she need not hesitate a moment in giving her orders for any purchases which are necessary for the war on account of fear of experiencing any difficulty in the matter of raising money for payments. We confidently anticipate that by the time these first advances will have been exhausted the military position will have distinctly improved both in France and in Russia.

I may say that Treasury bills to the extent of £10,000,000 on the credit of Russia have been issued within the last few days. At 12 o'clock today the list closed, and the House will be very glad to hear that the amount was not merely subscribed but oversubscribed by the market, because this country is not quite as accustomed to Russian securities as France, and, therefore, it was an experiment. I think it is a very good omen for our relations, not merely during the war, but for our relations with Russia after the war, that the first great loan of that kind on Russian credit in the market has been such a complete success.

Now we have to consider the position of this country with regard to the possibility of our gold flitting in the event of very great credits being established in this country. The position of the three great allied countries as to gold is exceptionally strong. Russia and France have accumulated great reserves which have been barely touched so far during the war. I do not think the French reserve has been touched at all, or has been used in the slightest degree, and I think as far as the Russian reserve is concerned it has only been reduced by the transfer of £8,000,000 of gold from Russia to this country. Our accumulation of gold is larger than it has ever been in the history of this country. It has increased enormously since the commencement of the war. It is not nearly as large as that of Russia, France, or Germany, but

it must be borne in mind that there is this distinction in our favor; up to the present we have had no considerable paper currency, and this is the great free market for the gold of the world. The quantity imported every year of, what shall I call it, raw gold, comes to something like £50,000,000, and here I am excluding what comes here by exchanges. collapse of the rebellion in South Africa assures us of a large and steady supply from that country, and, therefore, there is no real need for any apprehension.

The

But still it would not have been prudent for us to have overlooked certain possibilities. I have already pointed out some of them-the diminution of exports, the increase of our imports, the absorption of our transports for war purposes, large credits established for our own and other countries, and a diminution in our savings for investments abroad. There is just a possibility that this might have the effect of inducing the export of gold to other countries. We therefore have to husband our gold and take care lest it should take wings and swarm to any other hive. We therefore made rangements at this conference wherby, if our stock of gold were to diminish beyond a certain point-that is a fairly high point-the Banks of France and Russia should come to our assistance.

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We have also made arrangements whereby France should have access to our markets for Treasury bills issued in francs. We have also initiated arrangements which we hope will help to restore the exchanges in respect of bills held in this country against Russian merchants, who, owing to the present difficulties of exchange, cannot discharge their liabilities in this country. They are quite ready and eager to pay, they have the money to pay, but, owing to difficulties of exchange, they cannot pay bills owing in this country. We therefore propose to accept Russian Treasury bills against these bills of exchange due from Russian merchants, Russia collecting the debts in rubles in her own country and giving us the Treasury bills in exchange. We

hope that will assist very materially in the working of the exchanges. It will be very helpful to business between the two countries, and incidentally it will be very helpful to Russia herself in raising money in her own country for the purpose of financing the war.

We also received an undertaking from the Russian Government in return for the advances which we were prepared to make, that Russia would facilitate the export of Russian produce of every kind that may be required by the allied countries. This, I believe, will be one of the most fruitful parts of the arrangements entered into. An arrangement

has also been made about the purchases by the allied countries in the neutral countries. There was a good deal of confusion. We were all buying in practically the same countries; we were buying against each other; we were putting up prices; it ended not merely in confusion, but I am afraid in a good deal of extravagance, because we were increasing prices against each other. It was very necessary that there should be some working arrangement that would eliminate this element of competition and enable us to co-ordinate, as it were, these orders. There will be less delay, there will be much more efficiency, and we shall avoid a good deal of the extravagance which was inevitable owing to the competition between the three countries. I have done my best to summarize very briefly the arrangements which have been entered into, and I would only like to say this in conclusion. After six months of negotiation by the cable and three days of conferring face to face we realized that better results were achieved by means of a few hours of businesslike discussion by men anxious to come to a workable arrangement than by reams of correspondence. Misconceptions and misunderstandings were cleared away in a second which otherwise might take weeks to ferment into mischief, and it was our conclusion that these conferences might with profit to the cause of the Allies be extended to other spheres of co-operation. [Cheers.]

In Committee of Supply.

Mr. Asquith, who was loudly cheered on rising, moved the supplementary vote of credit of £37,000,000 to meet the expenditure on naval and military operations and other expenditure arising out of the war during the year 1914-1915. He said:

The first of the two votes which appear upon the paper, the one which has just been read out, provides only for the financial year now expiring, and is a supplementary vote of credit. The vote that follows is a vote of credit for the financial year 1915-1916. I think it will probably be convenient if in submitting the first vote to the committee I make a general statement covering the whole matter. I may remind the committee that on Aug. 6 last year the House voted £100,000,000 in the first vote of credit, and that on Nov. 15 the House passed a supplementary vote of credit for £225,000,000, thus sanctioning total votes of credit for the now expiring financial year of £325,000,000. It has been found that this amount will not suffice for the expenditure which will have been incurred up to March 31, and we are therefore asking for a further vote of £37,000,000 to carry on the public service to that date. If the committee assents to our proposals it will raise the total amount granted by votes of credit for the year 1914-1915 to £362,000,000. I need not say anything as to the purposes for which this vote is required. They are the same as upon the last occasion. But I ought to draw attention to one feature in which the supplementary vote, which comes first, differs from the vote to be subsequently proposed for the services of the year

1915-1916. At the outbreak of the war the ordinary supply on a peace basis had been voted by the House, and consequently the votes of credit for the now current financial year, like those on all previous occasions, were to be taken in order to provide the amounts necessary for naval and military operations in addition to the ordinary grants of Parliament. It consequently follows that the expenditure charged, or chargeable, to votes of credit for this financial year represent, broadly speaking, the difference between the expenditure of the country on a peace footing and that expenditure upon a war footing. The total on that basis, if this supplementary vote is assented to, will be £362,000,000.

For reasons the validity of which the committee has recognized on previous occasions, I do not think it desirable to give the precise details of the items which make up the total, but without entering into that I may roughly apportion the expenditure. For the army and the navy, according to best estimates which can at present be framed, out of the total given there will be required approximately £275,000,000. That is in addition, as I have already pointed out, to the sum voted before the war for the army and the navy, which amounted in the aggregate to a little over £80,000,000. That leaves unaccounted for a balance of £87,000,000, of which approximately £38,000,000 represents advances for war expenditure made, or being made, to the self-governing dominions, Crown colonies, and protectorates, as explained in the Treasury minute last November, under which his Majesty's Government have undertaken to raise the loans required by the dominions to