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ANNUAL REGISTER

FOR THE YEAR

1926.

PART I.

ENGLISH HISTORY.

CHAPTER I.

THE ECONOMY CAMPAIGN.

Ar the opening of 1926 the political sky in England was, on the whole, clear. At home no political issue of importance was agitating the public mind, and a large majority in Parliament continued to follow the Government with unswerving loyalty. Abroad, Britain was still enjoying the prestige of the Locarno treaties. The friction in which she had become involved with Turkey owing to her acceptance of the reserved mandate over Iraq was the subject of negotiations which were proceeding amicably, and bade fair to be successful. With Russia her relations were neither more nor less strained than they had been since the Conservative Government took office; with other countries they were uniformly friendly.

On the economic horizon, however, lowered a dark and forbidding storm-cloud. A stoppage in the coal-mining industry, spelling disaster for the economic life of the country, had only been averted five months previously by the temporary grant of a subsidy. The truce thus purchased had only four more months to run, and there was still no guarantee that at the end of that time matters would not revert to the position which had arisen in the previous July. In order to prevent such a calamity, the Commission presided over by Sir Herbert Samuel was busily engaged in collecting evidence on conditions in the industry with a view to framing a report and making recommendations for putting the industry on a sound basis. The Government in the meantime was absolved from further responsibility in the matter, and was free to devote its whole attention to other problems.

Of these, the one with which it was for the time being chiefly

A

preoccupied was that of public finance. Mindful ever of its pledge to its own party, the Government was anxious to reduce the volume of public expenditure, while in order not to disappoint any section of its followers, it was yet loth to desist from any of its vast and manifold commitments, either in the sphere of imperial or of social policy. The only prospect, therefore, not merely of reducing expenditure but of preventing it from rising still further lay in a lynx-eyed supervision of individual items-in making cheese-paring in details take the place of economy in general policy.

With this object in view the Government had, in the latter part of the previous year, appointed two Committees to overhaul public accounts-one, drawn from the Cabinet itself, to deal with the Estimates in general; the other, presided over by Lord Colwyn, to deal with those of the fighting Services in particular. The reports of both Committees were expected before the end of January, but meanwhile two Departments of the Government took the initiative in calling a halt to the growth of expenditure in their own spheres. On January 5 the Board of Education, as the result of its discussions with the local authorities on the notorious Circular 1,371 (vide ANNUAL REGISTER, 1925, p. 122), issued a memorandum laying down a system of economy for one year by limiting new capital expenditure to cases of necessity, and postponing new services or extensions of old services during the year 1926-27. A couple of days later the Unemployment Grants Committee issued, on behalf of the Government, a circular (dated December 15, 1925) intimating that before they approved of any scheme which might be submitted to them, they would have to satisfy themselves not only that the work was in all respects a suitable one of public utility, put in hand expressly for the purpose of relieving unemployment, but also that it would not otherwise be undertaken for a considerable period (ordinarily five years), and that the unemployment sought to be relieved was exceptional. In accordance with this intimation a number of local authorities were informed that schemes of public works which they had in hand for the relief of unemployment would not be supported by the Government. This decision was received with surprise in many places, and the Newcastle-on-Tyne City Council, which had projected an ambitious scheme of improvements, passed a resolution of protest against the Circular.

An authoritative exposition of the Government's views on the financial position was given by the Chancellor of the Exchequer before the Leeds Chamber of Commerce on January 20, when the reports of the two Economy Committees were already in the hands of the Government. Mr. Churchill began by saying that the country, Parliament, and the Press would have an opportunity quite early in the new session of showing whether they were in earnest about economy. The Government, said Mr.

Churchill, had been engaged for several months in making a detailed survey of the whole of its expenditure, with a view to curbing increases and effecting reductions; but, he added, it was not likely to be very successful in producing positive decreases. The ever-growing complexity of modern civilisation, and the standard of administrative efficiency expected by the public added to the cost of every service, and created the need of new services, or of improvements on existing services. There was thus a vast upward tide which had to be stemmed before there could be any net reduction in expenditure. As a result of the labours of the Cabinet Committee, he hoped to be able to do this without any addition to direct or indirect taxation. When Parliament met, an Economy Bill would be laid before the House of Commons providing for economies in the whole field of expenditure, and demanding sacrifices from every Department without exception. The Government was endeavouring to curb expenditure all round in every branch of administrative activity, and every part of its proposals, therefore, held together, and all must be judged as a whole.

Mr. Churchill's remarks on the need for economy were underlined a few days afterwards by the Prime Minister in a speech delivered before the London branch of the National Union of Conservative Associations. They had, said Mr. Baldwin, reached a critical point in their financial progress. Any further advance along the road of collective social service must depend on the improvement of their economic position. They would need the stoutest support of all their friends when their proposals were laid before Parliament. He warned them that unless great economies were secured, an increase of taxation, either that year or next year, whatever Government was in power, would be inevitable. He wanted them to be under no illusions as to the difficulty of effecting economies, even under favourable conditions. It was obvious that substantial economies must, to-day, mean sacrifices; not necessarily of luxuries alone, but of things which they had perhaps regarded almost in the category of necessities.

While manfully struggling against the "rising tide rising tide" of the debtor side of the public ledger, the Chancellor of the Exchequer was able to secure a small but welcome addition to the creditor side. On January 6 an Italian deputation, headed by Count Volpi, visited London in order to effect, if possible, a funding of the Italian debt to England. Negotiations with the Treasury officials were opened the next day, and continued for about three weeks. On January 27 an agreement was signed by Mr. Churchill and Count Volpi by which Italy agreed to pay Great Britain roughly 4,500,000l. sterling yearly for sixty years in liquidation of her war debt. As the debt amounted to 610,840,000l., this represented a very considerable sacrifice on England's part. In

view, however, of the Government's known desire to cultivate the friendship of Italy, it was generally held in England that Mr. Churchill had made as good a bargain as could be reasonably expected.

Italy's friendship was particularly important to England at this juncture in view of possible complications with Turkey over the Mosul settlement. The Foreign Minister had also done his share in this matter. At the end of December Sir Austen Chamberlain had gone to Rapallo, ostensibly for a holiday; but Signor Mussolini took the opportunity of visiting Rapallo while he was there, and a long conversation, admittedly of a political character, took place between the two statesmen on December 29. An official communiqué stated that the conversation had ranged over the most important events of recent international politics, and had "shown the opportuneness of continuing that efficacious collaboration now established between the two countries with the object of harmonising the various interests and with the aim of consolidating European peace."

There could be little doubt that the sphere in which the interests of Great Britain and Italy chiefly required to be "harmonised" was the Near East; and the assurance of Italy's friendship certainly placed England in a firmer position for dealing with Turkey. The conversations which Mr. Baldwin had inaugurated on December 22 with Ahmed Ferad Bey, the Turkish Ambassador in London, for the purpose of concluding a friendly agreement on the Mosul boundary, were continued on January 5. The Turkish Government showed itself not unfavourable to the negotiations, and it was arranged that Sir Ronald Lindsay, the British Ambassador to Turkey, should proceed to Angora to discuss matters with the Turkish Minister for Foreign Affairs. The new Anglo-Iraqui Treaty, providing for an extension of the British mandate for a period of twenty-five years, if necessary, was signed shortly afterwards (January 12) in Baghdad without any protest being made by Turkey.

Before closing their hearing of evidence, the Coal Commission, on January 12 and 14, heard statements, first from the Mining Association of the owners, and then from the Miners' Federation, of their plans for settling the troubles of the coal-fields. The former, in their memorandum of evidence, submitted that the unrest in the mining industry was the result of a deliberately planned attempt by the miners' leaders to prevent the reconstruction of the industry under private enterprise. Their concrete proposals, as summed up by the Chairman, were that the miners should work an additional hour without any direct extra remuneration, that wages would have to be reduced by amounts varying from a small sum in South Wales, to 5s. and 6s. a week in some of the more important districts, and over 15s. in other districts, and that wages should be fixed by district and not

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