HC Deb 02 November 1937 vol 328 cc757-887


Order read for resuming Adjourned Debate on Question [26th October]: That an humble Address he presented to His Majesty, as followeth: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament."—[Captain Balfour.]

Question again proposed.

3.46 p.m.

Major Lloyd George

I beg to move, at the end of the Question, to add the words: But humbly regret that the Gracious Speech contains no indication that His Majesty's Government are taking adequate steps to provide against a possible diminution of employment occurring either on the completion of the process of rearmament or through a period of commercial depression, firstly by the prosecution of active measures in concert with the Dominions, the United States of America, and other countries, to reduce the economic barriers to world trade; secondly by promoting the fuller development of backward or inadequately populated regions of the Empire; and thirdly by the examination and preparation of definite plans for employing our people on the construction of capital works of national importance and the utilisation of national resources that are at present neglected. I do not feel that any apology is called for in rising to continue the Debate on the Address, because, since the Debate was started, a great deal of time has been taken in discussing foreign affairs, and, while there is no one in the House who would not agree that foreign affairs are of vital importance, I think it is true to say that the affairs of our own people are of equal importance. The Chancellor of the Exchequer, speaking last Tuesday, in replying to an observation by the right hon. Gentleman the Leader of the Opposition, who had stated that, as the period of comparative prosperity continued, we were getting near to the time when a change might be expected, said that no doubt it was a very true, if somewhat obvious, deduc- tion. It may be because it is obvious that we see no mention of it in the Gracious Speech. He went on to say that there were no palpable indications that our trade was on the decline.

That may be true, but I suggest it is equally true to say that a set-back there will be sooner or later. That is proved by every precedent, whatever Government or party has been in power in this or any other country. If we postpone the preparation for a set-hack until it commences, that will be too late, and our people will be faced again with hardship and misery, consequent upon prolonged unemployment. I think it is the duty of any Government in this country to take steps before that time arises, in order that its effects may be lessened when they come. Is the present situation in this country satisfactory? It would be futile to argue that there has been no improvement since the shattering world crisis of 1931, but it would be equally futile not to ascertain to what extent that has been due to the removal of the prime causes of the great depression, and to what extent to new factors, which not only may be temporary, but themselves may actually contribute to greater difficulties in the future. Everyone knows that depression was due to a serious drop in our export trade which is reflected in those areas primarily concerned with export, which had the largest numbers of unemployed and became known as depressed, or Special, areas.

At the present time we are enjoying a comparative boom, but when we compare this comparative boom with similar periods there is no cause for jubilation and certainly no cause for boasting. Let me give the House one or two figures. The year 1929 was, I suggest, a period similar to the present. There was a comparative boom in that year, and in the third quarter of 1929 unemployment was 1,152,000. In the third quarter of this year it was 1,376,000. It is becoming a practice, especially among supporters of the Government, entirely to ignore the figures of unemployment and lay great stress on the numbers in employment. Practically every speech they make lays stress on the fact that we have so many more thousands in work this year than in 1931. So we ought to have. In the first place, there are more people for whom to find work. There are something like 200,000 to 300,000 entrants into in- dustry every year, and if this is a good argument, why not go back to a period before the War when there was no unemployment and say that there are so many more people in work to-day than there were then, although unemployment is greater?

As loss of exports is primarily responsible for the condition of the country, that is what we should look at if we want to find out whether the condition is a healthy one or not. Despite the recovery, the quantum of our export trade is 24 per cent. less this year than in 1929. and may I observe that the adverse trade balance about which we heard so much in 1931, which was used as a means of alarming the public and showing the real depth and gravity of the crisis, that adverse balance in 1931 was £281,000,000; to-day it is £296,000,000. I mention that in passing and, of course, this is a period of prosperity compared to 1931. An improvement there has been, even in the Special Areas, but I suggest that the improvement requires careful examination by the Government. I am not going to assert that all the improvement is due to the rearmament programme, but I am going to say that it has played a very important part in the improvement. Let me give some figures to the Chancellor of the Exchequer. The right hon. Gentleman said that in November, 1934, the numbers of unemployed in the Special Areas were 442,000 and that by September, 1937, they had dropped to 264,000. The Government issued a White Paper in March of this year, and this is what they said: It has for some considerable time past been the policy of the Government to give a preference to tenders received from firms in certain scheduled areas … The effect of this policy has been to direct a substantial quantity of work into the Special and Depressed Areas. How large the stream of orders has been is not always recognised, but the following figures afford some illustration of its scale. Over the period from 1st April, 1935, to 30th November, 1936, direct contracts to a total value of over £41,000,000 have been placed by the Defence Departments alone in the areas to which the preference applies. Moreover, these were orders placed in the initial stages of the Defence Programme; they will increase as the programme progresses. Hon. Members will observe the date—1st April, 1935. The Chancellor of the Exchequer gave last night the figure for November, 1934. But another figure was in this White Paper, 28th January, 1935, which showed that unemployment had increased in the Special Areas by 13 per cent., while from April, 1935, to November, 1936, £41,000,000 worth of orders was placed. It is not surprising that unemployment is down to 264,000 to-day. I am not suggesting it is entirely due to that, but it plays a very important part, and it is not surprising, therefore, that people of note in every walk of life in this country are showing a little uneasiness as to the extent to which the improvement is due to an improvement in trade, and to what extent it is due to the artificial stimulus which the rearmament programme has given, and which, I would remind the House, is entirely unreproductive. If we are to assess the situation in this country it is vital we should know how much is due to that and how much is due to a real trade improvement. When we advocated schemes of work to put the unemployed in work before and during the slump and pointed to the figures in Germany to show how their unemployment had gone down through these works, we were told that it was due to German rearmament. Can it be true of Germany and not true of Britain that rearmament plays no part: in the recovery of the Special Areas?

Whether it be true or not, there can be no doubt that the rearmament programme is having a serious effect on prices in this country. I was reading an article in the "Times" the other day. The writer pointed out that between 1933 and 1936 there had been a rise of 8 per cent. in wholesale prices, and that in little over a year there was a rise of over 20 per cent. He went on to say: Having regard to the sharpness of this rise the increased figures of overseas trade become less impressive. There are two important factors in connection with this matter: one is the sharp rise in prices, and the second the shortage of skilled labour. I was reading a statement made by one of the banks in their trade review the other day in which it was said that in many trades customers could not get delivery, which rather suggests interference with the ordinary business of the community. It was said: Rearmament has led to an expansion of factories and plants on a large scale which might well create a productive capacity which would outstrip the expansion of consumption. That has happened before in this country with disastrous effects, and it is a matter which must be carefully watched. We have all read what Lord Nuffield said, that the price of steel for motor cars was up by 25 per cent. He complained, probably because he now realises the difference between being the only protected man in a free country and one of a crowd. Nobody could have been better chosen to make that remark. In regard to shipbuilding, the Chancellor of the Exchequer said that the amount of construction in the yards of this country was 184 per cent. above that of 1931. I notice that the chairman of a large shipping company said that, "the price of ships to-day was rising so rapidly that it was practically impossible for them to make even a moderate profit, and that in some instances he knew of shipbuilding programmes that had had to be stopped. There were complaints coming from all industrial centres which showed the difficulty of getting orders fulfilled."

The Government's programme is a five-year plan. Two years have gone. The stimulus of the rearmament programme we all hope will come to an end. Obviously, we cannot go on for ever, and as a result there will be no real strengthening of the commercial fibres of this country. But surely, in view of all this, we are entitled to ask the Government to take some thought of the morrow, a morrow which, I think, is quite rapidly approaching. The greatest benefit, of course, that will accrue to this country will be in a recovery of international trade. I believe that to-day it is about 85 per cent. of what it was in 1929. But there are other things of which the Government can be thinking and now is the time to be thinking of them. Our experience in 1931 ought to have shown us that it is no good thinking of remedies in the middle of the fears created by a situation such as we had then. Now is the time to prepare a scheme. Let me refer to one or two possibilities.

First, I would say a word about Empire development. This country made itself great by developing the undeveloped areas of the world, and it prospered exceedingly thereby. Are there no such areas to-day? Leaving out foreign countries altogether, are there no such areas in our Empire? I regret to say that I see no mention of the Empire in any part of the King's Speech—not a word. We had a conference at Ottawa, and one of its objects was to stimulate Empire trade and to develop the Empire. That was in 1932. Between the years 1931 and 1935 17,600 Britons went to Canada and from Canada to Britain there came 77,000; to Australia 18,000 went and 34,700 came back; to New Zealand 3,400 went and 7,800 came back. The population of this country is 468 per square mile. The population of Canada and Australia is about three per square mile and of New Zealand 14 per square mile. If we do not develop these countries and the vacant spaces there, other countries will be looking towards them; they will see in those vacant areas their opportunity. Nature is not the only thing that abhors a vacuum. The same applies to our Colonies, only much more so. Development there would mean the increased purchasing power of the inhabitants, and consequently increased trade with this country.

But there are great opportunities at home. I shall refer to them only briefly, because on many occasions they have been mentioned; the fact that they have been repeatedly referred to does not make them any less desirable. Take first electrical development, especially in rural districts. If that industry is going to take any part in developing the rural life of this country it must make current available at a reasonable price. At the present time even if there is current available it is at such a price that no one can utilise it, and sometimes the lines are not there, despite promises that have been made. I have known cases where villages have been promised a supply and no supply has been forthcoming, and on inquiry they were told: "The load does not justify our going there." If we are to wait until every single one is satisfied with the load he gets there will be no development in our rural areas for a long time. That is a very bad thing and it may well be that in this matter the Government will have to take strong action.

The next thing is rural water. I sit for a rural area. We have had there a short drought. At the end of that drought in many places in my constituency and others, people living in the rural districts have had to go one and a-half miles to get water not only for themselves but for their cattle. That is not an isolated case. It is happening all over the place in a country where we do not know what to do with water for most of the year. We call ourselves a civilised nation, but the conditions in regard to water and sanitation in some of our rural districts are scandalous. To undertake this development would not only provide much employment but would add enormously to the health of the people.

Then a few words about roads. Here the Minister of Transport seems to resent any criticism. I repeat that I think the roads of the country are totally inadequate for the traffic that they have to bear, whether heavy or light. You do not need to study statistics; all you have to do is to travel along our roads, especially at night, when you will meet those heavy lorries coming out of the cities. Then go to countries abroad, where they have realised at last that this is a different problem, and you will see that we are falling behind. There was a time when this country was the pioneer of road development, but it is not so to-day. A great fund was started for the purpose of allowing the roads to keep pace with the development of transport, but with an incredible short sightedness scores of millions of that money have been taken, with the result that to-day you have not got the road development that you should have. You widen roads here and there and bypass certain great towns, but as far as great arterial construction is concerned we have not undertaken development in the way it should be done. The great arterial roads are totally inadequate. There is an immense scope for work there. Not only would such development add to the efficiency of our industry, but it would give some safety and security to the people of this country.

Now for a few words about agriculture. With regard to afforestation, I think I am right in saying that we have not yet made up the loss in trees that we incurred during the War, and, heaven knows, our afforestation before then was not too good. I gather that there is a good deal of work for which provision could be made. Then there is land reclamation. There is no need here to study statistics. Anyone who knows or lives in the country can see what is happening. Any one who knows the country knows that what I say is true. I have known fields that in the last 10 years have gradually disappeared, encroached upon by bracken, thistles, or ragwort. Fields which to-day are a beautiful sea of yellow have been in my time some of the finest of pasture lands. That sort of thing is happening all over the country. A great deal could be done to bring that land back to its former condition. The same remark applies to land drainage. Here is this great industry of agriculture that could absorb tens of thousands of people in healthy employment, and others indirectly. What has happened? Millions of money have been doled out every year. I am not complaining because I think it is obvious that agriculture can never be put on its feet without the expenditure of a good deal of money. The only objection I have is to the application and distribution of that money.

No one denies that money has to be spent. Can anyone be satisfied, despite the spending of all this money, that the condition of agriculture to-day is sound? The acreage of land under cultivation is continually shrinking; the agricultural population is continually leaving the soil. Since 1921 250,000 labourers have left the soil. Since the first National Government came in 87,000 have left. Let me apply to agriculture the test which Ministers are always applying to their great work in other things. They say to us, "It is the figures of men who are in employment which matter." Apply that test to agriculture. In 1921 the occupied population of this country was 19,000,000 and the occupied population in agriculture was 1,300,000. In 1931 the occupied population was 21,000,000; the occupied population in agriculture was 1,200,000. So the occupied population has gone up by 2,000,000 and the agricultural population has gone down by 100,000. That is applying the Government's own test. That there are more people in employment applies to every industry except the one which they assert they have helped so much. I suggest to the Government that that is a very serious matter.

Moreover the people who are leaving the soil are the young people. The very rearmament programme of the Government is helping them to do so. There are in many parts of the country spaces where works have been put up in the middle of the agricultural districts and the labour has been recruited locally. Can anyone blame these young people? To begin with, they get better wages. This is a problem that must be looked into—the question of the wages of agricultural workers. If you want to keep people on the land you must make it worth their while to stay on the land. All these subsidies have been doled out to various interests in the country. I sometimes think it might even have been better to give some of this money to subsidise the wages of agricultural labourers. I suggest to the Government that the situation in the agricultural industry, with the great possibilities it has for absorbing the people of our country, is one that should be tackled. One day it is a subsidy for sugar beet, the next day for milk, then for beef and wheat, one after the other. The whole industry should be carefully investigated as a whole and should be treated as an industry. We should get the best brains possible, the best business brains to see that the marketing of agriculture is put on a proper basis. There is enormous scope for improvement in that way. But it has to be taken in hand.

Beyond question there is a vast field in our own country for development. Again I stress the statement that now is the time to prepare the plan. If we wait until the depression starts it will be too late. If the Government are prepared with plans when the depression sets in not only will they make it possible for the people to go through that depression with far less suffering, but, what is even more important, they will have strengthened enormously the economic structure in this country.

4.14 p.m.

Mr. Graham White

I beg to second the Amendment.

I think the House will agree that after the speech which my hon. and gallant Friend has made my task is really one of supererogation. But I hasten at once to associate myself with the diagnosis he gave of the existing economic position of the country, and to add that, as far as we on these benches are concerned, the proposition that we are to drift from prosperity to slump and that we are unable in the present state of world development, with regard to production and the means of distribution, to extricate our- selves from a trade cycle, is one which we refuse to accept. Nor is there any occasion for thinking otherwise. The economic position in this country to-day is very different from what it was in 1929. Many of the difficulties which were then inherent in the situation are no longer present to-day. There are none of the immense stocks of materials which in 1929. when prices were rapidly falling, threatened producers everywhere with bankruptcy. Currencies all over the world are not linked to the gold standard, as they were at that time, so that a depression in one country spread automatically to all the other countries which were hound together by the same link. There is no accumulation of debts such as existed in 1929 and 1931.

Nevertheless, the Government would do well to bear in mind that, whereas the position is much better to-day and there is nothing which, on the face of it, justifies much of the pessimism which we have heard expressed, the difficulties are of a different character, and also that the same means of remedying them are no longer present. It is not possible to-day to adopt the remedy of cheap money; money is already so cheap that one cannot contemplate its being made cheaper. There is no great debt bearing a high rate of interest which it is possible to convert. However, one difficulty—one of the less palpable difficulties but still one of the greatest—exists to-day to a very marked degree. Although the situation at the moment is fundamentally sound, confidence is beginning to be undermined. There is great uncertainty in the minds of business people as to the economic outlook. In the wool trade, for instance, owing to the conflict in the Far East, the Bradford wool market is disorganised, and producers in Australia are concerned about the absence of the Japanese market. Uncertainty is rife in the trade.

My hon. and gallant Friend referred to the position in the steel industry, and I speak with some feeling on that question. I know that the flow of orders into the shipbuilding industry has, in fact, stopped, and men are being turned off because steel is not available. What is treating the falling off in business and the lack of confidence is the uncertainty as to what will be the price of steel. I do not know what the Government can do in this matter, or whether they have any control over the industry, but it would be a great and vital thing for the shipbuilders and steel users generally if some indication could be given now as to what the price of steel is going to be, since contracts cannot be accepted and carried out in the state of uncertainty which prevails to-day.

Having dealt for a moment with those practical illustrations, I feel inclined to protest against the general fatalistic outlook which there seems to be in some quarters of the country that we must inevitably relapse into an economic slump. I know that two Members of the Government have spoken with authority and conviction in this matter; the Prime Minister and the Chancellor of the Exchequer have expressed themselves with gratifying unanimity as believing that we have not yet reached the peak. But I do not like that reference to the "peak" by the Chancellor of the Exchequer and the Prime Minister, because it seems to mean that when we have got to the peak, we shall have to go down on the other side. As my hon. and gallant Friend said, action must be taken now if we are to avoid approaching and declining into a slump. The Government must concentrate upon the difficult task of the demobilisation of men employed in the munitions industry which will have to follow the end of the armament programme. We know that the Government have this matter in mind, because I noticed that my right hon. Friend the Secretary of State for Scotland, speaking in the Third Committee of the Assembly of the League of Nations on 23rd September said: The investigations of economists showed, however, that humanity was far from the standard of living that it might claim to have. It was sometimes said that if the armaments race stopped, unemployment would begin again. He did not think so, for workmen freed by disarmament would employ their time in more useful functions—nutrition, heating, leisure, and study. Unless peace were safeguarded, not merely the present but the future of the world would be lost. But to safeguard their existence they must also organise their defence. Those are comfortable words, but I do not find them very comforting because this transition from war industries to peace industries will not happen of its own accord. Plans should be made now before we are involved in the coils of a slump. I venture to suggest that there is one plan, in addition to those which have already been mentioned, to which the Government might well give their immediate attention. There is an immense amount of controllable expenditure which is made by various local authorities and public authorities throughout the country. During the last five or six years, the amount of that expenditure has been from £76,000,000 to £116,,000,000 in any one year. That represents a formidable mass of money which, if it were manoeuvred at the right time and in the right direction, could have a very powerful influence in staving off or levelling out fluctuations in trade.

I suggest that there should be a careful, discriminatory and comprehensive inquiry set on foot, in active consultation with local and public authorities who have in their hands the expenditure of capital funds of every kind, for the purpose of seeing whether some of that expenditure which is not vital at the present time could not be postponed. That might be done with advantage to those who spend the money, because it might mean that they would save in the ultimate costs of the great transactions for which they are responsible. If some of this capital expenditure were kept in hand, its expenditure at the right moment might do a great deal to check the coming of a depression. Certain conditions would have to be observed if anything of that sort were done. There is some expenditure by municipal authorities which must be pressed on now with the utmost speed; I am referring to town-planning, housing, slum clearance and the scheme for doing away with overcrowding. There must be no stoppage in expenditure on such things. Moreover, it would be possible to agree to a scheme of that sort only if the Government would give a guarantee that if there were some check on capital expenditure now, they would take no steps to curb it at less prosperous times, and also give an undertaking that the grants upon which so much local expenditure depends would be continued in times of less activity.

I have tried to show that the Government must look ahead and that they have an important part to play in the demobilisation of men now engaged in the armaments industry. I was very much struck by some remarks made by Lord Austin in the course of a speech at the meeting of his company the other day. He put this matter much more accurately and with greater authority than I am able to do it. He said: And let us seek new outlets for our energy—outlets that are not negative like the production of munitions. I am entirely in accord with the Government's determination to place our Empire in a safe and secure position, but when that is accomplished industry must be so organised as to be able to turn its energies into other channels. While we are taking every precaution to protect this country against attack, it is even more necessary to protect it against poverty and want and against cycles of depression which have hitherto followed good times. We cannot excuse ourselves again, and we must take the blame if the comparatively healthy conditions of the present are not maintained. I say to the Government and those concerned in industry, for what my views may be worth: 'Plan now.' I wish to associate myself with those words. There is a certain malaise over industry at the present time. It is perfectly excusable, but I think that much would be done to remove it if there were a declaration from the Government that all their resources were being devoted to seeing that the country should not again relapse into the state in which it was in 1931, or anything like it. There is a feeling of uncertainty and a growing lack of confidence. One serious reason for that is the almost intolerable international tension which exists at the present time. We cannot but be depressed by the failure of all political efforts to put an end to or reduce that tension.

The lamentable thing is that there seems to be a complete lack of contact between ourselves and some other countries, and a lack of common ideals on which we can meet and co-operate with other countries. Even more lamentable is the lack of a common language in which we can discuss some of the problems that are before us. We must make allowances for people who have to maintain regimes or systems that are not very well-established. We may excuse them if they find it necessary, as part of that process of maintaining their regimes and systems, to speak with little respect of other systems and peoples, but a little courtesy would not come amiss, for it is not helpful for our efforts to be described, for example, as the bleating of a decadent democracy. We must make the best of this situation. In view of the constant failure of political efforts to bring about a relaxation of the tension that is brooding over Europe at the pre- sent time, we cannot let things go, but must try a new road, that of economic appeasement. I read with pleasure, satisfaction and relief the statements made by the Foreign Secretary at Geneva, by the Prime Minister in this country and by the Foreign Secretary over the wireless, in a speech to America, welcoming the overtures that have been made by the United States for the conclusion of an agreement between ourselves and the United States.

It must be obvious that, on general grounds, nothing could have a wider influence for good on the world situation than the conclusion of an agreement by these two great democracies—the two greatest trading countries in the world. Let us not forget that between them they sell something like 28 per cent. of the world's exports, and that they buy 24 per cent. of the whole of the world's imports. The conclusion of a satisfactory agreement of that kind would not merely be of benefit to ourselves and to the Empire, but of benefit to the world as a whole. On the political side, it would be a refreshing and salutary thing for world opinion if the two greatest democratic countries could make a close agreement for co-operation on any subject at all. If we cannot show the world that we are prepared to co-operate for our own benefit, without at the same time taking any action which would be hostile to other peoples, then on what other grounds or for what other object are we likely to co-operate?

It is a matter of the greatest possible consequence that the United States, under the leadership of President Roosevelt and his Secretary of State, Mr. Cordell Hull, have, in recent times, adopted an entirely different policy from that which they formerly pursued. I doubt if the House realises, and I am certain that the people of this country do not realise, the change which has taken place in America in this regard. It seems to me an almost miraculous thing that the authors of the Hawley-Smoot tariff, that most iniquitous, almost inhuman document, should now be the advocates of low tariffs.

Mr. H. G. Williams

Of low tariffs?

Mr. White

Of lower tariffs and, I would add, of low tariffs. One sometimes hears in this House the question raised as to whether America really means business or not, and whether she intends this seriously. I suggest to those who take that view that they have not followed the obvious sincerity of the campaign which President Roosevelt has led and the support which he has been given by Mr. Cordell Hull. I do not know which of the hon. Members opposite took me up just now on this point.

Mr. Williams

I did.

Mr. White

Would the hon. Member regard it as of negligible consequence if this House were to give the President of the Board of Trade power to reduce, on his volition, 50 per cent. of the duties on anything in the range of our tariff? Because that is the power which the United States have given to President Roosevelt, and there is no reason to suppose that those powers have been given for no purpose or that they will not be exercised.

Let it not be thought by anybody that there are no difficulties in the way of an agreement such as I have suggested. No service is rendered by suggesting that this is something which has merely to be proposed, and that certain people have only to meet together and in a few minutes everything will be well. That is not so. On the face of things, it ought to be comparatively easy for Great Britain and the United States to come together, and on a cursory examination, Great Britain would appear to be in a strong bargaining position. We have an adverse balance of trade with the United States of something in the neighbourhood of £23,000,000. But on a further examination, if we take into account invisible exports from this country and Colonial trade as well, it will be found that there is not much in it one way or the other. There is certainly not so much in it as might appear at first sight. As regards the actual tariff systems of the two countries, the British tariff appears to be, and actually is, moderate, while the Hawley-Smoot tariff is, as far as I know, one of the highest in the world. Again, there would appear to be at first sight great scope for conciliation and concession and arrangement on that basis, but America argues with considerable force that our discriminatory duties on her agricultural products are as damaging to her as her high and non-discriminatory tariffs are to us. That argument has been advanced, and it is that divergence of views which presents a task to the statesmen of both countries.

Mr. H. G. Williams

Will the hon. Member tell us to what commodities he is referring?

Mr. White

On which side?

Mr. Williams

On their side. The hon. Member has referred to discrimination by us against their agricultural products. To which products does he refer?

Mr. White

If my hon. Friend will listen to me a little longer he will find that I am coming to that point. I have not the whole tariff schedule in my mind, but in the American tariff there is considerable scope for bargaining of this kind. In some cases we are the main suppliers; in others we are not. It is, of course, the discriminatory tariff of the Ottawa Agreement which brings us straight up against the main difficulty, and I want to say something about that subject. I am convinced that the United States realise the position which Great Britain has taken up in this matter, and do not wish to adopt any policy which would weaken the British Empire or make difficulties between the metropolitan country and the Dominions. I am convinced that that is no part of their policy, but the difficulties of the Ottawa Agreement are clear and those difficulties have to be faced. Canada has set an example and has shown that an agreement of the kind indicated is compatible with the Ottawa Agreement. An agreement has been made between Canada and the United States to the satisfaction of both. I venture to express the hope that our friends in Canada having made an agreement of that kind—which was not easy to make, which required an infinity of negotiation and argument about tariff schedules and concessions, and the like—will stand by this country in whatever negotiations are proceeding, and will try to help to bring about a further agreement between this country and the United States.

It is with regard to agricultural products that the main difficulty arises and much could be done if this country were to adopt a whole policy for agriculture instead of a partial policy resting almost entirely upon production. If the Government were to link up their agricultural policy with the needs of the 9,500,000 people who are spending several shillings a week less on food than the British Medical Association consider necessary, and the other 9,000,000 people who are just on the border-line, it would go a long way to help this difficulty by expanding the market by agricultural products. I realise that there is nobody in this country who would not wish to see an agreement made between ourselves and the United States if it is possible to do so, but I would like to call in aid of my argument one whose counsel we have often enjoyed in these debates, but who is no longer with us. This is the first occasion for a number of years on which the Debate on the Address has not had a contribution from Sir Robert Home, as he was when he sat in this House, now Viscount Home. Some two months ago there was published a very valuable contribution to the literature on this subject. It was an attempt to bring the views of America on this great question to the mind of the English people, in a book entitled "Together We Stand" written by a publicist in this country of great qualifications and unrivalled opportunities for investigation. Viscount Home wrote a foreword to that bock which is very illuminating, coming as it does from one who has given so much thought to the question. He wrote: But there are other impediments which may obstruct the way; and the one which is most obvious is the fact of our preferential arrangements in trade between Great Britain and her Dominions. If agreements could only be made with America at the expense of the Dominions, without any compensating factors it would rightly be impossible to bring the British people to adopt such a course. On the other hand, it is conceivable that triangular arrangements might be adjusted which, while affecting the Dominions to some extent in our markets, would benefit them in the United States; and, so far as one can gather, this view was present in the minds of the representatives of the Dominions at their recent conferences in London, with the result that the situation seemed to be left open for consideration. Viscount Horne added that while there might be some who thought that it would be impossible to find a common foundation of agreement between the interests of the United States and those of the British Commonwealth, he was unable to take that view and he raised his voice in favour of an effort being made in that direction.

I have allowed myself to speak somewhat longer than I usually do in this House, but my excuse is that the possibility of an agreement between these two great democracies to co-operate for their common good and for the good of the rest of the world, is something the im- portance of which cannot be overestimated at the present time. It might not be possible to arrive at an agreement at once which would do everything for which we hope. Any agreement reached now might only be the first of a series between ourselves and the Dominions and the United States, but even so it would be impossible to exaggerate the importance of an agreement of that kind. I stress the fact that time is of the essence of the bargain. We are already in the second term of the Presidency of the United States. There is no guarantee that the power which the present President enjoys will be enjoyed by his successor. In fact, I think, that is highly improbable. America has, for some time, been holding out the hand of friendship to this country in this matter. It will not do so indefinitely, and I would like the House to consider the effect of a successful trading agreement and agreement for co-operation between ourselves and the United States, on one or two of the outstanding problems of the time. I say, without hesitation, that there is no economic problem of the present time which would not be made easier of solution, if we could face it in co-operation with the United States.

I would remind the House of the shock which roused the business world in the early part of this year when a question arose as to the price of gold. There are powerful critics in the United States who say to their legislators, "Why should we go on paying the present price of gold? Do you not see that what you are doing is to subsidise South Africa and the British Empire?" Well, let us have an agreement of this kind, and if we can go forward in co-operation with the United States, we can solve a problem of that kind together without immense dislocation and without the devastation which might follow one-sided action, if it had to be taken, for political or other reasons, by the United States of America. I mention that as an example of the kind of benefit that would flow to the whole trading community of the world if such an agreement were entered into, and I would invite the House to consider what the prospect may be in regard to gold and other questions if we have to face them independently. For myself, if we go forward, having failed in this attempt, and the United States is driven back into political isolation and economic isolation, I think the economic prospect for the world would be terribly grave.

My last word is this: I welcome without any reserve the speeches that have been made on this side by the Prime Minister and by the Foreign Secretary, and the announcements on the other side. We accept them as a pledge of action which will be taken and taken to its logical conclusion. I think it would be fair to say that if an agreement does not come out of these negotiations, it will be due, either on one side or the other, or possibly on both sides, to sectional interests which will have been able to triumph over the common good. It can only be a question of vested interests, but there is one interest at the present time which overrides every other interest. The greatest vested interest of this country, of the United States of America, and of the world is peace, and the conclusion of an arrangement of this kind, the best that can be made under the circumstances, would be at this moment the most powerful and hopeful step we could take, for by freeing the channels of trade we are opening one road to peace. We wish those who are responsible for the negotiations the greatest possible success in carrying them out.

4.49 p.m.

The President of the Board of Trade (Mr. Oliver Stanley)

The whole House, I am sure, thoroughly enjoyed the speech made in moving this Amendment by the hon. and gallant Member for Pembroke (Major Lloyd George). We have had the privilege during the last few days of hearing both father and son. All of us enjoyed last week the philippics of the elder, but I think we may say to-day that the rather different style of the hon. and gallant Gentleman does not suffer in comparison or effectiveness with that of the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George). It is indeed refreshing to see them both. one still young despite his years, the other still moderate despite his example. My right hon. Friend the Foreign Secretary yesterday compared the right hon. Member for Carnarvon Boroughs with a trench mortar. I am glad to think that the hon. and gallant Gentleman, a member of my old regiment, still remembers that the work of the gunner is not so much the production of noise as accuracy of aim and economy of ammunition and I certainly listened with interest to the speech of the hon. Gentleman the Member for East Birkenhead (Mr. White). I have always had a profound respect for the hon. Gentleman, and I must say at once, a certain amount of sympathy. He sits for Birkenhead, and I cannot help being sorry for someone who is only separated by a narrow river, and no doubt the good sense of the electorate, from the neighbouring city of Liverpool.

No one on this side of the House, least of all myself, can have any complaint that this subject has been raised. The subject of preparations to be taken now, of plans to be thought out now, to prevent any possible future recession of trade is one that ought to be discussed in this House, and discussed seriously, but I think a great deal depends on the way in which it is discussed, and here I think the tone adopted by both hon. Members was admirable. It does matter very much whether we discuss this question in a sort of search for a panic remedy, for an impending disaster, or whether we discuss it as prudent beings preparing for an eventuality which we hope and believe may never arise. If the first, then I think the discussion does nothing but harm; if the second, as to-day, I think the discussion does nothing but good.

At the outset of my speech I am going to take a serious risk. During the last two years the Opposition have discovered a word of which they now make very frequent use, and that is the word "complacency." If anybody on the Government side points to anything good in this country, then it is complacency; if anybody on this side rejoices any improvement, then it is complacency; if anyone expresses any hope for the future, then it is complacency. Of course, that is restricted entirely to Members who sit on this side. If hon. Members on that side declare to a credulous audience that such are their powers, both of intellect and oratory, that before them dictators would bow and natural laws bend, that is not complacency, that is only justifiable confidence. I agree that complacency is a dangerous thing, but I do not think it is as dangerous as continued and unjustifiable pessimism. I think the refusal to see anything good anywhere is just as bad and just as dangerous as the refusal to notice anything that is bad, and there can be real danger in all these talks about a slump. I know the view which some hon. Members take that economics are not a pure science. In my view they are in fact about 50 per cent. psychology, and there is a real danger that slump talk may produce a slump mentality, and that a slump mentality may itself produce a slump, so I want to state at once that with the information at my disposal today I do not believe in the imminence of a disastrous slump.

I noticed last week a speech by the right hon. Member for Wakefield (Mr. Greenwood). The House enjoys his speeches. They are always energetic, they are usually sweeping, and they are sometimes inaccurate. In the course of his speech he declared that those Civil servants who advise the Government know perfectly well that before very long there is bound to be a trade depression as bad as anything remembered within living memory.''—[OFFICIAL REPORT, 27th October, 1937; col. 90, vol. 328.] I do not believe there is any justification for that statement whatsoever. In so far as it means that those who advise the Government believe in the imminence of a slump, that they are advising the Government that that is so, and that it is being concealed from the House and the public by Members of the Government themselves, it is absolutely without any foundation. Speaking last Friday, my right hon. Friend the Home Secretary dealt with some of the figures which go to disprove this belief. It is one of the penalties of those who are called upon to speak very late in this Debate on the King's Speech that they have to spend many days watching bigger and earlier guns firing off their stock of ammunition, and the right hon. Gentleman in that speech used general trade statistics which we use as a sort of thermometer to test the economic health of the country, and, I think, used them effectively, to disprove this fear. I do not intend, of course, to repeat either his speech or his figures, but I would like to say that just as the general statistics do not reveal the imminence of a slump, neither do more detailed analyses of the prospects of individual industries.

In most industries there is no sign of any real abatement or check of activity. In iron and steel and in engineering, which may be taken as typical of those industries producing capital goods, activity still remains at a high level. In trades such as motor production, arti- ficial silk, and many other industries producing consumers' goods, those goods are still going into consumption as rapidly as ever. It is, of course, true that there are a few industries in which conditions are not now as favourable as they appeared to be in the Spring, but there is one interesting fact to note, and that is that if you analyse those industries and the reasons for the present check, you will find no common underlying factor through all these industries such as would point to some general economic trend. They are, in fact, explainable only in terms of the particular industry concerned.

The hon. Member for East Birkenhead referred to shipbuilding, and he himself gave the explanation there. It is not due either to a general national tendency or a general world tendency, but to the exceptional difficulties that the industry is put to by uncertainty as to the future price of steel and the difficulty of obtaining it promptly. I agree with what he said as to the desirability of the industry knowing the price of steel as soon as possible after the beginning of the year, and I understand that probably an announcement on that will be made before long. But in contra-distinction to shipbuilding, take the case of cotton. In the past few weeks there has been some decline in the forward orders being received by the cotton industry, and there any analysis of the situation will show that that is to be attributed to exactly the opposite cause to that of the decline in shipbuilding orders, not to the rising price of the raw material, but to the lower price. As hon. Members know, there was a bumper American cotton crop in August, and that, coupled with a cessation of buying by the Japanese of Indian cotton, has caused a very sharp recession in the past few weeks in the price of raw cotton, and that, of course, by unsettling the confidence of prospective customers, has reduced, temporarily I believe and hope, the flow of orders to Lancashire.

As far as the home market is concerned, I think there is little doubt that the present rate of activity will be substantially maintained for many months. The hon. Member referred in some detail to rearmament. Well, in so far as rearmament has an effect upon production for the home market, we must remember that we have not yet reached the peak of our expenditure on rearmament nor, therefore, reached the climax of whatever effect it will have on our production. We are apt to exaggerate the effect which rearmament does and can have upon the industry of this country. It is true that if you select a particular town where an armament factory has been put up or a particular area where armament works have been induced or impelled to go, it might in that town or area make a very substantial difference; but in a comparison of industrial activity as a whole it is easy to exaggerate the effect that it has. There is one figure which may not be familiar to hon. Members. It is the estimated normal factory output of this country for a year, which amounts to £2,500,000,000. Compare that figure with any figure such as that of £41,000,000 which the hon. and gallant Gentleman mentioned as having been placed for armament orders—

Major Lloyd George

In the Special Areas.

Mr. Stanley

As I have said, in a particular area the armament orders have an effect, but when you compare the £41,000,000 with the £2,500,000,000 it is clear how small the effect on the general industrial position of the country must be.

Major Lloyd George

That was not the comparison I was making. The Chancellor of the Exchequer last night gave figures of improvement in the Special Areas, and it was to the Special Areas that my figure was directed.

Mr. Stanley

I am sorry if I in any way misused the hon. and gallant Gentleman's argument. All I was concerned to prove was that from the point of view of industry as a whole the effect of rearmament must be comparatively limited.

Mr. Mathers

The £41,000,000 is the amount allocated to the Special Areas, and there is a much larger amount than that to be spent on armaments.

Mr. Stanley

The House is familiar with the proposed armaments expenditure over five years, and I say that, compared with the yearly factory output of L2,500,000,000, the total is comparatively small. So much for the home market.

It is not so easy to speak with any certainty on the prospects of the export trade because they are much more dependent upon politics and are, therefore, more likely to confound the prophets. A great deal of the improvement in our export trade during the past year or so has come about through an increase in commodity prices and thus through the increased purchasing power of those who produce the commodities and who have been able to take our goods in greater quantities. It is true that since the spring commodity prices have fallen, but they are still well above slump level and there is still increased purchasing power available for our exports. If there is no worsening of the international situation, I think that there is no reason to anticipate any serious reduction in the existing level of world trade. If there should be, as all of us must hope, any substantial relaxation in the tension, we may look for a further and sharp expansion in our export trade.

It is true, as the hon. Member for East Birkenhead said, that there has been during the past few weeks a considerable increase in the slump talk that one hears as one goes about. That, I believe, is due entirely to the falls which have taken place in Wall Street in the past few weeks. The Wall Street crash is so reminiscent superficially of what happened in 1929 that it is bound to attract comparisons and bound to start in people's minds fears of the same events being followed by the same consequences. If, however, one can really compare the fall in Wall Street this autumn with the fall in Wall Street in 1929, one finds that the fundamental conditions were quite different. In 1929 the cause of the Wall Street slump was, I believe, purely economic. Take some of the circumstances which existed. First, security prices were absurdly high. I remember at the time that a bright American bond salesman tried to persuade me that a yield of a little under 1 per cent. on bank shares was not a speculation for a wise investor. Secondly, money was exceptionally dear. The average price of call money in New York in 1929 was 7¾ per cent. compared with 1 per cent. in America to-day. Finally the stocks of many commodities, and especially of agricultural commodities, had been rising for some years. In other words, even in normal times the production of the agriculturist was not going into consumption. Year by year those stocks were increasing, and year by year, therefore, there was an increased disparity between the incomes and rewards of the agricultural and industrial population. Take, for instance, the case of wheat. Before 1929 stocks of wheat had been increasing year after year. In 1926 they were 255,000,000 bushels; in 1927 they were 304,000,000 bushels; in 1928 they were 365,000,000 bushels; and in 1929 they were 553,000,000 bushels. For the last three or four years stocks of wheat have been decreasing until to-day there are only normal and manageable stocks.

Sir Arthur Salter

Seeing that the right hon. gentleman's analysis will have great attention, may I ask whether he would not be inclined to add one other factor which, in my view, was the most important factor which does not exist today? That was the top-heavy international debt structure.

Mr. Stanley

I am obliged to the hon. Gentleman. That was clearly a factor, but I am not sure whether it was so much a factor in deciding whether the slump would start as an important factor -as to how far the slump would go. It is clear that the position to-day is not the same as it was in 1929. In 1929 it was purely economic, and to-day it is political, due, to some extent, to differences between Wall Street and the American administration, which are, of course, no concern of ours; and due, to some extent, to fears, and perhaps exaggerated fears, of the international tension which now exists. If I have spent much time on that question it is not because I want to burke the action which we ought as prudent people to consider should this present happy situation disappear and a recession take place. It is important that we should not allow exaggerated and unjustifiable fears to grow, and that we should take every opportunity to analyse the situation.

Let me turn to the important subject raised by the hon. Gentleman as to the action we should take for the future. The hon. Member for East Birkenhead said that that action should be to free our foreign trade. I believe that that transcends in importance any possible action that can be taken for the avoidance of a slump. The last two years have seen a very large and satisfactory increase in our internal trade and in our foreign trade, but it is in the foreign rather than in the home market that room still remains for that expansion which we re- quire, not only further to reduce the amount of unemployment which now exists, but as a safeguard against any recession which might occur in future. It has been for that reason the declared policy of His Majesty's Government to play their part in any concerted effort to reduce economic barriers which impede world trade. It was part of the joint Currency Declaration of 1936; it has been said by the Foreign Secretary at Geneva; and it has been repeated in many speeches by the Prime Minister.

In saying that, it is only fair to make it plain that the Government are not prepared to put themselves and the country in the dock as those who, by high protective methods, have largely caused these impediments to world trade. That would be very far from the case. It was agreed in the Joint Currency Declaration and by the Economic Committee of the League of Nations recently that the real and by far the worst obstacles to international trade are not tariffs, which, however high, are at any rate fair and can in certain circumstances be surmounted; the worst obstacles are currency restrictions and quotas. We, of course, have no currency control nor any quotas on the import of industrial goods. Therefore, we should make it clear that while we are prepared and anxious to cooperate in anything which will lower these barriers, and, therefore, foster our export trade, there can be no question of our abandoning the system which we adopted five years ago, which the circumstances then made inevitable and which events since have, in the minds of all of us on this side, proved to be amply justified.

The question is how we can proceed in this attempt to relax trade barriers. The hon. Member for East Birkenhead dealt —quite rightly, because it is of the first importance—in most of his speech with the negotiations with the United States of America. He expressed the great importance which he, with many on all sides of the House, attached to the success of those negotiations. I would, however, point out to him and those who sit with him and who believe that great benefits may come from some agreement of this kind for the reduction of the American tariff, that if it had not been that we in this country in our turn had adopted the tariff system there would not be to-day any informal exploratory talks with America nor in future, as we hope there will be, an agreement with America for some reduction of that Hawley-Smoot tariff which the hon. Member so roundly condemned.

It has been stated before on behalf of the Government what importance we attach to any agreement with the United States. It is an agreement which we intend to be fair to both sides and one which will really mean an increase in trade between the two countries. That in itself would be a great practical advantage, but the hon. Gentleman was right when he called attention to advantages far beyond the immediate and practical trade effect—those great advantages which will come from co-operation between these two great countries in the economic sphere. At the present moment, as for some time past, these discussions with America are in an informal and exploratory stage. I do not think anyone on any side of the Atlantic in the past under-estimated the great difficulties which, even given the best will in the world on both sides—and there is the best will on both sides—faced those who had to approach this task. There are difficulties which are due to the peculiar circumstances of this case. In the first place the United States of America has a very elaborate public procedure when formal negotiations are opened. It is very natural, therefore, that in America they should wish to assure themselves that there is a reasonable chance of a successful outcome of these negotiations before this formal procedure is initiated, and for that reason many matters which, if they were under discussion with any other Government with whom a trade agreement was in negotiation, would have been discussed round a table in the course of the negotiation, have to be explored before formal negotiations can be started.

The second difficulty is one which must be obvious to all Members of this House. The geographical position of the United States, its climatic range and its economic structure all mean that here and there the United States must have interests which are parallel to those of one or other of the Dominions which are signatories to the Ottawa Agreements. When the representatives of the Dominions and of Southern Rhodesia were in London they were informed of these informal discussions which had been going on with the United States, and they expressed full sympathy with the efforts we were making and with the desire of the United States and ourselves to expand world trade. They understood, as the United States has made it clear from the first, that the principle of the Ottawa Agreements was not being called into question, and that there could be no idea of the abandonment of the system of Imperial Preference. With these difficulties it is not surprising, even if it is somewhat regrettable, that this preliminary survey has been rather prolonged, but I can assure the House that it is the earnest desire of His Majesty's Government at the earliest moment that is practicable to conclude this exploration to start the negotiations and to arrive at a satisfactory agreement. The hon. Member for Seaham (Mr. Shinwell) asked me a personal question: did I take this matter seriously? I can assure him and the House that there is nothing, I think, in public life to-day which I take so seriously or for which I strive so hard as the possibility of an agreement of the kind we are discussing.

My Noble Friend the Member for Horsham (Earl Winterton), who is going to wind up, will be able to deal with many of the points raised by hon. Gentlemen, and in particular with the interesting passage in the speech of the hon. and gallant Member for Pembroke with regard to Dominion emigration. I would only make this preliminary remark Any possibility of further development in the way of Dominion emigration for our population must depend upon Dominion sentiment, upon Dominion approval and the belief of the Dominions in their economic capacity to absorb our people. I hope the hon. Gentleman in his desire, which I share, for a growth of this movement will warn some of those who sit with him that the best way of securing the approval of the Dominions and of arousing their belief that this immigration will be justified is not to advocate the denunciation of the Ottawa Agreements.

For a few minutes towards the close of my speech I will deal with he subject to which the hon. and gallant Member devoted most of his time and one which, at the moment, creates a very great deal of public interest. It is that part of the Amendment which deals with public works and puts forward the idea that as employment on one kind of public work, that is, rearmament, falls off, the Gov- ernment should have in reserve another kind of public work which could reabsorb those who are displaced as armament expenditure tapers off. It is natural that that idea should occur to any one. It is a natural thing to assume to-day, and, as has been stated by the Prime Minister and by the Chancellor of the Exchequer, it is a matter which the Government naturally have in mind and to which they are giving the closest and continuous attention, because we too are aware of the difficulty of "timing" the long preliminaries which have to precede the inception of any work of this kind, and, therefore, the loss of any really effective results at the time when those works are most wanted.

This Amendment calls for what is described as "definite planning," and that gives the idea of a large desk in one of the Departments of State in which repose our plans for public works ready, as soon as the Minister presses a button, to be taken out and sent to those who are to put them into operation. There is one great difficulty about an idea of that kind. It is that, slump or no slump, public works are going on all the time, that while there is this desk with its pigeon holes filled with those plans that one by one the plans are being taken out and used before the slump comes, and that long before the slump arrives they are no longer plans but accomplished facts. Some of the instances to which my hon. Friend referred illustrate that difficulty very clearly. There was the instance of rural water supplies. During the past three years there has been an expenditure, aided by a grant from the Exchequer, of £7,000,000 on the provision of rural water supplies. It is clear that here was £7,000,000 worth of expenditure which, when a slump came, could have been used to absorb labour, but nobody could suggest that that expenditure should have been postponed till the slump came, that we should have said to villagers clamouring for water, "I am sorry you cannot have it until a slump comes," and when they asked, "When will that slump come?" replied, "Well, I hope never." I have no doubt that pure economists might argue that what you ought to do at the present moment is to postpone all public works until the slump does come. I am talking about pure economists. I am coming to the hon. Gentleman later. From the point of view of the pure economists that might be a suggestion well worthy of consideration, but if it is good economics it is clearly not practical politics, nor is it socially possible. There are certain things which are urgently needed and we cannot say they must be postponed until the advent of a slump whose exact date nobody can possibly determine.

Mr. Shinwell

Will the right hon. Gentleman depart from mere theory and deal with what happens in practice? Is it not the case that public authorities are not proceeding with public works because of the difficulty of obtaining supplies due to rearmament and difficulties in connection with labour?

Mr. Stanley

The hon. Member is quite right, and I was going to deal with that point. I was going to refer to a letter which was sent to the "Times" in the summer, signed by a number of economists who were, according to my theory, not quite pure economists but very respectable ones, the name of the hon. Member for Oxford University (Sir A. Salter) being among them. They urged the postponement of public works when such postponement: Was not detrimental to the social services or the needs of the specially depressed areas. They agreed to that letter—though they were quite an exceptional number of economists to agree to any letter—but I wonder if they would find agreement when it came to specific cases which justified that exception. Not detrimental to the social services or to the needs of the specially depressed areas. That is the inherent difficulty of making any exact plan of that kind, but still it is quite true that whether orders are given, or whether sharp demarcations are laid down, that postponement is occurring automatically and inevitably. It is occurring, as the hon. Gentleman said, because of the rise in prices or of difficulties in obtaining deliveries and to some extent, therefore, if and when recession comes, the position would be different from what it was in 1929. Then, for some years, roughly speaking, all the local authorities had been spending about as much as they wanted to spend, and when the hon. Gentleman's Government was in power it was a question of trying to stimulate new demands. Now if a recession came it would be more a case of trying to make these postponed demands effective in the new conditions created by the recession.

That is a matter which must be under the constant review of the Government; but it is not only the Government who can help in these cases. Both public bodies and private individuals can help. Even if a local authority or any undertaking does not desire at the moment to proceed with some work on account of the cost or difficulties in obtaining materials, it is possible for them to complete the preliminaries for it, to go on with the preparation of plans, so that they would be ready to start without delay when a more favourable moment occurs. On this point again I would utter one word of warning—do not attach too great importance or rely too much on this as the inevitable and only safeguard against recession. The House will recall that I gave the figure of £2,500,000,000 as the normal output of our factories in one year. In the 15 years from 1920 to 1935 the total expenditure on public works which was either grant-aided or actually undertaken by the Government was only £1,200,000,000. It will be seen, therefore, that a comparatively small change in the normal output of factories due to a change in economic conditions counts for very much more than anything that could be accounted for under the heading of public works.

Had there been time there are many other subjects which I should have liked to have discussed. There is the remedy, to which the hon. Member called attention, against the slump or against excessive recession which I believe is provided in tariffs. I should like to point out how important in a period of comparative prosperity is the organisation of industry in order to enable that industry to stand up to any period of recession, and in this connection I would mention the Coal Industry Bill which is to be introduced. The cotton industry are preparing a scheme, and if that is approved by the industry the Prime Minister has promised that it shall receive prompt and sympathetic consideration. The tramp shipping scheme, about which I answered a question to-day, is one of those schemes which may do much to avert any recession, and certainly will do a great deal, if that recession should come, to prevent it from going to anything like the length and depth of the slump of 1929.

I am afraid I have detained the House for a considerable time, but I have tried to take seriously a subject which was raised seriously and which deserves serious treatment. I have tried to convince the House that, although the Government do not believe in the imminence of any slump as has been suggested, they have constantly in mind the necessity for taking such steps as are possible, practical steps, to prevent a recurrence of the tragic years 1929–33.

5.31 p.m.

Mr. Beechman

In rising for the first time in Debate in this House I am encouraged by the friendliness which I have received from every quarter. I am fortified, too, by the circumstance that I was brought up in a philosophy of hopefulness, namely, in the great faith and traditions of Liberalism. I know that Liberalism has many aspects, one of the most beneficial being that it teaches us to look forward with courage and confidence to the time when we may see the opportunity provided for all our citizens to enjoy the spiritual and material resources of the world. I cannot help confessing that I felt a little apprehensive when I listened to the most interesting speeches—if I may call them so, novice that I am —of the Mover and Seconder of the Amendment, that some of the ancient virtue of our Liberalism was dying out. I should be very sad to see the day when our Liberalism had dwindled into an anatomy of melancholy, especially where the melancholy is unnecessary and the anatomy perhaps somewhat dubious. I would like to comment upon some of the observations which fell from the hon. and gallant Member for Pembroke (Major Lloyd George).

I should like to distinguish, as one must carefully do, between the general trend of trade and what are known as trade cycles. I believe that the hon. and gallant Member who moved the Address pointed out that the rise in production that has taken place was nothing very remarkable compared with what used to happen. If one takes the past 50 years, say the period from 1880 to 1930, taking an average one finds that the production was about 3 per cent., and that the rise was dependent upon the increase of population. If you take the rise in production last year in this country you will find that it was about 10 per cent. and that the rise in the previous year was 9 per cent. I suggest that that compares very favourably with the average taken over the former period. It is necessary to bear in mind that the rise that has taken place of late depends not upon a rise in population but upon a rise in consumption per head and upon technical developments; that is to say, upon a rise in the standard of living. Modern equipment has put into our hands the means of developing our resources with a new intensiveness and rapidity. Thousands of people in this country and hundreds of thousands of people in every continent in the world are beginning to demand, and will in the future persistently expect, a higher standard of living. Taking the long view, it seems to me that our hope lies in an endeavour to supply that demand. The demand can be supplied only if two conditions are fulfilled. The first is that there should be working stability in the system of currency, and the second free availability of credit to finance these purposes. Both of thise conditions depend upon the presence of confidence.

So much for what I call the long view. Some economists tell us, and I think rightly, that there are what are known as trade cycles. Take the period 1874 to 1894; there were six prosperous years and 15 depressed years. From 1895 to 1913 there were 15 prosperous and four depressed years. Various reasons have been ascribed for this curious process. Some economists have suggested that the cause is the weather. That is not suggested by hon. Gentlemen opposite, because the National Government are not responsible for the weather. Others, like M. Caillaux say that the trouble is inventions; others that trade cycles are occasioned by changes in taste. Every one of the cycles has a special character. In dealing with this matter one has to face the problem in general although every cycle varies in its character and is a new historical entity. The reason for the cycle is this: There is always the tendency in industry for a winding-up process to go on, started automatically. Demand follows on demand and investments increase until the time comes when the downward process begins, when you cannot get enough labour because it becomes expensive and the cost of equipment does not enable you to produce at the prices expected by the consumer. Prices become too high for what the con- sumer wants to pay. Orders cease, apprehension sets in and one is left with the stock.

I should like to call attention to one or two characteristics of the cycle in which we now find ourselves. The first characteristic is that fluctuations, especially in this mechanical age, are more violent in respect of producers' goods and durable goods than in respect of consumers' goods. This fact depends upon mathematics and should be considered in relation to any device which can be put forward. The second characteristic is the matter of wages. The Mover of the Amendment made a very interesting suggestion in relation to wages, but before I deal with it I should like to say that business, commerce, and its success or failure are increasingly regarded from the point of view of unemployment. That is a humane viewpoint, but it arises also from the fact that we have not a free system. We have not had a free system of supply and demand for many many years. When the doctrine of Free Trade was originated there was a free supply and demand not only of goods but of labour. It is from that that all of us now shrink with horror. The price of labour is now artificially fixed. As Sir Josiah Stamp pointed out a few days ago, we live in a new age when in some spheres prices are specially fixed while in others they are more or less regulated by the free operation of supply and demand. This fact has created some alteration at the basis of the doctrine of Free Trade whether regarded from the point of view of commerce at home or international trade.

But the fact about wages to which I wish to refer is that as prices rise wages do not necessarily rise with them in equal measure. That is a fact generally accepted. The question has been asked also whether wages should not fall when retrogression begins. The answer depends upon what you do with savings which result from reducing wages. The hon. and gallant Gentleman made a suggestion about agricultural wages in which those who have any interest in agriculture must have had a special interest. We are glad to see improvements in many aspects of agriculture in this country, but we wish to see as the industry improves everybody concerned in it, labourers included, shares in the increased prosperity. The hon. and gallant Member for Pembroke sug- gested a subsidy to wages. That is a very interesting suggestion not only because of the time at which it is put forward but because of the historical reason that it was first put forward in 1793 in the Speenham Land Act. What was the result? The agricultural industry was almost ruined; so much so that the Poor Law Commission which considered the matter in 1834 told us that the system was destructive of the welfare of the community. It put extra money into the pockets of the landlords which I imagine is the last thing which the hon. and gallant Gentleman desires.

One word in regard to the supposed slump. Up till April, 1937, matters were improving, admittedly; they still are. In April, 1937, what happened was that there arose all sorts of rumours about the shipment of gold and about gold prices and rumours of wars, and so on. Had it not been for the feeling of apprehension engendered for political reasons, and possibly by stock exchanges, there would not and could not have been any suggestion that we were entering a slump. This matter is very well set out in the world economic survey published by the League of Nations in August of this year. The authority is very respectable. The survey makes it perfectly clear that the difference of feeling in regard to trade since April, 1937, is due almost entirely to nervousness resulting from rumours of all sorts. It describes the situation as being such an exhibition of nervous instability in the face of what in earlier periods would clearly have been regarded as a favourable conjuncture of economic tendencies. That is a description of the situation in April of last year, in a League of Nations document issued in August of this year.

The hon. and gallant Gentleman made some very interesting suggestions with regard to public works. My right hon. Friend has dealt with the point that the hon. and gallant Gentleman made it plain that he did not intend that these public works should be carried out now. I should like to mention one case in my own experience. For the last 30 years the fishermen of St. Ives have been asking for a breakwater. Its absence has not only threatened death, but has meant death. Am I to go down to the fishermen of St. Ives and say to them, "I have good news for you; be of good cheer; wait for the slump''? If we have the men, and if we have the money, that is a typical example of something which must be done now. Or does my hon. Friend mean that we should wait for the peak? How do we know when that peak is going to appear? Is he going to stand on some economic Pisgah height and give us early notice of sighting the appearance of the promised Special Area? Or are we to wait until the slump has gone half way down? At that stage it is agreed by economists that it is very difficult to stop its downward march. Or are we to wait until the slump is at bottom? If that be so, it will be no cure for the slump.

The hon. Member for East Birkenhead (Mr. White) said something about saving up for these things, but it is very doubtful whether large savings in this manner would not actually induce a slump. It is well known that forced savings, as a result of which people buy fewer hats, hoots and so on, are likely to induce a slump. In any case, one feature of the condition of a slump is that you have savings, because that is what ultimately helps you to get out of a slump. The fact that we got out of the last slump was in some measure due to the fact that the building of houses by private enterprise started to increase. I was interested to hear the Minister of Health tell us that the building of houses by private enterprise was not so much in the ascendant as it had been: It is exactly what one would have expected. It has been a feature of every depression that the building of houses by private enterprise has moved first. It is very sensitive to the capital market, and it requires cheap capital. For this reason the building of houses by private enterprise has always tended to be in the ascendant during a depression, and therefore the fact that there has been some lowering in that regard is perhaps an indication that we have emerged from the depression and are rising upwards.

I have made a suggestion with regard to wages, and, if I may say so with humility, I should like to see an inquiry into wages, to ascertain to what extent wages ought to rise with prices and to what extent they ought to go down when prices go down. There should, perhaps, be a closer partnership between wages and rising prices. As I have pointed out, we are living in an era when there is price fixing on the one hand and a free or comparatively free system of supply and demand running at the same time in other spheres, and it seems to me that this matter has to be worked out especially in relation to wages. The greatest factor, from the point of view of national planning, in getting out of the last depression was the conversion operations of the National Government. That is not my own statement; it occurs in the economic report published by the League of Nations in August of this year, which says: In national plans of recovery the greatest single operation was the scaling down of debt by British conversion operations. It follows that the effect of an operation of that sort would be entirely destroyed if large sums of money were to be expended on great public works. I do not want to give the impression that I think that nothing can be done, but, if I may make the suggestion, I think the truth is that there is a slight confusion. It is not that public works are a cure for slumps, though central public works may contribute to that end; but it is that we all feel in our bones that, with our heavy commitments in regard to defence, which are such an important item in the confidence to which I have referred, we cannot carry out all sorts of developments which we have at heart, and that, while in the difficult position in which we are there is not the money available at the moment, there is nevertheless a great deal of preparatory work which could be done at little cost. I have very great sympathy with what the hon. and gallant Gentleman said about organising the resources of our Empire. I should like to see some concerted machinery developed to consider those resources and to consider their organisation. This is not a matter of cost; it is a matter of thought. I would like to see some survey of our own mineral resources, so that that information may be available for the purposes of whatever financial operation is used to develop them.

The great thing is to retain and improve our home trade, which, after all, is the biggest and most valuable sector of our trade. Obviously, this has been extremely well done under the National Government, but, if we are to be able to carry out the great developments to which we may look forward we must develop our export trade also. In this regard I myself would like to see, in the first place, a reduction of restrictions on credit, and I also feel very strongly that there are far too many tariff barriers in the world. It is no use, however, saying that as a generalisation; how are they to be reduced? The hon. Member for East Birkenhead told us very plainly that the American tariff structure is much higher than ours, and that, therefore, we should naturally look for a reduction in the American tariff structure. I myself am not at all in favour of unilateral disarmament in this matter, for experience has shown that it leads nowhere at all. In the second place, there has, as I say, been a certain amount of price fixing.

As an example, I may refer to an area about which I know something. As a result of tariffs, there are now 600 acres of anemones in Cornwall, where there were never anemones in commercial quantities before. Nor has the tariff impeded efficiency. On the contrary, although in earlier years considerable interest was taken in the scientific growing of these flowers, in the presentation of the boxes, and in doing up the packages, it was not until the tariff was put into operation that it was possible to make it pay. In the same way the production of broccoli—the Cornish cauliflower—-has gone up from 17,000 tons a year before the introduction of tariffs to over 30,000 tons a year. I could take hon. Members to farms one after another where before the tariff there were two people employed, and now there are 40 or 50. The question we have to ask ourselves is simply whether, for a possible benefit to be derived from a theory regarding international trade, we are to create a new distressed area, because that is what we should be doing if we removed this particular tariff —a distressed area in regard to an industry which means an enormous amount for the character and health of this country taking horticulture as a whole. For my own part, I have no doubt where I stand in regard to that matter. I support the tariff, because I see on its merits what are the results. Our task is to judge these restrictions on their merits; do they or do they not help us in building up the organisation of our industry? Do they help to develop our social or economic liberties, or do they impede them? Our task is to ensure that as we organise, for organise we must, we preserve our liberties.

5.58 p.m.

Mr. Price

I should like, at the outset of my remarks, to congratulate the hon. Member for St. Ives (Mr. Beechman) on his maiden speech. I listened with much interest to what he said, and was surprised at the way in which he addressed the House for the first time, as though he were thoroughly at home in our midst. My mind went back to the time when I myself addressed the House for the first time, and I can only say that I wish I had had as much confidence as the hon. Member has shown to-day in delivering his first speech in the House. Moreover, with much of his speech I felt myself in a considerable degree of agreement. Indeed, some parts of it sounded as though he were giving a Fabian lecture on the Marxian theory of surplus values. I should have liked him to go rather further than he did in crossing the t's and dotting the i's and showing that these cyclical up and down movements of trade are part and parcel of the system of uncontrolled and unplanned economy which we on these benches never cease to criticise. We do not consider that such movements are like the laws of the Medes and Persians; we regard them as things which may be controlled by a planned economy.

I am very glad that hon. Members below the Gangway took this opportunity to-day of putting down their Amendment. It is a very useful supplement to the Amendment moved by my hon. Friends on these benches yesterday; it concentrates attention on one or two features in the Gracious Speech which call for special comment, and also upon certain matters which are absent from the Gracious Speech and which should have been there. The Gracious Speech refers to the favourable outlook for trade and industry, and indicates the satisfaction of His Majesty's Government with the present state of affairs. It seems as though Ministers consider it to be their duty to radiate optimism all the time. I do not say that it is not the business of the Government to-day to keep up the spirits of the country, but, at the same time, they have no business to feed the country on illusions.

It is not true to say, as the President of the Board of Trade suggested, that we on these benches and hon. Members below the Gangway refuse to see anything good in the present situation. It is not that, but that we refuse to be led in blinkers. Though we are prepared to admit that the economic state of the world to-day is considerably better than it was some years ago, there are elements of danger in it which ought to be guarded against, if serious trouble is to be avoided. We are concerned to see that the Government do not appear to be aware of these elements of danger. It has been repeated many times in these Debates that, in spite of our having the highest industrial production in our history, unemployment figures are not yet down to the 1929 level. It has been argued that we ought to consider those who are in employment rather more than we do, but I will put figures before the House, which I have not heard quoted yet in this Debate, and indicate a serious position, which may continue to grow. Industrial production. if we take 1929 as 100, has risen this year to 130. We are 30 per cent. up on our industrial production as against the year before the previous trade slump. In 1929 unemployment was a little over 1,000,000, and now it is a million and one-third.

Although we are producing one-third more wealth, there is one-third more unemployment, and, moreover, there is this serious aspect, that a very large amount of the unemployment to-day is the hard core of unemployment. They are men who are beyond 50 years of age and not likely to obtain work again. Also, in a very large number of new industries which have grown up in the south of England, young people have been brought into blind alley occupations. A very large number of the industries have a large number of apprentices; young men who have been brought in to learn a little, to stay two or three years and then to be turned off. This is a very serious aspect of the class of finishing industry which has grown up in parts of the south of England. It enforces the point of view expressed so often from these benches, that this technological unemployment, as the economists call it, the unemployment caused by labour-saving devices and new processes in industry, can only be met by a systematic attempt on the part of the Government to get the hours of labour reduced.

We do not attach sole importance to public works which, as hon. Members below the Gangway have argued, are extremely important in dealing with unemployment, for it is not the only way of dealing with it. Shorter hours, and a general spreading of hours of leisure in an increasing measure, would make an important contribution. We are not inclined to take calmly the apparent complacent attitude of the Government. Every time there is a conference at Geneva and attempts are made by the trade unions in the various countries to bring about a shortening of the hours of labour, our Government seem to do nothing but obstruct movements in that direction. The truth is that we are back again in the dangerous old position of trade booms and depressions, and our case on these benches is that it can only be dealt with by tackling unemployment from the point of view, partly of public works, partly by shortening the hours of labour, by the extension of public ownership in industry, and last but not least by the introduction of planning in our whole system of national economy.

I wish the Government would give an earnest of their desire to see steps taken towards the control of the location of industry. I am very glad that one of my hon. Friends on these benches is to raise this matter on the Adjournment, perhaps to-night, in view of the unsatisfactory nature of the answer he received at question time to-day. This is a very serious matter, because it appears that at least one Government Department, in the evidence that it gave to a Commission, appears to be quite satisfied with the position as it is to-day. That, presumably, represents the point of view of the Government of the day or the Minister in charge of that Department. As one who represents a constituency in this House which is in danger of losing much of its industry in the course of the next 10 years unless new industries come into that area, I see very fully the desirability of taking steps towards controlling the movement of industries by not only attracting them into an area by offering privileges, but also making it difficult for new industries to grow up in areas where they are not wanted.

The Amendment moved by hon. Members below the Gangway speaks of the possibility of a new period of commercial depression, and indeed there is evidence that the situation is none too secure. There has already been a severe fall in certain wholesale commodity prices. Since last March a whole series of commodity prices is 20 per cent. lower than six months previously. There has been a steady fall, almost amounting to a catastrophic slump, in certain other very important raw materials of industry. There has been also a tendency to weakness in the prices of certain agricultural commodities like wheat and cotton. I am not altogether sure that it is not due to new world conditions that are arising. Possibly the relatively high price of wheat in recent months may have been due to drought in the United States of America. and if these conditions cease to exist we may get once more a very large production of wheat in the world and an unsaleable surplus. This may bring us face to face with low prices of agricultural commodities like wheat and cotton which may reflect upon the purchasing power of countries like the Argentine, and countries which are the main producers of such agricultural commodities. These are all points which the Government have no right to regard as being of no importance. They are things which require watching. They indicate the continual necessity to watch for the danger signals.

The fall in prices, as the President of the Board of Trade suggested, was also partly due to the situation in Wall Street in America, which to some extent is political; where a political vendetta is being carried on against the President of the United States by the financial people in Wall Street. I think that another factor has been at work which has tended to bring about this sudden fall in commodity prices as far as the City of London is concerned. There has been gross over-speculation in certain important raw materials of industry. We on these benches warned the Government several months ago of the speculation which was going on, which made it necessary for higher prices to be paid by manufacturers, and consequently was increasing the cost of re-armament. Our warnings were fully justified. There has been this gambling going on in the essential commodities of industry. Stocks of material have been bought simply on credit. In the United States measures have been taken to stop that kind of thing by insisting on 50 per cent. cash payment—I think it is less now—on the purchase of commodities of this kind. I suggest, as the Gracious Speech envisages legislation to prevent frauds in share dealing, that there are other things to which the Government might give their attention, such as methods to stop the gambling in the essential raw materials of industry, which is in part responsible for the recent slump in commodity prices which has taken place in this country and in other big producing countries.

The most valuable part of the Amendment of hon. Gentlemen below the Gangway is their reference to the demand for active measures to reduce trade barriers. It is obvious that there can be no really healthy position in this country unless our international trade is increased beyond what it is to-day. It is still 13½ per cent. smaller than it was in 1929. Although it may be that international trade always revives slightly slower than the home trade, still it is lagging too far behind, and no doubt artificial barriers such as those created under the Ottawa Agreements have been very largely responsible for this. The Government seem to be wedded to the principle of preferential duties to the Dominions, and there is a great danger that these preferential duties may be the means of preventing any further improvement in our trade relations with other countries outside the Empire. That must not be allowed. It is a very dangerous situation. I should like to see the Ottawa Agreements expanded to include countries even outside the Empire in a low tariff area. Therefore, I lay the very greatest importance upon the proposals for negotiations for a commercial treaty between this country and the United States of America. I hoped that the President of the Board of Trade would have given us rather more information than he has done. As preparatory negotiations are still going on, I recognise that he could not say as much as he would like, but I assure him that there would be very wide support throughout the country in all parties and among all sections of opinion, if the Government really would take this matter seriously in hand. I know that there would be vested interests with which to deal but if they would only take their courage in their hands and carry on, they would be taking a step of enormous value in improving the international trade position.

I know there are many difficulties. The Americans want to increase the export of their agricultural products to this country, such as pig products, fruit, soft woods and cereals. That would, to some extent, impinge upon the rights of the Dominions under the Ottawa Treaty. It has been suggested that the United States should make a sacrifice to the Dominions to compensate them for any loss they might sustain in this way. Naturally, the United States cannot quite see their way to pull the chestnuts out of the fire for us because of the agreements we have made with the Dominions. That is one of the difficulties. But I do not think the Dominions are really likely to make trouble on this matter. On the contrary, from what I can see, opinion in Canada is not opposed to closer relations between this country and the United States in commercial matters. The Government of Canada have since they came to office lowered tariffs on certain goods coming in there from America, in return for the lowering of tariffs on certain goods going to America, and I am certain there is no organised opinion in Canada which would in any way oppose an improvement in the commercial relations between this country and the United States.

In New Zealand the statement was made by the Hon. Walter Nash and other members of the Government that they look with favour on closer relations between this country and the United States. Australia is not likely to make any difficulties, because its interests just now are mostly concerned with the Far East and troubles over wool exports. The sky seems clear so far as the Dominions are concerned. Moreover, I believe there are substantial advantages to be obtained. If we can get a reduction of the Hawley-Smoot tariff by 50 per cent. by our agreeing to the lowering of tariffs on goods which the Americans want to send here, there will be an advantage for industries over here in regard to a large number of articles which we send to the United States, and of which we are the sole suppliers. I believe those articles number 60. We are in need of speed in regard to this matter, and I hope the Government realise that. Opinion in the United States to-day is favourable, but Congress is meeting shortly for a special Session and one never knows how the political caucus may get to work. Moreover, before very long the ground will have to be prepared for the new elections to Congress next year, and when the elections come along it will be goodbye to a satisfactory atmosphere for negotiations on a delicate matter of this kind.

I do not think that we need to have any fear—as the right hon. Member for Spark-brook (Mr. Amery), who has an Amendment down, seems to think—about the interests of agriculture in this country if we take a step of this kind. The right hon. Gentleman seems to envisage that there may be a danger to our agricultural industry if we permit a greater amount of imports from other countries outside the Empire. I think that is a wrong attitude. British agriculture will not be saved by high tariffs or by obstructing international trade. It will be saved rather by organising plenty on the home market and making it possible for the masses of our people to purchase all that we can produce here and all that can be sent here, not only from' our Dominions but from other countries, I believe that that purchasing power can be obtained if the Government take the right measures.

Finally, I should like to support the hon. Member for East Birkenhead (Mr. White) in his advocacy of this great international trade agreement between us and the United States, on the grounds that it would be of great psychological value as well as of great economic value. It would have the effect of showing that the two great English speaking democracies can give a lead to the world. We could bring along the different parts of our Empire with us, and this would be of colossal importance on the continent of Europe, where the Fascist dictators are still closing themselves in behind doors and demanding colonies, as a proof that that is the only way of getting them out of their difficulties, which are largely of their own creating.

The psychological side of this Anglo-American proposed treaty must be considered. I believe I am right in saying that an ancestor of the President of the Board of Trade was a colleague of Sir Robert Peel and was a great free trader and took part in that great episode in our history when we became a Free Trade Country. I am not one of those who want to back to that time. I do not believe that we can have free trade in the old fashioned sense of the word. I believe in regulating trade, but I regard the present trade relations that we have in this country with other countries as thoroughly unsatisfactory. There is a tendency to put barriers against normal development. I hope, however, that the right hon. Gentleman will take some in- spiration from the role which his ancestor played in freeing our trade from a terrible incubus in the middle of the last century, and that he will do something now to induce the Government to push forward with this most important measure for improving the general state of the world and international trade in particular.

6.25 p.m.

Mr. Amery

The whole House is indebted to the Mover and Seconder of the Amendment not only because of two sincere and thoughtful speeches which were listened to with attention by all of us, but also for bringing us back to those economic issues which underlie all the grave problems of foreign policy, defence, social reform and social welfare which we have been discussing during the last few days. After all, the vast sums that we are expending to-day on armaments are derived from no other source except the industry and trade of this nation. What is more, if ever there should come the unhappy issue of war it is the industrial strength of England that will provide, as it did in the Great War, the resources of expansion that alone can give us hope. On the other hand—and here I deal with what is even more important—it is that same industrial strength which not only provides the revenue for social reform, and will provide it, I hope, in ever increasing measure, but also provides what is not less essential, even more essential as the foundation of social welfare, opportunities for employment at decent wages for our people.

I hope the House will forgive me if before coming to the more concrete issues which we have been discussing to-day I say a few words on a fundamental economic aspect of the question which we are apt to overlook. We are so accustomed to talk about trade—home trade, foreign trade, Empire trade—that we are apt to forget that the test of prosperity, the test of our standard of living, is not trade but production. It is production, wherever may be the market for our wares, which is the source of employment. It is by the production of goods, whether we consume them directly or consume other goods which we secure in exchange for our products, that we maintain the total population of this country and its standard of living. I am rather sorry, as typical of that outlook, that we call my right hon. Friend the President of the Board of Trade. A very valuable psychological change was introduced a few years ago, and one which had great consequences for the welfare of the nation, when the President of the Local Government Board was rechristened the Minister of Health. It gave a new idea and a new aim. I wish the President of the Board of Trade could be rechristened the Minister of Production and Shipping. That might help us a great deal in the problems of the immediate future.

Trade, as such, is not an end in itself. Its only value is as a means to an end, and that end is production. If for want of proper regulation it diminishes our production, as in certain circumstances it might, then it is harmful. What matters in trade is not its volume but its character. What the character of the trade of a country should be must depend upon its particular circumstances. In our case we sustain an immense population on a small island, with limited resources, by being able to purchase raw materials and foodstuffs, far in excess of our own production, by the surplus of our manufacturing skill. That is the trade that matters—the trade by which we sell finished manufactures for raw materials and essential foodstuffs. All other trade is only secondary. There is no advantage in pushing our export trade if it is only at the cost of importing more manufactured goods to compete directly with our own industrial products, or more agricultural products to compete to the detriment of our home agriculture.

What we need is not barriers on trade but regulation, as the hon. Member for the Forest of Dean (Mr. Price) said. We do need regulated and selective trade. The policy which His Majesty's Government have followed in the last six years has been one not of indiscriminate interference with trade but that of applying a deliberately selective tariff. That policy has had great success, and has falsified every prediction of those who wished us to adhere to the old policy of unregulated, indiscriminate trade. We were told it would raise prices. Nobody suggests to-day that our tariff policy has raised prices. It was suggested from those benches opposite that, because we raise a small proportion of our Defence expenditure with a promise to repay, that has been an inflation, and has caused the recent rise. The hon. and gallant Mem- ber who moved this Motion never laid stress on that. When he was speaking, I could not help thinking of those far-off days when a distinguished relative of his suggested that the smallest deviation from orthodox Free Trade would reduce us to a diet of black bread and horse-flesh sausages. We were told it would destroy our export trade, partly by increasing the cost of production and partly, also, as an automatic consequence of the reduction of our imports. Have our imports been reduced?

It is interesting to note that last year imports were the largest in our history at £1,007,500,000 at 1930 prices. As for our exports, they stood for the first six months of 1937 at 103 per cent. compared with our exports of 1930—before the really serious slump occurred— and 22 per cent. higher compared with 1931. At the same time, I do not want to lay stress on these gross unanalysed figures. More important is the change in the character of our trade as the result of scientific regulation. The really interesting thing about our trade figures is that our imports of raw materials, in terms of 1930 prices, went up from 100 in 1930 to 128 last year, and are 35 per cent. above the figures for 1931. That is the figure that is really important. We were also told that our policy would destroy our shipping, but actually it has been immensely beneficial to our shipping. Raw materials involve much larger tonnage than finished goods, and raw materials from the Empire involve much more British tonnage than those from other countries.

Now for the broad result. Since the policy was initiated, the total sum of our production has gone up 50 per cent. That is the real figure by which this Government may be well content to be judged so far as its economic policy is concerned. That has led inevitably to a large increase in employment. The hon. Member for the Forest of Dean dwelt on the regrettable fact that there still is a large amount of unemployment in this country, but he omitted to state that employment has gone up by nearly 2,250,000 workers. Let me remind him of one fact to which the hon. and gallant Member for Pembroke (Major Lloyd George) drew attention, namely, that during these years of depression the Dominions have not been able to absorb migration, that there has been an actual inward movement. The ordinary diminution of the pressure on the labour market in other years resulting from migration has not been operating. Yet, in spite of that, unemployment has been reduced from 2,750,000 to a very little over 1,250,000. The hon. Member for the Forest of Dean and the hon. Member for Aberdare (Mr. G. Hall) the other day both drew attention to the fact that owing to labour-saving devices the additional number of persons employed in some of the industries whose production has increased most, such as the iron and steel industry, has not been proportionate to the number of persons put out of employment. But that is only one side of the case. It does not take into account the transport of raw materials to those factories, and still less the actual distribution of the products of the factory. When it comes to distribution, it is still the individual customer who buys from the individual salesman or saleswoman. The immense increase in factory production has been reflected indirectly in the immense increase of 1,000,000 or more of those employed in transport and distribution of all kinds.

There can be no doubt that the policy of selective regulation of our trade has been a success. Indeed, the criticism which might be advanced is not that we have gone too far, but that we have lacked somewhat the courage of our own conviction. Imports of finished manufactures competing with our own, limiting to that extent our own home market, have steadily increased, and whereas in 1933 these imports—I am excluding non-ferrous metals and oils-stood at 57 per cent. of the 1930 figures they have risen to nearly go per cent., and are actually larger now than in the year 1923, when Mr. Stanley Baldwin, as he then was, went to the country on the issue of employment through tariffs.

We have also been reminded more than once in these Debates that our adverse balance of trade is growing seriously. There is thus a very strong case for a general tightening up of our very low tariffs. Also, an aspect to which the hon. and gallant Member for Pembroke rightly drew attention, there is the fact that we have not yet successfully dealt with the actual dwindling away of our agricultural population. I think it could be said in answer to that that, but for the measures taken by this Government, agriculture would have broken down altogether in this country. A good deal has been done for agriculture, although I do think that there is some force in the contention that we have still failed to produce a comprehensive agricultural policy and to coordinate it fully with our industrial and Imperial policy.

That brings me to another aspect. We are not concerned here, whether dealing with Defence or social policy, only with home production. We are concerned with Imperial production. In the long run, we cannot hope to defend an Empire scattered all over the world with the unaided resources of one little island off the north coast of Europe. We have to call a new world of Empire into being to redress the dangerously unfavourable balance of the old. So far as spirit and willingness are concerned, we know well by experience where the Dominions stand in the hour of danger, however rightly they refuse to commit themselves beforehand. Last night the Foreign Secretary, in talking about the League of Nations, used a phrase which struck me very much. He said that collective security was in these days an incomplete collective security. We can remember that when the thunderbolt of war came out of a clear sky every Dominion of the Empire stood by us from the first day, not bound to us by any Covenant except the Covenant of their blood, traditions and ideals. That is one aspect of the matter, not the whole of it, but so important an aspect that it is well worth strengthening to the fullest extent to which we can go. Similarly, too, with migration. I would be the last to look on it as being simply a means of divesting ourselves of our responsibility for the unemployed, as throwing out of this country those who have not made a success of their lives here in order to give them a chance elsewhere. But successful migration for those desiring to find a wider opportunity would be beneficial on both sides, and surely it is an element of social reform which we of all nations ought not to ignore.

As regards development of the Colonial Empire may I, in passing, congratulate my right hon. Friend the Colonial Secretary for having revived, on a smaller scale though it may be, the admirable work of the Empire Marketing Board, and for an admirable statement of the purposes of our Colonial policy, constituting the real justification for our holding on to whatever Colonial responsibilities we have to-day. All the same I would remind hon. Members that the easiest and most practical way of developing the resources of the Empire is buying the goods they produce. It is because of this, because in Empire trade we are just as much concerned, for reasons of social health and Defence, to build up the production and population of the Empire, as well as our own production, that Empire trade differs in kind and not merely in direction from foreign trade. That is why we should prefer it, and rightly give it a preference in our tariffs. Empire trade would be worth preferring even if it involved a certain amount of economic loss. So far, however, from involving economic loss, it has been a success on both sides of the picture, valuable to ourselves and equally valuable to the Dominions themselves. I think it is worth while pointing out that our export trade to the Empire went up from £171,000,000 in 1931 to £216,000,000 in 1936—an increase of 26 per cent. over a period which was very largely adverse. Our foreign exports over the same years went up from £220,000,000 to £224,000,000—an increase of only 2 per cent. due not to any fault of ours, but essentially because of the policy of other nations.

Since, and including, the year 1934 our exports of manufactured goods to the Empire have been greater than our exports of those goods to the rest of the world. In the first half of the present year the four main Dominions, South Africa, Australia, Canada and New Zealand, with barely 26,000,000 people between them bought £60,000,000 worth of goods from this country, whereas the United States with five times their population bought only £16,500,000. Surely we should be very careful before we imperil a trade already so valuable and with such immense capacities for expansion. On the other side of the picture, from the point of view of the Dominions, the expansion has been no less gratifying. Our imports from them have gone up by something like 80 per cent. Empire imports have gone up from 35 per cent. of our total imports to nearly 40 per cent. of our total imports. The Dominions have gained enormously; indeed, British Columbia was simply saved by the British preference. The Prime Minister of Australia the other day pointed out that under preference their exports to the United Kingdom went up from £46,000,000 to £61,500,000, an increase of 33 per cent. Incidentally, he also pointed out that their imports from this country have gone up from £20,000,000 to £32,000,000, an increase of 60 per cent. Surely that is a policy well worth pursuing and developing.

Let me remind the House that it has been a policy very moderate in its application. The main effect of preference, even if it begins by having an initial adverse effect on foreign trade with the Empire, results in the long run, through the development of Empire resources, in increasing the total foreign trade of the Empire at large. It is a striking fact that the actual total trade of the Empire with the world has gone up in the last few years, although the ratio of inter-Empire trade as a whole has gone up the small matter of one point, from 29.1 per cent. to 30.4. I think we might well be amazed at the moderation of our policy, and might consider, not how the policy should be checked or whittled down, but how it can be carried further. The late Prime Minister after Ottawa referred to it as the first step in a steady, forward policy. As a matter of fact, except for the recent Treaty revising the unfortunate backward step of the Argentine Agreement of 1933, we have made comparatively few forward steps, and I think the time has come for a definite advance all along the line in Imperial Preference.

At the same time, I fully recognise that there are limits to the extent to which we can enforce Preference now or at any time. This country will always want to do a certain volume of trade with foreign countries, and so will each of the Dominions. Australia will still want to sell her wool outside the Empire, and Canada her wheat. We are not aiming at a rigid policy of autarky, but only at a vigorous Preference which will still leave an opportunity for trade treaties with foreign countries on our part and on the part of the Dominions. I say at once, so that there may be no misconception as to the purpose for which we put down our Amendment, that we by no means oppose a treaty with the United States. On the contrary, we are anxious to see a treaty brought about. But let me point out some of the difficulties and the necessity for seeing the matter in proper perspective. The hon. Member for the Forest of Dean suggested that such a treaty would change the whole outlook of Europe. That was also the theme of speeches delivered in a previous Debate. I am afraid that, not only Europe, but the world at large is much too wedded to-day, for reasons based on their fundamental philosophy of nationality, to dream of doing that.

Communism and Socialism are by their very nature wedded to a strong and complete regulation of trade, and it is not only dictators with military objects in view who are advocates of economic nationalism. Labour wherever it is in power in the world demands effective protection. It is far more nationalistic than any bourgeois class ever was. I predict that if Mr. Lewis and the Committee of Industrial Organisation once get the upper hand in America there will be very little left of any concessions which we may secure in the immediate future by a trade treaty. I hope such a treaty will be possible, but do not let us be too sure that it will last. In fact, from the way in which some speakers to-day approached this question, it seems that their one hope is that before America changes her mind we may snatch something useful as against the general tide of economic nationalism.

A word on the actual merits of such a treaty. What is the object of any trade treaty? It is to introduce stability and security into the economic relations between two countries without prejudice to the economic policy of either. That is the general effect of several of the treaties which we have made in recent years. Take Denmark. We had a very unfavourable balance of trade which we wished to redress, not only in the interest of British exports but in the interest of British agriculture and Empire agriculture. We did so on terms which gave us a larger export to Denmark, and which, while reducing Danish exports to us, gave the Danes a certain measure of security, certain minima below which their exports could not be reduced for a certain number of years. I see no reason why we should not approach the United States in the same spirit. We have a very unfavourable balance of trade which gives us our lever. We are entitled to say: "We wish to redress that balance of trade; we wish to develop Empire Preference still further. But we do not wish to do that except on lines which will involve the minimum of inconvenience and hardship upon your producers." We know quite well that the Empire cannot produce all that we want, and as long as Imperial Preference is not reduced or whittled away, there is no reason why a certain tempo should not be set to its advance for a given time, say for the next three years, for regulating and stabilising the conditions of trade with the United States.

Let there be no mistake about one thing. It would be the height of folly to allow any negotiations to have the effect of whittling away the success of the policy we have already put into effect. The hon. Member for the Forest of Dean talked of the Americans wishing to increase their exports of fruit, apples, pig meat, and softwoods. In all these trades they have very good reason for wishing to increase their exports. They have an immense production, and in the years of high production the internal price in America falls and so reduces their profit. They wish to get rid of their surplus outside so as to keep up the price in the home market. Every one of these articles is of vital importance to the very existence of large communities within the British Empire—not a mere question of disposing of a surplus. To give way on these issues would indeed be to create a distressed area on the Murray River in Australia, in British Columbia, and elsewhere. That is something which we cannot do.

There is one other thing I want to say. We are interested not only in our own domestic development and in the development of the Empire. We also realise that in economic matters, as in foreign policy, we have to play our part in the development of the world generally. Is there no way by which world trade may be free from excessive obstructions? I believe there is. I believe that Ottawa pointed the way to complementary trading, involving internal reductions and some external additions, between groups of nations who from one motive or another, sentimental, historical or geographical, wish to trade with each other. To do that you will have to get rid of the Most-Favoured-Nation Clause in its present form. If we had not got rid of that Clause in 1898 as regards the Empire there could have been no Ottawa. That Clause in its rigid application is the greatest obstacle to freer trade. It is the real reason why the nations to-day are unable to make tariff concessions to each other and are forced to resort to the elaborate and vexatious machinery of quotas and monetary restrictions.

I believe that we, without any real sacrifice, could give substantial help to the economic and political regeneration of Europe if we announced boldly and definitely that we would no longer adopt a dog-in-the-manger policy in regard to the Most-Favoured-Nation Clause, but would encourage other nations to get together even if we were partially excluded. In our history we have often given a lead not only in political freedom but also in economic matters. We once led the world in the development of scientific protection. In the last century we led it in the development of free international trade. Let us give a lead now in the development of such freer trade as world tendencies to-day allow, and encourage the formation of groups like our own in the world. If the Prime Minister were able to say to the world that we would not stand in the way of the formation of such economic groups of European nations including their Colonies, but would use our influence with the Dominions and the United States to encourage such groups, it would be the dawn of a better day in Europe.

7.0 p.m.

Mr. Lees-Smith

If hon. Members who are responsible for the Amendment take it to a Division my hon. Friends and I propose to go into the Lobby with them. I propose to refer later on to the speech of the right hon. Member for Sparkbrook (Mr. Amery) which appeared to me to be rather distorted and out of perspective, but before doing so I should like to deal with the other main subject we have been discussing—the prospect of there being sooner or later another slump. Now I notice that the President of the Board of Trade said that he did not believe in the imminence of the slump, and that he thought the present activity of home trade would be maintained for many months. That is not, in fact, any answer to the contentions that have been put forward not only in the speeches this afternoon below the Gangway but in the speech delivered by the right hon. Gentleman the Member for Hillsborough (Mr. Alexander), or in the speech of the hon. Member for Bishop Auckland (Mr. Dalton) yesterday from these benches. We are not saying exactly when there will be a recession in trade. We say it is very likely there will be one, and what we say is that you ought to frame plans for dealing with that possibility at least a year or two ahead, and one of the reasons for doing that, apart from the fact of having your plans ready, one of the very sound reasons for doing that, is contained in the remark made by the right hon. Gentleman himself when he spoke of the great importance of, I think he said, the psychological position, when you are dealing with the possibilities of trade depression.

When a trade recession seems to be coming one of the great dangers is, perhaps, undue anxiety, which adds to the depression far more than the mere state of trade might produce; and, if you are going to correct it, one of the obvious methods is to let the public know, in advance, that the Government have thought out, in advance, all the possible plans for dealing with that contingency, and in particular—this is important—to make them understand in advance that those plans will necessitate the spending of money on capital account, which otherwise might alarm them. Let them understand in advance that the Government accept the doctrine that it is just as justifiable to spend money on reproductive investments, like roads, in time of slump, as to spend money, in time of booming trade, on economically unproductive investments like seaplanes, which are wasting assets, with a life of three or four years. That is the argument.

Listening to these Debates in the last few days, what impresses me is the enormous volume of public work which is waiting to be done. The Ministers themselves have pointed it out. The first speech on the first day of the Session was a plea for at last £10,000,000 to be spent on the roads. The Home Secretary has been telling us that we have to remodel and pull down a large number of our prisons. The Minister for Health spoke of slums and overcrowding. The Parliamentary Secretary to the Board of Education has been talking about black-listed schools. Now the Secretary of State for War is coming along, and he is telling U3 we should pull down and rebuild our barracks. There is no end to the work that is waiting. The right hon. Gentleman, in reply to these suggestions, says:

"If you did put this work in hand, if you did make your plans, you might find some of your plans had been carried out before the slump began." You will have plenty left; you will only have touched the very fringe of it. That is way I was rather surprised that whereas he suggested to the local authorities the wisdom of making plans like these, he gave no indication that the Government were going to stimulate them or that the Government themselves were going to carry out the policy that they were recommending other authorities to undertake.

The right hon. Gentleman followed the policy which I notice other Ministers have also adopted in seeming to reprove those who point out its possible danger by telling them they are unduly alarming the public. This policy was started by the Prime Minister in a speech not long ago when he described those who deal in these possibilities as "dismal Jimmies." I notice the Prime Minister in that speech, which I read, said that if there was another slump it would be of a very minor character, and very mild, because the seriousness of the last slump was due to the fact that we were still suffering from the destruction of capital during the War. As a matter of fact, when the last slump began we had over and over again made up for the destruction of capital during the War, and by 1929 the capital equipment of this country was much better than it was in 1919; and in the United States, where there was no great destruction of capital during the War, the slump was far more fierce than in this country. His argument was quite untenable, and I am surprised at the way in which he looked al: these future possibilities.

The possibilities might be very different. We have a situation in some respects more menacing than before the last slump, because we have the prospects of a trade recession which in itself will be one form of slump. At the same time we have the prospect that if the Government's plans are correct and are carried out, there will be some slackening off in armaments expenditure and that in itself is a possible cause of a slump and we may very likely be faced with those two causes of slump at the same time, with the result that we may have a recession quite as bad as those which we have had in the past. As a matter of fact, there is no particular reason why we should argue at great length as to what the degree of severity may be. The official view of the Government, so to speak, on this subject can be found in the report of the Unemployment Insurance Statutory Committee. This report is one to which we ought to pay serious attention, because it is on these conclusions that the finance of the Insurance Act is now based. The Statutory Committee has recommended that the finance of the Insurance Act should be based on the assumption—and this is a recommendation which the House has carried out since—that on the completion of the intensive phase of the Defence Programme we should be prepared for a relatively severe recession, and they go on to calculate that the recession will raise unemployment to about 16 per cent., which means a figure of about 2,000,000.

There was a statement—quite as good as anything put forward by ourselves—made as a matter of fact by the Chairman of the Unemployment Statutory Committee. I will read it to the right hon. Gentleman because it speaks with semiofficial authority. This was in a speech made to the Institute of Municipal Treasurers and Accountants. This is what Sir William Beveridge said: Preparation against war is obviously necessary. But there are other eventualities, definitely more probable than war, for which no similar preparation is made. He goes on: The first is the slump which we may expect after the present boom. He is the Dismal Jimmy. The general reason for expecting it is the experience of nearly 100 years of cyclical fluctuation of trade, industry and employment. The special reason is the stimulant given to industrial activity by the rearmament programme. When this programme gets past its most intense phase, unemployment, through displacement of particular classes of men, is likely to be added to cyclical depression. He continues: Damping down cyclical fluctuation directly involves more knowledge of its causes than we possess; but is the Government doing anything to promote discovery of these causes? Is it doing anything to plan the distribution in time of public work, central and local, so as to counteract the trade cycle? Has it a programme of peace works or plans to follow the rearmament programme? The right hon. Gentleman has obviously made it clear that the Government do not intend, though they may recommend the local authorities to do so, themselves to carry out these suggestions. For that reason the Debates are of a good deal of importance, because if and when Sir William Beveridge's expectations are fulfilled, a few years hence we shall remind the country of the warnings that were given to the Government. We shall call the Government to account—I will not say for their complacency, for the right hon. Gentleman objects to that phrase—but for the shortsightedness and the frivolity with which they are dealing with these possibilities.

Now I come to the subject matter of the Trade Agreement with the United States and the views on that subject and the observations made by the right hon. Gentleman the Member for Sparkbrook. I found his speech a little impalpable, because, apparently, he has no objection to the Trade Agreement unless it involves sacrifices to the British Dominions or British interests. I take it for granted that neither this Agreement nor any other agreement will be signed unless it gives mutual benefit to all the parties concerned. For a time I could not understand what his argument was, and what was his reason for the Amendment on the Paper. I saw as he went on that the right hon. Gentleman does not object to the form of the Trade Agreement, but his speech was certainly not encouraging. He thought it might break down very quickly, and that it would not hold water. He rather poured cold water on the attitude which a large section of the House has taken, and the argument which he used, and which one must take seriously, is that it would be far better, even at the expense of the United States, to build up the wealth and strength of those upon whom in time of danger we should be able to rely. That seems to me broadly what he said. That argument, as a matter of fact, begs the question. It assumes in advance that which has got to be proved. I thought he was going to prove it, but he did not do so.

The fact is that it is not clear to the Dominions that they would be building up their wealth and strength by a system which admittedly would give them a preference in the British market, but which would place a limitation on them when they wanted to enter into arrangements with other countries which would be advantageous to them. It has been clear for some time, especially from the reports of correspondents of the "Times," that the Dominions realise that it might not be so wise for them to increase their trade with this country if it were at the expense of the possibility of a further expansion of trade with other countries outside the British Empire.

The fact is that the Dominions must increase their trade with foreign countries. They have to take account of the fact that the population of this country is becoming stationary, and that apparently, whatever steps we may take, for some time to come there will be a declining population. The Dominions are beginning to adapt their minds to that fact. A few days ago I was talking to one of the officials of the Economic Section of the Secretariat of the League of Nations, who has been in close touch with Dominion representatives, and his opinion was—and I think it is not contested—that if the Dominions want to obtain an expansion of their trade, it must be very largely with foreign countries. If they cannot do that, they will have to build up certain secondary industries to produce goods which they are now obtaining from this country, and in the long run that will lead to a reduction in the amount of Imperial trade. Therefore, I am not at all sure that the right hon. Gentleman the Member for Sparkbrook has not fallen into the error of being more Imperialist than the Empire itself.

I certainly hope that a trade agreement will be made. We have now a very valuable opportunity of making one. When the idea of a trade agreement was first mentioned, what came into my mind was that the next step that I would like to see discussed after the signing of such a trade agreement would be the possibility of an intermediate tariff in this country. There is the preferential tariff for the Dominions, there is the ordinary tariff—why should there not be an intermediate tariff for the United States of America, joined by the Oslo Powers and by a large section of the world, which might be the next step towards a general increase in international trade? I say that because it is clear that a very unusual opportunity is now before us.

Hitherto, the Government have always said that they most earnestly desire a reduction of trade barriers, but that the initiative must be taken by other countries. At last the position is that an initiative for a reduction of trade barriers has come from another great industrial country. All the correspondents of the newspapers are certain that Mr. Cordell Hull has set his heart upon securing this trade agreement. The reason is fairly plain. Mr. Cordell Hull has already ma de 16 agreements with other countries, but he cannot complete the system or go much further ahead unless he makes a comparable agreement with the great manufacturing countries, of which we are the chief representative.

A book entitled, "Together We Stand," by Mr. Leonard Reid, the financial editor of the "Daily Telegraph," has been referred to by hon. Members. I noticed that the American Ambassador said that he thought that that book was the best expression of what the American administration really thinks, and I have spent a very diligent week-end in reading the book. I am bound to say that there is one thing above all others which it seems to make clear. The United States is a difficult country to understand because it combines extreme materialism with extreme idealism. I have been to the United States on three occasions, and it was only on the third occasion that I could persuade myself that that idealism was a genuine part of their make-up. It can become an important international factor. It is clear from the account given in the book to which I have referred that at the present moment we stand rather well in the United States. Our stock is rather high. In the early days of this Debate there was a great deal of discussion about the ideological attractiveness of Fascism and Communism to those of like mind to those two creeds, but I am pleased to see now that we also possess this ideological attractiveness, and that the American administration and American public opinion are attracted by this country at this moment because we have a system which is more like theirs than the systems of the authoritarian administrations. If we possess this attractiveness, why not exploit it? Why not respond to the advances of those who are attracted by our ideological allure?

Mr. Boothby

It is the National Government.

Mr. Lees-Smith

It is the democratic system which hon. Members in all parts of the House maintain; it is not the National Government, but that for which this House stands. This House has an allure for the United States, and there is now a very great opportunity before us. From the speech of the right hon. Gentleman the Member for Sparkbrook, I can see that there is a very clear difference between his conception of the future and that which is held by hon. Members on this side of the House and perhaps by a good many hon. Members opposite. The right hon. Gentleman spoke about diverting trade from other countries to the Empire, and he seemed to think that the more trade could be diverted from other countries to the Empire, the better it would be. I have an entirely different conception. I think that the more we have an economically closed Empire, the less justification we have for claiming that it gives benefit to the whole world. During the last half-century, when the Empire was even less closed than it is to-day, we maintained it with practically no complaints and no attacks from any other nation. That is why I hope the Government will not be deflected from going further on the path of this treaty by pressure from any of those who support them.

7.25 p.m.

Mr. Boothby

I am sure that the whole House has listened with great interest to the speech of the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith), and I must say that there was nothing in that speech with which I could not wholeheartedly agree. I do not know whether that means that I am becoming a Socialist, or that the right hon. Gentleman is no longer a Socialist; certainly he paid the most graceful tribute to the National Government that I have heard. He said that, after many years of suspicion and even hostility towards this country, on the part of the United States, the idealistic side of their nature had been brought to the surface for the first time in contemplating this country and its Government at the present time. He said that the United States were lit up with enthusiastic idealism as a result of watching my right hon. Friend the President of the Board of Trade over a period of two or three years; and that they felt more fervently pro-English than they had felt for many years. The impression I get from correspondence which I have with friends on the other side is that this is entirely true. I congratulate my right hon. Friend, and I hope that he will continue to inspire the idealistic side of the nature of the inhabitants of the United States for a very long time to come.

Before dealing in detail with the arguments of the right hon. Gentleman the Member for Keighley, there are one or two facts to which I would like to draw attention—without being alarmist in any way—because I think they have not hitherto been brought out in the Debate. The first is that, in addition to the words "Empire" and "League of Nations," one other word which was not mentioned in the Gracious Speech was "economy." We are at the present time spending a fearful amount of money. Our rearmament programme will cost £1,500,000,000, of which only £400,000,000 is to be raised by borrowing, the remainder being raised from revenue. That presupposes that there must be a continuation of cheap money and of confidence, and also that we must expect an increased revenue of at least £220,000,000 per annum for nearly five years, and probably for a considerable period longer.

There was no mention of economy in the Gracious Speech. Not only that, but the programme outlined in it will obviously require further Government finance. Moreover, every speech which has been made in the Debate, from all sides of the House, has urged upon the Government further expenditure of one sort or another. What I would like to point out is that our present debt burden is double the total national annual income, as compared with one-third before the War; and I do not think it can be easily borne without a further rise in money incomes in this country. In addition, we have at the present time an adverse balance of trade.

I do not think that those facts in themselves are very alarming, although I believe that attention ought to be drawn to them. We can carry these immense burdens, but on one condition only—if the trend of business continues upwards. If it does not, we cannot hope to carry them. We must face that fact. What it means is that all raw commodity prices have not only to stop falling as they have done for the last few months, but have to begin to rise slowly again, and also that capital investment in the industries of this country has to increase.

I feel that it is also necessary to draw attention to what has happened in the markets of the world during the last four or five months. I know that many jokes have been made about it, but I do not think it is a very funny joke. Largely for psychological reasons, there has been in markets during the last three or four months a slump of a greater intensity than the slump in 1929. I am not speaking now of trade, but of markets only. I have had some calculations made during the last few days which I believe to be more or less accurate. The paper loss in the United States since last March amounts to £3,700,000,000 on stocks alone. That is not taking commodities into consideration. I estimate that the loss on this side must come to at least £1,000,000,000 and possibly a little more; so that we may say that, on stocks alone, the market fall has caused a paper loss of something like £5,000,000,000.

I agree that that is unjustifiable. There is nothing in the circumstances of trade and industry to justify a fall of that magnitude, or indeed of any magnitude. But you cannot expect to get away with a market fall of such magnitude without any repercussions. There has been considerable impoverishment of small investors both in this country and in the United States—and we must not forget that, apart altogether from speculation, there is a considerable amount of investment in the United States on the part of people in this country, through trust companies and in other ways. British money has gone very largely in the past to building up the present economy of the United States. A great deal of it has been there for years. It was there before 1929; it remained there during that slump, and it remains there still. The second thing which this market slump has involved is a reduction, not only of actual purchasing power, but of the desire to purchase, on both sides of the Atlantic; and therefore a certain falling off in consumers' demand. Lastly, and this is a factor which I think the Chancellor of the Exchequer will sooner or later have to take into serious consideration, it must result in a con- siderable loss of revenue—for example on stamp duties.

We have had a sharp temporary reversal in raw commodity prices, which has not yet been checked. They are still, I agree, a good deal higher than they were and at nothing like slump level; but we want to get that reactionary tendency, at least, checked. The result of all this has been a most disastrous, and in my opinion unnecessary, weakening of the democratic forces of the world at a very critical moment. This is the most serious aspect of the slump in prices which has taken place. I hope that the optimism which has been expressed by the Chancellor of the Exchequer and the President of the Board of Trade recently is justified; but in this connection I would like to make two short quotations from an article which appeared in last week's "Economist": It seems to be the case that the bulk of the better-placed industries are looking for little more than the maintenance of present activity, while others can hardly avoid a setback. This fact coupled with the undoubted deterioration in sentiment seems to make it almost inevitable that there will be some decline in trade in Great Britain next year. That decline may be slight and is unlikely in arty case to he really drastic. Just how far it will go, will depend entirely on the development of the economic situation in the world as a whole. And that in its turn can be held with a certain economy of reasoning to depend upon two factors: the trend of commodity prices and the state of affairs in the United States. I think those are the two most important factors in the world at present, and they are the factors with which we are dealing in this Debate. The other quotation is this: Given a buoyant psychology, further progress in the world as a whole and maintenance of substantially the present level of activity in Great Britain could be predicted with some assurance. But a buoyant psychology is just what is lacking. The economic factors are very much better than in 1929. But the international political position is incomparably worse. It is questionable whether the world can afford even a minor set-back to economic recovery at a time when political tension is already almost unbearable. There is a great deal of truth in that statement. This is the only real danger signal I see. Whereas we could afford quite easily in ordinary times to have a minor recession, the present position is so critical that a minor recession, if not checked in time, might easily develop into something which would resemble a major recession if not a slump.

I imagine that the peak of capital expenditure on rearmament in this country will be reached some time next year. We must all hope so, if the programme is making satisfactory progress. What then? The hon. and gallant Gentleman the Member for Pembroke (Major Lloyd George) in his most interesting speech threw out several suggestions of a constructive kind, but there are limits to slum clearance, to municipal schemes, to water schemes, and so forth. There are limits also to the provision of arterial roads; and as my right hon. Friend the President of the Board of Trade has pointed out, you cannot postpone all these plans against the possibility of a recession. The best hope, as I think every Member of the Government and most Members of the House have realised, lies in the revival of international trade; and this is where the fall in raw commodity prices comes in as a highly disturbing factor. Whatever happens, primary producers all over the world have suffered during the last few months, and will suffer for the next two or three months, some diminution of purchasing power. That is why it is essential that the downward trend in commodity prices should be checked.

It is instructive, and it would be amusing if it were not so sad, to discover how this recession occurred. It is a very extraordinary story. I still believe that there was no real valid reason for it, or for anything like the fall in prices that has taken place. About the end of last year the authorities in Washington, and to some extent the authorities here, came to the conclusion, for reasons best known to themselves, that we were in danger of an inflationary boom. They came to that conclusion despite the facts that we had ample credit based on gold, that there were no actual surplus stocks of commodities, and that commodity prices were well below the 1926 level. However, we got, against a very dark and even lurid international background, a series of shocks administered—not I am sorry to say entirely from the other side of the Atlantic—to finance and credit, and to the markets, which, after all, are very sensitive.

First, there was the declaration by the President of the United States to the effect that, in his opinion, metal prices were too high; although previously he had said that his objective was to get them back to the level of 1926, which was considerably higher. On top of that was a gold scare, which appeared to emanate from the other side. Then came the first National Defence Contribution proposals. Then there was a second gold scare. My complaint at the time, and I think it was fully justified, was that nothing was done by the Governments on either side of the Atlantic to nip these scares, once and for all, in the bud. I still believe that if the Chancellor of the Exchequer had come out with some reassuring declaration on the subject of gold—had stated for example, that the Bank of England would purchase gold at a fixed price, this scare would not have arisen. It was the most dangerous scare of the lot, because it tended to bring the whole currency under suspicion. Confidence, upon which everything ultimately depends, was badly shaken and for some time practically destroyed. What has happened since has been simply that the barometer has made the weather. The weakness of the markets has brought about a temporary slump; and that is why the present economic situation gives cause for some anxiety.

It is, of course, not too late to check all this. I believe we can do it, but it is well that we should learn such lessons as are to be drawn from the experience—the largely unnecessary experience as I think—of the last few weeks. The closed economies of the Fascist States may last for some time, under increasing stringency, but I do not think that in the long run they represent the right form of economy. I believe the right hon. Gentleman the Member for Sparkbrook (Mr. Amery) would like to see these economies indefinitely extended throughout the world. The more closed economies he can get, the happier he will be. But here, I think, the right hon. Gentleman is fundamentally wrong. If business activity all over the world is to be confined permanently to certain political and geographical areas, there can only be one result, namely, a shortage of commodities in some of these areas and a glut of the same commodities in others; and, in addition, a shrinkage of markets and increasing poverty everywhere, due to the fact that fewer goods will in the aggregate be produced in the world as a whole. Modern transport and communications have telescoped the world from an economic point of view; and economically as well as politically, the democratic countries must, in the end, stand or fall together.

There is another lesson to be drawn from our experience, and not even the right hon. Gentleman the Member for Sparkbrook can escape it. It is that the prosperity of this country and of the British Empire to-day is largely bound up with the fortunes of the United States, whether we like it or not. The markets of London and New York do in fact rise and fall together. This, as I say, is a fact from which there is no escape. Hon. Gentlemen opposite say that they would like to take over and to run the economic system of the country themselves. I have some doubts about the right hon. Gentleman who has just spoken, but some of his colleagues declare they would like to take over and to run our economic system. But at the moment, neither the Government of the United States nor the Government of this country proposes to take over and run the economic system. They are asking other people to do that; and I submit that it is essential that any Government which is trying to run a capitalist system should create and maintain the conditions which are necessary if capitalism is to work.

Under a capitalist system, prosperity can be maintained only through the steady flow of capital into industry under the stimulus of confidence and anticipated profits. There is no other way in which you can get the wheels of capitalism to go round satisfactorily. To-day the rate of investment in capital goods is falling off in the United States, and, in a less degree, in this country. This is another rather disquieting factor. My right hon. Friend the President of the Board of Trade said, rightly, that we had no right to interfere in the internal affairs of the United States. Nevertheless it cannot be said that they are no concern of ours. The fact remains, that whether it is President Roosevelt in America or the Chancellor of the Exchequer in this country, any man with power and authority who makes a speech or gives a Press interview which brings about a diminution of confidence does, by that very fact, deal a blow not only at the economic system of the United States and of this country, but also at the democracies and the democratic systems of the world. I personally admire President Roosevelt in many ways, but I often wish he would remember in some of his natural fits of indignation against Wall Street, that every time he brings about a lack of confidence he deals a thundering blow at the very cause which he himself has most at heart—the cause of democracy and freedom.

Lastly, another lesson which we can learn is that whether we have a Socialist or a capitalist Government in this country, managed finance is here to stay; and the power of the managers is almost unlimited—far greater than any of us ever imagined it would be. Bad management and lack of co-operation between the United States and this country were, in my opinion, largely responsible for the slump of 1929; and they are almost entirely responsible for the recent recession. But whatever mistakes have been made, it is not yet too late to rectify them, and we must always bear in mind the fact that policy is more important than either individuals or Governments.

I would like now to enumerate certain points of common interest between the United States and this country and the British Empire as a whole, because they are vital to the argument. First, we are all intensely interested in the maintenance of commodity prices at a level sufficiently high to ensure the economic well-being of the primary producer on whom everything ultimately depends. Secondly, we are all greatly interested in maintaining the currency value of gold, we, as the greatest producers of gold and the United States as the greatest possessors of gold. I do not think that even the hon. Member for South Croydon (Mr. H. G. Williams) can expect that in the absence of economic agreement between our two countries the United States will continue indefinitely to take 20,000,000 ounces of gold from us per annum and thus keep South Africa going. Finally, we are all interested in the removal of exchange restrictions and quotas, and the revival of international trade.

All I would say to my right hon. Friend in regard to this trade agreement is this. We know there are difficulties. We all know the difficulties that are bound to be raised by vested interests on both sides, not merely because they are wicked vested interests, but naturally and inevitably. It is bound to be difficult to negotiate any kind of tariff agreement because of the circumstances of the case. All I would beg him to do in these negotiations is to keep his eyes firmly fixed on the ultimate goal, as well as on the immediate objective; and not to take a narrow view We are not really, in the long run, aiming merely at a tariff agreement. We would like to see that carried through as the necessary first step in a policy of increasing economic co-operation between the British Empire and the United States of America.

But just think of the ultimate forms that co-operation might take—a de facto stabilisation of the pound and the dollar, to which the currencies of all those countries of the world which are not behind a closed system would ultimately link themselves; the maintenance on both sides of reserves and credits at the banks sufficient to maintain commodity prices; and last, but not least, as an ultimate aim, is there any reason why, in cooperation with the United States, we should not use some of the vast stocks of gold that we possess in a joint lending policy to try and re-establish a measure of prosperity to those countries which are still impoverished as a result of the War and of the slump of 1929–32? There are countries which are crying out for purchasing power, to whom gold loans would be invaluable. We could quickly increase international trade, and purchasing power, by acting thus together with the United States. We can do that in cooperation; but I doubt whether it is possible for a single country to do it at the present time. I would only say that Mr. Bruce, of Australia, has repeatedly emphasised that if, as part of an agreement with the United States of America, we could work out some policy which would result in a lending policy designed to revive the purchasing power and prosperity of some of the impoverished countries of Central and South Eastern Europe, which would then be in a position to purchase Australian raw materials, he would be wholeheartedly in favour of such an agreement, and would be prepared to make tariff concessions to attain that end.

I have not touched, and have not time to touch, on the political advantages of economic co-operation between the English-speaking peoples, as others have already done. I would only say that I believe it is by far the best hope, and perhaps the only hope, of saving our civilisation from war and destruction. If we accept the advice of some hon. Members opposite and turn the League of Nations simply into an armed alliance of the countries of the Left against the Fascist States, then, in my opinion, an ideological world war is inevitable sooner or later. We want a wider and a broader conception than this; and the first essential is co-operation between the British Empire and the United States of America based, not on a military alliance, but upon mutual interests, sympathies, and aims. Such a combination could to-day control the oceans of the world, the gold of the world, and, therefore, the economy of the world; and together we could, I believe, use our power and our influence at least to localise war, if it should break out in the future; and we could use our immense resources, in fruitful co-operation, to restore a measure of prosperity to humanity.

7.48 p.m.

Mr. Owen Evans

I entirely endorse what the hon. Member who has just sat down has said as to the desirability of co-operation between this country and the United States of America. I think it is significant that almost every speaker in this Debate to-night has welcomed the raising of this question, and my two hon. Friends the Mover and Seconder of the Amendment will, I am sure, be very gratified that in all parts of the House an expression of welcome has been made to their raising of this question. That indicates, I think, that this very serious question of the possible recession of trade is in the general mind of the Members of this House and that it calls for careful consideration. Therefore my hon. Friends need make no apology at all for bringing forward this Amendment, which has called forth such an excellent Debate and such a great variety of views.

Circumstances point to the fact that we are justified in calculating at any rate on the possibility of a recession of trade, if not in the near future, at any rate in the not too distant future. The trade cycles that we knew before the War were something very different from what might occur to-day in the very abnormal and unnatural circumstances that exist as regards trade. In the trade cycles of the past, if there was a little increase in unemployment, countries like Germany and this country before the War, and therefore before unemployment insurance, were able to deal with the problem to some extent, were able to meet the sufferings of the unemployed and the loss of earnings of workmen to some degree, but after the War we have had none of these trade cycles such as we knew before. They should not be called trade cycles so much as trade convulsions. With the relations between the nations as they are to-day, the fear that we have to bear in mind is not that we have to meet an ordinary trade cycle, a variation in employment, but, having regard to the state of the world to-day, it is something like a convulsion that we have to meet, and the ordinary methods that have been devised to insure against unemployment may not meet that situation, although they are all calculated actuarially to meet the ordinary occurrence of unemployment. The trouble that we have to face is that owing to the political conditions of the nations of the world to-day, we may have to suffer a great deal more than what can be calculated upon for the ordinary changes in trade.

The Government have been duly warned of the possibilities. Mr. Maynard Keynes, at the beginning of this year, wrote a very important series of articles in the "Times," drawing the attention of the Government to the problem and suggesting some plans for meeting it, in his own way, a very original way. I do not know whether the Government have given consideration to those plans, but it shows that people who think on these subjects are alive to the necessity of bearing these problems constantly in mind. Even the Chancellor of the Exchequer, in the course of these Debates, referring to some observations of the Leader of the Opposition, said: He observed, and his observation is no doubt justified, that as the period of comparative prosperity continues we must be getting near the time when a change might be expected, though the Chancellor went on to say: I do not think there is any solid ground for saying that on the whole there is any palpable indication that this progress will be arrested."—[OFFICIAL REPORT, 26th October, 1937; cols. 24–5, Vol. 328.] The Government have had this warning from all directions, from industrialists, from economists, and from their own supporters. I would say here that, although I believe in these possibilities, I deprecate very much exaggerated ideas of these possibilities, and for that reason I deprecate some remarks by the right hon. Member for Wakefield (Mr. Greenwood) in this Debate, when he made the statement: Unless you begin to think about taking steps now … nothing can prevent a trade slump in the next three years… Of course, a trade slump is inevitable."— [OFFICIAL REPORT, 27th October, 1937; col. 90; Vol. 328.] I deprecate that sort of statement, because I do not for a moment consider that a trade slump, if we consider the whole matter in time, is inevitable at all. I should think that, were we to meet the situation now and to deal with all the reasons which may account for a serious slump, we could at any rate alleviate it and possibly avoid it altogether. I have referred to the state of the world. The political state of the world, the uncertainty, the talk of war, the discussions in this House for days on foreign affairs, the talk in the City, the talk everywhere of war, the possibility that at any moment there may be a conflict in Europe, whether that is true or not, the constant expression of our views about it—all this is bound to affect the question, and that affects trade more than anything else. The condition of the world at present does not give to me or to any industrialist or private individual in this or in any other country assurances of progressive improvement in trade. You have crisis after crisis, day after day, nervousness all round, flaming headlines in newspapers, especially in the United States of America, where I happened to be when the President made his remarkable speech. Therefore it is natural that everybody in this House must seriously consider whither we are going. The United States, as everybody knows, is the most self-contained and the wealthiest country, probably, in the world. You get the newspapers there during the last month with flaming headlines, and I had, from an authoritative study of the conditions there as a result of the slump in Wall Street, such a description as this by a research bureau in Washington: A confused outlook… Sharply de-dining prices of commodities… Lagging tendencies in steel and other basic industries… Management's cautious policy, confining current purchases to a minimum. When you get a great country like the United States described in that way, as having a confused outlook, with the managers of great steel industries refusing to sign contracts, with no orders from railways for equipment which is badly needed, with great leeway to make up in public utility companies, including railways, that shows that there is a lack of confidence. Why? It may be due to fear of what the President is going to do, but the talk of war in Europe has more to do with it, to my mind, that anything else, and if that goes very far in the United States, that is bound to have its reaction in this country and in other countries of the world.

Take our own country. Reference has been made, in the course of these Debates, to the reduction in building by private enterprise. What is far more important is the cause of it, and that is the substantial rise in the cost of building materials. I agreed with the argument presented by the Chancellor of the Exchequer last night when he said that a rise in the cost of living does not necessarily mean that conditions are getting worse. I venture to submit that when there is an increase in the cost of manufactured articles or of material which is being used in manufacture or building—a rise of 20 to 25 per cent has, I believe, occurred during the year—it is bound to steady and to slow down the building and the equipping of factories. The tendency will be for owners of factories to postpone equipping them until they see clearly what prices are going to do in future. All these things have a tendency to affect adversely the course of trade in this country. Then there is shipbuilding, which has been mentioned. With regard to that, again, the President of the Board of Trade said that he was not so sad, but imagine what the conditions are in the Clyde. They are sufficiently important for the "Times" to pay attention to them and for the "Glasgow Evening News" to give a two-column statement of the position, in which it says: A small ferry boat is the only contract secured by the 23 producing shipyards in the Clydeside during the past two months. The explanation given to the House is that that again is due to the rise of the cost of steel and materials used for the purpose of shipbuilding. Whatever else may be said, it does not necessarily mean that the rise in the cost of living and in commodity prices indicates that we are going backwards, but it is a serious thing for those who have to calculate their costs of building that they do not know how far this rise is going in the next few months. Therefore, it has a tendency to affect adversely the trade of the country, especially in the purchase of capital goods. The hon. Gentleman who has just spoken quoted an article in the "Economist," which is the same quotation that I had on my notes, and I will not quote it again except to say that the conclusion arrived at by the "Economist," and also by the London and Cambridge Economic Service, is that it is almost inevitable that there will be some decline in trade in Great Britain next year. The chief factor which is causing that is the uncertainty in the world to-day, and the one thing above everything else that will remove it is, in the words of the "Economist," to relax this tension—

A relaxation of this -tension to-day is an economic necessity as well as a political imperative. One is inclined to ask for some more information from the Government on this subject. Can we have some statement on what their policy is? We have suggested in the Amendment that one thing we must have is the removal of economic barriers to world trade. What are these economic barriers? There are tariffs. I agree with the remark that was made today that far worse than tariffs, quotas and such restrictions is exchange control in the various countries which have to deal with one another. Who establishes these exchange controls and why are they established? In order to discuss intelligently the question how they should be removed, we must diagnose the cause of the disease and know why they were put on. Take the case of Germany. She was ordinarily before the war a large and valuable customer of this country, and she is so to-day. It is not for us to question whether Germany is wise in putting on exchange controls, but the economic advisers of the German Government consider they are necessary for their own national safety. The same thing occurs in Italy. It is not for us to deny them exchange control if they need it. It is an internal matter and they consider it is necessary in order to preserve their currency and to limit the amount of foreign currency which is available for the purchase of goods from abroad. Therefore, the limitation of that currency means less trade all round. It means less trade for us. Italy was a good customer of ours. She was an excellent customer to the coal fields of South Wales. The exchange control affects adversely that trade, and engineering, machine tools and that sort of trade is also affected.

We have discussed the political relations of this country with Germany and Italy for days. There have been full-dress debates on foreign policy. What do the Government know about the internal economic positions of those countries? Surely there should be an economic general staff to enable us to know what is their position economically, because that materially affects the trade of this country. Having ascertained that, the Government should start conversations with those countries to improve their economic conditions in order to make them better customers of ours and to improve trade generally. I should like to know whether the Government are undertaking conversations for the economic pacification of the world—of Germany, Italy and all other countries—because without that I do not see any hope of any permanent peace, or even a beginning of a permanent peace in Europe.

One word about the United States of America. I am one of those who firmly hold with strong conviction that the one thing above everything that is needed in the world to-day is the completest and closest co-operation in every respect between this country and the United States. Those of us who had the good fortune to visit America recently—and there were several Members of this House with whom I had conversations on the way back—are all agreed that the atmosphere is right in the United States for a discussion. There is, however, one thing about which I should like to warn the House. If we think that we can lead the United States by the nose to do certain things, we might as well give up the job, but in mutual discussion I believe that the American Government, especially Mr. Cordell Hull, is 10-day open-minded and ready to move a good step forward in the direction of co-operating with this country with a view to having freer trade, and especially an agreement with this country which will have a tremendous effect upon world trade as a whole.

I am not going to add anything to what has been said so well by my hon. Friend as to public works and means which the Government should take to plan in readiness for any reduction in employment, if it ever comes. We have used the phrase "utilisation of national resources." That does not necessarily mean public works. We do not even know our national resources yet. It is one thing that the Government do not know. We dc not even know our national resources in metal. We have never had an official survey of the national resources of the country from the point of non-ferrous metals. There used to be lead, tin, zinc and silver worked in this country, and I do not believe, from all the information I have been able to get, that the Government really know what are the national resources in this respect. In my own constituency there were prosperous lead mines. There is still plenty of lead there, hut the Government have never made a thorough survey. If the Government wish to throw subsidies about, they can give me a few thousand pounds for North Cardiganshire, and I will make these lead mines pay very easily.

I was interested last night to hear the Chancellor of the Exchequer reminding the Labour party that they had admitted that they could not put their policy into operation without a crisis. If we have a crisis of the right sort I do not mind a crisis. Those Liberals who support the National Government wholeheartedly, including the Chancellor of the Exchequer, know perfectly well that any progressive party, even the Liberal party and the Radical party, will create any number of crises. As long as we have a crisis of the right sort, a crisis which pathologically changes the patient for the better, I do not mind. We have had crises in the history of the Liberal party. At the introduction of Old Age Pensions and of National Health Insurance there was a crisis, with outcries about stamp licking. Noble Lords—Lord Rosebery and others—thought when Old Age Pensions were introduced that it was the end of all things, that we were pauperising the nation. Any party if it is doing something notable is bound to create a crisis. Even the National Government raised a crisis this year. They had to withdraw a tax which they had introduced, because there was a slump in prices in the City. What was that but a crisis? I invite the Government to do something which is really notable and will give the country a feeling of confidence that they are in earnest about this question.

8.16 p.m.

Mr. Peat

I find it very difficult to produce anything in the nature of a debating speech to-night, because in listening to the Debate I have been struck by the unanimity among the Members who have taken part in it. I should like to add my word of pleasure in the fact that this most important discussion has taken place, because, in common with the hon. Member who has just sat down, I think it is the duty of all hon. Members, on whatever side they may sit, to do everything in their power to stop a recrudescence of the trade cycle in which a slump inevitably follows a period of boom. In my opinion the next slump, if it comes, will be more disastrous than the last slump. In some ways I think it would be worse than war, and it is just as important that we should fight against another slump as that we should fight against another war, because I believe the people of this country and of the world in general will not stand for what they had to endure in the last slump, with its frightful penury, misery, poverty and feelings of suspense. If we cannot evolve something in this Parliament which is going to stop that, I think the people in this country will have some right to ask that others shall take our places here, even that there should be some other form of government. In other words, I believe that our very form of democratic government may be in jeopardy unless we can find some solution to this problem.

I am not an economist and I cannot produce any particular plan for avoiding slumps in future, but I can, from my own fairly simple mentality, show what I conceive to be the main factors in this system of slump and boom. A slump, as has been said, arises from lack of confidence, is very largely psychological, largely a matter of fear and of worry. As others have said, unless we can get international trade going again in the next few years all our efforts will be unsuccessful. We may provide palliatives, but they will be unsuccessful in the long run. I have complete confidence that our Foreign Secretary and the Government are doing all in their power to avert the great disaster of war. The next thing contributing to a slump is the fear of a fall in prices. How many men and women who are to-day thinking of carrying out a contract or of undertaking some improvement will say, "If I wait a little longer prices will drop?" That is the first stage in the break of a boom—that people begin to fear they will have to buy at the top of the market, and wonder whether prices have yet reached the ceiling.

Then there is the important question of making trade impervious to stock exchange panics and "hot money." The last big slump was produced, we have been told, by a stock exchange panic in New York. I am very glad to think that we in this country have passed through a very uneasy time on the stock exchange, when a great deal of money was lost -on security prices and commodity prices, with the trade of this country still keeping on an even keel and, indeed, progressing. I think it is a favourable sign that we are getting away from the influence of such things as stock exchange panics. We have to face the fact as other speakers have said, that the countries of the world to-day are intensely national in their economic outlook, and with that in mind we have to try to build up some way of regulating our markets, because that is important in the international situation. I think the Government have done as much as they can in the trade arrangements made at Ottawa and in the other trading agreements which they have entered into, but I should like to support my right hon. Friend the Member for Sparkbrook (Mr. Amery) in his view that it would be an improvement if we could get away from the Most-Favoured-Nation Clause.

Coming to the question of Empire development, I think that if we make a trade agreement with the United States of America we should attempt to make an agreement not only between this country and the United States but, as far as possible, between the whole Empire and the United States—something in the way of a three-cornered arrangement. I should like to see our trade agreements enlarged with that consideration in view. We ought to bargain with the world as an Empire and not as an isolated country. If we could do that it would be to the advantage of the Empire certainly, and to the advantage also of the world in general.

I do not intend to keep the House long, but I should like to refer to something which has escaped the notice of other speakers, and that is the efforts which have been made in this country to avoid in the domestic sphere the return of a slump. I refer to the organisation—the reorganisation if you like to call it so—of industry, and I will quote the iron and steel industry as providing an example of what we ought to try to do. I do not speak for that industry in any way, but I have a certain knowledge of it. That industry has attempted, under pressure from His Majesty's Government, to organise itself in such a way that it will be proof against the trade cycle. That has been openly stated by its leaders. How has industry gone about it? First of all those in the industry have made themselves a homogeneous unit. They have got into touch with their consumers and with their suppliers, and have attempted to make certain of their markets. Their market in this country was assured to them by the action of the Government. Their markets abroad have been assured to them by their own efforts in making arrangements with the international cartel. In that way they have achieved a start in making certain of their market, so that they can say "We have a certain production which we can sell."

The next point—I am only touching on a very few points—concerns prices. It is a most important point, because as soon as prices start to get out of control and are not regulated by anything except the shortage of the supply and the greatness of the demand, we find that buying falls away. The industry is well aware of that fact and has been trying, to the best of its ability, to keep prices clown. It has been trying—and this is a most important point —to correlate prices throughout the industry, from the buyer of raw material to the purchaser of the finished product, so that any change in prices may be regulated from top to bottom. Those prices are subject to the control of the Import Duties Advisory Committee, who have audited costs of these prices submitted to them.

That seems to deal a very strong blow at the trade cycle. If the customer is assured that the cost he is paying for his steel or other commodity is based on the lowest possible figures of production he wall get away from the dangerous mentality that he is dealing with a rising market which has no relation to the cost of production. Certain hon. Members may be apt to criticise the iron and steel industry for its prices, but those are prices which are charged by distributors, who are riot controlled as we would like to control everybody in the industry. Hon. Members must face the point that if you are to reorganise industry as it must be done under present economic conditions, the industries reorganised must be controlled completely; not 90 per cent. but 100 per cent. controlled. You must be perfectly ready for rebate schemes and schemes of that character, which have only one object, control of prices.

Lastly, I would like to refer to controlled expansion, which is another important feature in the trade scheme. When times and prices are good, everybody puts down a new factory or a new works, often being very ill-advised in doing so. That is a feature in the iron and steel industry. It is a typical example. It has been quoted as an experiment in which an attempt is being made to control expansion so that, for the purposes of their customers, in normal times they have an efficient productive capacity, but behind that, a stand-by capacity which will be prepared for swollen demand in times of boom. Such a stand-by capacity is to be supported, if the plans go through, by contributions from the industry. There is no question of inefficiency or of reducing demand by putting up the prices. That is not the point. The great desire is to avoid the derelict plant when the boom is over, appearing in the wrong place with nothing to do, while hundreds of thousands of workmen are out of a job. That is one of the most important of the efforts which are being made in this country, not only in the iron and steel industry but in other industries, and I hope it will be made with increasing vigour, first in our basic industries, and secondly, in the distributive industries. Unless we face reorganisation of industry on that basis we are allowing weaknesses in our industrial structure in this country which may very well, by its chaos, help us towards another slump. I hope hon. Members will forgive me for being so long, but I wanted to refer in general terms to the international situation and to draw the attention of hon. Members to what I consider is a very important development in domestic reorganisation of our industries.

8.30 p.m.

Mr. McLean Watson

I would like to say a word or two on the subject of this Amendment before we pass from it, as this is the last night when we shall discuss the King's Speech. We are discussing a very interesting Amendment dealing with the future prosperity of this country. We are supposed to be enjoying a period of prosperity at the moment, but a considerable section of the community is very much concerned with what is to happen to it in the not far distant future. The hon. and gallant Member who moved the Amendment said that present conditions could not go on for ever. With the termination of the rearmament programme, what is to happen? The Amendment has been moved and framed in the hope that the Government will give us an indication of what they intend to do before the slump comes.

I am pleased to be able to support the Amendment. It is a much better one than another which appears upon the Paper. There is an Amendment in the names of Welsh Members protesting against the omission of Wales from the Gracious Speech and because the Government do not propose to set up a Department for Wales together with a Welsh secretary such as we have in regard to Scotland. I would remind our Welsh friends that we have a Secretary of State for Scotland and that we are supposed to have a separate Department, but, so far as the King's Speech is concerned, that is all we are to get. We are to retain our Secretary of State for Scotland and our Department. I suppose the people of Scotland will be expected to be grateful to the Secretary of State for War for the announcement that we are going to retain our Greys, and that the Government propose some paltry Rural Housing Bill to be introduced during this Session. We shall see what comes out of that. It may make a very material difference in Scotland. I want to draw the attention of the representatives of the Government who are on the Front Bench to what is actually happening in Scotland at this moment.

Mr. Deputy - Speaker (Sir Dennis Herbert)

I hope the hon. Gentleman in what he is going to say will remember that we are now restricted to discussing the Amendment.

Mr. Watson

I am trying to deal with the terms of the Amendment which deals with the intentions of the Government in the event of a slump. I wish to bring before the House at the present moment the position in one part of the United Kingdom where, I maintain, the slump is on already. From the indication the slump is here already, and the Government are required to do something now and not at some future time; not next year, when, according to the hon. Member for East Aberdeen (Mr. Boothby) we shall be at the peak of spending upon rearmament. If we are only to reach the peak next year, I would draw the attention of the Government to the fact that the slump is already on in some parts of this country, and that it is necessary for them to do something. I do not know whether a better distribution of the rearmament programme would meet the case, but certainly something is required in order to meet the difficulties that are arising in various parts of the country.

It may be held that Scotland has its share of the rearmament programme. Reference has been made over and over again to the state of matters on the Clyde. The Clyde is building a considerable number of warships for the Admiralty, but, while some of the shipyards there may be busy with Admiralty work, I would remind the House that, as was said by the last speaker from the Liberal benches, so far as commercial work is concerned the Clyde has had only one very small order during the last month or two, and there is going to be a slump on the Clyde before next year unless something is done to improve the position there.

We have been told from the other side of the House that the surest indication of coming prosperity is activity in the building trade. I suppose the converse is true, that indications of the coming slump are given when building falls off. Scottish Members, not for weeks, but for months past, have been drawing the attention of the Secretary of State for Scotland to the fact that house building in Scotland is in a very serious position, and that also is an indication that the slump is coming even before next year. There are other indications. In anticipation of a share in the prosperity resulting from the rearmament programme, certain capitalists have been encouraged to develop certain works. For example, near Dumfries a works was started some time ago for the building of aero engines. So far as I can learn, that works is likely to close down, and, while it is true that no large number of men may be thrown out of employment, it shows that Scotland at any rate is not going to share very largely in the boom that has been caused by the rearmament programme. I want to say these things to the representatives of the Government who are here in order to indicate that something requires to be done now, before the slump comes, and that this Amendment is a very proper one to bring to the attention of the House.

I know that other Members, like myself, are anxious to say a word or two before the Debate closes, and I do not propose to take up very much more of the time of the House, but I should not be doing my duty as a Scottish representative if I did not draw the attention of the representatives of the Government to the fact that we have first-class schemes in Scotland for absorbing labour and material, if the Government are prepared to find the money, or, at any rate, a respectable part of the money. [Interruption.] It is true that there is no representative of the Scottish Office here, but, at the same time, I am taking my chance of bringing some Scottish grievances before the attention of representatives of the Government. A deputation of Scottish Members went to the new Minister of Transport to draw his attention to the fact that we have some big schemes that could be taken in hand should the Government be wishing for schemes to take the place of the rearmament programme when that is finished.

Over and over again we have drawn the attention of the Government to bridgebuilding schemes in Scotland that will require to be taken up at some time or other. A number of years ago we were hopeful of getting a Forth road bridge, and perhaps also a Tay road bridge. Unfortunately, the last slump came, and we were told that it was impossible to undertake such schemes at that time. Then, when prosperity comes, and we again approach the Government on this matter, we are told that because of the rearmament programme these schemes cannot be considered. They are to be kept in mind. The present Minister of Transport has assured us that these schemes are in the minds of the Government, and that, when the opportune time comes, they will be considered. I hope that something is going to be done about this matter. The last time we approached the Minister of Transport we got his sympathy and his assurance that the schemes were being kept in mind. We impressed upon him the fact that, before either scheme could be undertaken, a considerable amount of preparatory work would be required, and I would like to know whether the Government are doing anything preparatory to undertaking schemes of that description. The local authorities have indicated that they are prepared to do something in order that these schemes may be completed.

The schemes are required for the opening up of the East of Scotland. It is lamentable that the connection between Fife and the Lothians is confined to one railway bridge. We require at least one good road bridge over that estuary in order to provide proper facilities for travelling in the East of Scotland, and it is lamentable that up to this moment the Government do not seem to have done a single thing towards undertaking any of the preparatory work that will be required in connection with these schemes. I hope that during the present Session of Parliament the Government are going to give to the people of Scotland some assurance that a scheme or schemes for road bridges over the Forth and Tay will be undertaken. In addition there are drainage, water, and other schemes that require to be undertaken, and I am certain that, if the Government were prepared to give the local authorities assistance with schemes for rural water supplies and for drainage and other public undertakings, they would be perfectly willing to cooperate with the Government in order to avoid a slump in a year or two years from now.

As the Mover of the Amendment said, the present conditions cannot go on. We cannot go on spending hundreds of millions of pounds for an indefinite period. It has got to come to an end, and, before it comes to an end, I hope the Government will have their schemes well prepared in order to avoid a slump. Hon. Members, on the other side particularly, have deprecated any reference to a coming slump, or to a trade depression, or anything of that kind. They pretend that, if we talk about the coming slump, the slump will come. Whether we talk about it or not, the slump will come. Everybody knows that, after this rearmament programme is finished, the slump will come. Let the Government stop their rearmament programme, and you will see what will happen. Let the work be stopped in all these areas where either naval or military work is being undertaken in the shadow factories about which we have been hearing and reading during the last few weeks, and the naval work that is going on throughout the length and breadth of the country, and you will see what will happen to the unemployment figures. It is true that there has been general improvement in the trade of the country apart from the rearmament programme, but undoubtedly a very great stimulus has been given to employment and to wages in this country by the rearmament programme of the Government. I join with those who this afternoon have appealed to the Government to prepare plans before the slump comes. At any rate, we in Scotland are convinced that the slump will come, because the indications already are sufficient proof that before long we shall be in a trade slump.

8.47 p.m

Brigadier-General Sir Henry Croft

I am sure that the House has listened with interest to the speech of the hon. Gentleman, which was offered in such very courteous and friendly terms. But we have had, as he remarked, speech after speech from those benches indicating the opinion that the slump must come. I try to keep in touch with industry in this country and to watch its progress, and there are two thoughts which I want to offer for dealing with the Amendment in answer to what the hon. Gentleman has said. Undoubtedly, before the rearmament programme was commenced industry was back again on a pretty firm basis. That is the first point I want to emphasise. The second point is that, even if the rearmament programme were to be completed more speedily than we can hope, it is not correct to say that the whole of that expenditure would suddenly come to a halt. Every penny spent upon a battleship, cruiser, destroyer or aeroplane is circulating through the country. I am not one of those who feel that the whole of that money disappears into thin air. It goes right through the steel works, the mines, through all the trades and industries of the country and the transport system. I agree that we might have better expenditure—we all hope that the day will come when sanity will rule the world and we shall not be compelled to make these expenditures—but that expenditure will not disappear. It will help forward the continuance of trade prosperity, in which, apart from rearmament, I can see at this moment no sign of any great decline.

I come to the Amendment, moved in such able terms by the hon. and gallant Member, who knows that I intend to make a remark or two, but as there was nothing critical in what he said I do not think that I shall be disregarding the courtesies of the House if I do so in his absence. I regret very much that the Amendment moved from the Liberal benches is an omnibus Amendment, because it seems to be rather contradictory in two parts. The idea, which is rather implied, that you could get rid of tariff barriers, as they are called by hon. Members on the Liberal benches, but which others describe as preferential tariffs between the countries of the Empire, and at the same time go ahead with the full policy of development of the Empire, seems to be contradictory. You cannot develop the Empire if you first destroy its economic life and its power to attain prosperity.

I could not possibly cast my vote against that part of the Amendment which refers to Empire settlement if it stood as a substantive resolution. I rejoice to see this very specific determination of the Liberal party to put its faith upon record that it has so definitely departed from the old laissez faire policy as urgently to advocate the development of the Empire overseas. When the hon. and gallant Gentleman was speaking I could not help asking, "Is Saul also among the prophets?" The further his speech progressed the more I began to say to myself, "What a pity it is that so much virtue is wrapped up in an Amendment with a certain amount of political sin." I state quite definitely—and I know that I am voicing the opinion of a great number of those who sit behind His Majesty's Government—

Mr. G. Griffiths

There are not many of them present.

Sir H. Croft

It is the dinner hour, and before the dinner hour there was hardly a space on those benches. [Interruption.] It is very courteous to the hon. Gentleman to sit and listen to what I am saying. I am very grateful to him, and I hope that I may listen with equal courtesy to him in the days to come. I believe that the policy indicated in the Amendment, of taking active steps to develop the British Empire, is the sanest long-distance policy which we could consider in this House for insurance against depression, for the helping of the depressed areas and for increasing trade and employment generally. Upon that long-scale policy, in my belief, depends very much the future welfare of the people of this country. Undoubtedly the initiative must come from this country. We should assent to the principle of development and offer our aid to every part of the Empire which intends to expand and perfect its machinery of civilisation. I do not mean by this that the Government, or the Governments of the Empire, should go in for special settlement or development schemes. That always appears to me to be wasteful and extravagant, and, as hon. Members know, unfortunately, in some of these settlement cases, even ruinous. But if you had a great corporation of chosen experts—experts on settlement, rail, road and air transport, constructional engineering, harbours and shipping, and irrigation, with a Treasury official representing the Government, if the Government are to give their credit, you would be wise in placing British credit behind such an organisation. I am of opinion that you could go safely up to something like £50,000,000 a year for 10 years with such Empire expansion and development.

It is clear that you cannot get the capital overseas, and, therefore, let Britain provide the capital, through private initiative. Let us ask the Dominions and Colonies to give all possible assistance in providing land and facilities under the most favourable terms, and their co-operation in making it impossible for land sharks to make such schemes difficult. Do not let us say, "It cannot be done; the figures about which you are talking are altogether too great," when we in this country have been able to lend something like £400,000,000 sterling since the War to Continental countries, a vast proportion of which money has gone, if not actually, to the provision of armaments, in relieving those countries in other directions and making it possible for them to spend the money on armaments, some of it having no interest return, I regret to say. If we can do that, I am certain that it is not impossible to contemplate a somewhat similar sum loaned from this country for the purpose of promoting the peace, prosperity and happiness of the Dominions and the people of the Colonies overseas. I implore the Government to consider some such scheme.

I think the criticism from the hon. and gallant Member had some sting in it. We have not done much for the British Empire since the Ottawa duties, not that we have not had the good will, but for other reasons. The minds of hon. Members above the Gangway have been almost the whole time in the Mediterranean seas. A great number of debates have taken place on Spain, and the Government have been involved in all these great international questions. Is it not time that we concentrated our minds upon the great possibilities of the Empire? If a landlord in this country had a great estate and he allowed it to go to waste, everyone who is a decent citizen would be up in arms and would say that the man had not cultivated his land. That is equally true in regard to the larger estate of the British Empire as a whole.

Let us be big in this matter and make only one condition. If we are going to give these great facilities for development in the Empire, if we are going to lend vast sums of money for developing the Dominions and Colonies overseas in the various ways I have indicated from time to time, let us only insist that 50 per cent. of the labour involved out there shall be offered to British people if they are willing to go overseas to undertake the work, and that 75 per cent, of the materials should come from the factories and workshops of this country. If we could do something like that the Dominions would speedily welcome such a scheme and that would be a real long-term policy which might keep a great many people from the hunger line in this country in the years to come.

Now I come to that portion of the Amendment which mostly interests hon. Members who sit behind me, namely, the question of "trade barriers." We need sometimes to be a little bit fairer to ourselves and to the achievements of this country and not be too ready to make out that we are indulging in nefarious practices and that our policy is selfish, and so on. Since we adopted tariffs our exports and imports have increased so rapidly that the former are up by £95,000,000, taking the volume basis, whilst our imports are higher, in spite of tariffs, than in any single year of our history. That is a very remarkable fact. Let me tell the House once more of the very interesting fact—and I apologise for repeating it, as many hon. Members are aware of it—that in this country under our moderate fiscal system we buy more from foreign countries alone, apart from the Empire, than the United States with her vastly greater population buys from the whole world put together. We have not restricted the total of our imports but, as my right hon. Friend the Member for Sparkbrook (Mr. Amery) mentioned, we have changed their character to a certain extent.

I have always held that, apart from the employment-giving value and the revenue advantages of a tariff, it ought to be used for securing better terms under trading arrangements with foreign countries. It will be remembered that the late Mr. William Graham—who was a great figure in this House and greatly respected by everyone; a man of supreme ability for whom everybody predicted a wonderful future—went to the nations of Europe and asked them to co-operate, not in the reduction of tariffs but in saying that they would not raise their tariffs any further. He failed in that effort and it was almost heartbreaking to him. Since we have had a tariff, although I am inclined to think that it has not been used with the greatest amount of skill, perhaps owing to the inexperience of youth, we have already made progress with, I think, 15 trade agreements with foreign countries. That is a remarkable achievement.

We have undoubtedly obtained very substantial advantages both for those with whom we have made the agreements and for ourselves. If I have one criticism to make it is that the ex-President of the Board of Trade was perhaps always too much inclined to look at these trade agreements through the atmosphere of coal and not to realise that there are other important industries that must not be adversely affected. Cotton is an industry which certainly deserves our attention, because it is still our greatest export trade in this country. The great losses that it has suffered in the last few years are well known to us. With the tariff we might have secured at least that those markets in the Empire to which we have some right should have been preserved for our great Lancashire cotton industry. In some of these trade agreements certain essentials were forgotten. The lesson of the Great War was forgotten. The starvation peril which nearly brought us to our knees was ignored, and substantial industries of vital importance to the people of the country, such as meat, dairy produce, including eggs and pig stuffs, which have been attacked in increasing measure from foreign sources, did not receive sufficient attention when we first set out on this admirable policy of trying to make arrangements with foreign countries.

I do not want to add to what my right hon. Friend said in regard to the Favoured Nation Clause except this, that I am perfectly certain that you can never make a real contribution to freer trade by means of this kind of trade agreement until you are empowered to put the willing buyer in a better tariff position than the reluctant one. For this reason I would again urge the Government to consider whether the ideal solution would not be a three-decker tariff, high against those who will not reciprocate, moderate against those who will trade with you— I should like to see a low tariff policy, which used to be advocated by a right hon. Gentleman on the benches behind me, against those who are willing to trade with us—and a preferential tariff for the whole Empire. Under that kind of system you immediately have a real opportunity of approach and you are not giving advantage to the whole world because one country is ready to be reasonable in its trade arrangements with your-self.

Let me say a few words about foodstuffs, because this is a subject which has ranged rather large in our discussions recently. In addition to the con- sidered opinions of Lord Addison and the late Mr. William Graham, which have been quoted in the Debate, I always remember with great interest a remark which the right hon. Member for Keighley (Mr. Lees-Smith) made when we were still in the depression. I quote his remarks because he is, I think, the economic expert of the party opposite. I think that, although he was not in the House, he used to come in and lecture to hon. Members upstairs.

Mr. Kirkwood

We are fed up with economists.

Sir H. Croft

I rather agree. The economist has done a great deal of damage in his time. The hon. Gentleman the Member for Dumbarton (Mr. Kirkwood) sees that it is the realities of trade that count and not theoretical talk from the experts. Nevertheless, the right hon. Member for Keighley did say clearly and distinctly in a speech at Cardiff in 1933 that the first duty of the Socialist party would be to raise the level of prices. And the Trades Union Congress used to say the same thing. A special memorandum issued by the General Council in 1932 said: The policy of the Labour movement, both industrially and politically, is that wholesale prices should be raised to a suitable extent and should thereafter be kept reasonably stable.

Mr. G. Griffiths

Did they say that the wages must be there to buy it?

Sir H. Croft

We have heard from a previous speaker that wages have already gone up. The fact remains that the wise men of the Trades Union Congress and the Labour Party at that time were all holding these views. They said that you can get recovery only through an increase in prices. And Lord Samuel, when he sat on those benches, also indicated that it was necessary. He did the hon. Member for Oxford University (Sir A. Salter) the honour, quite rightly, of quoting him when he said: What the world needs now is an increase in gold prices, preferably to the level of 1929.

Sir A. Salter

Might I point out that that, of course, was written in 1932 when prices were at a very different level from now?

Sir H. Croft

The hon. Gentleman specifically said that they must be raised to the 1929 level. The fact remains that Lord Samuel accepted that as being correct. Now I want to say a word or two with regard to the American trade agreement. I want to say at once that I believe there is not a single Member in this House who does not feel we have so much in common with the United States, so much in our spirit and tradition, and, at this moment, so much in our responsibility for the common defence of our liberties, that we would naturally do anything to promote harmony between our two countries. But this must not be regarded as an admirable opportunity for destroying the Ottawa Agreement, an objective which seems to influence some people even more than the desire for an American trade treaty. I would remind the House that world trade is not increased by merely transferring trade from nation A to nation B. And if nation A is either your own country, or, the next thing to it, the Dominions of the Crown, people of your own kith and kin, the process of transfer is not helpful to world trade, but merely advantageous to a foreign country at the expense of people who should be your first concern, who stood by you in fair weather and in foul, in peace and war.

It is from this standpoint that we must consider the American trade treaty. Let us seriously consider whether there are any commodities successfully produced in the British Empire which we might exchange with American products—products which they can produce satisfactorily while we cannot. In other words, we should search out any road we can find for promoting trade between the two countries so that we should not grievously injure trade interests in one country or the other. Unfortunately, when we come down to realities, we find that there are undoubtedly difficulties. But that is no reason why we should not get the spirit of the thing. The more optimistic champions of an American trade treaty are always pointing out that we must concentrate on foodstuffs and give up some of the advantages of Ottawa. Specifically, we have noted that bacon, wheat, maize, barley and cotton are mentioned as commodities which we ought to buy from the United States in larger quantities. In these commodities the United States has no grievance whatever against Ottawa.

Take cotton. There is no Ottawa duty on cotton. There has been no large transfer of cotton purchase from the United States to the Empire. Some of us regret that it has not been larger. Take bacon. There is no Ottawa duty on imports from the United States, but these imports had fallen by go per cent before the Ottawa Agreement was signed. Take maize. There is no duty on the greater proportion of maize. I think it is only on white flaked maize. The larger part of maize does not come from the Empire at all, but from the Argentine. Take wheat. United States imports have decreased largely, but they had decreased by 90 per cent. before the Ottawa Agreement. So it is grotesque to suggest that these commodities have been affected by the Ottawa Agreement. Lastly, I take barley, imports of which from America have been halved, but, there again, trade has gone to foreign countries, Iraq and Persia, and so on, which are on the same basis as America. America's grievance, if she has one, is against those other foreign countries which have beaten her in our markets on equal competitive terms.

I want to say, in conclusion, how terribly serious I feel it would be if we should injure the spirit of Ottawa. It may be that we could make some slight modification here or there, but we made this arrangement with our own people in return for reciprocal trade advantages over a number of years. That trade has become really vital to us. During last August we sold £2,000,000 more manufactured goods to the British Empire than to all other countries put together. Last year, excluding coal, our Empire overseas actually purchased from us as much as all the rest of the world put together. These are striking facts. Some people would say, "Why not give up some of your preference to Australia in order to help the United States? "Australia with her 6,500,000 inhabitants actually buys more from us than the United States of America with 18 times her population. You cannot give up such a really wonderful customer as Australia for a potential trade with any other country, however great and desirable the trade with that country might be. The Ottawa duties have proved a considerable success. It is no mean thing that more than half the British workers engaged in the manufac- ture of exports are kept in business by the custom of our people overseas.

When we see the dangerous condition of the world at the present moment I ask His Majesty's Government in any trade agreement they may henceforth make to give every consideration to British agriculture, which is the one absolutely safe food supply we may have in time of danger; and, secondly, that they will not promote any proposal which will put back trade with our Colonies or have any effect on the primary producers of the Empire who absolutely depend for their livelihood on the great market in the home country. I cannot think that the Government would be so unwise as to adopt another policy. Apart from these considerations, this wonderful great fiscal union in the British Empire, so much of which is free, surely is a pattern which the rest of the world might follow.

After all, when we know how necessary it is that we should have every support we can in these difficult days, when we know how difficult it is to get foreign nations to co-operate, is it not vital that we should do nothing to impair in any way the unity and harmony of the collective security of the British Empire? There are 500,000,000 people within this system, men of different creeds, races and colour. Cannot we bring them permanently into such a collective union? If we could, would it not be a pattern for the rest of the world to follow? Then we could extend the gesture to other countries, to come into this kind of system, and thus teach the world how men and nations can work together.

9.19 p.m.

Sir Arthur Salter

In continuing the Debate I am struggling with a somewhat severe temptation. As I heard the speeches of the right hon. Member for Sparkbrook (Mr. Amery) and the hon. and gallant Member for Bournemouth (Sir H. Croft), I felt I should like to speak on the first part of the Amendment. There was one part of their speeches with which I was in agreement. I entirely agree that it would be an extremely desirable thing that His Majesty's Government should somewhat change their policy with regard to the Most-Favoured-Nation Clause. I have believed that for the last nine or 10 years. There was a great deal in the rest of the speeches however with which I am not in agreement, and I am therefore very much tempted to speak on these matters. But I have decided that I must confine what I have to say to the third part of the Amendment which refers to the preparation for public works to he put in hand when the depression begins. I have come to that decision for two reasons. I have had an opportunity of expressing in this House and outside my general views as to tariff policy and the Anglo-American Agreement. As recently as yesterday I had an opportunity of putting forward my views on that subject to the Prime Minister and the President of the Board of Trade. I feel that I must confine myself now to the third part of the Amendment, both for this reason and also because the President of the Board of Trade has in some sense directly challenged me as the Member for Oxford University by what he said on the subject of the letter of Oxford economists in June of this year.

In answering that challenge I feel that I am speaking not only for myself but for my constituents, and not for one section or group only of the economists of Oxford University. In this matter they have spoken as a whole, and have spoken unanimously. The letter to which the President of the Board of Trade has referred was a letter signed by every person in a responsible position teaching or studying economics in the University of Oxford. They unanimously expressed the view that Government policy and local authorities' policy with regard to public works could be an extremely useful corrective if properly timed and used in relation to the ups and clowns of trade cycles. They believed equally that there was a really serious danger of trade recession within a few years, and that it is absolutely essential that for this corrective to be used there should be a careful and detailed preparation a long time ahead of the emergency. The President of the Board of Trade somewhat discounted the letter by comments upon economists which are familiar not only in this House but outside, but particularly familiar from the mouths of Ministers. He said that economics was only a half science, a 50–50 science.

If by that the right hon. Gentleman means that in economics you cannot attain to more than half the amount of certainty of prediction which is possible in a science such as astronomy, of course I agree, but that is true of every science dealing with man and man's affairs. I think it is true that economists get something of the same kind of certainty that any other scientist does who deals with the activities of man. Many of the criticisms made against them are grossly exaggerated. The President of the Board of Trade explained that economists generally were first of all too pure and, secondly, were too quarrelsome. I do not think we are so pure or anything like so quarrelsome as is usually stated. May I illustrate this point from the letter itself? Among the signatories are some who have had considerable experience in Whitehall and of public administration in relation to particular industries. We are not really all so cloistered; some of us have had a considerable experience of life. Nor are we so quarrelsome. The fact that every single economist in Oxford was agreed in giving this advice is something of an answer to that statement, and in their unanimity they are, I believe, reflecting a similar unanimity of the profession as a whole. It happened by an unarranged coincidence that two of the most distinguished economists in Cambridge were saying much the same thing about the same time, and the then Director of the London School of Economics was also criticising the Government severely for preparing only for war and preparing only for the military side of war, not for its economic side.

After making this somewhat tentative reply to the criticism of economists, I may perhaps suggest I think an equally valid criticism that economists might make of the utterances and the attitude towards economists of officials and Ministers. I think the point was put very well a short time ago by the Professor of Economics at Cambridge, Professor Pigou. I quote from memory. In a recent volume of collected Essays he says that normally he finds that Ministers in office tend to resort to economic reasoning not as a method of ascertaining the truth but as a way of finding brickbats with which they can injure their opponents. He said it is their custom, first of all, to decide what they want: to do, and then to look round to see whether there is any kind of economists' argument they can use to support a policy on which they have already decided on quite other grounds. We all know that it is quite possible for a person addicted to a pleasant vice to find by diligent search a doctor who will tell him that his ill health is due to some other cause, and we all know that when he finds such a doctor he thinks he is a very good doctor indeed.

Professor Pigou quoted an experience of his own. He said that some time ago, apropos of some proposed legislation which involved certain economic principles, he wrote a letter to the "Times." The Minister concerned on reading that letter misunderstood it and thought it supported the policy he was advocating. He therefore quoted Professor Pigou as "that very great Cambridge economist." Professor Pigou wrote to the "Times" saying that he had meant precisely the opposite and did not support the policy, whereupon, in the next public utterance of that Minister Professor Pigou was referred to as "a mere academic theorist."

Mr. Kirkwood

The hon. Member ought to give us the name of that Minister.

Sir A. Salter

I am afraid I should have to refer to Professor Pigou for that name. I have not inquired from him. Having said that, I will admit that economists do not show any particular reluctance to express their disagreement when they disagree. But that, I think, makes it all the more impressive when they do agree with the unanimity which economists show in regard to this particular matter, that the finding of public work can, and should, be a most important corrective in relation to trade cycles.

I agree with the President of the Board of Trade in thinking that the situation at the time, when we have just had this big Wall Street slump, is profoundly different, I might almost say altogether different, from the conditions of 1929 and 1931. The great top-heavy international debt structure which then existed does not now exist, and the great disparity between agricultural and manufactured-article prices does not now exist. And so I might go through the other major factors. That, I think, is true. I am not anticipating an imminent, severe trade depression. If I thought a great depressoin was imminent I should not be supporting this Amendment because I should think it was already too late. But it certainty is not premature to be preparing now for a depression.

By all human experience, according to all economic precedents and principles, a depression must be coming at no very distant date. We know from experience that from the moment when the first preparation or the first study is made, and the time at which on any considerable scale those preparations can be translated into actual employment and actual work, is a period of more than two years. Now we cannot certainly rely, with confidence, that it will be considerably more than two years before we have some substantial recession. It is quite true that the armament expenditure is postponing the time at which the economic depression might be expected, but if it is retarding it, it is no less certainly aggravating the intensity of the depression when it comes. There is one small point. Even though the armament expenditure will, as long as it lasts, have a tendency to increase general economic activity—to mitigate the extent of the recession which might be due to other causes—we must remember it is at the first stage, when the capital construction of new factories is undertaken that the effect of that expenditure is at its greatest; the time when that particular form of armament expenditure will come to an end will be long before the peak of general armaments expenditure has been reached.

I am not taking a pessimistic view of the future. I do not think it is at all inevitable that we should have depression on the same scale as the last one. But there is undoubtedly one adverse factor in the weight on the Budget that must result from financing so large a part of the armament expenditure by means of loan instead of out of current taxation. One of the great disadvantages will certainly be that at a time when it would be on all economic grounds desirable to increase public works, the financial difficulty of doing so will be greater than if we had managed to a greater extent to finance our armaments expenditure out of current taxation.

I do not think I fail to recognise the difficulties and the limitations of a policy of expanding public works in depression. I fully realise, as the President of the Board of Trade said, that there is a great deal of public work that cannot be postponed. There is no use saying: "Let us hold back telephone constructions when there is a boom "; and so it is with a great deal of our public works. The reason why I am advocating that action should be taken at once is that there is a lot of time between the making of the plans and the moment when work begins. A further difficulty is that a very great proportion of public work is not public expenditure undertaken by the central government. Undoubtedly the difficulty of timing public works is aggravated by the fact that the responsibility often rests with local authorities.

On that matter I would like to remark, that although the legal powers of the Government in relation to local authority work are restricted, their influence over local authorities is very great indeed. I well remember that in 1932 a number of us who are now supporting this policy felt very strongly that immediately after the Conversion Loan there was every economic reason for, and no financial reason against, a very considerable expansion of public works, particularly by local authorities. I know, however, that there was very great delay, due to the continual influence of the Minister of Health at the time in discouraging the expansion of local authority work. When the Minister of Health was criticised he was able to show conclusively that the number of cases in which the Ministry had actually refused to allow work to go forward was really very small; that however was no real answer to the criticisms, because what stopped the work going forward was the fact that the Minister of Health had discouraged the local authorities from even making the plans and putting them forward. As a friend of mine remarked at the time, infantile murder has very much less effect upon the number of the population than birth control. What was happening was that the Ministry of Health was preventing the plans from even being conceived; he was not killing them after they had been born.

I am convinced that, in spite of the limited legal powers of the central Government over local authorities., they could do a great deal to influence Local authorities to be ready to go ahead with work at the appropriate moment—on one very vital condition, that the central Government should itself really study the matter, and be able to give considered and wise advice. That means very much more than the acceptance of the general economic doctrine. It means the considera- tion, in district after district, of where it is that the improvement of the last few years is on a very precarious basis; where it is that, in all probability, it is specially desirable that as soon as a recession begins, public works should be expanded, and so on. I am sure that if the Government would do that, they would be able very largely to overcome the difficulty that arises from the separate authority of local authorities.

I realise that the difficulty of finance arises, particularly in this period, and for the reason I have just mentioned. I am very much afraid that after we have had some years in which we have been increasing our debt by borrowing for armaments, we shall find that the budget situation is so serious that there will be very strong pressure to subordinate everything to meeting the needs of the financial situation, and that there will be a very strong movement for economy just at toe moment when, from the point of view of maintaining the volume of employment in the country, some expansion of public work is very desirable.

I do not wish to confine my remarks on that point merely to regretting the line of policy that has been adopted with regard to the financing of the armaments programme. I wish to make one modest suggestion, which does not cover the whole problem by any means. There is one not unsubstantial and not inconsiderable nest-egg that the Government can use at the appropriate moment. As one consequence of the last crisis, the pound was depreciated, and I believe the Government have never utilised the main profit made by the depreciation of the pound. By a revaluation of the gold reserves of the bank, there is, of course, a very substantial sum that can be used at the appropriate time. I suggest that nothing would be more appropriate than that: that particular nest-egg should be very carefully preserved and reserved to assist in the financing of public works at the moment when the need becomes urgent.

So far I have talked upon general principles, but the Amendment does not only give advice to the Government. It very definitely criticises the Government, and with very great reluctance, I feel that I must associate myself not only with the advice, but with the criticism. I think that in this matter the Government have been unduly lax and unduly dilatory. I am reluctant to say that the Government are "complacent" after what the President of the Board of Trade has said; but when he told the House that it is true that the Government ought to prepare and that they were preparing for an eventuality—by which I suppose he meant a recession in trade—which he hoped and believed would not arise, I felt that he was showing, if not complacency, at least very undue optimism, seeing that all our experience of the past and everything by which one can reasonably judge, shows us that one must expect—and at no distant date—some recession in our trade position. If one adds to that the fact which I have already emphasised, that no preparations of this kind can really be effective unless they are started and carried some distance two or three years before the moment at which they are most needed, I think one is entitled to say that in this matter the Government have been guilty of very regrettable delay. I should like to support that by several quotations which indicate, I think, the mind of the Government. One quotation which I have already given from the speech of the right hon. Gentleman does, to some extent, indicate their attitude of mind.

Mr. Stanley

The hon. Gentleman did not quote me correctly.

Sir A. Salter

Would the right hon. Gentleman mind telling me in what respect I was incorrect?

Mr. Stanley

I think the hon. Gentleman will see, when he reads my speech in the OFFICIAL REPORT to-morrow, that he took two bits of a sentence from two different parts of the speech, and put them together.

Sir A. Salter

Of course, I accept what the right hon. Gentleman says, but I retained very clearly the impression of that sentence as I quoted it.

Mr. Stanley

Perhaps the hon. Gentleman will look at the OFFICIAL REPORT.

Sir A. Salter

I recollected the right hon. Gentleman as saying that the Government were preparing for an eventuality which he hoped and believed would not arise. I may be wrong, but my memory seems very clear on the point. In any case, if my criticism does not attach to what was said by the right hon. Gentle- man, I think it very definitely attaches to the equally clear indication of an attitude expressed by the Prime Minister immediately before the Summer Recess. On 16th June, my hon. Friend the junior Member for the Combined English Universities (Mr. E. Harvey) asked the Prime Minister whether concerted plans are being prepared by the various Government Departments concerned, both for schemes of public works to be undertaken by the Government and for proposals to be commended to local authorities, so that there may be no delay in their application when a period of trade depression arrives? The Prime Minister replied: The question whether by Government action it is possible to mitigate the effects of a trade depression following a period of exceptional trade activity has been under consideration for some time, but the stage at which plans could be concerted as suggested in the question has not yet been reached."— [OFFICIAL REPORT, 16th June, 1937; col. 372, Vol. 325.] On 16th June, 1937, then, the Government were still considering the question of principle, though, as I have said, experience of the whole of the depressions has led economists to agree for a long time that, beyond any question, useful correctives can be applied. Apparently, in June only the question of principle was being considered, and the stage had not yet been reached at which any plans were being concerted. I am certain that if further delay is allowed, the plans will be too late. The same applies to certain other matters. I have in mind at the moment an economic aspect of war preparations, the question of food storage. I think the Government are taking an altogether excessively long time in deciding even the question of principle, apart from making actual plans. There are certain matters upon which it is not possible to procrastinate until the last moment and then to improvise successfully. I am certain that if the Government continue to procrastinate in regard to food storage and in regard to this question of plans for public works it will be quite impossible to improvise successfully at the end. Judging them both by their actions and by the expressions of their opinion upon this subject, I shall feel obliged to-night to support that part of the Amendment which criticises the Government. I quote one other instance of what seems to me, if not complacency, at any rate—I hardly know by what other terms to describe the manner in which the representatives of the Government refer to the present economic situation. Let me say that their evidence is unduly "selective and retrospective." For example, the Chancellor of the Exchequer said the other day, of the present situation: I do not think there is any solid ground for saying that on the whole there is any palpable indication that this progress will be arrested. I think in that embarrassed and rather laboured phrasing there is an indication of a tendency to put a gloss upon the hard facts of the case. There are undoubtedly factors in the present situation which indicate a recession. I am not taking an alarmist view of the situation, but there are such signs, for example, as the curve in the building trade to which the Chancellor of the Exchequer referred, although I think he unduly depreciated its significance. But if I hesitated as to what was really in the right hon. Gentleman's mind when he used the phrase I have just quoted, I was confirmed in my less favourable interpretation of it when I found that, later on, he said: What the future may contain is a matter which nobody can prophesy or entirely control.—[OFFICIAL REPORT, 26th October, 1937; cols. 25 and 26, Vol. 328.] It is true, of course, that one cannot prophesy with precision when a depression will come or what its effects will be, but one certainly can prophesy as certainly as one can prophesy anything in the sphere of human affairs and human politics, that there will be a depression against which we ought to make preparations. It is also, of course, literally true that the future is not "entirely" under control, but is that a reason why no attempt should be made to do what is possible to control it? Therefore, having in mind the actions of the Government, as well as the expression of what is in their minds in regard to the problems before us, although I have never voted against the Government on general grounds—that is to say, except where on specific issues I felt myself in definite disagreement with them—I shall, for the reasons which I have ventured to put before the House, feel myself obliged tonight to record my agreement with the Amendment, not only by my voice, but by my vote.

9.50 p.m.

Captain Conant

It seems to me that the proposals which we are considering now, by which it is suggested that the Government should make provision for a possible reduction in employment are— some of them, at any rate—proposals which do not fall within the control of the British Government. We have to recognise the fact that we are not now, and never shall be, dictators in the world as far as trade barriers are concerned. Much as we should desire to be able to remove the trade barriers which other countries erect, even though we have a Protectionist system, we are not yet able to go further than other countries are prepared to permit us to go. The achievement of trade agreements was not, I think, the only purpose for which we introduced Protection. We introduced it also in order to protect many of our industries against the lower standards of living which exist in many parts of the world. There are still in this country some industries facing severe competition from countries in which the labour conditions are on a very much lower level than those in this country. I would mention in particular the condition of the carpet industry. It has perhaps an outward appearance of prosperity. There is comparatively little unemployment in that trade. Nevertheless, it is, slowly but surely, being undermined by imports which are every day pouring into this country and with which it is impossible to compete.

To-night, however, I wish to discuss the proposal that we ought to prepare to embark upon capital works and capital expenditure and the utilisation of national resources. It is very fortunate, I think, that we did not adopt the suggestion which hon. Members opposite below the Gangway have been making for a great many years, in regard to capital expenditure. Had we done so, even if we had escaped bankruptcy, we should not be able to-day to carry on that rearmament programme which all hon. Members regard as necessary, and it is fortunate that in this matter we have in the past gone slowly. But there are some national resources which ought to receive more energetic attention. I refer to the position of the agricultural industry. I agree that the position of the agricultural industry would be considerably worse had it not been for the steps taken by the National Government to help it. Yet I should like to see a great deal more done to assist that industry. There is no industry in which employment is dwindling so rapidly and there is no industry which is capable of providing employment of such a permanent kind, or employment less likely to be affected by the ups and downs of world trade. The condition of the relationship between the farmer and his employés is such that he discharges his workmen only as a last resort. That condition, unhappily, does not apply in the towns. Undoubtedly there was substantial unemployment in the country during the trade depression, but it was not as severe as the unemployment in the towns. Employment in the countryside is of a more permanent kind than employment in the town, and if the agricultural industry became prosperous, there would be opened a vast field of employment which should be more than adequate to safeguard the country against the unemployment which might be caused by any trade depression or by cessation of the rearmament programme.

One fact which has, perhaps, been overlooked is the great distinction between the protective system for manufacturing industries and the protective system for agriculture. In the case of a manufacturing concern, it may be possible, by adequate tariffs to produce perhaps a doubling of the output in a very short time. In the case of agriculture, even if adequate protection is given, its results cannot possibly be seen perhaps for six or 12 months. Any steps which are taken to assist the agricultural industry cannot affect the industry until a considerable period has elapsed. It is, therefore, incumbent upon the Government to nurse the industry until the full effects of the protective policy are shown to the farmers themselves. We have recently seen a welcome rise in wholesale prices. There may be some who feel that this is improving the position of the British farmer and farm worker. Unfortunately, I do not feel that that is yet the case, because, although there has been perhaps some appreciable rise in the prices that he receives in some cases, yet there has also been an even greater rise in the prices of his raw materials. No doubt ultimately the rise in wholesale prices will affect the British farmer, but that is not the case as yet, and I think there is no better way to provide against the effects of unemployment which might arise from the end of the rearmament expenditure than by taking such steps as will enable the agricultural industry so to improve its conditions of employment that it is able to attract labour from the towns rather than to repel it.

9.56 p.m.

Sir Archibald Sinclair

The last speaker has provided a very effective reply to the speech of the right hon. Member for Sparkbrook (Mr. Amery), who said that the tariffs had raised no prices. The hon. Member regrets that the rise in prices, which he admits has taken place, has not yet benefited the farmer, and he points out that the farmer is himself suffering from the increased prices which he has to pay for all that he uses, for his feedingstuffs, his manures, his fertilisers, his implements, for all his household goods. For everything he has to pay an increased price on account of the tariffs which have been imposed on those articles, and the result is that, even though the prices of his products are rising, he is gaining no benefit.

We have had a most important and a most interesting Debate, and we on these benches are particularly grateful to my hon. and gallant Friend the Member for Pembroke (Major Lloyd George) and to my hon. Friend the Member for East Birkenhead (Mr. White) for the speeches with which they opened the Debate, and also to the President of the Board of Trade, not only for the manner, but I would also say in some measure for the matter, of the speech which he delivered in reply. When I say "in some measure for the matter," I mean that, within the limits of the Government's policy, limits which we deplore, we think he made a very satisfactory declaration. In particular, this Debate would have been justified if by nothing else than by one passage in the speech of the President of the Board of Trade, and that was the passage in which, in language more forceful and convincing than has yet fallen from any other Minister in the present Government, he declared that he regarded more seriously than anything else in public life the prospect of an economic agreement with the United States of America, and pledged himself to strive to achieve it For that declaration we are grateful to him.

Dealing with the economic outlook, he said that it was important not to shake confidence by allowing exaggerated fears to grow, that we must not discuss the prospects of trade in an atmosphere of panic, and he believed the present rate of activity will be maintained for many months. So far we agree with him, but when he went on to say, as I, like the hon. Member for Oxford University (Sir A. Salter) understood him to say, that he was preparing for an eventuality which he hoped and believed might never arise— those were the words that I took down— we answer that it may never arise, at any rate on the scale on which it arose in 1929 if the Government act on the lines suggested in our Amendment, but it will inevitably arise, not immediately and not perhaps on the same catastrophic scale as in 1931, if they fail to do so. I had put into my hand just before I rose to speak a letter which contains an extract from a speech which was made by the Secretary for the Department of Overseas Trade, whom I see sitting next to the President of the Board of Trade, who said at Southport on 19th October: I have been spending a month in the train, going all over the country to try and persuade manufacturers that, however attractive the home market is at the moment, our export trade is vital to the country. I am trying to persuade them to maintain our export trade in spite of the difficulties, because I am quite sure that if we do not do it to-day, our main competitors will undoubtedly take advantage of our failure to do so, and when we need the trade in two years, we shall find ourselves unable to get our share. It is because we are looking forward to that year or two that we have put down this Amendment to-day. The urgency of this Amendment arises, in the first place, from the precariousness of the present foundations of our trade and employment. The President of the Board of Trade suggested this afternoon that we ought to taken encouragement from the figures which were given to the House by the Home Secretary in his speech last week. The Home Secretary had been supplied with a very skilfully prepared brief. His attention had been very much taken up in recent weeks and months with the preparation of his Departmental Bills. He had failed to notice that there had been a rise in the cost of living in recent months; he had not observed that fact until his attention was drawn to it in the course of the Debate. He had forgotten the numbers of the unemployed who had gone off the registers in the past year, and there were several little mistakes which he had made and observations which he had failed to make, but he was so carried away by this skilfully prepared brief that, in a burst of uncharacteristic enthusiasm, he said this: These are the facts, and I challenge hon. and right hon. Gentlemen opposite to refute them… Unemployment, I forget by how many hundred thousands, is less to-day than it was 12 months ago… I ask the right hon. Gentleman these questions: Can a similar improvement in the social and economic life in any country be found anywhere else in the world? … Can it be found in Germany or Russia … or in France? If so, let us hear the facts in the course of the Debate."—[OFFICIAL REPORT, 29th October, 1937; col. 442; Vol. 328.] I have furnished myself with the facts, and here they are, as set out in the statement of industrial production in individual countries issued by the League of Nations in the "World Economic Survey." The base year is 1929–100— and for the period 1932–36 Britain's percentage of increase is lower than that of 11 other countries, and among those 11 other countries, curiously enough, are not only Canada and the United States of America, but Germany and Soviet Russia, which are the two countries with which the Home Secretary himself challenged comparison in his speech. Then, if you take 1935–36, the improvement in Britain is lower than that of six other countries, three of whom are leading countries. Therefore, it is quite clear that Ministers themselves have a wholly distorted idea of the present economic condition of the country. I cannot follow the Home Secretary into all the detailed comparisons which he made, all of them made between this year and the worst year of the world slump, but one comparison is of special importance in connection with the need, which our Amendment proclaims, for looking ahead to the cessation of rearmament expenditure. It is not only the cessation of trade that we, like the Secretary for the Department of Overseas Trade are bothered about; it is the inevitable result on our employment situation of this cessation of rearmament expenditure.

The right hon. Gentleman the Home Secretary compared the tonnage of shipping now under construction with that under construction in 1931. He said it had increased by 184 per cent., and he must have given any uninstructed listener the idea that shipbuilding was a booming industry. He did not mention the falling off in the orders for ships now being laid down, and everybody who is in touch with the situation knows perfectly well that, as the President of the Board of Trade confessed and as my hon. Friend the Member for East Birkenhead asserted, the rise in prices is now paralysing new construction. The right hon. Gentleman the Member for Sparkbrook boldly declared this afternoon that tariffs had not injured shipping. The decline in British shipping is one of the most alarming features of the economic situation at the present time.

Sir H. Croft

Oh, no!

Sir A. Sinclair

If the hon. and gallant Gentleman compares it with 1931 he will find it bad enough, but if he takes a long-range survey and goes back to the position of shipping before the War in 1914—

Sir H. Croft

Will the right hon. Gentleman take the last Free Trade years?

Sir A. Sinclair

No, I am going to take a much longer range than any years which the hon. and gallant Member happens to select. I am going right back to 1914, and I say that if he compares the tonnage of British shipping now with the tonnage we had at our disposal at the beginning of the Great War, he will find that, in spite of the tariffs which have injured shipping for the last five years, our tonnage is 2,000,000 tons lower than it was in 1914, while the tonnage of foreign countries has risen from 28,000,000 to 45,000,000 tons. These are facts which Ministers can no more challenge than we can challenge their carefully selected figures. The difference between my figures and theirs is that I have chosen for comparison long periods which show long trends, while they have taken figures which show a comparison between the lowest of the slump years and now, when trade is beginning to revive all over the world—a transparent device which shows the weakness of their case. The President of the Board of Trade says that these are the usual statistics employed by his Department to measure the health of the country. It is most deplorable if indeed the Government are measuring the health of the country by comparing it with the year in which it was at its weakest, when its health was at its worst.

Then the Home Secretary tries to minimise the importance of rearmament as a contribution to employment. A great body of labour and by far the greater part of the shipyards, he says, are now engaged in merchant ship construction. I was astonished when I read that. I reached out for the Board of Trade Journal—and I suppose the President of the Board of Trade will tell me I can rely on the facts and figures in the Journal. In the Journal for 14th October I find that 1,185,000 tons are under construction, not including naval tonnage. There will be less in future, but let us take that figure. It is not an unfavourable figure from the Government's point of view. According to the Secretary of State for Foreign Affairs at Geneva on 10th September, there were 450,000 tons of naval shipping then under construction. The total, therefore, is 1,635,000 tons, so that naval tonnage is more than one-quarter, nearly 30 per cent., of the total shipping under construction in this country at the present time. That is to say, if you take 16 ships building in this country to-day, 11 are for peaceful commerce and five are ships of war. Yet the Home Secretary tries to make out that the armaments expenditure makes but an insignificant contribution to the development of the shipbuilding industry and to the employment of men in that industry.

The President of the Board of Trade also said that Opposition speakers were inclined to exaggerate the effect of rearmament on trade and employment. He said that the normal factory output of this country for the year was £2,500,000,000. But what is the annual armaments expenditure? It is £300,000,000, or one-eighth of that figure. There has never been in the history of the country such a colossal concentration on armament production. It is the biggest single factor in the employment of British labour in industry to-day. The importance of the contribution of rearmament to employment can be clearly illustrated. When the policy of public works was in the forefront of political controversy, there was some dispute whether 4,000 or 5,000 was the correct figure of employment given to men and women in respect of the expenditure of £1,000,000. It depended, of course, on the kind of work. On land drainage and road construction employment was high, but on other work it was comparatively low.

My hon. Friend the Member for North Cumberland (Mr. W. Roberts) yesterday gave some interesting calculations based on the higher figure. Let me take the lower figure of 4,000 per million pounds of expenditure. Our normal armament expenditure for the last to or 15 years, which we had hoped to reduce if the Disarmament Conference had been successful, was £100,000,000. So that we have added £200,000,000. That means, taking even the lower figure, that not fewer than 800,000 men and women are engaged directly or indirectly on rearmament work in Britain to-day. If you stopped that work, threw 800,000 men and women out of work, added those who would lose their employment through the reduction of the purchasing power of those men and women, you would double at one stroke the present unemployment figures and send them soaring above the 2,000,000 mark. As for the depressed areas, we are told that their affliction and their miseries have been due to too much concentration on one industry. Now their lifeblood is armament work, and if you stop it you plunge the depressed areas back into their depression.

Ministers say that this will not happen for another four years. But why not? Will they delay disarmament? Surely not; that is not their policy. Surely they will not delay disarmament on account of the men and women employed? The most terrible danger of the rearmament policy is the creation of vested interests of employers and employed in the armament industry. In the interests of world peace and confidence the armament race ought to be stopped at the earliest possible moment, and it is the responsibility of Ministers to prevent the emergence of a tragic conflict between peace and employment. The opportunity for disarmament may be fleeting when it comes. The natural hesitation of the Government against flinging 800,000 men and women out of work may make them too reluctant to agree to a full measure of disarmament and their reluctance may arouse the suspicion of other Governments. Plans to employ 800,000 men cannot be improvised on the spur of the moment.

Planning ought to begin now. My hon. and gallant Friend the Member for Pembroke spoke about some of these schemes. The President of the Board of Trade said they are being carried out now—schemes for water supply and roads.

So much the better. That is not an argument against planning; it is an argument for starting planning now, having the broad lines of plans marked out and watching which of the schemes can be delayed and which cannot. My hon. and gallant Friend instanced water supplies and housing as being types of schemes which could not be delayed. They have to be proceeded with, and if you have your plans produced from year to year you can be co-ordinating the various factors and adding other work, as a substitute for the work which from year to year is being carried out. He emphasised the difficulty of working out the plans which were roughly sketched out by the Oxford economists in their letter to the Times." That is not an argument for refusing to start planning now, but rather for making a start, so that all these difficulties can be thought out and overcome.

Then the President of the Board of Trade made an appeal to local authorities, to public bodies and to private individuals to do preliminary work on plans while high prices are stopping their ordinary work, so that the plans could be put into operation quickly in the event of an increase in unemployment. Rising prices must, as the hon. Member for Seaham (Mr. Shinwell) pointed out, have the effect of restricting public works at the present time. Why should they work at it when the Government will not give them the lead? Let the Government set the example and do the most vital work of all—map out the main lines, guide and co-ordinate the work of local authorities, public corporations and individuals.

The vitally important problem of finance should be considered, as my hon. Friend the Member for Oxford University pointed out; its solution must inevitably influence the structure of the Chancellor's Budget. Its study by an already overburdened Department can never solve the problem. We ask the Government to set up the necessary machinery of an economic general staff now. In whatever plan is prepared, a scheme of public works to replace armament expenditure must inevitably play an important part, though I would say a temporary part.

We agree with the President of the Board of Trade that it is still more necessary to consider the broadening of the basis of our industrial and commercial activity by restoring our overseas trade. We know it to be true, and are glad that the President of the Board of Trade said that it was true, that it is in the foreign rather than in the home market that an improvement must be looked for. An important part must be played by trade between Empire countries, and in that respect I associate myself with all that has been said by my hon. Friends who have spoken on this subject.

I pass to the consideration of world trade, and that is vital from the standpoint of the Empire as a whole. The right hon. Member for Sparkbrook is always astonished, though we are not, at his own skill in foreseeing that the effect of Imperial Preference would be to increase Imperial trade at the expense of foreign trade. We always knew that the right hon. Gentleman was right when he claimed it years ago. To-day he seemed to be disclaiming part at any rate of the credit which is due to him, because he said the comparative fall in foreign trade was not due merely to economic causes, to any want of effort on our part, but wholly due to the economic hostility of foreign countries.

Mr. Amery

I was talking about the export trade.

Sir A. Sinclair

Certainly, so am I. There was no lack of effort on our part—none. We deliberately diverted trade from foreign countries to Empire countries. The hon. and gallant Member for Bournemouth (Sir H. Croft) said that it was grotesque to suggest that the United States of America have suffered from the Ottawa Agreements. That, at any rate, is not the opinion of the people living in that country. It is incredible that they should not have suffered, seeing that those Ottawa Agreements were commended to this House at the time when they were passed as a means of diverting trade from foreign countries to the Empire. How could we have benefited the Empire if the countries from whom trade was diverted had not suffered?

A challenge was thrown out by the hon. Member for South Croydon (Mr. H. G. Williams) to my hon. Friend the Member for East Birkenhead to say in what products the United States had suffered. It is undoubtedly true that the British imports of American ham have fallen from 7,000,000 tons, to 1,500,000 tons in 1936, while from Canada the imports have risen from 1,500,000 tons to 5,500,000 tons. I hear an hon. and gallant Gentleman say that a great deal of that happened before the Ottawa Agreement. Certainly there was a falling off in the ham trade. The point is that the Americans did not recover the trade and that as a result of the Ottawa Agreements the Canadians were able to recover it. It was diverted from the Americans to the Canadians. I listened to the speech of the hon. and gallant Gentleman with great care and he did not mention timber. British imports of American soft woods have fallen from 2,000,000 tons in 1929 to 1,000,000 tons in 1936, while the corresponding Canadian imports have risen from 1,000,000 tons to 4,000,000. [HON. MEMBERS: "Hear hear."] Hon. Members say "Hear, hear," but do not let us shed crocodile tears with the hon. and gallant Member for Bournemouth when the intended results materialise in injury to the trade of the United States and other foreign countries. A senator from Oregon complained in the United States Senate last August of the heavy fall in the North Pacific lumber trade to British Empire countries saying that they had supplied only 6 per cent. as compared with 74.5 per cent. in 1929.

Do not let us think that the Ottawa Agreements have not aroused bitter hostility abroad. They have. Mr. Roosevelt denounced them before he became President; American publicists and politicians have frequently denounced them. The President of the Board of Trade referred to the currency agreement; when he was concluding it, the French Minister of Commerce said across the table at Geneva to our representative, the present Minister of Agriculture: We suffer from some of your arrangements, notably the Ottawa Agreements. That was unusual practice on the part of a Minister because every sovereign Government must recognise our sovereign right to make these agreements if we choose. We have that right and have exercised it, and nobody can challenge our conduct officially; let us at any rate recognise the consequences. Let us frankly face what the consequences are. The consequences are inevitably increased hostility and jealousy and distrust in all the countries affected. We can probably get some kind of agreement with the United States of America without much qualification of the Ottawa Agreements, but we cannot get that full co-operation with the United States in working for economic appeasement which individual Ministers and, most of all, the Secretary of State for Foreign Affairs, desire unless we substantially modify those agreements. Those agreements are the obstacle which have hung up these negotiations for 18 months. They, and the economic imperialism of the bulk of the Government supporters, are the obstacles to-day.

It is idle for the President of the Board of Trade to say that the Ottawa Agreements offer the only means of Imperial co-operation. There was far more Imperial development before the Ottawa Agreements were negotiated than there has been since. Before they were negotiated, Imperial migration was from the home country outwards; now it is from the Dominion countries inwards. India and Australia have denounced them, Canada has insisted upon modification and Ceylon has accepted them only under strong and vehement protest. The truth is that all the Empire countries stand to gain by economic appeasement and the restoration of world trade far more than they would lose by the modification of Imperial Preference.

The right hon. Gentleman the Member for Sparkbrook said that tariffs had not ruined our export trade, as Liberals always said they would. He did not condescend to figures, but the Postmaster-General last week was less cautious. The Postmaster-General said: The Liberals always asserted that we should ruin our exports if we put on tariffs, but our exports have gone up from £365,000,000 in 1932 to £440,000,000."— [OFFICIAL REPORT, 29th October, 1937; col. 505, Vol. 328] Yes, but he did not add that, in order to find a year in which exports were as low as they were in 1932, omitting the War years, you have to go back more than a quarter of a century, more than a generation; you have to go back to the year 1905, when they were £330,000,000. In this situation it has taken five years for them to go from £365,000,000 to £440,000,000. In 1905 it only took them two years to reach £428,000,000. Then came the United States financial crisis and a world slump, and, after falling to £377,000,000 in 1908, in two years again they reached £430,000,000. In those days, under Free Trade, our export trade had such resiliency that in two years it had recovered to the same extent to which it has taken five years to recover in the present situation. As for the rest of the Empire, it remains true that two-thirds of the trade of Empire countries is done with foreign countries. This diversion of trade wastes trade, excites hostility, breeds economic armaments, jealousy, distrust, loss of confidence, and fear of war. Those are the things which are undermining the position of the Empire a1 the present time.

Now I ask, for the last time in this Debate, as others have asked, what is the Government's policy? What is it, first of all, with regard to public works? Are they going to create the necessary machinery for considering plans on the lines which those of us who have supported this Amendment have suggested? Secondly, what are their plans with regard to the general reduction of barriers to trade? Unfortunately, M. van Zeeland, to whom was committed the main responsibility for working out these plans, has resigned his great office in Belgium. What plans are the Government making for carrying on that work at the present time? Thirdly, what is the present position of the negotiations which have been dragging on for 18 months with the United States Government?

The President of the Board of Trade said that this Government is not prepared to put itself in the dock, but when its economic policy is under discussion that is the only proper place for it. There was much talk of what was going to be done when the currency agreement was concluded. France reduced duties substantially on a wide range of raw materials and manufactured goods, and abolished one in four of her quotas. Switzerland reduced many import duties, in most cases by 50 per cent. or more, and modified or abolished many quotas. Italy made various reductions of from 40 to 65 per cent., and enlarged a number of quotas. Latvia reduced a large number of tariff duties and abolished some quotas; and Latvia and Czechoslovakia reduced their exchange restrictions. His Majesty's Government did nothing, and on 13th June the French Minister of Commerce complained vehemently that the reduction of tariffs and the extension of quotas accomplished by France had elicited no response. We are grateful for some of the words which fell from the President of the Board of Trade to-day, but our Amendment demands action, and we shall press it to a Division in the Lobby to-night.

Mr. De Ia Bère

Let the right hon. Gentleman remember that Great Britain comes first.

10.30 p.m.

The Chancellor of the Duchy of Lancaster (Earl Winterton)

It has been my privilege to sit practically throughout this discussion listening to one of the most interesting Debates to which I have ever listened, and it is now my privilege to reply to the speeches which have been made. We have had a number of most instructive and instructed speeches in the course of the afternoon, and I would like, in particular, to refer to the speech delivered by the hon. Gentleman the Member for St. Ives (Mr. Beechman), whose maiden speech delighted all of us who heard it. The Debate has been generally conducted in a spirit of great moderation and restraint, but I need hardly say that the right hon. Gentleman the Leader of the Liberal Opposition, in the new role which he has now adopted of what I might call champion pessimist, was, to use an American term, "the king-pin of gloom," appears to have roused the temper of the Debate, as he is fully entitled to do. It is one of the rights of the leaders of the Opposition, great or small. It is perhaps, in a sense, appropriate that my humble self should reply to the Debate, because we have had under discussion, among other subjects in the Amendment, the question of Imperial preference and Empire economic unity, and I am proud to stand at this Box and mention the fact that I was the first Member to be returned to this House in full support of the policy of the Prime Minister's father, Mr. Joseph Chamberlain. We were, in those days, a somewhat small and twice persecuted group. We were attacked by the Liberal party, which was formidable both in weight and in intellect, and also by Members of our own party. They, as far as the Opposition Liberals were concerned, were formidable, and it is indeed true to say, as we look around and see behind us to-day a mighty and very confident host, that time in this House and elsewhere, brings its revenge.

It is impossible to exaggerate the importance and the formidable nature of the subject we have before us to-day. Hon. Members, and certainly the Government, though we disagree with the terms of the Amendment, are grateful to hon. Members opposite for bringing forward the subject and for what has been said in the course of the Debate. In rising to give my ideas on this matter, I do not speak from a Departmental brief. As the House is aware, the Chancellor of the Duchy is a Department which is not immediately concerned with this House, though I should be the last to suggest that I have not some Departmental duties. It is, perhaps, rather an advantage that a Minister without serious Departmental duties should reply on a Debate of this kind when the interests of a number of Departments are affected, as one can give more of a bird's eye view of their work.

Let me, at the outset of my reply, submit one or two indubitable propositions. The first is that the spending of sums of public money in large or small quantities is beneficial or deleterious according to the circumstances. A second proposition, which has been forgotten in these debates, is that tariffs, subsidies or trade restrictions, which are within the competence of this Government, are and must be principles to be adjusted or removed according to the fluctuating needs of British trade and world conditions. I do not suggest that hon. and right hon. Members have fallen into the habit which I deprecate, considering the situation we have before us, of conducting these debates much on the basis of a Debate on the abstract theories of Free Trade or Protection, in the spirit of sixteenth century theologians. That is why we suffered so gravely before the War when we had discussions of these matters. One side put the rigid Free Trade point of view and the other side put the rigid Protection point of view, and at the end of the evening were no nearer agreement than at the beginning. In this Debate there has been a certain measure of agreement on certain aspects of the question, and I would suggest, although there is nothing original in saying it, that it cannot be too often realised that this post-war world is in every economic and other sense a new world demanding fresh light and new treatment of its problems. That is the great difference between the situation to-day and the situation pre-1914. Everything is much more fluid and much less static than it was then, and I shall in my reply examine the subject under review in that light.

Let me say a few words on the subject of trade restriction. I think there is a misunderstanding in some quarters of the House both as to the nature and the reasons for the so-called trade restrictions. I do not think that even so orthodox an economist as the hon. Member for Oxford University (Sir A. Salter), from whom we had an extremely interesting speech, would deny the force of this analogy, that, while it is a fact that the high blood-pressure of too great a restriction in this country may gravely risk our trade abroad by producing retribution and so preventing the lowering of restrictions already against us, it is equally a fact that what may be called the too low blood-pressure of unrestricted entry so weakens our productive manufacturing power causing unemployment and reducing our consuming power, that the patient will slowly wilt away. In this as in other matters we have to choose between two extremes.

I say, and neither I nor any other Minister standing at this Box need apologise for using such a phrase, that we have to be opportunists according to the circumstances. [HON. MEMBERS: "Oh!"] Hon. Members may jeer at that statement, but in these economic matters, in the present state of the world, it is impossible to apply the rigid ideas of pre-war economists. That is true in every sense. Therefore, we have to be opportunists, and I do not think that any economist on the benches opposite would differ from that point of view. There is another point very frequently forgotten in connection with trade restrictions. In general, whatever may be their effect in practice, they are not imposed primarily to raise prices and fill the pockets of producers but to promote stability and to avoid the calamitous circumstances of 1929, when the world was glutted with products which it could not absorb.

When questions are asked from the benches opposite—such a question was put by the right hon. Member for Keighley (Mr. Lees-Smith)—as to what steps we are taking to avoid the next trade recession—that is the modern word—I would point out that undoubtedly one of the causes of the slump in 1929 was the glut of products in certain directions. Without coming to the thorny subject of consumption, and whether or not if you did not increase the consuming power you could not do away with the glut, it is notorious that in regard to certain products there was an amount which no immediate improvement in the consuming power could possibly have absorbed. That was one of the primary causes of the depression.

Therefore, when restrictions are attacked, you must remember that the primary reason why they are imposed is to prevent a state of affairs similar to that which occurred in 1929. I believe that in the majority of cases they will fulfil that object, and are fulfilling that object. Surely similar considerations apply where the question of public money is concerned, if you approach the matter from an unprejudiced and economic, not a political, standpoint. I would lay down this proposition, which is not so popular in this House in these days as it used to be, although before the War it was unquestioned, that the taxpayers' and ratepayers' money should be spent only on objects of national or local benefit, provided that no better method of financing the scheme from private sources existed. I would add that the proposition, which at one time just after the War was dangerously and pervasively held in this House, that expenditure of public money would pave the way to an economic Heaven, is purely a delusion. I trust we shall not again fall into the error which I have detected in many speeches, including that of the right hon. Gentleman the Leader of the Liberal Opposition, that all you have to do to prevent a slump, or deal with it when you come to it, is to pour out public money.

Sir A. Sinclair


Earl Winterton

I am glad to have that contradiction. There are many passages in the right hon. Gentleman's speech which would lead one to think that. I could quote figures showing that under the Governments of Members opposite, as much as under Conservative Governments, the tremendous amount of expenditure which was involved per man in providing work, however much it was, would have been inadequate to absorb all the men unemployed. I would turn to a question which has been raised in some speeches, and which is referred to in the Amendment. That is the question of migration and the development of backward or inadequately populated regions of the Empire. On that, I would submit that this is one of the most difficult problems with which we have to deal at the present time. It is certainly not to be solved by mere repetition of clichés, such as that the empty spaces of the Dominions are crying out for settlement and that Great Britain is overcrowded. My right hon. Friend the Dominions Secretary has pointed out in previous debates some of the difficulties and the efforts that have been made to solve them. I would like to emphasise one primal factor.

I am sure none of my hon. and right hon. Friends behind me would mind me calling their attention to the fact, as much as that of hon. Gentlemen opposite, that development in the Dominions, and the migration which would follow from it, is a matter on which the Dominions themselves must set the pace. I would like to add, with some knowledge, having visited two of the Dominions on three or four occasions, and having friends and relations in them, that, while one must be extremely cautious in commenting from this bench and other benches in this House on matters which fall within the competence of Dominion Governments, one could not be wrong in making this statement, because it is so obvious, that no Dominion state or provincial government can move in this matter without the consent of public opinion in its own territory, and public opinion in every one of the Dominions is probably more alert on this matter than on almost any other. It is only natural it should be so in view of the fact that two or three of the Dominions have just passed through a period of serious unemployment which has strained their resources to the utmost.

That brings me by a natural process to the question of the Ottawa Agreements. It has altogether escaped the notice of some who have criticised these Agreements that the prime object of the Agreements concluded at Ottawa between His Majesty's Government and the Dominions was to stimulate mutual trade; and an increase of mutual trade by promoting the prosperity of each country must and can only produce the conditions favourable to and necessary for a resumption of migration on a large scale. It is obvious that when these conditions have been created the United Kingdom Government are prepared to do their part in the matter of migration and settlement which the Empire Settlement Act of 1922 provides.

I must refer to a rather curious point made by the Mover of the Amendment, as it has escaped attention in subsequent speeches. The hon. and gallant Member said that so far from their being migration on any considerable scale from this country to the Dominions, there has been an inward flow from the Dominions to this country in the last few years. He complained of that and criticised the Government. Surely, the opposite is the case. Surely, it is a tribute to the policy pursued by the Government that people should come back here. The fact that people have come back not merely from the Dominions but from the United States and from every country in Europe, if they can obtain permits to do so—surely, if they wish to come and live and work in this country, it is some tribute to the conditions under which we are governed.

I should like to refer to a most extraordinary proposal coming from the hon. and gallant Member who moved the Amendment. Everyone realises that agriculture is still passing through a transition period, the effects of the measures taken by the Government are still in their initial stages. The hon. and gallant Member in commending the cause of agriculture to the House made the astonishing suggestion that we should subsidise agricultural wages. I wonder whether he has ever heard of the Speenhamland experiment, when this country attempted to subsidise agricultural wages over 100 years ago, which led to a period of disruption and disturbance never known before in the agricultural industry. I was astonished that a speaker representing the Liberal party should suggest subsidising agricultural wages.

Mr. Gallacher

Subsidise the landlords.

Earl Winterton

Exactly. For once the hon. Member is correct. The only effect of subsidising wages under the Speenham land proposal and under the hon. and gallant Member's suggestion would be to subsidise landlords. There is another curious point which must be noticed in the speech of the hon. and gallant Member. It seems extraordinary that even in this country, where inconsistency is held to be a virtue and illogicality a blessing, the Liberal party should at one and the same time condemn Ottawa, the whole object of which was to encourage inter-Imperial trade and through that inter-Imperial migration, and at the same time should support migration and Empire development.

Sir A. Sinclair

It does not fulfil its object.

Earl Winterton

I heard what the Leader of the Opposition had to say on the things which are likely to happen to us in the next few years. I have heard that sort of speech from the Liberal benches before, indeed from the benches opposite. I would advise hon. and right hon. Gentlemen not to make what I would describe as a frontal attack on the facts. I notice that they appeared to he very much annoyed at what my right hon. Friend, the Chancellor of the Exchequer, said last night in a comparison of the facts and figures which he gave. They seemed to me to be quite indisputable and to supply the strongest possible argument against the whole tendency of the speeches which have come from the Opposition benches in the course of this Debate.

We have heard these gloomy prophecies made before. However much hon. Gentlemen and right hon. Gentlemen may differ from it, I would make the assertion with confidence that, compared with five, 10 or even 25 years ago, the people of these islands are better fed, better housed, have more paid leisure, more scope for recreation and are less divided by industrial and political disputes. If hon. Gentlemen do not believe that, let them go, as I have done, in the recent months and recent years; let them visit any country on the Continent of Europe. They are constantly saying to us—and it is a perfectly fair point to them—that those of us on this side of the House, where we are, generally in fairly comfortable circumstances, do not realise the lives led by the poor of this country. I always listen with respect to anything that comes from the benches opposite about the hardships of the wage-earner and the hardships that hon. Gentlemen in some cases have gone through in their early life. But I would say: Let them go to any country they like in Europe, to a democratic country like France, or among the peasantry of Italy, or even to Germany or any other great country; let them go into any country of the Left or Right dictatorships, and I have no hesitation in saying that the general wellbeing of the people in those countries will be nothing like as high as hon. Members will find in this country.

Of course, it is a supreme disappointment to the Leader of the Liberal party that none of the things which he has prophesied has happened. People have not become, as he suggested, less prosperous, but more prosperous; the people have not become more discontented but less discontented. Almost every prophecy that he has made has fallen. I might add that this island people accept less and less the particular brand of Liberalism which he puts before them because —if I might put the matter so without offence—they like it slightly diluted and mixed with other ingredients as it is on this bench, where they find it a most invigorating tonic. I sympathise with the right hon. Gentleman. I think I am speaking for a good many of my hon. and right hon. Friends around me when I say that we appreciate the courage and consistency with which he and his little band stick to a set of principles that the public is deserting more and more every day—in fact, I think they deserted them several years ago. It must be rather boring going on year after year, hearing the muezzin calling from the Liberal minarets, and finding that none of the faithful are prepared to pray. It makes it considerably worse when there is a very independent and unorthodox Grand Mufti sitting on the Front Opposition Bench.

I wish to conclude by saying that there is no doubt that some recessions in trade arise from psychological—one might almost say pathological—as much as tangible causes. It is interesting to note in that connection that there have been supporters, official and otherwise, of the United States Government who have accused certain Wall Street operators of trying to cause panic and pessimism about trade in order to damage the Roosevelt administration. That, of course, is no concern of this House, and I personally make no such charge against either Opposition; but at the same time, there can be no escaping the fact that a period of trade depression coinciding with the probable date of the General Election, two and a half years hence, would be an electoral aid to the Government's opponents. That cannot escape notice.

My right hon. Friend the President of the Board of Trade has shown that there are no grounds for believing that a trade blight or recession is either imminent or inevitable, or that the Government have no plans to avert or mitigate it. I have not time to deal with the matter fully, but when the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith), in the course of his speech, said that the impression left in his mind by my right hon. Friend's speech was that there were no plans under consideration or in operation, he contradicted himself out of his own mouth. For example, he spoke of the question of building new barracks and referred to the fact that the Minister of War considered it necessary or desirable to replace a great number of barracks; and he also mentioned the question of rural housing. It is not fair to say that that was the impression given by my right hon. Friend's speech.

What my right hon. Friend said was that the Government are preparing plans, but that they do not believe that it is right to assume that a trade recession is either likely or imminent simply because that has been the case in the past. It is a notorious fact that both in the case of the Government and private enterprise, there are certain things which it is inconvenient or impossible to do at the present time because of the armaments programme, and that these things must await the time when there is less pressure upon skilled labour than is involved by the rearmament programme now. In my last words, I would like to maintain that there is not the slightest reason for supposing that this frightful calamity will come upon us. The most frightful calamity that could come upon us would be a general European war, which would upset all calculations, and I say with sincerity and earnestness that the best means that we can adopt to avoid that terrible calamity of a European war, and the trade depression which such a war would certainly produce, is to see that the British Government, with the overwhelming majority of British public opinion behind them—as I think they have in this matter—should continue to work ceaselessly for appeasement and understanding among all the nations of the world.

Question put, "That those words be there added."

The House divided: Ayes, 146; Noes, 363.

Division No. 2.] AYES. [10.59 p.m.
Acland, Rt. Hon. Sir F. Dyke Groves, T. E. Parker, J.
Acland, R. T. D. (Barnstaple) Guest, Dr. L. H. (Islington, N.) Parkinson, J. A.
Adams, D. (Consett) Hall, G. H. (Aberdare) Pethick-Lawrence, Rt. Hon. F. W.
Adamson, W. M. Hall, J. H. (Whiteahapel) Price, M. P.
Alexander, Rt. Hon. A. V. (H'Isbr.) Hardie, Agnes Quibell, D. J. K.
Ammon, C. G. Harvey, T. E. (Eng. Univ's.) Rathbone, Eleanor (English Univ's.)
Anderson, F. (Whitehaven) Henderson, J. (Ardwiok) Richards, R. (Wrexham)
Attlee, Rt. Hon. C. R. Henderson, T. (Tradeston) Ridley, G.
Banfield, J. W. Holdsworth, H. Riley, B.
Barnes, A. J. Hopkin, D. Ritson, J.
Barr, J. Jagger, J. Roberts, W. (Cumberland, N.)
Batey, J. Jenkins, A. (Pontypool) Robinson, W. A. (St. Helens)
Benn, Rt. Hon. W. W. Jenkins, Sir W. (Neath) Rothschild, J. A. de
Benson, G. Johnston, Rt. Hon. T. Salter, Dr. A. (Bermondsey)
Bevan, A. Jones, A. C. (Shipley) Salter, Sir J. Arthur (Oxford U.)
Broad, F. A. Jones, Sir H. Haydn (Merioneth) Sexton, T. M.
Bromfield, W. Kelly, W. T. Shinwell, E.
Brown, C. (Mansfield) Kennedy, Rt. Hon. T. Short, A.
Brown, Rt. Hon. J. (S. Ayrshire) Kirby, B. V. Silkin, L.
Buchanan, G. Kirkwood, D. Simpson, F. B.
Burke, W. A. Lansbury, Rt. Hon. G. Sinclair, Rt. Hon. Sir A. (C'thn's)
Cape, T. Lathan, G. Smith, Ben (Rotherhithe)
Casselie, T. Lawson, J. J. Smith, E. (Stoke)
Charleton, H. C. Leach, W. Smith, Rt. Hon. H. B. Lees- (K'ly)
Cluse, W. S. Lee, F. Smith, T. (Normanton)
Cove, W. G. Leonard, W. Sorensen, R. W.
Cripps, Hon. Sir Stafford Leslie, J. R. Stephen, C.
Dagger, G. Logan, D. G. Stewart, W. J. (H'ght'n-le-Sp'ng)
Dalton, H. Lunn, W. Strauss, G. R. (Lambeth, N.)
Davidson, J. J. (Maryhill) Macdonald, G. (Ince) Taylor, R. J. (Morpeth)
Davies, S. O. (Merthyr) McEntee, V. La T. Thurtle, E.
Day, H. McGhee, H. G. Tinker, J. J.
Dobbie, W. MacLaren, A. Viant, S. P.
Dunn, E. (Rother Valley) MacNeill, Weir, L. Walkden, A. G.
Ede, J. C. Mainwaring, W. H. Walker, J.
Edwards, Sir C. (BedwelltY) Mander, G. le M. Watkins, F. C.
Evans, D. O. (Cardigan) Marshall, F. Watson, W. McL.
Evans, E. (Univ. of Wales) Mathers, G. Westwood, J.
Foot, D. M. Maxton, J. White, H. Graham
Frankel, D. Messer, F. Whiteley, W. (Blaydon)
Gallacher, W. Milner, Major J. Williams, E. J. (Ogmore)
Gardner, B. W. Montague, F. Williams, T. (Don Valley)
George, Major G. Lloyd (Pembroke) Morrison, Rt. Hon. H. (Hackney, S.) Wilson, C. H. (Attercliffe)
George, Megan Lloyd (Anglesey) Muff, G. Windsor, W. (Hull, C.)
Gibson, R. (Gretoock) Nathan, Colonel H. L. Woods, G. S. (Finsbury)
Graham, D. M. (Hamilton) Naylor, T. E. Young, Sir R. (Newton)
Greenwood, Rt. Hon. A. Noel-Baker, P. J.
Griffith, F. Kingsley (M'ddl'sbro, W.) Oliver, G. H. TELLERS FOR THE AYES.
Griffiths, G. A. (Hemsworth) Owen, Major G. Sir Percy Harris and Sir Hugh
Griffiths, J. (Llanelly) Paling, W. Seely.
Acland-Troyte, Lt.-Col. G. J. Bird, Sir R. B. Cazalet, Thelma (Islington, E.)
Adams, S. V. T. (Leeds, W.) Blair, Sir R. Cazalet. Capt. V. A. (Chippenham)
Agnew, Lieut.-Comdr. P. G. Stoker, Sir R. Channon, H.
Albery, Sir Irving Boothby, R. J. G. Chapman. A (Rutherglen)
Allen, Col. J. Sandeman (B'knhead) Bossom, A. C. Christie, J. A.
Amery, Rt. Hon. L. C. M. S. Boulton, W. W. Clarke, Lt.-Col. R. S. (E. Grinstead)
Anderson, Sir A. Garrett (C. of Ldn.) Bowater, Col. Sir T. Vansittart Clarry, Sir Reginald
Anstruther-Gray, W. J. Bower, Comdr. R. T. Clydesdale, Marquess of
Ansley, Lord Boyce, H. Leslie Cobb, Captain E. C. (Preston)
Aske, Sir R. W. Brass, Sir W. Colman, N. C. D.
Assheton, R. Briscoe, Capt. R. G. Colville, Lt.-Col. Rt. Hon. D. J.
Astor, Major Hon. J. J. (Dover) Brown, Col. D. C. (Hexham) Conant, Captain R. J. E.
Astor, Hon. W. W. (Fulham, E.) Brown, Brig.-Gen. H. C. (Newbury) Cook, Sir T. R. A. M. (Norfolk, N.)
Atholl, Duchess of Browne, A. C. (Belfast, W.) Cooke, J. D. (Hammersmith. S.)
Baillie, Sir A. W. M. Bull, B. B. Cooper, Rt. He. A. Duff (W'st'r S. G'gs)
Baldwin-Webb, Col. J. Bullock, Capt. M. Cooper, Rt. Hn. T M. (E'nburgh, W.)
Balfour, Capt. H. H. (Isle of Thanet) Burghley, Lord Courtauld, Major J. S.
Balniel, Lord Burgin, Rt. Hon. E. L. Courthope, Col. Rt. Hon. Sir G. L.
Barclay-Harvey, Sir C. M. Burton, Col. H. W. Cox, H. B. T.
Baxter, A. Beverley Butcher, H. W. Cranborne, Viscount
Beamish, Rear-Admiral T. P. H. Butler, R. A. Craven-Ellis, W.
Beauchamp, Sir B. C. Caine, G. R. Hall Croft, Brig.-Gen. Sir H. Page
Beaumont, M. W. (Aylesbury) Campbell, Sir E. T. Crooke, J. S.
Beaumont, Hon. R. E. B. (Portsm'h) Cartland, J. R. H. Crookshank, Capt. H. F. C.
Beechman, N. A. Carver, Major W. H. Croom-Johnson, R. P.
Beit, Sir A. L. Cary, R. A. Cross, R. H.
Bennett, Sir E. N. Castlereagh, Viscount Crossley, A. C.
Bernays, R. H. Cayzer, Sir C. W. (City of Chester) Crowder, J. F. E.
Birchall, Sir J. D. Cayzer, Sir H. R. (Portsmouth, S.) Cruddas, Col. B.
Davidson, Viscountess Hopkinson, A. Petherick, M.
Davies, C. (Montgomery) Horsbrugh, Florence Pickthorn, K. W. M.
Davies, Major Sir G. F. (Yeovil) Howitt, Dr. A. B. Plugge, Capt. L. F.
Davison, Sir W. H. Hudson, Capt. A. U. M. (Hack., N.) Ponsonby, Col. C. E.
Dawson, Sir P. Hudson, R. S. (Southport) Porritt, R. W.
De Chair, S. S. Hulbert, N. J. Power, Sir J. C.
De Ia Bere, R. Hume, Sir G. H. Pownall, Lt.-Col. Sir Assheton
Denman, Hon. R. D. Hunter, T. Procter, Major H. A.
Denville, Alfred Hurd, Sir P. A. Purbrick, R.
Despencer-Robertson, Major J. A. F. Hutchinson, G. C. Radford, E. A.
Dodd, J. S. Inskip, Rt. Hon. Sir T. W. H. Raikes, H. V. A. M.
Doland. G. F. James, Wing-Commander A. W. H. Ramsay, Captain A. H. M.
Donner, P. W. Jarvis, Sir J. J. Ramsbotham, H.
Dorman-Smith, Major Sir R. H. Joel, D. J. B. Ramsden, Sir E.
Dower, Major A. V. G. Jones, Sir G. W. H. (S'k N'w'gt'n) Rankin, Sir R.
Drewe, C. Jones, L. (Swansea W.) Rathbone, J. R. (Bodmin)
Duckworth, Arthur (Shrewsbury) Keeling, E. H. Rawson, Sir Cooper
Duckworth, W. R. (Moss Side) Kerr, H. W. (Oldham) Rayner, Major R. H.
Dugdale, Captain T. L. Kerr, J. Graham (Soottish Univs.) Reid, Captain A. Cunningham
Duggan, H. J. Keyes, Admiral of the Fleet Sir R. Reid, Sir D. D. (Down)
Duncan, J. A. L. Kimball, L. Reid, W. Allan (Derby)
Duglass, Lord Knox, Major-General Sir A. W. F. Rickards, G. W. (Skipton)
Eastwood, J. F. Lambert, Rt. Hon. G. Ropner, Colonel L.
Eckersley, P. T. Latham, Sir P. Ross, Major Sir R. D. (Londonderry)
Edmondson, Major Sir J. Law, Sir A. J. (High Peak) Ross Taylor, W. (Woodbridge)
Elliot, Rt. Hon. W. E. Law, R. K. (Hull, S.W.) Rowlands, G.
Ellis, Sir G. Leech, Dr. J. W. Royds, Admiral P. M. R.
Elliston, Capt. G. S. Lees-Jo es, J. Ruggles-Brise, Colonel Sir E. A.
Elmley, Viscount Leigh, Sir J. Russell, Sir Alexander
Emery, J. F. Leighton, Major B. E. P. Russell, R. J. (Eddisbury)
Emmott, C. E. G. C. Levy, T. Russell, S. H. M. (Darwen)
Emrys-Evans, P. V. Lewis, O. Salmon, Sir I.
Entwistle, Sir C. F. Liddell, W. S. Salt, E. W.
Errington, E. Lindsay, K. M. Samuel, M. R. A.
Erskine-Hill, A. G. Little, Sir E. Graham Sanderson, Sir F. B.
Evans, Capt. A. (Cardiff, S.) Llewellin, Lieut.-Col. J. J. Sandys, E. D.
Everard, W. L. Lloyd, G. W. Sassoon, Rt. Hon. Sir P.
Findlay, Sir E. Locker-Lampson, Comdr. O. S. Savory, Sir Servingten
Fleming, E. L. Loftus, P. C. Scott, Lord William
Fox, Sir G. W. G. Lovat-Fraser, J. A. Selley, H. R.
Fremantle, Sir F. E. Lyons, A. M. Shakespeare, G. H.
Furness, S. N. Mabane, W. (Huddersfield) Shaw, Major P. S. (Wavertree)
Fyfe, D. P. M. MacAndrew, Colonel Sir C. G. Shaw, Captain W. T. (Forfar)
Ganzoni, Sir J. M'Connell, Sir J. Shepperson, Sir E. W.
Gibson, Sir C. G. (Pudsey and Otley) McCorquodale, M. S. Shute, Colonel Sir J. J.
Gilmour, Lt.-Col. Rt. Hon. Sir J. MacDonald, Sir Murdoch (Inverness) Simmonds, O. E.
Gledhill, G. Macdonald, Capt. P. (Isle of Wight) Simon, Rt. Hon. Sir J. A.
Gluckstein, L. H. McEwen, Capt. J. H. F. Sinclair, Col. T. (Queen's U. B'll'st)
Glyn, Major Sir R. G. C. Maclay, Hon. J. P. Smiles, Lieut.-Colonel Sir W. D.
Goldie, N. B. Macmillan, H. (Stockton-on-Tees) Smith, Bracewell (Dulwich)
Gower, Sir R. V. Macnamara, Capt. J. R. J. Smith, L. W. (Hallam)
Graham, Captain A. C. (Wirral) Macquisten, F. A. Smith, Sir R. W. (Aberdeen)
Grant-Ferris, R. Magnay, T. Smithers, Sir W.
Granville, E. L. Makins, Brig.-Gen. E. Somervell. Sir D. B. (Crewe)
Greene, W. P. C. (Worcester) Manningham-Buller, Sir M. Somerville, A. A. (Windsor)
Gretton, Col. Rt. Hon. J. Marsden, Commander A. Southby, Commander Sir A. R. J.
Gridley, Sir A. B. Mason, Lt.-Cal. Hon. G. K. M. Spears, Brigadier-General E. L.
Grigg, Sir E. W. M. Maxwell, Hon. S. A. Spens. W. P.
Grimston, R. V. Mayhew, Lt.-Col. J. Stanley, Rt. Hen. Lord (Fylde)
Gritten, W. G. Howard Mellor, Sir J. S. P. (Tamworth) Stanley, Rt. Hon. Oliver (W'm'I'd)
Guest, Lieut.-Colonel H. (Drake) Mills, Major J. D. (New Forest) Stourton, Major Hon. J. J.
Guest, Hon. I. (Brecon and Radnor) Mitchell, H. (Brentford and Chiswick) Strauss, E. A. (Southwark. N.)
Guest, Maj. Hon. O. (C'mb'rw'll, N.W.) Mitchell, Sir W. Lane (Streatham) Strauss, H. G. (Norwich)
Guinness, T. L. E. B. Mitcheson, Sir G. G. Strickland, Captain W. F.
G[...]nston, Caot D. W. Moore, Lieut.-Col. Sir T. C. R. Stuart, Lord C. Crichton- (N'thw'h)
Hacking, Rt. Hon. D. H. Moore-Brabazon, Lt.-Col. J. T. C. Stuart, Hon. J. (Moray and Nairn)
Hambro, A. V. Moreing, A. C. Sueter, Rear-Admiral Sir M. F.
Hannah, I. C. Morris, J. P. (Salford, N.) Sutcliffe, H.
Hannon, Sir P. J. H. Morris, O. T. (Cardiff, E.) Tesker, Sir R. I.
Harbord, A. Morris-Jones, Sir Henry Tate, Mavis C.
Hartington, Marquess of Morrison, G. A. (Scottish Univ's.) Taylor, Vice-Adm. E. A. (Padd., S.)
Harvey, Sir G. Morrison, Rt. Hon. W. S. (Cirencester) Thomson, Sir J. D. W.
Haslam, Henry (Horncastle) Muirhead, Lt.-Col. A. J. Titchfield, Marquess of
Haslam, Sir J. (Bolton) Munro, P. Touche, G. C.
Heilgers, Captain F. F. A, Nall, Sir J. Train, Sir J.
Heneage, Lieut.-Colonel A. P. Neven-Spence, Major B. H. H. Tree, A. R. L. F.
Hepburn, P. G. T. Buchan Nicholson, G. (Farnham) Tryon, Major Rt. Hon. G. C.
Hepworth, J. Nicolson, Hon. H. G. Tufnell, Lieut.-Commander R. L.
Herbert, Major J. A. (Monmouth) O'Connor, Sir Terence J. Turton, R. H.
Herbert, Capt. Sir S. (Abbey) O'Neill, Rt. Hon. Sir Hugh Wakefield, W. W.
Higgs, W. F. Palmer, G. E. H. Walker-Smith, Sir J.
Hills, Major Rt. Hon. J. W. (Ripon) Patrick, C. M. Wallace, Capt. Rt. Hon. Euan
Hoare, Rt. Hon. Sir S. Peat, C. U. Ward, Lieut.-Col. Sir A. L. (Hull)
Holmes, J. S. Perkins, W. R. D. Ward, Irene M. B. (Wallsend)
Hope, Captain Hon. A. O. J. Peters, Dr. S. J. Wardlaw-Milne, Sir J. S.
Warrender, Sir V. Williams, C. (Torquay) Wood, Hon. C. I. C.
Waterhouse, Captain C. Williams, H. G. (Croydon, S.) Wood, Rt. Hon. Sir Kingsley
Watt, G. S. H. Willoughby de Eresby, Lord Wragg, H.
Wayland, Sir W. A Wilson, Lt.-Col. Sir A. T. (Hitchin) Wright, Wing-Commander J. A. C.
Wedderburn, H. J. S. Windsor-Clive, Lieut.-Colonel G. Young, A. S. L. (Partick)
Wells, S. R. Winterton, Rt. Hon. Earl
Whiteley, Major J. P. (Buckingham) Weimer, Rt. Hon. Viscount TELLERS FOR THE NOES.
Wickham, Lt.-Col. E. T. R. Womersley, Sir W. J. Captain Margesson and Lieut.-
Colonel Kerr.

Main Question put, and agreed to.

Resolved That an humble Address be presented to His Majesty, as followeth: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament.

To be presented by Privy Councillors or Members of His Majesty's Household.

Forward to