HC Deb 12 December 1945 vol 417 cc421-558

3.36 p.m.

Mr. Speaker

Before I call on the right hon. Gentleman the Chancellor of the Exchequer to move the Motion on the Order Paper (Anglo-American Financial Economic Discussions) it will be for the convenience of the House that the Debate on the Motion should be defined. The Motion covers three international agreements, which are closely related to each other, and the Debate can, of course, cover all three. There are certain pro visions in the Bretton Woods Agreement which require legislation in this country and a Bill has in fact been introduced for the purpose. According to the rule against anticipation, the fact that the Bill is before the House would prevent reference to it in the course of the Debate on the Motion. Since, however, the sole purpose of the Bill is to implement some of the provisions of the Bretton Woods Agreement it would prove a very inconvenient restriction on what was intended to be a comprehensive Debate if all reference to that Agreement were excluded. I am prepared, therefore, to relax the rule and to allow reference to the provisions of the Bill so far as is necessary for explaining the Agreement. It would not, however, be in Order to raise points which should be reserved for the Commit tee stage of the Bill. This, however, cannot be used as a precedent for disregarding the Rule on anticipation on ordinary occasions.

Mr. Stokes (Ipswich)

May I ask, Sir, if, supposing an hon. Member is fortunate enough to catch your eye today or before 7 o'clock tomorrow, he is likely also to catch your eye during the next day, even though it means repeating his whole speech on the Bretton Woods Agreement?

Mr. Speaker

I cannot answer now, but I hope that hon. Members will not make two speeches.

Mr. Boothby (Aberdeen and Kincardine, Eastern)

For the convenience of the House, Sir, would you indicate whether you intend to call specific Amendments?

Mr. Speaker

No, I do not. It seems to me it would be much more satisfactory to have a straight vote.

3.38 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

I beg to move, That this House approves the financial arrangements between His Majesty's Government and the Government of the United States, including the final settlement of Lend-Lease and other claims arising out of the war, as set out in Cmd. 670S; welcomes the initiative of the Government of the United States in making "Proposals for an Inter national Trade Organisation," Cmd. 6709, and approves the participation of His Majesty's Government in the discussions proposed with a view to arriving at an international agreement upon the basis of the suggestions put forward; and approves the proposals for setting up an International Monetary Fund and an International Bank for Reconstruction and Development as set out in Cmd. 6546 of 1944. His Majesty's Government ask the House to approve three things—first, the Financial Agreement with the United States Government, including the final settlement of Lend-Lease and cither claims arising out of the war; secondly, the proposals for' an International Trade Organisation; and thirdly, the firetton Woods Agreements for the setting up of an International Monetary Fund and an International Bank for Reconstruction and Development. My right hon. Friend the President of the Board of Trade will deal, later in the Debate, with the International Trade Organisation. My part is to explain and defend the Loan agreement, the Lend-Lease settlement and the Bretton Woods Agreements.

I will begin with the Loan Agreement; and it may be convenient and logical if we first ask ourselves why we need a dollar loan at all. The answer is, because, during the war, our national economy has been distorted and violently twisted out of shape for the sake of the common war effort. And this distortion was deliberately worsened by Lend-Lease itself. We deliberately forced down our exports to the bare minimum. Why? To make munitions; to make supplies of all kinds connected with the war, for ourselves and for our Allies; and to man the Navy, the Army and the Air Force.

With the conclusion of the war against Japan, and with the sudden ending of Lend Lease, we found ourselves in a most abnormal situation. We were faced with not only one problem but two serious problems. The first was a question mark for the future, and the second a heavy legacy from the past. The first problem was the simple question—how were we to pay, from VJ-Day onwards, for all the food and raw materials and other necessities which we must import in order to live and to employ our people? Lend Lease and Mutual Aid had ceased; but our urgent need of supplies from the dollar I countries continued and will continue. Some of these supplies cannot be got except from the dollar countries; and ultimately, of course, we can pay for them only from the proceeds of our exports, visible and invisible. I do not need to stress to this House that it will take time—though I do stress that we must make sure that it takes the least possible time—not merely to regain the pre—war level of our exports, but to reach that higher level which is required if we are effectively and securely to balance our external trade in the post war days.

During the interval, while we are re-establishing this balance, we shall need to import supplies from all parts of the world, and to pay, somehow or other, for what we import. Inevitably, therefore, we shall be running, for some time, an overdraft on our current trading account. The thing is inescapable. If any hon. Member has doubts as to the magnitude of that overdraft, I would ask him to study the facts and figures given in the White Paper on the Statistical Material presented by our representatives during the Washington Negotiations. That is one of our problems—what I have called the question mark for the future, the problem of how soon we can re-establish our export trade in sufficient volume to pay for our imports, and how, meanwhile, we are to meet the critical situation which confronts us.

But there is also the second problem of the legacy from the war years. This legacy, a wholly disagreeable one, consists essentially of the debt which we find ourselves owing to our Allies and associates in the war, not to speak of certain neutrals. These debts we have accumulated during the war, entirely for war purposes. This great load of debt, which we are bringing out of the war, is, indeed, a strange reward for all we, in this land, did and suffered for the common cause, to which all parties and sections of this community were totally devoted. It is a strange and ironical reward, on which historians will make their comment. But, pending that comment, we must deal with the situation.

During the past six years, we have had to spend a vast sum in sterling to maintain our effort in every part of the world. We spent it in buying local currencies to pay for our own vital imports of food and raw materials, and to maintain our troops on many different fronts all over the world, often to the great profit of the local inhabitants. Yet there is no new physical asset, there is no new real wealth, which we can now set against this expenditure. We can set against it only the fact of victory, and the liberation of many who fought by our side. It is literally true to say that all this money has been lost, in a purely financial sense, in winning the war, but that we still owe it. The sterling which we paid for all these goods and services, which we needed then so desperately, is still held by the countries who supplied us; and since we have not been able to write it off by exports to any great extent, it still stands on the debit side of our account. A large part of this debt, though not all of it, is owed to the sterling area.

I would like, here, to say a word about the sterling area. This is a term which is, I think, sometimes misunderstood. The sterling area is no new thing. It is no creation of the war. It is not even a creation of the immediate pre war years. The sterling area has existed for over a century as a banking and currency arrangement. Right up to 1939, when the war broke out, holders of sterling were free to spend it anywhere for any purpose. But when war came, we and the rest of the sterling area enforced, for the first time, a complete system of exchange control. It was necessary for the effective conduct of the war; but it was a new thing, born of war conditions. All members of the sterling area were free to spend sterling anywhere within the area or outside, it, for any purpose approved by their own control; but—and this is important to an understanding of the present position—we asked the other members of the sterling area to cut to a minimum their demands on our reserves of gold and dollars, since these were the central reserves for the whole area. That was the origin of what is now called "the sterling area dollar pool." As hon. Members will see from the Financial Agreement, it is proposed that this arrangement, in the form in which it has existed during the war, shall shortly come to an end, and that we shall revert to the convertibility of sterling for current transaction Later, I shall indicate how shortly it is to come to an end; but here I wish to emphasise that what we are doing is reverting, in this respect, to the pre war situation. We are not doing some thing which is fresh and new.

May I say a word about our own re serves in this country? We began the war with a little over £ 600,000,000 of gold and dollars, as against external liabilities of £ 496,000,000. But in April, 1941, immediately before Lend-Lease began, our reserves had almost disappeared, as a result of the need to use them up, in pre-Lend-Lease conditions, for the purchase, on whatever terms we could, of essential supplies from the United States and elsewhere. In April, 1941, our re serves had practically vanished. They had fallen to the dangerously low figure of only £ 3,000,000 net. From that point, however, following upon the introduction of Lend-Lease, our reserves began, fortunately and not unnaturally, to recover. This recovery was due partly to proceeds of sterling area exports, and partly to the fact that American troops in the sterling area were paid in sterling and other local currencies, which the American Government bought with dollars; and these dollars came back into our reserves. By 31st October of this year, our net gold and dollar reserves had risen to about £ 450,000,000 net—not an excessive figure in all the conditions that confront us! For meanwhile, our external debts had risen, as a result of the circumstances I have been describing, to £ 3,500,000,000.

This, then, is the essence of the situation which I am seeking to lay before the House. On the one hand, we have a vast wartime debt, which we have no hope of paying off from our own unaided re sources in the near future. On the other hand, we have a prospective overdraft on our current trading account for the first few years of the future, until our exports enable us once more to pay our way. That was the two-fold problem, which our negotiators took with them to Washing ton. That was the reason why we needed an American loan.

Before I consider the rest of the Loan Agreement, I would like to turn to the details of the Lend-Lease settlement included within that Agreement. This settlement stands rather apart from the rest of the text, and it is, in many respects, one of the most satisfactory features of the Agreement. What does it provide? First, we receive all American goods for which we had placed, or were just about to place orders on V.J. Day. These were mostly foodstuffs and some raw materials. In the second place, we acquire large stocks of American goods of all kinds, which were held in the United Kingdom and in the Colonies on V.J. Day. These stocks consist partly of war material, a miscellaneous category of items—iron and steel scrap, medical stores and so forth—and partly of foodstuffs, raw materials and oil. The settlement covers also certain capital assets, constructed by the Americans in this country and the Colonies, such as pipelines, oil storage facilities, harbour installations, and the like. Thirdly, we have a complete and final clearance, recognised by both Governments of all the miscellaneous out standing claims between our two Governments arising out of the administrative arrangements of the war.

I value this settlement very highly. It does, I think, remove from the future all fear of ill-will and misunderstanding arising from this most important element in Anglo-American co-operation in the war. Lend-Lease, a great scheme, greatly begun by the late President Roosevelt— that most unsordid act in history, as the right hon. Gentleman the Member for Woodford (Mr. Churchill).aptly called it—has had a fine, clean end, which we should welcome.

I now turn with a flicker less of enthusiasm to the main provisions of the Loan Agreement. This Agreement— let us admit it—is the result of three months of very intricate discussions and of some very hard bargaining; and I frankly tell the House that more than once we have been very near to breaking point in these discussions. Here I would like to pay a warm tribute to our team of negotiators in Washington. They have had a hard time and they have done amazingly well. They have combined together a great variety of talents and personalities in a very effective team, headed by our Ambassador, Lord Halifax, and including Lord Keynes, Mr. Brand, Sir Percivale Liesching of the Board of Trade, an exceedingly able official whom, I am proud to think, I brought to the Board of Trade from the Dominions Office when I was President, and in particular—last but not least—Sir Edward Bridges, Permanent Secretary to the Treasury, who, when things were very difficult, at the request of my right hon. Friend the Prime Minister and myself, flew at a few hours' notice to Washington, and played a most important part in the last critical and most difficult week of negotiations. All these public servants deserve high praise from this country.

I will frankly tell the House that this Agreement is by no means what we at first proposed. In view of the nature and extent of the British contribution to the common cause, and of the fact that we had held the pass alone for more than a year, when all our European Allies had been overrun, and the United States of America and the Union of Socialist Soviet Republics were still neutral—in view of these historical events, our representatives first proposed at Washington that, to en able us to restore the gravely disturbed balance of our economy, gravely disturbed, as I have emphasised, in the common cause of us all, we should receive some form of grant-in-aid or, failing that, an interest-free loan. This was the proposal made by our representatives in the first stages of the talks, and the reasons in its support were deployed with great wealth of detail and great skill by our spokesmen. But we were told, quite definitely, that this was not practical politics, and that the Congress of the United States would never consent to any such arrangement. Nor did we willingly or easily accept some of the other pro visions of this Agreement. Nor are all the forms of words used in it those which we ourselves should have preferred.

None the less, in spite of all this, I ask the House to approve this Agreement, as giving us, on balance, substantial and indispensable advantages. In addition to the 650,000,000 dollars which I have already mentioned for the final settlement of Lend-Lease, we obtain a further credit for 3,750,000,000 dollars, making a total of 4,400,000,000 dollars in all. This credit is open to be drawn upon, up to this amount, until the end of 1951. It bears interest at 2 per cent. No payment is due, either of interest or principal, until 31st December, 1951, six years hence. Thereafter the loan is due to be repaid in equal annual instalments of 140,000,000 dollars—about £35,000,000—over 50 years.

I would draw the attention of the House to the fact that the Agreement contains a novel and important provision, not previously included in an arrangement of this sort, for a waiver of interest. The annual interest is to be completely can celled in any year in which our exports, visible and invisible, are insufficient to pay for our pre-war level of imports, adjustments being made for price changes—on the understanding, naturally, that our reserves also are insufficient to make good the payment. On this last point we are the sole judges. But I would add that, welcome as this provision is, and helpful as it ought to be in certain circumstances not altogether easy to fore cast in this changing world, we should not think of invoking this waiver unless all the circumstances of the time justified it.

There is no waiver of the principal. But if we feel that any part of the Agreement needs hereafter to be modified in the light of events, it is recognised in the text that the United States Government and His Majesty's Government shall consult together. I would add one small point, an obvious point. Since the debt is being repaid by a series of equal annual instalments, in the early years the interest will be the predominant element in the annual payments, as against the principal. As the years go on, this situation will be reversed. But in the earlier years this waiver will be of greater interest than at a later date.

So much for the waiver clause. I will now say a word about those sections in the Agreement dealing with the sterling area arrangements, which I should like to touch upon in the light of what I have said about the sterling area as a whole and its character. It is, at first sight, surprising that, according to Section 6 (1) of the Agreement, no part of this credit is to be used to reduce our debt to the sterling area. At an earlier stage of the negotiations, we thought it was particularly desirable that part of the loan. should be set aside for this purpose; but as the discussions proceeded, the American representatives took the view that Congress would not look kindly upon proposals to apply any part of this dollar credit to reducing our debt to the sterling area. Hence Section 6 (1). But the Agreement does help us to take the first step towards the much desired restoration of the convertibility of sterling. And there is considerable desire for this within the sterling area—let not the House be mistaken on this. point. The restrictions on convertibility are not popular with our friends in the sterling area. They desire to see them loosened up. Their relaxation is not something demanded by the Americans only, it is also much desired by our friends in the sterling area. It is important, therefore, that we are enabled, under this Agreement, to take the first steps in that direction, through being helped to balance our current trading account at an earlier stage than would otherwise be possible.

The problem of thesterling area does not only consist of the debt which we accumulated during the war. For that debt, unfortunately, is not static. It is continually increasing, from week to week and month to month, because we still need to acquire, from within the sterling area, more goods than we can at present pay for by our exports. The Agreement covers both aspects of this question. First, it con templates that, within one year of the opening of the credit, the whole of the current earnings of the sterling area, except those arising from our overseas military expenditure during the next three years, will be made available to be spent on current trade in any part of the world, without any discrimination. Broadly, that is liked and welcomed in the sterling area.

In the second place, the Agreement records our intention to agree, with each of the sterling area countries concerned, a plan for dealing with the accumulated sterling balances. We propose to ask each of the Governments concerned to discuss and settle with us, on the broad basis—which will, of course, vary with the circumstances of each case—that part of the accumulated balances shall be set free forthwith, for current expenditure anywhere in the world; part shall be gradually set free, according to a programme, over a term of years; and the balance shall be adjusted, perhaps, in some cases, adjusted downwards, as a contribution by the sterling area countries to a reasonable settlement of this war debt problem. It on those lines that we intend to proceed; and it is on those lines that we hope, within a measurable time, to restore the pre war convertibility of sterling. But I must emphasise that we could not begin to do any of those things if we had, at the same time, to deal with our own immediate difficulties and the problem of paying our own way in the next two or three years, without any aid from the United States. It is only because the American loan contributes to the solution of this problem that we can afford, literally afford, to take these further steps. That is why the loan is an indispensable preliminary.

I will turn now to the Bretton Woods Agreements, our acceptance of which is a condition of the Loan Agreement. And I submit to the House that the acceptance of the Bretton Woods Agreements, subject to one proviso which I will make in a moment, is definitely to the advantage of this country. Subject to one proviso, His Majesty's Government will be pre pared to defend our acceptance of the Bretton.Woods Agreements quite independently of this Loan Agreement with the United States. But the proviso is that we have the financial strength to under take the obligations of the Bretton Woods Agreements, and thus to acquire the benefits which Bretton Woods offers. In this sense, the Loan Agreement is, for us, a condition of Bretton Woods.

I shall ask the House to pass, this week, a Bill enabling His Majesty's Government to ratify the Bretton Woods Agreements. It is only a machinery Bill, and, Mr. Speaker, I therefore welcome the fact that your are allowing this Debate to proceed on wide lines, so that no one who has views on Bretton Woods shall be embarrassed in expressing them by any rules of Order. It is necessary to pass this Bill into law before the 31st of this month, since that is the operative date in the Bretton Woods Instrument, as it was originally devised. Unless we ratify by 31st December, the whole of the Bretton Woods scheme lapses. On the other hand, if the Bill passes into law in time, we shall become foundation members of the Bretton Woods organisation. But I must make it plain—as I desire to meet frankly the criticism that is set forth in one of the Amendments put on the Order Paper by some of my hon. Friends—that if we were not to obtain the dollar loan, and, therefore, were not to derive the financial strength which I have suggested is a necessary condition for our entering effectively into the Bretton Woods scheme in the next few critical years, we should not be able, nor should we be prepared, to continue our membership of Bretton Woods.

There is a considerable amount of misunderstanding regarding Bretton Woods, and I will endeavour to explain, as simply as I can, the purposes and the obligations of the Agreements. Those Agreements establish two new international institutions, one the International Monetary Fund, and the other the International Bank for Reconstruction and Development. The purpose of the Fund is very simple. It is to assist in stabilizing rates of foreign exchange. And, surely, it is most desirable that we should have, 0:1 the whole, stable rates of foreign ex- change, provided—an important proviso—that we have learned the lesson of the inter-war years, and obtain, along with measures for promoting stability, a reasonable freedom of adjustment to prevent any repetition of those deflationary pressures, which created so much needless poverty, unemployment and misery in the inter-war years in this and many other lands. There is no doubt that our monetary affairs were not well managed in those years. Everybody admits it, and the problem is to see whether we cannot lay the foundations for a better and more effective management in the future. It is clearly laid down in the first Article of the Agreement on the Fund that one of the principal purposes of the Fund is: to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income. I would venture to suggest that there can be no effective international economic plan, that will work in practice, unless there is some reasonable element of stability—such as Bretton Woods seeks to provide—in the field of foreign exchange. British industry, and British export trades in particular, suffered grievous damage in the pre-war years from un regulated, anarchical competitive depreciation of foreign currencies. One day, we woke up and found the franc had been marked down. Nobody had been given notice. Another day, some other currency was depressed, and no reason was given for it. I will not multiply examples. It is well known, particularly to those who pecialise in knowledge of the export trades, and represent constituencies where those trades play an important part in the life of the community, that we were constantly being knocked right and left, without warning and with out good reason, by foreigners depreciating their currencies. It would be of great value to the British export trade if we could be reasonably sure that that kind of treatment would not be repeated

It is a British interest, therefore, that other countries should not be free to depreciate their currencies in this way, at least without proper procedure for consultation and discussion; and it is worth our while to enter into an international arrangement designed to promote more stable exchange rates. But this is not a return to the gold standard. This proposition, I understand, is debatable, and will be debated; and there will be many hon. Members who will make contributions to the subject. I will merely endeavour to state, in a simple way, the reasons why I maintain the view that this is not a return to the gold standard, or anything like it, but is quite a different order of things altogether. We shall go into Bretton Woods with the existing rate of 4.03 dollars to the pound. There has to be an initial rate, and my advisers in the Treasury and the Bank.of Eng land are satisfied that 4.03 dollars is as good a rate as you can fix now. There is no reason to suppose it is too high or too low, in relation to the probable course of events.

Mr. Boothby

Is there any reason to suppose that the Treasury is now in a position to know any of the governing factors which should settle,the rate of exchange?

Mr. Dalton

They do not decide these matters entirely out of their own inner consciousness. They take counsel with other people, and, in stating the advice given to me, I have associated with the Treasury the Bank of England—not yet nationalised. If my hon. Friend will adduce any substantial reason why 4.03 dollars is wrong, of course I will give it most careful consideration.

Mr. W. J. Brown (Rugby)

That is far too high. In Portugal, or wherever there is a free market, the rate is nearer 2.50 dollars to the pound.

Mr. Dalton

The hon. Member gets a tourist allowance now to go abroad, and when he goes abroad I do not want to interfere with any of his currency transactions! But 4.03 dollars, it seems to us, is at present a reasonable rate. If we are wrong, we arc not bound for ever—and that is the whole of my argument—for we can retrieve mistakes in this new and more flexible world of Bretton Woods. When we went back to parity on the old basis—I am not scoring a point, but only describing the situation—the value of sterling was held thereafter most narrowly. It could only fluctuate—and it was a very narrow fluctuation—between the limits determined by the cost of sending gold in one direction or another. We go into Bretton Woods at 4.03 dollars to the £ but, if any variation should be necessary—and I beg hon. Members who believe that it is still a return to the gold standard to notice what I am going to say, because it is derived from the text and is not disputable—the Agreements provide four successive possibilities of variation, successive avenues which arc open to us to enable us to alter the value of our currency. In the first place, we, or any other Member of the Fund, may change the par value of our currency by 10 per cent., merely by notifying the Fund. This means that we should be free to change the sterling dollar rate down to 3.63, with merely a notification to the Fund. [Interruption.] I do not know as much about Portugal as my hon. Friend, but I will look into it. In the meantime, perhaps I may be allowed to go on. We can, as a matter of fact, bring down the sterling dollar rate from 4.03 to 3.63. [HON. MEMBERS: "Or up? "] Yes, or up. That is not so commonly proposed, but, certainly, it works either way. [An HON. MEMBER: "Only once? "] Once, certainly.

In the second place, there is the possibility, provided the governing body of the Fund agrees, of a further 10 per cent. variation in either direction, which is permissible if a request for agreement to such further variation is made by a member of the Fund. There must be no delay; there must be a reply from the Fund within 72 hours. That would enable us, if the Fund agreed, to make a further reduction of the dollar rate to 3.22 or a corresponding upward movement. Let it never be forgotten that, when we speak of getting the consent of the Fund, we are going to be there. We are not nobodies in this world. The United Kingdom will be represented in all these discussions. So will the Dominions. The Empire will be there in full force, and, according to the quotas which determine the voting power, the total voting power of the British Commonwealth in the Fund is almost equal to the voting power of the United States. They have over 27 per cent. and we have, I think, between us, over 25 per cent., of which the United Kingdom has over 13 per cent. Do not let us speak as if the Fund was some external and anti-British agency, in the influencing of which we have no power. We shall be there, with the rest of the Fund, including countries like Soviet Russia, the countries of Western Europe, Latin America and China. The second possibility of variation is, therefore, a further variation of 10 per cent., making 20 per cent. altogether. The world would have to be in a pretty good mess if we ever wanted more than a 20 per cent. variation in the next period of years.

In the third place, further changes, over and above this 20 per cent., may be made, again with the consent of the Fund; although, here, there is no time limit of 72 hours for the Fund's answer. Such an application would need more time for consideration; but, if good reasons were adduced and the Fund agreed, the variation could be made.

In the fourth place, and finally—and I desire to underline this most emphatically—under Article 15 of the Bretton Woods Agreements, any member is free to resign from the Fund, immediately on giving notice, and without penalty—and can even get back its own subscription. On resignation from the Fund, the resigning country recovers full liberty to vary the value of its currency, with out any limitation at all, and without any need for consultation. The return to anarchy and full national sovereignty in these matters is complete. That may be held by some to be an advantage of the scheme; but I am stating it in reply to those who say we are bound hand and foot. We are not. We are going into this scheme with considerable elasticity and flexibility, culminating in this unfettered. right of resignation. Let not the House suppose that, in any way, in the future, we shall be alone in this matter. Others, besides ourselves, will notice if the situation is going wrong, and will complain of it; and,. if we cannot get our own way in the Fund, and very likely we shall, there will be some other members to join with us in trying to get something better.

I am convinced—and I believe that any body considering my argument will share the view—that this is an entirely different situation from the old gold standard. It bears no resemblance to it at all. When we went off gold in 1931, we were charged with a breach of faith; and there was some substance, perhaps, in that charge, be cause there was no provision, under the old gold standard, for any escape clause, provided in advance. No such charge could be made henceforward under the Bretton Woods scheme. If we were forced to avail ourselves of any of the procedure of which I have spoken, including the procedure of final resignation, the arrangements and conditions of the scheme would be well known; and, therefore, no charge of a breach of faith could be made against us if we decided, from time to time, to vary the value of sterling.

Having emphasised this point for the sake of clarity, and in order to rebut the arguments put from both sides of the House that Bretton Woods takes us back to the gold standard, I hasten to say that it is most desirable that no country should depreciate its own currency without good cause; otherwise, the whole scheme for stabilising currencies is defeated. There occurs in Article 4, Section 5, the phrase,fundamental disequilibrium." This phrase relates to a very important principle, and I commend it particularly to those who have a recollection of what occurred in 1931—which I do not discuss now—of pressure being brought to bear on the Government of this country to make it change certain of its domestic policies. I also draw particular attention to these words in Article 4: The Fund shall not object to a proposed change "— that is, in the par value of the currency of a member at any particular moment— because of the domestic, social or political policies of the member proposing the change. That, too, is a fundamental provision, which means that every free people or Government remains master in its own house, so far as its own domestic policy is concerned. This is a matter to which the Government attaches very great importance; and, to place our view quite clearly on record, beyond any doubt or peradventure, we intend to follow the example already set by the United States Government, who, in acceding to Bretton Woods, gave notice that, when the Fund is set up, they will seek from its management interpretative declarations as to the meaning of certain parts of it. It is not material to my argument to discuss on what points they seek these declarations. We intend to follow this example in procedure, and to seek an interpretative declaration in these terms:

That, having regard to the intention of the Government of the United Kingdom to maintain full employment and to the terms of Article I (ii) and (v) of the. Articles of Agreement, the Fund shall agree, under Article IV, Section 5 (f) that steps necessary to protect a member from unemployment of a chronic or persistent character, arising from pressure on its balance of payments, shall be measures necessary to correct a fundamental disequilibrium. I have read that out to get it on the record. Its purpose is to get agreement that, if we found ourselves suffering from chronic or persistent unemployment, due to our balance of payments being disturbed by the trade or currency policies of other countries, we should be entitled to modify our own rates of exchange. We must retain the freedom to protect our selves against the contagion of defiatation. We do not intend to' import unemployment from any here abroad. And it is with a view to making this abundantly clear that this interpretative declaration will be sought.

I must now refer to a very important Article in the Bretton Woods Agreement— Article VII—commonly called the "scarce currency" Clause. Here again, I ask hon. Members in all parts of the House who have doubts whether Bretton Woods is really in our interests, to read carefully this Clause and ponder on its importance and meaning. Before the war, one of our difficulties was that certain countries were very anxious to export but very unwilling to import, and very often refused to take payment for goods sent abroad in the form of imports into their own country. They used to combine high tariffs with an ex port drive, which is not, as a rule, a good combination. The "scarce currency" clause is designed to meet that situation, and to prevent its continuance or repetition. Under Article VII, a currency be comes scarce when a country is exporting much more than it is importing, and when it expects its imports to be paid for, not in goods and services, which is the natural way, but in gold or foreign currency. In such conditions, the whole process of inter national trade is frustrated. We must seek to prevent any recurrence of those conditions. Article VII, therefore, provides that, if the Fund pronounces any particular currency to be scarce, any member of the Fund may take action against that currency and against exports from that country, on a discriminatory basis. This is of first importance. It means that if some country is pursuing the line of policy which I have indicated, and is combining an export drive with high tariffs, the Fund may declare the currency scarce; and, thereafter, all other countries can discriminate against that country and its trade by special measures of exchange control. These are the safeguards against the repetition of some of those very un fortunate events between the wars. The Loan Agreement states specifically that our freedom to impose exchange control on current transactions, in the circum stances envisaged in Article VII, remains intact.

Let me add a word about exchange control here. In the Washington Agreements, references to exchange control are, generally, to exchange control of current transactions. In the Bretton Woods Agreements, exchange control of capital movements, as distinct from current transactions, is not only permitted but positively enjoined on all members—which is a very remarkable and interesting fact. In the view of His Majesty's Government, this is an admirable provision, and we intend to live up to it. We are not going to relax our exchange control over capital movements. We cannot have any more of the troubles that we had before the war, resulting from the movement of "hot" money, as it was called, from one country to another. All such movements must be held firmly in check. I have lately been reviewing our present exchange control arrangements, and I hope to introduce a Bill, in this Session, to make these arrangements even more effective within the terms of the agreements which I am seeking to explain to the House. The control of capital movements is regarded in the Bretton Woods Agreements as an essential weapon in the hands of every signatory Government.

I pass now to the next, and very difficult, problem of the Bretton Woods Agreement transitional period. Our delegation at Bretton Woods—I am not now speaking of the latest Washington talks—insisted, rightly, that we in this country should be free to maintain ex change controls on current transactions for a period of five years. That freedom is recognised in Article 14 of the Bretton Woods Agreement. At the time, this was undoubtedly a very wise and necessary provision.

But I tell the House, quite frankly, that, to my regret, and after hard bar gaining and under heavy pressure in the Washington talks, we had to agree to a certain modification of this arrangement. As part of the Loan Agreement with the United States, we have now agreed to restore, within a year from the effective date of entry into operation of that Agreement, the free convertibility of sterling for current trade.

This question of the transitional period was one of the most difficult points in the whole course of the Washington negotiations. We were most anxious to keep a somewhat longer period; and it looked at one stage as though, on this point, negotiations might break down. But the Americans argued strongly that the five-year period had been introduced into the Bretton Woods Agreements at the time when there was no thought of any large dollar loan from the United States to this country, such as we are now discussing. This, they argued, completely changed the situation. For the first few years of the transitional period, they said, we should be sure of dollars; and this, they argued, would surely remove the need for a long period of transition. Finally, though with very great reluctance and after very great prolongation of discussion, we felt that we must meet them on this point sooner than break the whole negotiation. It was a point on which they were most firm, and, I would add, I think that their argument has cogency. The transitional period is going to be easier, and our difficulties in that period are undoubtedly going to be less severe, because we shall have the dollar credit available for what would otherwise be the most difficult years of trade.

May I say a word on the second part of the Bretton Woods Agreements, regarding the International Bank? This Bank might be properly described as an Inter national Investment Board—to quote the term employed by the Macmillan Committee—designed to assist in the development of economic resources in the territories of its members, including the restoration, in particular, of countries ravaged by the war, and the development of backward areas where it is particularly necessary to raise standards of life, purchasing power and productivity. Membership of the Bank is confined to countries which are members of the Fund. Its capital, contributed by the members, is to be rather more than £2,250,000,000, of which our contribution will be £325,000,000. One—fifth, in our case some £65,000,000, can be called up to enable the Bank to begin operations; and of this £65,000,000, £6,500,000 is payable in gold or dollars, and the remainder in sterling. The Bank will conduct its operations only through the agency of the central monetary authority of each member.

It can operate in any of three ways. It can provide a loan directly out of its own subscribed funds; it can sell its own securities in a member country; or it can guarantee loans raised in a member country.

The Bank has attracted less attention than the Fund; but, at least for the immediate future, it may be more important. The mechanism of the Fund is more appropriate to reasonably settled conditions; the Bank, on the other hand, may be a most powerful instrument to help to repair the damage and ravages of war in many countries, to set trade moving again, and to foster development in the back ward areas of the world. If so, it will be a powerful agency for the international planning of investment. It will be able to ensure that a programme of investment is worked out well in advance, paying regard to trade conditions in different countries, and that projects are put in due order of priority and importance.

I believe that this institution can play a most important part not only in providing funds for the new investment, which the post war world needs so much, but in securing that international investment is wider, more far sighted, more honest and more humane than in past years.

I have tried to explain, as briefly and simply as I can, the main provisions of these complex Agreements, the Loan Agreement and the Bretton Woods Agreements, and to show how they are related to each other. I do not claim that they are perfect, from the British point of view. Still less, as I have already indicated to the House "on several points, do they embody just what His Majesty's Government first asked for in these negotiations or first proposed. They fall short of what we should have desired, and of what we strove for through the long negotiations. But, to those who are critical of these arrangements, I venture, in conclusion, to put one blunt question: What is your alternative? Every critic should be prepared to answer that question—What is your alternative?

Let us look at the alternative—an alternative not selected according to the fancy of an ingenious hon. Member, but dictated by the inevitable and ineluctable facts. Our stock of gold and dollars is running low. Every Monday, in the Treasury, they place before me a statement showing how much gold and dollars we still have. The curve goes so—and so; but it tends downwards. Without new dollar resources, we could not much longer afford to purchase any supplies which have to be paid for in dollars. The dollars would not be there. It will take us several years to re-establish the balance of our external trade, and this on the assumption that industry is active, that the Government play their part in stimulating and assisting it and that industry itself—[Interruption]—that private enterprise also docs its best. I do not want to start a Party Debate on this; we have discussed the question so far without getting on to party line.

Lieut.-Colonel Dower (Penrith and Cockermouth)

The right hon. Gentleman raised it.

Mr. Dalton

i raised nothing of the sort, except to say that it would take several years, anyhow, for our balance of trade to be re-established, and that, if it is to be re-established within several years, it must be dependent on co-operation between all parties in the business field, including the Government on the one hand, and private industrialists on the other. I was assuming that, between them, they would do pretty well; but that, even so, it would take several years. But, if we rejected this Agreement, what would happen? It we rejected the Motion I am moving, and the group of Agreements I am recommending to the House, grave shortages would very soon set in, due to our lack of dollars with which to purchase essential supplies. Our people would be driven down, once more, deeper into the dark valley of austerity from which we thought we were beginning to struggle out. We should have to endure greater hard ships, not in facing danger or from V-bombs, but in the trials of our economic life; we should have to undergo greater hardships and privations than even during the war; and all those hopes of better times, to follow in the wake of victory, would be. dissipated in despair and disillusion.

If I may put the thing in a perfectly concrete way, I would say that, if we could no longer afford dollar imports—and I have been arguing that we could not afford dollar imports, if this group of proposals were rejected—we should have less food of every kind, excepting bread and potatoes. We should have very much less cotton. We should no longer be able to buy American cotton. The Lancashire cotton industry would be dislocated. Many of the mills can run only on American cotton, and could not switch over to Egyptian cotton, even if Egyptian cotton were forthcoming in sufficient quantities. We should have very much less cotton, and, therefore, fewer clothes, even fewer than we have now, and fewer hopes of exports of cotton textiles. Further—for those of us who study the psychology of man, and, I would add, of woman—we should have only a very small fraction of our present supplies of tobacco. Eighty per cent. of our tobacco comes from dollar sources—I have looked into this with particular care, to see how serious the situation really was. Although we get some tobacco from Rhodesia and a little from Turkey and from Greece—though Greece is not now supplying much, for obvious reasons—it is not possible to fill the gap that would be made in our tobacco supplies by the cutting off of United States leaf. That would have a most serious effect upon the morale of large sections of our people—[An HON. MEMBER: "Oh."] Anybody who says, "Oh" is either a non-smoker or does not travel about. The shortages which would come upon us as a result of the rejection of these Agreements would be a most grave and unexpected shock to civilian morale, something not promised to the electors either by the Labour Party or by the Conservatives.

Mr. Cocks (Broxtowe)

What would happen to the American exporters?

Mr. Dalton

if Congress did not endorse the loan, I do not think that American exports would be made available without payment, either to this country or any where else. It is a very shallow optimism which thinks that, if these Agreements were rejected, somehow or other we should get all our supplies, because American exporters would have nowhere else to send their exports. There would be a trade war between us, and a great deal of pressure would be used to coax away members of the sterling group. I ask my hon. Friend to be a realistic person and not to cherish airy dreams of that character.

Moreover—if I may complete this picture of the alternative which would face us if these Agreements were rejected—. the whole of our re conversion of industry would be slowed up, not only because we should be faced with heavy and pro longed unemployment in a number of areas, such as the Lancashire cotton area, and in a number of our essential industries which would be starved of their raw materials, but also because we could no longer afford to buy machinery and capital goods from the United States, many of which are essential to a quick conversion of our industry from old to new ways and from pre war to post war conditions. It is indispensable that some considerable part of this dollar credit should be spent on the purchase, not only of food and raw materials, but of capital goods which are essential to re-equipping our industry. If these Agreements were not endorsed, all this would be impossible.

I add this further consideration. If the Motion which I am moving were to be rejected, this would mean a grave embarrassment to our friends in Canada, who look to their earnings from the sterling area to cover their deficit from their trade with the United States. And Canada has been particularly generous in her help to this country during the war. We should ponder, once and again, be fore we take any action which would cause distress and disappointment in that great Dominion.

Finally, and perhaps most serious of all, the rejection of these Agreements would mean the dissipation of all hopes of Anglo-American co-operation in this dangerous new world into which we have moved. We and the Americans, if peace is to be assured, must learn to live and work together. The rejection of these Agreements would not only be an economic and financial disaster for this country of ours, but it would be not less a disaster for the whole future of international co-operation.

On the other hand, I desire to emphasise that acceptance of these Agreements does not mean a life of ease and plenty for all; it does not mean that. This dollar credit only gives us a breathing space in which to brace ourselves for new and greater efforts, designed to restore our industrial and commercial strength, and to enable us to play our full part, within a world-wide order, in a steadily increasing production and exchange of wealth. I beg to move the Motion.

4.49 p.m.

Sir John Anderson (Scottish Universities)

I am sure the House is greatly indebted to the right hon. Gentleman for the clarity and the frankness with which he has spoken, and I am equally sure that, in the light of what he has said, there will be no disposition in any quarter to minimise the gravity of the issues we are debating. The decision that we shall be asked to take at the conclusion of this Debate, may, indeed, be a dominant influence in our financial and economic affairs for a generation. Now it is quite clear that the Government have made up their minds, and are in a position to ensure, by reason of their majority, approval of the Motion which has been submitted. Nothing, therefore, said here on this side—nor, I should think, anything that may be said here and there on the other side—can affect that result. Nevertheless, I conceive that it is right, before a decision is taken, that the plan should be critically examined in all its aspects. I speak on this occasion for myself, and for my right hon. Friends on this bench, and I speak also, I assure the House, with a sense of the grave responsibility which, on such an occasion, must weigh on anyone who occupied as I did the position of Chancellor of the Exchequer until four and a half months ago.

Now I say frankly that my first impression, when I was able to study the plan that has been evolved and agreed upon between the two Governments, was one of acute disappointment. That does not imply the slightest reflection upon our representatives who have been negotiating these matters on the other side. I cordially agree with all that the right hon. Gentleman has said. Lord Halifax, Lord Keynes, Mr. Robert Brand, Sir Percival Liesching, and, in the concluding stages, Sir Edward Bridges, I am sure have played their part in a manner beyond all praise. I know, from what I saw and heard when I was in Washington the other day, of the patience and the resource that they have displayed during most tedious and trying negotiations. I know too—and I think it right to say this—that the negotiators on the American side have approached these matters with good will, with sympathy, with understanding and that, when the tedious weeks, even months, of negotiation came to an end, they all parted with the best of good feeling.

Though there is much to be said in criticism of these arrangements I, for my part, do not doubt that His Majesty's Government have secured the best terms that were open to them in existing circumstances. In such matters one has to take account of atmosphere. The war is over. That fact is realized more clearly perhaps on the other side of the Atlantic; it may be because that side is more remote from the chaos which war has left in its wake here in Europe. Whether the atmosphere would have been more favour able, if the Government had been differently constituted, I am not prepared to say; there is, I think, room there for some difference of opinion.

Now I come to the Agreement itself, the substance of which can conveniently be dealt with under three heads: the Loan Plan; the Bretton Woods Agreement; and the commercial policy declaration on which we have been told the right hon. Gentleman the President of the Board of Trade will speak later, but to which I think I must, nevertheless, make some reference. We stand at this moment in very great need of financial assistance, and we have no cause for shame in that. Our position is the direct result of the efforts we put into the war, when we sacrificed everything in the common interest to ensure complete, and the earliest possible, victory. Our position, as the right hon. Gentleman said, was aggravated in the later stages by the very existence of Lend Lease, which enabled us to make sacrifices in respect of our export trade, and in other ways, which would not otherwise have been possible, and before Lend Lease came into play—as the right hon. Gentleman again reminded us—when we stood alone we had of necessity disbursed all our gold and dollar balances—and he might have added, realised practically all our readily realizable securities until our net resources were on the miser able level of—3,000,000 net—our net external resources—3,000,000 net.

I, myself, have indulged the hope—and until recently the confident hope—that means would be found of providing what I might call an adjusting payment, in conformity with the principles of equal sacrifice and the clean slate; principles for which, until very recently, there was powerful backing on both sides of the Atlantic. Our difficulties are indeed nothing other than the prolongation of our war effort. The cutting of Lend Lease was a great shock but it was inevitable—I accept that—for technical reasons. The early termination of the Japanese war, very welcome in itself, paradoxically greatly worsened our position by making it impossible for us to take the first step towards a readjustment of our economy while we were still receiving the benefits of the Lend Lease regime.

Now I come to the terms of the loan, for loan it had to be, when the possibility of what I have called an adjusting or a balancing payment was ruled out. Why could it not have been a loan free of interest? Well, I take it that that, too, was tried and found impossible. In the result we have to pay a rate of interest which I gather, taking account of the five years initial moratorium, works out at about 1.62 per cent.

Mr. Dalton

indicated assent.

Sir J. Anderson

The right hon. Gentleman confirms that figure. Well that, on the face of it, is perhaps not a very unreasonable rate but let us remember this—and I think the point should be made—that what is reasonable in regard to a loan of this kind between Governments, cannot be judged on the criterion of an ordinary loan which a Government may raise within its own territory. The net cost to a Government of raising a loan from its own citizens must be calculated after taking into account the effect of Income Tax on the interest—Income Tax which has to be paid back to the Government. I am bound to say that, I think—as indeed the right hon. Gentleman very frankly stated—we have had to accept a very hard bar gain. There is no support here for the theory, which is in fact entirely baseless but is widely held on the other side, that when American and British—to use a well-known trans—Atlantic idiom—get together in a deal, America is always outsmarted.

With regard to the waiver clause, in that, I think, we must recognise a generous purpose operating in the minds of our friends on the other side. But without examining a gift horse too closely in the mouth, and without pausing to consider too closely whether this, indeed, is a gift horse, I do not feel quite sure that the limit to Article 5 (b)—that is to say, the point after which we cease to be eligible to claim the benefit of the waiver clause—has been put high enough. It is for me a little difficult to understand what exactly would be the effect in practice of these provisions. I can see that the object has been to ensure that we have, before we lose the opportunity of recourse to the waiver clause, a sufficient volume of exports to pay for our pre war imports and to meet other claims, in visible items in the international balances involving payments of interest, and including an assumed payment in respect of accumulated sterling balances, on which I will say a word hereafter. It seems to me in that approach that no provision or, at any rate, no adequate provision is made for such items as increase of population, improvement of the standard of living—and we all recognise that our standard of living was much too low before the war in respect of a considerable section of the population—or for the raw materials and the equipment required by our industries, which will have to be producing on a greater scale than before the war because of the loss of our overseas assets.

I wonder whether a subsequent speaker for the Government could give us a little more information as to the probable effect in practice' of this clause; whether we can be told, for example, what the limit represents in terms of export? Does it mean 40 per cent, above pre war in volume, or 50 per cent, or 60 per cent.; or what is the figure? It is not easy to gather an accurate impression, and a very great deal of the difficulty arises from the wording of the provisions themselves. But I would venture to say these are not the most serious aspects of the loan agreement. The difference in terms of annual payments between the rate of interest provided for here, and a lower rate of interest, or even between an interest-bearing loan and a free grant is not, in my view, assuming we are going to be able to rehabilitate our economy, an aspect of absolute first-class importance. Much more serious to my mind is the modification, which the right hon. Gentle man referred to in some detail, which is enforced by this Agreement in a provision in the Bretton Woods plan to which many of us attach the greatest importance— what we call the transitional provision. I think it would be more convenient if I were to develop that aspect when I come, as I shall in a few moments, to discuss the Bretton Woods Agreement itself.

I pass from the question of the waiver clause to the question of our accumulated sterling debt—sterling balances which have been accumulated by various countries mainly in the sterling area. It is indeed strange, as the right hon. Gentle man said, that the position in which we find ourselves in that respect should be our reward for the efforts we have made in the common interest during the war. It' is also true,as he said, that, at any rate, for the most part, the sterling balances are not represented by actual assets. I think that he was a little too emphatic on that point because the facts between one country and another differ widely. There is, for example, Australia, where the accumulated sterling balance is almost entirely represented by market able assets in the form of wool clips of several years, which have accumulated in our hands. In other cases, a certain portion of the sterling balances is represented also by actual assets which we have or have had. For the most part, however, these sterling balances represent sterile military expenditure for which there is no corresponding asset. They represent the result of our having been compelled to purchase currency in the various countries concerned, in order to finance war operations which we were responsible for carrying on in the common interest and in the defence of these countries.

About a year ago, I made a speech on this subject at the Mansion House, in the course of which I said, as I have just reminded the House, that the different cases would have to be dealt with individually in the light of their different circumstances. But I went on to say that if the Governments concerned were prepared to recognise the special features of these accumulations—to recognise that they are not ordinary commercial debts to be dealt with in the ordinary ways applicable to such debts—and if they were prepared, therefore, to recognise our problems, there seemed to me to be no reason why a satisfactory arrangement could not be made. I find in paragraph 10 of the Loan Agreement a very welcome pointer to the lines on which, it had always seemed to me, such an arrangement would have to be framed. The plan recorded in paragraph 10—I think it is merely recorded and does not represent an agreement—rests on the principle that, if we have to accept bur dens, as it is proposed we should now do., they are a result of the efforts we made during the war in the common interest, and if other Governments, the Governments in question, are to have the benefit of unblocking and convertibility on agreed terms, and not entirely at our discretion, they may well be expected to be accommodating. I think it is very useful to have the moral support of our friends on the other side of the Atlantic in approaching the problem on that footing.

The main difficulty which, it seems to me, arises in that connection, is in respect of the short time within which it is obviously contemplated all these arrangements should be negotiated and concluded. I think that will confront His Majesty's Treasury and other Departments, such as the Board of Trade, with an extremely difficult problem.

I entirely endorse what the right hon. Gentleman said about the terms of the Lend-Lease settlement. So far as I can judge the terms are very reasonable in themselves, and it is a great thing to have a settlement which does not involve bar gaining, item by item, and a complicated system of accounting. That part of the Agreement can certainly, in my view, receive a whole-hearted welcome.

Now I come to the Bretton Woods plan. I should like first to refer to the Inter national Bank for Reconstruction and Development, because I believe, so far as our affairs in the immediate future are concerned, that is by far the most important part of the whole Bretton Woods Agreement. I think that it would be difficult to exaggerate the importance of the arrangement made under that scheme for loans, as the right hon. Gentleman explained, of various types, but loans which, so far as I understand the position, would be entirely untied as regards the country in which the money obtained in that way should be disbursed. That is a very important feature to which I think the right hon. Gentleman did not refer. Actually, if T may make a technical observation here, it seems to me that the International Bank for Reconstruction and Development is really a Fund, and the Monetary Fund under the Bretton Woods scheme has many of the characteristics of a bank. That is by the way. The bank—I suppose we must stick to the established terminology—is very important on the present occasion for this reason: It is of the utmost importance that the United States of America should keep dollars flowing freely through the arteries of inter national trade. Unless they are deter mined to do that, there is, in my view, no hope whatever for the success of this arrangement. Incidentally, in.that connection I support what the right hon. Gentleman said about the scarce currency Clause in the main Bretton Woods document. I think that is all I need say about the bank.

With regard to the Monetary Fund, the House knows, I am sure,that I have always been a supporter of that scheme. I think it a good scheme in itself. I think that its main purposes are entirely advantageous—to provide money for the avoidance of short term fluctuations in exchanges; to legislate, as the scheme does, against the competitive manipulation of exchanges from which, as the right hon. Gentleman reminded us, we have suffered more than once in the past and at the hands of more than one country; and finally—and to this I attach particular importance—to provide machinery for the continuous discussion and exchange of views on economic and monetary trends. I think that all these purposes are entirely beneficent. This is a matter on which I know some of my hon. Friends on this side and some hon. Gentlemen on the other side hold very strong views in contradiction to mine. I here agree with the right hon. Gentleman. I take the view that this scheme does not involve any return to the gold standard. In fact it does not involve any return to anything, it is an entirely novel conception, and an entirely novel mechanism. I also think that it holds no threat to the sterling area. I have always said that the sterling area can continue in the future as in the past. By "the past" I mean normal times. No one would suppose we would continue indefinitely into the post war period the wholly exceptional arrangements that have operated during the war. But there is no reason why the pre war should not continue in the future.

I am glad that the right hon. Gentle man paused to explain once again the characteristic features of the sterling area. It is not a formal or a formally constituted organism depending on care fully drafted instruments. It is a practical working arrangement for banking and currency. There is no reason why that should not continue. But in every thing I have said in the past about Bretton Woods, I have always made two points clear. One is that the provisions of the clause dealing with the transitional period were absolutely vital, and the other is that the Bretton Woods plan, again as the right hon. Gentleman reminded us, is really a plan for dealing with a state of things when exchanges have settled down, not a plan at all for dealing with the kind of situation we shall have in the first year or two after the war. We ought not to be rushed into it. I have always thought that the first thing of importance in time was the establishment of the International Bank, that as regards the Fund it was important to get the machinery set up to provide a mechanism for dealing with the problem making in advance the necessary contacts with central banks everywhere.

I am, I confess, shocked by the suggestion that we are to have this Fund in full working order in a very short space of time, and I hold that the transitional arrangements should not have been adjusted—to use a very mild word—in the manner contemplated by this Agreement. Let us see what all that involves. It involves convertibility, not merely in practice, but as a right, at a very early stage. Convertibility, in my view, is a thoroughly good thing; it was always a goal to be aimed at, to strive for; but left to ourselves we would have pro posed to approach convertibility by degrees, to approach it tentatively, and not until we had found in practice that we could undertake the obligation of convertibility and continue under that obligation, should we accept the de jure liability which this Agreement puts upon us.

I do not know exactly how things will work out. It would be very easy to imagine a state of things under which, if a number of unfavourable factors were to come into play simultaneously, the whole thing would at once break down. On the other hand, it is not necessary to make such a drastic assumption, and indeed on that sort of assumption I suppose there is no banking institution here or anywhere in the world, which could be regarded as absolutely safe. But to give de jure convertibility within a year, or, as the right hon. Gentleman said, 15 months, might mean virtually paying in dollars for everything we purchase anywhere in the world. That is an extreme way of putting it, but it represents the extreme possibility and the extreme danger. I feel sure that every effort will be made by everyone concerned to avoid creating that situation. I am encouraged by the fact that other countries in the sterling area have been able already to make consider able progress towards re-establishing their trade. If every effort is made on the other side of the Atlantic to avoid any risk of dollars becoming a scarce currency, we may be able to pull through. As the right hon. Gentleman said, convertibility will be very welcome indeed to other countries, primarily in respect of their current transactions, and ultimately in respect of such part of the accumulated sterling balances as it may be possible to unblock. That is all I need say about the Bretton Woods plan, because the right hon. Gentleman himself spoke so frankly and fully on the whole matter.

I pass to the declaration on commercial policy which forms part of these arrangements. I confess at once that I have found the document very complicated and very obscure, full of qualifications, reservations, and inter-locking provisions. I think it is very desirable that further light should be thrown, as no doubt it will be, by the right hon. Gentleman opposite, on this part of the subject. In this matter I do not speak with much expert knowledge, but I have always taken a very simple view, which is, that we are bound in fact and in honour by the provisions of Article 7 of the Mutual Aid Agreement. Article 7, read in the light of the exchanges between my right hon. Friend the Member for Woodford (Mr. Churchill) and the late Mr. Roosevelt, came to this, that while we were prepared to discuss the whole field, we were no more under an obligation to get rid of Imperial preference than the Americans were to get rid of their protective tariffs. I know that the Government have issued an explanatory statement which gives their view of the effect of this part of the agreed plan. I want to ask whether, in the view of H.M. Government, this declaration carries us any further in the direction of the abandonment of Imperial preference? I say that because I find in the document a very unpleasant and challenging reiteration of the new word "elimination." That has not appeared in any document of the kind before in this relation.

Mr. Dalton

Article 7.

Sir J. Anderson

I do not think elimination of preferences comes in there.

The President of the Board of Trade Sir Stafford Cripps)

The elimination of discriminatory practices.

Sir J. Anderson

Yes, the elimination of discriminatory practices, but it was left rather at large how far Imperial preference between a group of nations, bound together by special ties, could in this connection be so treated.

Another thing that troubles me in regard to this Agreement—and every one must know that this is a matter which has engaged very serious consideration for some time past—is the position of agriculture. I have seen statements to the effect that our position in that respect is fully protected. It may be right to say that the declaration goes further in the direction of recognising the special problems of agriculture, which it may be remembered we discussed to some extent a long time ago in connection with the wheat agreement, than any previous declaration or document issued with the authority of the United States Government. But when it comes to details I suppose that we shall not be bound by every detail that is set out in the declaration. It looks to me as if the right of the participating Governments to impose restrictions for the purpose of protecting home agriculture had been very considerably restricted. Per haps we can have an explanation on that subject.

I have come almost to the end of what I have to say. I declared at an Independence Day luncheon which I attended shortly before the General Election, that so far as I had any influence on the course of events, we would not be found, when the time came for discussing all these matters, in the position of suppliants. I said also, in emphatic terms, that we would not accept any obligations which we did not see our way clear to fulfil. That is still my position. If I thought it impossible, as a practical matter, to carry out the provisions of this Agreement, I would oppose it, I would give the reasons, I hope, in a way that would be found convincing, to large sections of opinion at any rate, in America and elsewhere in the world, and I would ask for an entirely fresh approach. I do not in fact take that view of the plan, but I utter the warning that, subject to other countries playing their part, the matter seems to me to lie very largely in the hands of His Majesty's Government. They have the responsibility. The plan will certainly break down unless all help and encouragement is given to those industries on which we have to depend for the development of our export trade, and unless everything possible is done to maintain the prestige of sterling, and create conditions of confidence throughout the world. Unless all that is done, I think that a breakdown is inevitable.

Before concluding I say that there can be no question of repudiating any of the provisions of this plan, if it is accepted by Parliament, or of our doing as a nation anything other than bend all our energies to the task of making it a success. If we do that, and if despite our best efforts it becomes clear that the plan is breaking down—and the tendencies will become apparent before the event—the result will not, in my view, necessarily be disastrous. We shall then have to bring Clause 12 into play and ask for a modification, and I believe confidently that if the occasion does arise, and if the circumstances can be shown to have been as I have described, such a request will be received with good will. Certainly, the consequences of a breakdown some time hence, under the conditions I have envisaged, are not to be compared with the effects, inevitable and almost immediate, of rejecting the plan now.

I would like to put, in my own way, the alternative of immediate rejection as I see it. We would inevitably for some time to come have to buy largely in the United States of America, or at any rate in North America, because the supplies we absolutely must have are not, at present, available in other parts of the world, or, where they are available, shipping is not in position to bring them to us. We should then find ourselves running through our meagre reserves at a most alarming rate. That would compel us to impose on our people at home a degree of austerity never before imagined, and to give a priority to essential food stuffs over raw materials and equipment, which would be disastrous from the standpoint of the establishment of our exports. We might indeed, after a time, conceivably, build a new economy on the basis of the Empire, or of some group of States, but only if the countries concerned were willing to share our fortunes and our sacrifices, and, in my view, before that opportunity arose, they would, in all probability, have broken away.

Let me, in that connection, say this, relevant to an interruption made while the right hon. Gentleman the Chancellor of the Exchequer was speaking. We are almost alone in having been stripped of our gold and dollars. The other countries, that were occupied by the enemy, suffered terrible hardships and privations, but their gold and dollar reserves were put into cold storage, and they are in a good position to carry on trade with the United States of America. So are the Dominions, and the temptation not to support us, but to go their own way, and make the best of their own resources and possibilities, would be very strong indeed. There fore, as I think I have made clear, if I have dealt adequately with the main features of this plan—there.are many details which it seemed unnecessary that I should deal with at this stage because it is the main features of the plan that matter—my hon. Friends and I have concluded that we should not oppose the Motion which is before the House, if it is carried to a Division. On the other hand we will not vote for it, and we advise our supporters similarly to abstain. We take that middle course, not merely because the measures necessary to the success of the plan, as I have said, are so completely under the control of the Government, but also, and mainly, because there are words in the Resolution as drafted which make it extremely difficult for us to give it sup port. I refer to the word "welcomes," which seems to import, at any rate in my view, a note of enthusiasm that goes far beyond anything we really feel.

5.34 p.m.

Mr. Boothby (Aberdeen and Kincardine, Eastern)

I feel rather strongly. about this question, and I would like to say to my hon. Friends that, as no Amendments are being called in this Debate, I do propose myself to seek to divide the House on the main question tomorrow and to ask as many of my hon. Friends as I can get to do so, to vote with me against the proposals of His Majesty's Government. The main ground on which I do that, among many others, is because I conscientiously believe that this country is not, and will not be, in a position to discharge the obligation she is being invited to undertake by the Government; and if one believes that, I do not think one has any alternative but to carry one's beliefs into the Division Lobby. The right hon. Gentleman the Chancellor of the Exchequer, in his extremely able speech, seemed to suggest that we are in a much stronger position as a result of what has been done for the purpose of going back to Bretton Woods—or going on to Bretton Woods or in to Bretton Woods—and other matters. I have never believed that you can get out of debt by getting into more debt; and I do not think this is going to make our position any stronger.

We spent—10,700 million over and above what we could provide ourselves on the war; and of this sum—9,200 million was spent during the war, leaving us on "V-J Day" with another—1,500 million of inevitable war expenditure to be paid, unless we had suddenly demobilised every soldier, sailor and airman in the field at that moment. I submit to the House, and I think the Chancellor of the Exchequer will agree with me, that this extra—1,500 million should have been included in Lend-Lease. It was essential war expenditure, for it was Lend-Lease that produced our war effort, and turned our national economy completely upside down, and is therefore largely responsible for the position in which we find ourselves. Lend-Lease was passed in the United States as an "Act for the defence of the United States." That is exactly what it was, com parable precisely to the subsidies we our selves paid to various European countries during the Napoleonic Wars, with great success, when we wanted them to fight our battles for us.

Unlike the last war which was officially terminated by Presidential proclamation on 2nd July, 1921, this one came to an end within three weeks of the termination of hostilities. I can see no justification for this. It was like giving a man a lift.in an aeroplane, as Mr. Roosevelt gave us under Lend-Lease, taking him nine tenths of the way across the Atlantic Ocean, and then, when 200 miles from the shore, throwing him out of the aero plane and telling him to swim for it. That is, roughly, what happened.

Let us now look at the financial burden we are being invited to assume. From 1951 to 2000 A.D. we have to pay £ 33,000,000 a year. There is an addition to this, a little item to which the Chancellor referred, the sterling debts, the sterling balances. These after an agreed scaling down, have to be paid now, not in sterling, but in dollars. Annual payments for interest and amortisation, on the basis of two per cent. of the principle, will amount to about £ 70,000,000 a year.

Therefore, I estimate that the cost of amortisation of the sterling balances in dollars plus the cost of the American Loan, will come to just over £ 100,000,000 a year; and that is a burden which, I say, this country will not, in any foreseeable future, be able to sustain. It is an obligation we shall not be able to meet. It represents about 10 per cent. of our pre sent target for exports and over 20 per cent. of our pre-war exports; and it is about half as heavy, as an eminent economist pointed out in one of the news papers yesterday, as the burden of reparations imposed on Germany after the last war; by the Dawes Plan. I do not really see that our war performance during the past six years has called for the imposition of such a burden.

I submit that the conditions put forward for our approval are far too onerous. it is not untrue to say that comparable terms have never hitherto been imposed on a nation that has not been defeated in war. To get through, and pay our debt, on the admission of the Government, we shall have to increase our exports by 75 per cent.; not 50 per cent. any more, but 75 per cent., over pre war. If there ever was any chance of our achieving this aim, it has been removed by the conditions attached to the Loan which is now being given us. Lord Baldwin has been much criticised for the 1923 debt settlement; but the terms he obtained then were princely in comparison with these terms. And our position was incomparably better then. But we were compelled to repudi- ate, as we shall be compelled to repudiate this time. Look at the inevitable effect of our convertibility undertaking—to convert dollars freely, sterling into dollars—on our trade. No doubt hon. Members on both sides of the House have read the extremely able letter of Sir Hubert Henderson in "The Times "this morning. He wrote: … all incentive to other countries to buy from us because we buy from them will be removed in about a year from now. More over, any part of the huge accumulated sterling balances which countries in the sterling area are allowed to spend at all must be made equally available for dollar as for sterling purchases. I was told only yesterday that some of our engineering firms have orders from countries in the sterling area up to 1950 and 1951 for capital goods and machinery, for delivery two, three, four, even five, years hence. As soon as this process begins, a very considerable number of these contracts will be transferred immediately to the United States. Can you imagine, for example, that India, or Egypt, as soon as they get convertible currency in exchange for their sterling balances, will not go straight to the United States of America; not because they dislike this country particularly, but because they can get the goods more quickly delivered. For the United States are well on the way to complete re conversion; in fact, they have already practically converted their industries to a peace basis, and we have a long way still to go in this direction.

As I have already said, in order to obtain the necessary imports to pay our debts, we shall have to increase our exports by 75 per cent. a year. What nonsense this makes of the waiver clause to which the right hon. Member for the Scottish Universities (Sir J. Anderson) made reference. It relates to our pre-war income from home-produced exports and invisible transactions. Is there any one in this House who is sufficiently pessimistic to believe that we shall never get back, permanently, to our pre war export and therefore import levels and that has to happen before the waiver clause comes into operation. Our trade, imports and exports, must be on an in comparably higher scale in the future than they were prior to 1938; and it is axiomatic, if we are to increase the export trade to the extent envisaged, that we must also greatly increase imports over the pre war figure. To say we cannot do that is tantamount to saying that our export target is unattainable.

As to the conditions that attach to this Loan. I will make a concession to the Chancellor of the Exchequer. I will not say we have to go back to the gold standard; I will say that we have to go back to gold. I hope to say a few words on this subject on the Second Reading of the Bretton Woods Bill, the rejection of which I am moving, so I will content myself on this occasion by quoting from Article IV, Section (1), paragraph (a )of the Final Act: The par value of the currency of each member shall be expressed in terms of gold as a common denominator, or in terms of the United States dollar of the weight and fine ness in effect on 1st July, 1944. If that is not going back to gold, I do not know what going back to gold is. Under the Bretton Woods Agreement, gold will purchase any currency. A member may, in defined circumstances, be called upon by the Fund to redeem his currency either in gold or in gold currency. In addition, exchange rates between member countries shall not vary from official parities by more than 1 per cent. There are many other articles I could quote. I will content myself with one quotation from the "Economist' on this question of gold, on which I have been challenged so often. The "Economist" said last week: '" The differences between the Bretton Woods system and the gold standard have often been pointed out, but the similarities are perhaps even stronger. The aim of both is free convertibility, and though the Bretton Woods system is more elastic than the gold standard of 1925-31, it is being introduced at a much earlier stage and in a much more tumultous world. I rest myself on the authority of the "Economist." And I would add one point. Under the old gold standard we could come off it if we wanted to, by a simple Act of Parliament. We could also de-value gold by a simple Act of Parliament, and lose gold once and for all. But under this Bretton Woods gold standard we have to "win back" the gold equivalent we may lose over a period of two or three years, under the danger and the threat of heavy and even penal charges which may be imposed retrospectively by the Fund. The Chancellor mentioned the scarce currency clause; but I would point out that, on my reading of the final Act of Bretton Woods, that clause cannot be invoked so long as the Fund can borrow dollars from the United States, and the United States are ready to go on lending them. As long as the rest of the world is ready to go on becoming indebted to an even greater extent to the United States, there is no reason why the United States should not agree to that proposition; be cause it is right in line which their policy.

Last, but not least, there is this cutting down of the transitional period from five years to one, to which reference has been made in previous speeches this afternoon. I ask hon. Members to look at the world today, and say whether final and long-term decisions of any kind can be taken. What are the governing factors which should be taken into consideration in the fixing of an exchange?—national incomes wage rates, trade, imports and exports. Do we know them? Can we prophesy them? He would be a very clever man who would dare to prophesy what conditions will be one, two, three or your years hence. Even the Treasury, great though their intellectual capacity is, are taking on a little more than they can chew if they assure the Chancellor that they are satisfied that a rate of 4.03 is "O.K." at present. They were satisfied after the last war with a rate of 4.86 and it did not turn out very well. I confess I think that to anchor ourselves to gold at this parity of exchange, at this juncture in world affairs, is an act of absolute insanity.

I am opposed to gold only because I believe that if you make it a monetary basis, and the basis of credit, "as Bretton Woods does, sooner or later it will exercise a contracting influence on the world. I believe it is the greatest obstacle to the one thing which will get the world to its economic goal, which is a continuous policy of economic expansion. Many hon. Members will remember vividly the Debates of 1925, and the old days of the gold standard of the 1920's. This Debate is like living the whole thing over again. We finished the last war a prosperous country, with a prosperous agriculture. It took ten years of deflation to turn it into a really poor country, with a derelict argiculture, the workers migrating to the United States, factories, dockyards and workshops closed down, and with 3,000,000 unemployed. That is what the gold standard did to us last time.

There is one last point in this connection that I would like to put. Of 28 billion dollars of monetary gold in the world, 23 billion are in the vaults of Fort Knox. If we are going to make gold the basis of credit, in my estimation, we are handing over world economic power, outside the Soviet Union, finally and decisively to the United States.

It is not denied that the sterling area, as we have built it up during the war, is brought to an end. This was, of course, implicit in the Bretton Woods Agreement, and it is now given formal recognition in the financial agreement. It means the end of London as a financial centre. Multilateral trade agreements within the sterling area, in terms of money as well as goods, which would have automatically provided the finance of international trade over the next 10 years, will not now be permitted. Another point is this. In so far as the sterling balances are not converted into dollars, we shall be forced to block them completely in London; whereas now they enjoy a considerabe measure, and would in other circumstances have enjoyed an increasing measure, of convertibility in the sterling area. I do not think that will have such a beneficial effect on the poorer countries in the sterling area as the Chancellor of the Exchequer seemed to think.

The third condition that we are now asked to swallow is the acceptance of the principle of non-discrimination in trade, involving the elimination of imperial preference and of quotas on imports. I do not think there is any need for me to dilate on this. I think that if it is persisted in—and I hope it will not be—it will involve the break-up of the British Empire. I say to my hon. Friends above the Gangway, before they abstain from voting, to reflect on the words of Polonius: To thine own self be true. If the Tory Party ceases to believe in the Empire, and in the economic expansion and development of the Empire, it ceases to have any meaning in this country. Nearly half our exports before the war went to the British Empire. Look at the effect which this proposal will have on the Colonies. What will be the effect, for instance, on Jamaica, which enjoyed a preferential price on sugar amounting to £ 11 5s. a ton prior to the war, in 1938? I agree that the countries within the close economic system of the United States, including the sugar countries—Porto Rico, for example—enjoyed an even greater preference. But the Customs Union of the United States is absolutely preserved under this agreement. The doctrine of non-discrimination of trade is based, in my submission, upon the altogether fallacious assumption that, as trade is, or should be, conducted by individuals, the size of national markets is of no consequence. According to this doctrine, from the economic point of view, there is no difference between the United States of America, and Monaco. What nonsense. This doctrine will not stand investigation in the modern world of mass production.

I come now to the fourth and last of the conditions imposed upon us—the commodity arrangements. We undertake not to restrict our imports of any commodity from the United States, unless we make a corresponding cut in imports from our own Commonwealth and Empire. This does not apply to countries with inconvertible currencies, like Turkey. No doubt, hon. Members will have seen Sir Hubert Henderson's letter in "The Times" this morning, pointing out that, if we make a cut in our tobacco imports from the United States, we have to make a corresponding cut in tobacco from Rhodesia and our own Colonies, but not from Turkey. That is a fact. I hope many hon. Members on this side of the House will expatiate on the purely agricultural aspect of the question; because the menace to agriculture is great. I will content myself by pointing out that every one of these commodity agreements is restrictive in character. You can put a control on, if the general effect is towards restriction; but if you want to control imports with the object of expansion, it is ruled out.

In other words, when one examines with some care these commercial proposals, to which we are now asked to give our full approval, one finds where America's interests are involved there are explicit exceptions in every case in her favour. For example, the whole agreement, as the Chancellor would admit, is going to stand or fall, in the long run, on the. maintenance of full employment in each country—this country and the United States—and, indeed, each country undertakes to take every step to maintain full employ- merit. But whereas, in all the undertakings which may affect us, there is a sanction if we do not do it, there is no sanction in this case. There is nothing to the effect that the United States will have to give us more money or reduce the tariff if they fail to maintain full employment.

What do we get in return? I would almost say, nothing; it is at any rate extraordinarily little. The elimination of Imperial preference breaks up the economic unity of that loose confederation, the British Empire; but the Customs Union of the United States of America—a compact, tight union—remains absolutely untouched. There is nothing to suggest that a country with a favourable balance of trade should lower its tariffs, on that account. On the contrary, it is explicit in the agreement that a country with high tariffs need make less substantial reductions than a country with a low tariff.

I would ask the President of the Board of Trade to answer this question. Is there anything in the Agreement which obliges the United States of America, in any circumstances, to make cuts in her tariffs of a magnitude which would ensure a substantial importation of goods into the United States of America? Anyway, what is the value of the United States of America as a market to this country? Compare it with the value of the Empire market, which we are throwing away. There is only one certain export to the United States, and that is whisky. It stood by us during the war, and before; but the Government and particularly the Board of Trade, have been doing their best during the last five months to ruin the whisky industry by cutting down the supply of raw materials. It is madness, if dollars are what we are after. And the Government seem to be very keen on dollars. In the Bretton Woods Agreement, and in every one of these White Papers, the onus is put upon the debtor nations to re-establish equilibrium in the balance of trade; and there is no onus at all upon the creditor nations.

I am going to speak bluntly, and say that there are two main objectives under lying the agreement which we are being asked to approve. The first is to get back as quickly as possible to the economic system of the 19th century—the system of laissez faire capitalism. The second is to break up, and prise open, the markets of the world for the benefit of the United States of America, who have an intense desire to get rid of their surplus products, which will be enormous, at almost any cost. If this is not so—and the continually asking us to put forward alternatives—why did they not give us a commercial loan to enable us to get through the next year or two, with out conditions attached, as they did to France? Were they asked to do so? Did they refuse to do so? The rate offered to France, without any conditions attached, was only five-eighths per cent. more than the rate which we are being charged under this Loan Agreement. Even an Aberdonian would hesitate to sacrifice as much as this for the sake of an additional five-eighths per cent. I suggest that it would have been far better for the Chancellor of the Exchequer to have said, when the negotiations took the shape they did, "All right. Let us scrap the long-term agreement for the time being, and let us have a straight loan on reasonable terms." I believe that would have been his right course. Furthermore, if we had then appealed to the Dominions and the countries in the sterling area to help us through these difficult years, I believe that they would have rallied to our side. I ask the Chancellor of the Exchequer, did he ever put that suggestion directly to the Dominions, the Colonies, or to other countries in the sterling area? If he had, I do not believe we should have been short of anything except tobacco, cotton and films.

What is the purpose of trade? Surely it is to raise the standard of living by the mutually advantageous exchange of goods. That is a principle that the United States will not realise. They think that trade is the building up of an export surplus, in exchange for debt or gold. That is their idea of trade, and that is the policy they are now about to resume on a colossal scale. There can be only one result of it, and it will be the same as it was last time. Between the two wars, international trade became a ruthless pursuit of gold. But the struggle for export markets did nothing to increase the real wealth of the world. It meant simply that some countries exported their unemployment to others, which got into un payable debt as a result. That was what international trade between the two wars amounted to. And this, in turn, led to stagnation, and to dislocation of the entire world economy, and ultimately to world war.

I want now to put two propositions to the Chancellor of the Exchequer. The first is that multilateral trade and free convertibility, to which this Agreement admittedly commits us, are impractical in the modern world. Mr. Amery, whose absence on this occasion is, I am sure, a source of great regret to many hon. Members on both sides of the House, wrote, a little time ago: The unregulated and unbalanced flow of international trade on laissez faire principles may, like the unregulated (low of water, prove disastrous to all concerned. Deluge and drought, boom and slump, over-production side by side with under—consumption, are in each case the natural concomitants of leaving water, or trade and investment, to find their own level. I believe that that is profoundly true.

The philosophy underlying the old Liberal doctrine of enlightened self-interest and the free-market economy de pended for its success on the existence of empty spaces and continually expanding markets. The spaces are filling up. The era of uncontrolled capitalist expansion is drawing to a close. 1 never thought I should live to teach these things to hon. Members who sit on the Government side of the House. The laissez faire economy of the 19th century, 1 would remind the Chancellor of the Exchequer, who used to think this himself, has now to give way to the planned economy of the 20th century.

My second proposition is that we can not have a planned national economy with international economic anarchy. It has been left to a Socialist Government to lead us back to international economic anarchy and to the economic system of the 19th century, the system of laissez faire capitalism, which crashed to destruction in 1929. The next time that an American slump comes—will anybody deny, by the way, the possibility of another American slump? Or do we all think that America's economic stability is now so great that they will never have another? Is every body so absolutely confident in the economic stability of the United States of America and of their system? Do hon. Members opposite feel such faith and reliance in the steady development of free, knock-about Capitalism that they think there can never be another depression in the United States? It is great optimism on their part if they place such reliance in the operation of free, knock-about Capitalism. I have no such confidence in the economic system of the United States of America. I think there may quite possibly be a slump there. And if there is, His Majesty's Government are, by these measures, depriving us of every weapon by which we might protect our selves from its most dire consequences.

How does their policy square with: There must be no return to the gold standard. It cannot be in our interests, or in anyone else's, to join in a policy of collective suicide. That is from the Labour Party pamphlet of 1944, endorsed by the Blackpool Conference. What about the Foreign Secretary who, only a month or two back in this House, during the "caretaker" Government, and in those flashing few weeks when he was relieved for a brief spell from the cares and responsibilities of office, said: I take the line, and my party takes the line, that, neither directly nor indirectly, will we again be anchored to gold in any circumstances."—[OFFICIAL REPORT, 4th June, 1945; Vol. 411, c. 581.] I would remind the Chancellor of the Exchequer that these agreements mean positively opening the sluice-gates of ex change restriction. It is no use the right hon. Gentleman drawing this tremendous distinction between letting capital out and letting money out for current transactions. That distinction is extremely difficult to draw; and many people will be able to evade it. There will be plenty of people in the City of London who will find a method of opening the gates, and will be able to get their money out. I would also remind the right hon. Gentle man that it was the export of money from this country which brought down the Labour Government in 1931, and later brought down the Blum Government in France. I am not at all sure that it will not also bring down this Government. Although that would be some compensation, it would not be sufficient to offset these proposals.

These terms are hard. They are very hard. As the "Economist" truly says: Our present needs are the direct consequences of the fact that we fought earliest, that we fought longest, and that we fought hardest. The Americans have had full value from Lend Lease. In addition, they have made a substantial capital profit on the securities which we were forced to sell in order to save them in 1941. We made nothing out of that transaction, because we shot off what we got in defence of the United States of America. As the "Economist" rightly says: It is for them to say what pleasure they derive from a bargaining victory won over their best friends "— I would add at such a moment and at such a price.

For the hardness of the terms I blame very much the method of approach. I think the hon. Member for Ipswich (Mr. Stokes) will agree with me when I ask, "Why is it that we should always talk about money, and not about goods?" I have always said we should approach these matters from the angle of goods not gold. I should like to quote from old Clemenceau—and how wise he was—because his words show clearly the point to which we have arrived: We have come to such a pitch that, for want of a Government, we blindly entrust our most vital interests to so-called independent experts, that is to say experts free from govern-mental responsibilities; with the result that we take haphazard, resolutions that will be a heavy burden on us to the end of our days. Every word applies to the present situation. I should like to put my alternative, but I am not proposing to occupy the time of the House any longer. [HON. MEMBERS: "Go on."] It is the alternative of the sterling bloc, based upon the British Empire, and fortified by the countries of Western Europe. There was a great chance, for a middle unit, standing between what my hon. Friend the Member for Chippenham (Mr. Eccles) and I call the knock-about Capitalism of the United States of America on the one hand, and the rigid, Socialist, closed economy of Russia on the other; free to expand, by multilateral agreement within that economy, between like-minded nations. That arrangement might have provided a balancing bloc which would have been of very great value in the world. I do not want to see the world divided into two, and only two, opposing systems. I think there is great danger in it.

When the Chancellor of the Exchequer talks about cotton, I ask him what he really thinks the cotton interests of the United States would do without the British market? They would find it very difficult to exist for any length of time.

This is the great argument of goods versus gold. It is an argument between those who think of human welfare in terms of the essentials of human welfare—light, heat, food, clothing and shelter—and those who think of it in terms of money. I have said before in this House that I am a goods man. I do not believe that money is, or should be, anything more than a convenient medium for exchanging goods and measuring their value. One day the myth of gold as a separate entity, and as the pivot around which the whole economy of the world revolves, will be exploded. The ultimate solution of our economic problems lies in increasing effective demand, by clothing the desperate needs of masses of people with sufficient purchasing power to enable them to buy the abundance which modern science has placed at their disposal.

Are we to throttle production of goods by making gold the basis of international credit? Are we to accept the doctrine of non-discrimination, based on the fallacious assumption that all sovereign States are of equal economic importance? Are we to hand over absolute economic power to the great creditor nations, by accepting the bargaining power of export surpluses, and rejecting that, of markets, which is our only asset? Are we to try to solve the economic problems of the 20th century by applying the ideals of the 19th? I never thought I should feel again as I felt at the time of the Munich Agreement, but I feel just the same as I did then. This is our economic Munich. I believe that we are at the parting of the ways 1940 and 1945; they are two critical dates in the long and almost in credible story of the British Empire. We took the right road in 1940; are we going to take the wrong road in 1945? Lord Keynes once described Mr. Lloyd George as "a witch flying through the murky streets of Paris from the hag-ridden bogs of antiquity." My description of Lord Keynes is, "A siren, beckoning us to our doom from the murkier depths of Bretton Woods." That is the danger. He is a siren, with his persuasive tongue. In defiance of all the teachings and precepts that he has told to us for years, he has now driven us into this position. We have' heard a lot about mandates recently especially from the Chancellor of the Exchequer. It may be that the Government have a mandate to nationalise the gas works. I do not deny it. And on the question of whether this will be good for the gas works, or the public, I would not venture to dogmatise. But there is one mandate which His Majesty's Government never got from the people of this country, and that was to sell the British Empire for apacket of cigarettes.

6.14 p.m.

Mr. Norman Smith (Nottingham, South)

The hon. Member for East Aberdeen (Mr. Boothby) has appealed to his side of the House with arguments calculated to get his friends on the opposite benches into the Division Lobby against the Government. He said he proposed to divide the House, but I can tell the House that if he does not do so, I shall do my best to divide the House. I want, in my turn, to use arguments calculated to bring my hon. Friends on this side of the House into the Division Lobby against these proposals—[An HON. MEMBER: "Shame."]—because I am absolutely certain that, as the hon. Member for East Aberdeen has already stated, these proposals open the way to the influences which broke the second Labour Government in 1931. If the House gives effect to these proposals, only a miracle will save the third Labour Government from the fate that overtook the second.

My right hon. Friend, about whom I speak more in sorrow than in anger, opened a very important Second Reading Debate the other day by showing this document, "Let us Face the Future," to the House. He does not show it to the House today, but on page 11 I find a quotation which is very apposite: The British, while putting their own house in order, must play the part of brave and constructive leaders in international affairs. What is his idea of brave and constructive leadership? When he introduced these proposals in his speech, he led the House to think that we, on our side, had gone out of our way to get Bretton Woods tacked on to them in order to give us a favourable financial situation to carry the burden of the loan. What he did not say was that Bretton Woods and the proposed trading organisation are conditions which the Americans have attached to the loan, and that we are, in fact, being treated as a defeated nation, very much in the way that Germany was treated under the Dawes and Young loans.

I have been in this Labour Party nearly 39 years. There are very few hon. or right hon. Gentlemen on this side of the House who have the length of member ship of this party that I have. When I joined this party in 1907 I was influenced by a book called "Merrie England," in which the late Robert Blatch ford argued very cogently against the doctrine of buying in the cheapest market and selling in the dearest. I hold in my hand a document dealing with the proposed International Trade Organisation—Cmd. 6709—one of those conditions imposed by the Americans, which, if it means any thing at all, means that the Labour Government in this country is going to appease American capitalism by helping to get the world back to buying in the cheapest market and selling in the dearest It is a matter no doubt for congratulation to the tiny remnant of Liberals, most of whose party have been swept out of this House, that, though their party is now shattered and almost non-existent, their ideals are triumphing on the Front Bench of the Labour Party. I do not believe that my right hon. Friend the Chancellor—for whom I shall never entertain any thing but tremendous affection—won his election in his mining villages by exhibiting posters, "Vote for Dalton and back to gold," nor do I believe that he go votes in his agricultural villages by put ting up posters, "Vote for Dalton and Free Trade."

What is it that the House is asked to do under this Bretton Woods plan? I invite the attention of the House to Article IX, and to the Fund which it is proposed to create. My whole case against the policy is this: it abdicates control of our internal finances by this House in favour of an irresponsible, non-elective body known as the Fund. This Fund will consist, no doubt, of human beings. They will be located in the United States of America, not here—that is part of Bretton Woods. They will enjoy complete immunity from all judicial process. They cannot be sued, but they can sue. Their archives will be immune, nobody can look at them; but they will have access to the archives of the Government of every member State of the Fund. Even in regard to taxation, their governors, executive directors, officials and the rest will not only be immune from legal process, but will enjoy complete immunity of every kind. Their property and assets will be immune from seizure. Never, in the whole of history, was it proposed to give such tremendous power to an authority as is contemplated in the Bretton Woods scheme. Neither Hitler nor Mussolini, at their respective zeniths, not even the Roman Emperors in Rome's palmist days, had such tremendous power as it is proposed to confer upon this Fund.

Does not this party learn? I want to draw the attention of the House, and particularly of my hon. and right hon. Friends, to the condition of things that existed between the two wars, during the whole of which period this House was not the sovereign power in dealing with finance. The ostensible Government was here in Westminster, butt he real Government was in the City of London. The thing is so plain, one has only to look at the highlights of the history of that period. I invite hon. Members on this side to think of what happened in this House in 1919, when the late Mr, Austen Chamberlain, as.he was then, was Chancellor of the Ex chequer. One evening in December he got up and announced casually that His Majesty's Government had decided to give effect to the recommendations of financial experts that we should return, not to the pre-1914 gold standard, but to a gold standard. That was a tremendous announcement, and it was destined to have colossal effects. It was destined to set in train the policy of financial deflation which, as I will prove in a moment, will be the con sequence also of my right hon. Friend's present policy. Mr. Chamberlain's announcement was destined to have re percussions in the shape of widespread industrial devastation, strikes and lockouts, sufferings in working-class homes and bankruptcies and suicides among business men. But not a dog barked on the Labour side of the House, as a look at HANSARD for 15th December, 1919, will show.

In fairness to this party, let me hasten to add that Mr. Austen Chamberlain's announcement was destined to have repercussions in the agricultural areas of this country, on the industry of which hon. and right hon. Gentlemen opposite claim to be the custodians. But not a Tory dog barked on that occasion. Apparently, this House was unaware that it did not really exercise control over finance, that the real control of finance was vested in the Bank of England in the City of London. The only voice—the only bleat—came from a member of the Liberal Party, who after wards became one of my hon. Friends. He got up and expressed the hope that the proposals would not mean the issue of 5s. Treasury notes. That was all. The House did not realise that financial power resided outside this Chamber.

The years went by, and we came to 1925. Again, there was a recommendation from the financial experts, and it is of the essence of my case that whatever other advice we may take we should always and inevitably disregard the advice of financial experts. This time the advice came from a Mr.—or was it Sir?—John Bradbury, and he recommended that in that year, 1925, the Government of the day should go right back to the 1914 exchange value of sterling. The right hon. Gentleman the Member for Woodford (Mr. Churchill) was Chancellor of the Exchequer and, assuming that experts were people who knew what they were talking about—not realising that experts were either interested people with an axe to grind, or rather stupid men completely consumed by obsolete prejudices -in his 1925 Budget he carried out the advice of the experts, and decided that the pound sterling should be put back to the 1914 level. No opposition was raised on the Labour side of the House.

The Labour and Socialist movement in this country completely failed then to understand that, if there is a class war, it is not between employers on one side and workers on the other, because neither employers nor workers have the real power when it comes to an economic showdown The real class war is between, on the one hand, the few people who control finance and, on the other hand, the rest of the community, in which category I would include anybody who works for a living in whatever capacity. This party, not understanding anything about these questions in 1925, and having a completely false financial ideology, raised no opposition to the proposals of the right hon. Gentleman the Member for Woodford. Within 18 months those proposals had brought about two coal lockouts and a general strike. The return to gold in 1925 brought about widespread misery, particularly in the mining areas. Many of us on this side of the House took part in the struggles of 1925 and 1926. I invite my hon. and right hon. Friends on this side to ponder this fact, that never during the whole of those bitter struggles did Labour speakers refer to the 1925 Budget or to return to the gold standard. The mine owners were represented as being responsible. It was quite the exception for any Labour speaker to refer to the return to gold as having been the cause of that struggle. [HON. MEMBERS: "No."] It was quite the usual thing to represent the conflict as being between employers and workers, and the real cause was. left out.

I come now to 1931. The same ideology was still at work, the same accepted belief that finance may be something out side of the economic system, a set of rules which have to be obeyed and according to which the economic system must be worked. The crisis of 1931 was very largely a crisis of shops and warehouses being packed with un saleable goods, while the people had not enough money to buy them. The obvious remedy was, and it ought to have been applied, for the Government to create more money and hand it to the consumers in one way or another, so that the consumers might take the glut off the market. That was the obvious remedy, but it was not adopted, because the orthodoxy of Mr. Philip Snowden stood in the way. The party on this side of the House was put in the invidious position in 1931 of admit ting the alleged need of economy as pro pounded from the other side, and differing from the other side only as to whether the economy should be at the expense of the rich or of the poor. The result was that this party crashed in 1931, and had no effective financial alternative to the monetary policies which the National Government proceeded to enact.

From Mr. Philip Snowden we come to my right hon. Friend the Chancellor of the Exchequer, of whom I desire to say that he combines in his person two very distinct personalities. The story of Jekyll and Hyde is very apt in this case. There is nothing I enjoy more, as a mere back bencher in this House, than to see my right hon. Friend waving "Let us Face the Future," leaning over that Box and giving the party opposite to under stand what is going to happen to the Bank of England under the Labour Government, how the Bank of England is going to be used to distribute the abundance which will be possible as soon as industry has got going again. That is the right hon. Gentleman to whom my heart always warms. By a piece of great good luck, on the very day that he introduced that Bill, I was rung up by an editor who wanted me to write 1,500 words about the personality of my right hon. Friend. Genuinely delighted with my right hon. Friend, I wrote the 1,500 words and said 1,500 nice things about him. That was how I felt about him. But if, when I go to tea this evening, another editor rings me up—

Lieut-Colonel Sir Thomas Moore (Ayr Burghs)

The hon. Gentleman will return the money for the first article?

Mr. N. Smith

I shall have to explain to that other editor that I am unable to accept the assignment, because there is in this country a very harsh operation of the law of libel. My right hon. Friend has one inherent defect which he will never be able to live down. It is found in "Who's Who," that marvellous crime sheet of right hon. Gentlemen, and there it is in black and white. It is not his fault, it is just that he had the appalling misfortune, after the war, to become, as "Who's Who" says, Sir Ernest Cassel Reader in Commerce, at London University. My right hon. Friends on this side of the House may not know that the late Sir Ernest Cassel, although he was not a Socialist, was a very broad-minded man. He was in fact a millionaire international banker who believed essentially in two things: one, that the business of creating money out of nothing was the business of bankers and not of Governments; and, two, that there was profit to be had out of overseas loans. The world was his parish and to make money his religion, He was not a Socialist but, as I have said, being a broad-minded man he did not object either to nationalised industries or to a Socialist Government, provided that those industries and that Government played the political game according to the rules pre scribed by the bankers. Unfortunately, my right hon. Friend is still addicted to that belief. It is a terrible thing, but there it is. Then there is the London School of Economics, with which he was long connected; and hon. Members on this side may. not know that the London School of Economics was rescued from perishing about 1920 by a very munificent gift of £472,000 from Sir Ernest Cassel, with the result that you still have that institution corrupting and poisoning the minds of young Socialists who are led to believe in socialisation and in the policy of the Labour Party while still supposing that it is quite all right to leave finance in the hands of irresponsible authorities whose rules you have got to obey.

What is happening? At this time and under these proposals of the Government we are going to transfer the control of finance from this House and this Parliament to a Fund away over in the United States of America. We are doing it at a time when, as I would draw the attention of the House, the pound sterling stands at 4.03 dollars, at a time when we are making heavy subsidies for food to the tune of £300 millions a year. It looks as though those subsidies will have to go up and not come down. That is one of the conditions under which you have stabilised sterling at 4.03 dollars. We are abdicating financial control at a time when you are about to enact legislation, in consequence of which you will fix security benefits in terms of sterling—and therefore in terms of gold, because under Bretton Woods sterling is defined in terms of gold. You arc about to legislate security benefits, not only old age pensions but also unemployment and sickness benefits, in terms of sterling, which is related to gold. You are doing that when your whole economy is rigid; and if at any time you are made to deflate on that rigid economy, you will be in for labour struggles besides which 1926 will be child's play.

My right hon. Friend has given us reasons for saying that we have plenty of defences which remove us from the effects of the gold standard. The first defence is that you are allowed voluntarily to reduce the value of sterling by 10 per cent. without getting permission. What is. 10 per cent.? The Macmillan Committee in 1931 pointed out that a reduction of 10 per cent, in the comparatively easy circumstances of that day would be absolutely inadequate. How much more would 10 per cent. be inadequate now? But, continues my right hon. Friend, he could if necessary go to the Fund a second or third time and get permission to devalue again. How do you know that you are going to get that permission? Who are the Fund? Are they representatives of the British nation? They are certainly not representatives of the British working class.

Look at what deflation did to the Labour Government of 1929-31 because its activities were dependent on this one fact, that the Labour Government's first concern was to maintain the exchange value of the currency. My right hon. Friend proposes to go back to that condition of things. To deflate means one or two or three things, or all three together. It may mean that you must restrict credit. If you restrict credit, what is going to hap pen to your hopes of full employment? It may mean that you must reduce your Budget; and if you cut down your Budget what is going to happen to the hopes of your supporters whom you encouraged last July? Or you may decide to increase rates of interest; and, if you do that, what is going to happen to the hopes that all of us have cherished under Clause 4 (3) of the Bank of England legislation, of getting cheap loans at about one per cent. for the local authorities to go ahead with their housing schemes?

At this stage I come to the really devastating case against Bretton Woods. You may find yourselves in the position of having to deflate. Look at Article IV, Section 8, Sub-section (b), Clause (ii), which says among other things that where in the opinion of the Fund currency has been depreciated within that member's territory, that member shall pay to the Fund within a reasonable time an amount of its own currency equal to the reduction in the gold value of its currency held by the Fund. The whole apparatus of deflation would get going. What does that mean? It means that the Fund may decide, no matter what you say, that your internal financial policies have caused your currency to depreciate within your own territory. What happens then to your policy of subsidising prices, as my right hon. Friend is now doing by quietly borrowing money from the banks at one-half of one per cent., adding it to the National Debt and saying nothing to any body about it? What happens to a policy like that? It is, in my opinion, a sound policy to subsidise prices in that way; but the Fund would not think so. The point is that the Fund has the power to "muck about" with your internal financial policy. The Fund and the Fund alone can decide this.

I find when I look at the Financial Agreement—Cmd. 6708—on page 4, paragraph 8 (i), that the Government of the United Kingdom agree that after the effective date of this agreement it will not apply exchange controls in such a manner as to restrict (a) payments or transfers in respect of products of the United States permitted to be imported into the United Kingdom, or other current transactions between the two countries; or (6) the use of sterling balances to the credit of residents in the United States arising out of current transactions. What does that mean? It means that the United States could sell its mass-produced goods in this country and could use the resulting sterling to buy up our fixed assets—as for instance, newspapers. This clause encourages them to do that, and it under lines Article 6 of the Bretton Woods agreement which is very much to the same effect. The hon. Member for East Aberdeen pointed out the great truth that this clause, and particularly the part that I have read, will enable any astute financial person to drive a coach and four through the Regulations that are designed to prevent the export of capital. If you want to know what that will do to this Labour Government, ask the Popular Front over in France.

The hon. Member for East Aberdeen said we should certainly repudiate this loan. "Repudiate" is a very harsh word, and it is not a word that I like; but I do think that I ought to point out that we shall inevitably default on the Loan. Lest any hon. Members think this is merely what might be called the opinion of an irresponsible back-bencher, let me invite the House to read the letter from Sir Hubert Henderson which appeared in "The Times" this morning, a letter to which that paper gave pride of place His very first sentence is this:

The financial agreement with the United States is for a loan upon conditions which are calculated to ensure default. That is not the view of an irresponsible Socialist back-bencher. That is in "The Times" newspaper. Of course, we shall never repay this Loan, for the same reason that we did not repay the war debt on World War No. 1; and unless America will accept a surplus of goods from us, we cannot repay; and there is no evidence that she will accept a surplus of goods. Is it honest to accept a Loan,' well knowing that you are never going to repay it?

It may be smart business, but I submit in the long run that it will create such ill-feeling between the two countries as will lead us bitterly to regret what we are being asked to do today.

I would like here to make a brief reference to the question of Imperial relations. The Tory Party have not got a monopoly of sentiment in this regard, and I want to say that I object most strongly to the conditions imposed by the Americans, which are nothing but interference in the relationships between us and our Dominions. One of the conditions is that within the next four years we shall not be able to accept a loan from any of our Dominions on terms more favourable than those which are being offered by the United States in respect of this credit. What right have they to put that in? This is dictatorship from outside, and as such I resent it. But there is a more serious thing. I find in this document on International Trading Organisation (Cmd. 6709) a provision which will virtually debar us from developing our Socialist policy of bulk purchases of imports from the Dominions in consideration of their agreeing to take an equivalent amount of goods from us. This is debarred in the international trade document, Section E.I, pages 8 and 9, according to which if the Americans can show that they can supply goods more cheaply than the Dominions, they have the right to annul our proposed mutual transaction.

I appeal to my right hon. and hon. Friends on this side of the House to come with me into the Division Lobby against the resolution now before the House, among other reasons in the interests of parliamentary democracy. Why should not Parliament decide? If Parliament is to decide, then hon. Members should listen to the arguments adduced on both sides, make up their minds about the whole business and, having done that, have the courage to do what they think right. We are being offered not parliamentary government but Cabinet government, and that Cabinet is advised by experts who are financial experts. Who was it who put in the date, 31st December, on which this Agreement has got to be ratified? It was the alleged experts. There has not been adequate discussion on this Agreement. Very many hon. Members on this side of the House have not had any adequate explanation of the Bretton Woods Agreement until, I believe, yesterday or today. I believe that what I am saying is true. There have been 18 months in which it could have been done, in which Labour Party conferences could have been called, in which national, regional or divisional Labour Party conferences could have been arranged; but nothing like this has been done. The whole of this agreement is the result of the fanatical devotion of my right hon. Friend and some of his colleagues to the idea of what has been miscalled "sound finance."

The war of independence has begun. These proceedings in this House and the action that some of us are taking in dividing the House are, I assert, the beginning of the British war of independence against the domination of American capitalism during the post war period. On the ultimate success of that war will depend our ability to build up in England a Socialist system, a Socialist economy; because you cannot have restrictionism at home combined with laisser faire abroad. I beg hon. Members to take their courage in both hands, and do what I intend to do, vote against these proposals, because it is right to vote against them.

6.45 p.m.

The President of the Board of Trade (Sir Stafford Cripps)

I would very much have liked to have had an opportunity of answering the last two speeches, but that unfortunately is not my function this evening. It is my function to introduce to the House the commercial side of these agreements, and therefore, I propose, as far as possible, to keep away from any controversy and to try rather to put be fore the House this—as the right hon. Member for the Scottish Universities (Sir J. Anderson) stated—rather complex and difficult document, Command Paper 6709. Before dealing with the provisions of these commercial proposals, I wish to say one or two words on the more general aspect of our responsibilities upon the commercial side. In considering these matters, we must go back in time to an earlier stage which was their origin. On 23rd February, 1942, conditions in the world were very different from what they are today. The Allied countries were then defending themselves under the heaviest pressure all over the world and though the prospect of final victory was never abandoned, it certainly looked at that time as if the path to victory would be excessively long and acutely difficult. There was a vital need, therefore, to build up the resources behind the fighting fronts, and there was only one possibility of producing the over whelming strength of materials that was an absolute prerequisite for final victory. That possibility was the industrial strength of the United States of America, and the method—the only method—of making that potential supply available on all the fronts of the world was through the machinery of the Lend Lease provisions.

It was in those circumstances that our then Prime Minister and Cabinet had to approach their problems and come to some arrangement with our American Allies as to the mutual aid which could be provided. Not unnaturally, and indeed wisely, it was considered right that we and our American Allies should make some provision as to the future liquidation of Lend Lease and that that liquidation should contemplate, not a complete and absolute cessation of our wartime economic co-operation, but a carrying over into the peace conditions of that spirit of working together which in 1942 promised, and afterwards accomplished, results for which the world must for ever be profoundly grateful. So it came about that we signed the Mutual Aid Agreement, which contained in it Article 7 that dealt with this vital aspect of our final settlement of wartime arrangements. Let me quote, because it is well that we should have them in mind, the words of that Article: In the final determination of the benefits to be provided to the United States of America by the Government of the United Kingdom in return for aid furnished under the Act of Congress of the nth March, 1941, the terms and conditions thereof shall be such as not to burden commerce between the two countries, but to promote mutually advantageous economic relations between them and the betterment of worldwide economic relations. To that end, they shall include provision for agreed action by the United States of America and the United Kingdom, open to participation by all other countries of like mind, directed to the expansion, by appropriate international and domestic measures, of production, employment, and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all peoples; to the elimination of all forms of discriminatory treatment in international com- merce, and to the reduction of tariffs and other trade barriers; and, in general, to the attainment of all the economic objectives set forth in the Joint Declaration made on the 12th August, 1941, by the President of the United States of America and the Prime Minister of the United Kingdom. I make no apology for reading that Article at length to the House, because I want to impress both upon the House and the country that these Washington Agreements are the carrying out of that obligation which we formally took upon ourselves as a result of the receipt of Lend Lease assistance in February, 1942. Whatever our view may now be as to the wisdom of having entered into that Agreement of Mutual Aid, there was no one, I think, who did not at that time when it was made consider it was an absolute necessity. Starting, then, upon the basis of our obligations under Article 7, we have attempted by these fresh arrangements to carry out both the letter and the spirit of those obligations.

Mr. Churchill (Woodford)

In order to make his statement complete, the right hon. and learned Gentleman should surely mention the quite definite correspondence I had with the President of the United States in respect of Article 7 and its bearing upon Imperial preference.

Sir S. Cripps

I will deal with that when I come to Imperial preference. That is a matter of definition of our obligations, but it does not in the least detract from our obligations. It defines the area of our obligations, but it does not detract from them. Starting upon that basis, we have tried to carry out those obligations, and I believe that anybody who studies the document which is now before the House, in Command Paper 6709, will come to the conclusion that it does carry out those obligations and at the same time it gives us every protection that we can legitimately ask for or expect.

But apart altogether from that specific obligation under the Mutual Aid Agreement, there are other considerations which make it essential, in my view, that we should at least make the best effort of which we are capable to arrive at inter national understanding upon the future of world financial and commercial relations. Many of us have in the past stressed the fact that the future peace of the world does not depend so much upon purely political considerations or co-operation as upon the elimination of financial, commercial and industrial practices and methods which have in the past proved themselves so fertile a seedbed for war. Now, as we face the future, we must make up our minds as to whether we are to attempt to deal with these economic problems as isolationists or as internationalists. We have in the past heard a great deal of criticism of political isolationism in other countries, especially when it was urgently necessary for our own safety that those other countries should be prepared to co-operate in the inter national sphere, and if we are to adopt sterling isolationism in this country, we must, I think, expect to meet a similar volume of criticism from other countries who wish us to co-operate. The fact is that we must make up our minds on this very fundamental question of policy, and having made up our minds, we must carry our decisions into the sphere of action. It is of no use professing a desire for inter national agreement if we are not prepared to take our part in arriving at that agreement. Those who today say they are prepared to come to agreements with other countries, but only upon the basis that we get our own way on every topic, or that their own particular theoretical convictions are completely safeguarded, are, I venture to say, in effect saying that they are not prepared to enter into international agreements at all. That is the point upon which we have to make up our minds.

We have, of course, in the course. of arriving at the terms of this document, done our utmost to see that our particular interests as a country are not jeopardised unduly, that our special relationships within the Commonwealth and Empire are not affected seriously, and that our own domestic decisions as regards national planning of our agriculture and industry are not made too difficult; but we have had also to meet the quite different views and requirements of the United States of America arising out of their own political theories and their own industrial necessities. The real question which, therefore, arises is not whether we have compromised or not— it is indeed of the essence of any inter national agreement that we should cornpromise—but whether we have arrived at a fair and practicable compromise which offers hope for the future because it will, in fact, be of assistance in a positive way to those who are participating in it. We must look not only upon the things we shall be prevented from doing, and which we might do in a world of complete international anarchy, but also, and even more keenly, upon any advantages that we should derive, as far as other countries are concerned, by their having to submit to those same regulations or prohibitions that we express ourselves as ready to accept. Unless we take that double-sided view of the advantages and disadvantages of the arrangements suggested, we cannot possibly weigh up whether on balance they are worth while or not.

This, I think, is certain, that we must either arrive at the best international understanding that we can, and that we can persuade others to accept, or else we must abandon all idea of international agreement on economic and commercial matters, and so revert to the dangerous anarchy which has been so well and truly pictured in the speech of the hon. Member for South Nottingham (Mr. Norman Smith), and from which we suffered so acutely in the past. If we are to prevent that anarchy and substitute for it the rule of law, the rule of law for which no statesman worked harder in the United States of America than Mr. Cordell Hull—and I should like to take this opportunity of paying a tribute to him for his persistence in the field of international agreement—we must certainly be prepared and able to arrive at some arrangement, on matters such as we are discussing tonight, with the United States of America at least. If we are able to do that I believe we shall have made some step forward as regards the future of world commercial organisation.

In the light of those general observations I ask the House to look at the definite proposals with which we have associated ourselves, proposals put for ward by the Government of the United States. I should make it clear that these do not, of course, constitute in any sense an international agreement. What we have said, and I should like to repeat it, is that we as a Government are in full agreement on all important points in these proposals, and that we accept them as a basis for international discussions. We shall, in the light of views expressed by other countries when these discussions take place, use our best endeavours to bring the discussions based upon these proposals to a successful conclusion. In other words, we and the United States will together urge the adoption of these proposals upon other countries, but, of course, their implementation must finally depend upon their adoption by those other countries as well as by ourselves and the United States. These are not, in other words, put forward as bilateral proposals between ourselves and the United States. They are proposals by the two of us for multilateral arrangements amongst various countries.

The proposals fall into three parts, under the headings A, B and C, of which much the longest and most detailed is C, which deals with the International Trade Organisation, but A and B are also important, particularly B, which deals with the proposals on full employment. It is important to bear in mind that these three Sections form one single whole, and all three Sections are proposals for international discussion at this conference which it is suggested should take place next year.

Mr. Maude (Exeter)

Before the right hon. and learned Gentleman goes any further may I ask whether he proposes at any time during his speech to deal with the de privations that the people of this country would go through, in his opinion, if, in fact, this loan was rejected? I believe that is a matter of vital importance—what happens in this country.

Sir S. Cripps

I should not like to duplicate what my right hon. Friend the Chancellor of the Exchequer said earlier in the evening. We have not too long a time, and I think it is better for me to stick to the problems with which I have been asked to deal. I was saying that the proposals under B are, in my view, of great importance. I can dismiss section A, not because it is unimportant but be cause I am sure everybody would be in agreement with the great majority of it. The sentiment there expressed as regards co-operation in the economic field would, I am sure, meet with general approval. Of course, the question is, as I said earlier, not whether we have the sentiment but whether we are prepared to do anything to carry that sentiment into action.

Section B makes clear that a high and stable level of employment in all individual countries is vital to the success of any scheme of international commercial co-operation. It is, therefore, a part of any co-operative method of dealing with world trade and commerce, that we must insist upon the need for each individual country which comes into such a scheme to foster full employment within its own territory—and that applies, of course, to the United States of America as much as any other country—and that becomes a matter not merely of national but of inter national interest and concern as well. Nor must the full employment be created by exporting unemployment from one country to another to the detriment of the other country. That is fundamental. So it is laid down that the attainment of approximately full employment by the. major industrial and trading nations, and its maintenance on a reasonably assured basis, are essential to the expansion of international trade on which the full prosperity of nations depends. The mere acceptance of such a declaration and principle by all the nations of the world would certainly be a step in advance of anything that gained currency during the period between the two wars. After set ting out these general principles as regards full employment there follow a series of undertakings by the signatory nations to the effect that they will take action with in their own countries to maintain full employment within their own jurisdiction, and that they will regularly consult inter nationally upon the problems which arise from full employment.

This new approach on an international basis to the problem of full employment—and of course, should it arise, unemployment too—is, we believe, of very great value to the future. It is a beginning, a recognition of the interdependence of nations on the question of world employment, which is naturally so intimately linked with matters of trade and commerce. Indeed, one has only to follow the steps taken between the two wars to hamper and hinder world trade, whether financial or commercial, steps which very often arose directly out of unemployment, to realise how closely the two problems are related. We now have the suggestion that it should be formally recognised that every country is responsible to all other countries to sec that it does not create international difficulties by permitting in its own territories large scale unemployment or by merely exporting that unemployment to the detriment of other countries. Of course these proposals in section B will require, at the international conference a good deal of working out and elaboration, and it is proposed that that should take place.

I now pass to the much more detailed proposals concerning the International Trade Organisation appearing under head C. The premises is that if we are to pre vent unemployment and its attendant evils we must not hamper the possibility of widespread exchanges of trade between countries upon an expanding scale. In other words, we must adopt an expansionist doctrine. For this purpose it is proposed there should be set up an Inter national Trade Organisation of the United Nations, which would be based upon certain general principles, and would pro vide the means for continuous discussion of matters of commercial policy and the gradual formulation of an agreed series of procedures by which the major inter national problems could be dealt with.

Mr. Walter Fletcher (Bury)

May I ask the right hon. Gentleman if he proposes to ask the ghost of King Canute to attend this Conference, as he would be the most suitable attender?

Sir S. Cripps

I do not think that is a helpful intervention when I am explaining a very difficult document. Per haps the hon. Gentleman will keep these remarks until he makes his own speech.

Mr. Fletcher

I will.

Sir S. Cripps

I am much obliged. The International Trade Organisation is pro posed to be set up, and it is clear, perhaps, that difficulties in setting up such an Organisation and in laying down multi lateral principles to be incorporated in a multilateral commercial agreement arise from a very great diversity of economic financial and commercial practices in the different countries of the world that one desires to get within this International Organisation. Some believe in completely free—I think the hon. Member for East Aberdeen (Mr. Boothby) called it "knockabout individualism "—and freedom of competition in every way, while others believe in a measure of control and planning, both nationally and internationally, and yet others believe in complete control, internally and externally, by the Government, of all financial and commercial operations in the country.

We must, therefore, either devise, if we can, some loosely-fitting framework within which we can contain all these diverse methods of national economy, or else we have to abandon the effort to get an international agreement at all, because one thing is quite certain, and this, I venture to think, is the main criticism of what the hon. Member for East Aberdeen and the hon. Member for South Notting ham (Mr. N. Smith) said, that it is awfully easy to say what one would like to do, but not quite so easy to persuade 58 other nations to do it, and one has either to say, as the anarchist does, that one will not accept anything except what one believes and will agree to nothing else, or one has to get the widest agreement as possible in one's own direction with the other countries. There is no alternative between these courses, and this document is a very definite attempt to achieve the latter object and get a measure of international agreement into which any national plan can fit without undue embarrassment to the national plan itself.

Therefore, it must be apparent that it cannot be, within an international arrangement, limited to any one particular national economic outlook, because it has to bring, so far as possible, the properties of many with a wide latitude, permitting great differences. Certainly, I am bound to say that a very great task has been performed by all those who took part in these negotiations on both sides, and many others who have been consulted in the course of the negotiations, from the Dominions, India and elsewhere, and, whatever the result may be, I think that we must give all these people our gratitude for the immense task that they have performed in producing any form at all in regard to this international structure.

Mr. Marlowe (Brighton)

May I get this point clear, because I am certainly not clear about it? Could we be told whether acceptance of these proposals is a condition of the loan or not? The right hon. and learned Gentleman has referred to them as a basis for discussion, but it has not been made clear whether these have been taken into consideration as a condition of receiving the loan, or whether they are quite independent, and whether we are bound to accept these proposals before we get the money.

Sir S. Cripps

They are not quite independent. They are dependent, in this sense, that both we and the Americans desire to come to a conclusion about Article VII at the same time as we were concluding Lend Lease and all the other matters and the loan, and they are all inter-dependent. We cannot, at this stage, draw out and stick to two of them and drop the third.

Mr. Marlowe


Sir S. Cripps

May I go a little further?

Mr. Oliver Stanley (Bristol, West)

I understood, from this document, that it was an American proposal, and I was rather puzzled when the right hon. and learned Gentleman referred to the able negotiators of our own and from the Dominions for the part they played in drawing it up.

Sir S. Cripps

It is quite obvious that, before such a proposal is put out, a great many conversations take place to try to get the proposal into a form that will be acceptable to the other party, and, although one takes the responsibility, as we often do in many cases, as the right hon. Gentleman knows, only too well, one discusses the thing very thoroughly before publishing it in order to know what the reception of it is going to be, and, in that sense, this has been discussed by us in order to know what the reception will be of the American proposals.

Mr. Marlowe

If we were to say "No" to these proposals, should we get the loan or not?

Sir S. Cripps

I have just said that we cannot draw out from any of these agreements and leave the other two, or what ever it may be, standing. They are all essential parts of the whole scheme. Our agreement as regards this is shown in the form of the statement at the end of page 18, which shows the extent to which we are bound under this document. Let me, if I may, revert to the point at which 1 was expressing our gratitude to those who have formulated these documents with such care, and the many people who assisted in their formulation, and I would like to reinforce one thing, particularly, that my right hon. Friend said in opening the Debate, and that is the great debt which I and the Government owe to Sir Percivale Liesching for a most out standing piece of work in helping to get this document into the form in which it now appears.

Of course, if every system of national economy is to have unrestricted liberty to do exactly as it wishes in its relation with other countries, then we cannot accept a document of this kind, but would have to leave the matter open entirely to the chance of anarchy and to the chaos that we know follows international commerce, and the more a country is bound up with international trade, as we are bound up with it as one of the great ex porting countries of the world, the more we shall suffer from unregulated systems and methods in foreign markets.

The framework of these suggestions includes, therefore, first of all, certain general provisions as to commercial policy of the kind that are usually inserted in all bilateral commercial treaties. I do not think I need delay upon the details of this, because they merely aim at codifying a great number of individual provisions put in for the convenience of parties in such agreements, but I would just make this observation—that, of course, the alter native to some multilateral arrangement will be a whole series of bilateral arrangements. We cannot go on without inter national commercial agreements. We have got to have something if we do not have this, and there are many advantages if we can get a number of these matters dealt with by multilateral provision rather than by bilateral provisions.

Following that Section A is the important Section dealing with tariffs and preferences. Paragraph (1) of that Section repeats the words by which we are bound under Article VII of the Mutual Aid Agreement, and cites them as being taken from that Agreement—that is, as to the substantial reduction of tariffs and elimination of tariff preferences

Mr. R. S. Hudson (Southport)

No, no.

Sir S. Cripps

—and the elimination of tariff preferences. I am saying that they cite the words, and that this arises out of Article VII, and that they deal with the reduction of tariffs and the elimination of tariff preferences. The words in Article VII are: The elimination of discriminatory methods. There has always been a question of whether preferences are or are not discriminatory methods. The phrase has now been crystallised in the sense in which it appears in paragraph 1. The proposal is that members of this organisation should enter into arrangements in order, ultimately, to achieve, if they can, this end, that is, the reduction of tariffs and the elimination of preferences. That is to say, the process of bargaining is to be initiated as between members whereby they should arrive at mutually satisfactory arrangements. Nothing can happen at all under paragraph (b) unless members are prepared willingly to agree with one another either to reduce tariffs or to reduce preferences. Nobody can compel anybody to reduce a preference; nobody can compel anybody to reduce a tariff. If any one party is invited by another to reduce a preference, he is at liberty to say, "I cannot do it unless you reduce your tariffs by 1oo per cent." The bar gain is entirely in his hands and if he is not satisfied with the bargain, there is no reason whatever why he should enter into it. He has complete and absolute liberty as to the settlement to which he comes and, moreover, it is clear that he is bargaining a preference from which another person gets the benefit..

That is the curious thing about preferences: although we impose them, we do not get the benefit from them. We have to put in the provision that we can not deal with a reduction in our preference, unless we get the person who benefits from it to agree as well as ourselves, and that the quid pro quo we both get is worth while for the reduction it is proposed to make. The House will remember the tri partite bargain of this sort entered into between ourselves, Canada and the United States of America, whereby a similar bargain was carried out. Certain preferences and tariffs were reduced by agreement between the three. This contemplates a similar sort of bargain but on a much wider scale. It is clear that we do not necessarily say that we should give up a preference because one country is prepared to give us tariff advantages. The peculiarity about our trade, as the House knows, is that it is a very wide spread and diversified trade. We do not sell large quantities of goods of particular lines to particular countries; we sell goods all over the world in what might be considered comparatively small lines.

Therefore, it is not enough for us to get, as against a preference, the reduction of merely one person's tariff; we might want 26 countries to reduce their tariffs before we were prepared to drop a preference. Therefore, the whole matter is completely at large and no one is bound at all. All we say is that we are pre pared to enter upon this process; we are prepared to consider that bargaining of preferences against tariffs. If we can get an advantage which appears to us to make it worth while and another country can get an advantage which appears to make it worth while, then we can come to an agreement. It is an attempt to try and bring down tariff barriers on all sides to a great extent, and it is clear that it must be to a great extent. A mere nominal reduction by a low percentage is not going to make anyone enter into a bargain and that, of course, our American friends understand perfectly well.

The initial agreement proposed these three points, as set out in (a), (b>) and (c). The first is that the mere fact that there are existing agreements, such as the Ottawa Agreement, for instance, does not prevent a bargain to change rates because we are bound by the Agreement and, therefore, will not enter into the bargain. Where most-favoured-4nation tariffs are reduced and the margin of preferences is narrowed, there will be no corresponding alteration of that preference margin, or if the reduction in a most favoured nation rate of duty, say, in our case, a duty payable upon imports from a foreign country, is large enough to eliminate the preference, then the preference will automatically be eliminated. That is merely a rule on how you approach the problem. It does not say that you are to eliminate it or not to eliminate it. It is really the way you proceed, and the mechanics of it. No margin of preference is to be increased and no new preference introduced before this process takes place. You cannot jump the position if you are going genuinely into a bargain of this kind.

Mr. Stanley

Does it lay it down that no tariff should be raised?

Sir S. Cripps

It is not laid down that no tariff would be raised but there is an obvious answer, if they were, they would have to be reduced before the bargain started, and they would have to be brought down again to where they were. I do not think that the right hon. Gentle man need worry because the major case would be tariff legislation in the United States of America which one would have in mind. Considering that the United States of America are going to ask for power to reduce tariffs in order that they may carry out these bargains, it does not seem likely that between now and June they would increase tariffs by legislation.

Mr. Brendan Bracken (Bournemouth)

Has not the President of the United States special powers to reduce tariffs if she cares to do so? She could reduce tariffs to morrow by 50 per cent.

Sir S. Cripps

Yes, but if the right hon. Gentleman contemplates a bargain of this kind he is not going to do much. The question in some people's minds is: Is 50 per cent. enough? I will not make any observations about it at the moment. I hope that I have explained sufficiently the provisions as regards tariffs and preferences.

Mr. I. J. Pitman (Bath)

May I ask a question of the right hon. and learned Gentleman which may be of help to the House as a whole? The words in Section B are a substantial reduction of tariffs and for the elimination of tariff preferences. The apparent anthesis between the elimination of tariff preferences and the reduction of tariffs. Is there anything to prevent it being the reduction or elimination of tariffs and the reduction or elimination of preferences? It may be that the apparent antithesis is the cause of the difficulty in which the House finds itself.

Sir S. Cripps

There is nothing to prevent it except that these are the words that happen to be agreed upon, but it does not alter the situation that both parties are absolutely at liberty to make what conditions they like with regard to reduction or elimination.

Mr. R. S. Hudson

why should there be this discrimination of language between the two? Why not us the same language for both—the same language to reduce tariffs and preferences? This appears to many of us pandering to the well-known desire of the United States to get rid of Imperial preference at all costs.

Sir S. Cripps

one has to recall that the Administration of the United States of America has to get this through Congress just as we have through the House of Commons, and whether they think there is some particular attractiveness in those words or not, I could not say. The words flow directly from Article VII. [HON. MEMBERS: "No."] They do flow from it. Whether discrimination covers preferences or not, they flow from it. The word "reduction" of tariffs is used in Article VII and "elimination" is applied to everything else. The only thing about tariffs in Article VII is "reduction." Everything else is dealt with under elimination. It is, there fore, a good argument—I am not going into it—to say that preferences were intended to be dealt with under this elimination, but it appears not to matter either one way or the other because we are at liberty to say, "We 'will reduce preferences," or, "We will not," or "We will eliminate preferences" or "We will not eliminate preferences" according to what we get offered in exchange by other Powers.

Vice-Admiral Taylor (Paddington, South)

Does the right hon. Gentleman not mean that preferences will be eliminated altogether? That is very different from a reduction in tariffs. Would he agree to the elimination of preference?

Sir S. Cripps

I am afraid I cannot say it more definitely than I have said it already. We agree to the initiation of a process of bargaining, the ultimate objective of which may be looked upon as the' elimination of discriminatory methods of preferences and the reduction of tariffs, but we are absolute masters as to whether we ever get to that objective or not. If it is worth our while, we can get there; if it is not, we shall not. Therefore I do not really think it matters how one expresses the objective.

Perhaps I may pass from that to quantitative trade restrictions which are the next paragraph. This section starts with a general condemnation of this method of regulating trade; a method, I may say, from which we as a country suffered more acutely in the period between the two wars than any other country. The disastrous effect of these kinds of restrictions upon our trade is illustrated by the fact that our exports to eleven selected countries fell in value between the years 1929 and 1937—the latter, incidentally, being a good year—by nearly 40 per cent, and this happened in spite of the fact that by 1937 we had concluded agreements, which mitigated the severity of restrictions, with nine out of 11 countries. That gives some measure of the effect upon our export trade of this type of restriction. The section details a number of exceptional cases in which, nevertheless, such restrictions would be permitted. They are—I do not think I need go through them all—dealing with the transitional period, the necessity to preserve internal supplies in cases of distress; the necessity to achieve suitable standards for international trade and commerce preventing the importation or exportation of bad quality goods; quotas for export or import to carry out approved commodity agreements under the chapter which follows; and then, which is by far the most important so far as we are concerned, paragraph (e) on page 6 which deals with the agricultural situation.

Mr. Pickthorn (Cambridge University)

Would the right hon. and learned Gentle man point out, purely for elucidation, what is the definition of "commodity" under paragraph (d )?

Sir S. Cripps

If the hon. Gentleman will allow me to come to that when I come to the commodity section, he will find it in Chapter 5 on page 11. I am quite aware that hon. Members in all parts of the House will be anxious to know what the reflection of this is likely to be upon our own agricultural situation because, although at the moment we cheer when we say that from the export point of view it will be most helpful to us if this is not permitted anywhere in the world, at another moment we cheer when we say that there' is an exception which will allow us to do it so far as our agriculture is concerned. That is one of the obvious difficulties in wending one's way through an agreement of this kind, because every one takes the same view as we do in these agreements: they want all the protection they consider necessary and all the prohibitions on the rest of the people that they consider necessary.

The position as regards agriculture may be summarised in this way. We shall still continue to be able to utilise, for the purpose of encouraging our agriculture if we desire to do so, the following devices: we can continue tariff protection provided, in the bargaining which goes on, we do not give it away. We can continue in our State trading, through the Ministry of Food when we are bulk purchasing, to have margins on prices we pay which are the same as would be permitted for tariffs; that is to say, we can use State trading just as we could use tariffs for regulating between imported and home goods. Import quotas can continue to be imposed to enforce government measures to restrict the quantities of like domestic products; that is to say, if we want to limit the quantities of pig meat, or whatever it may be, we can employ a quota for import as well as for home. That gives one a very great power, because it is always possible to put a quota on the home market for almost anything. Fourthly, domestic subsidies are not touched in any way by this document, except where they arc on such a large scale that they are affecting international trade. Obviously, as we are not an exporting country in agricultural goods, subsidies that we impose on our own internal production will not affect international trade.

Those four methods of assistance can be used either separately, or in combination, to achieve the aims of any agricultural policy. There is one other which is of negative assistance as it were; that is, the prohibition of export subsidies on primary products will prevent those products being forced into markets where there are surpluses arising in other countries. In other words, there will be less from which to protect our agriculture if export subsidies cannot be used by other countries and, of course, the same will apply as regards commodity arrangements. If I might take as an example of what we can continue to do, the levy subsidies provision of the Wheat Act, these are perfectly permissible under this organisation as it is here suggested. We had the advantage of a very careful investigation of all this by one of our agricultural experts on the spot in Washington when it was being examined, and my right hon. Friend the Minister of Agriculture is satisfied that, so far as the policy he has announced to the House and the country is concerned, this will give him ample latitude to carry it through.

Mr. Snadden (Perth and Kinross, Western)

Could I ask a question? This is very important because it raises the whole operation of the wheat deficiency famine which we had prior to the war. As I understand it, you could only apply for the cost of the purchasing of the wheat according to a tariff which would operate if we were under a commercial agreement. As there is no tariff on wheat, I cannot see how the levy subsidies could work.

Sir S. Cripps

The levy, in the levy subsidies system, is not a levy in the nature of a tariff, because it applies equally to all forms, and therefore it is more a tax. It is not a tariff in any sense, and it is not protective in any sense. Therefore, you are perfectly at liberty under this Agreement to levy money which is generally levied upon imported and home-grown commodities as well. Equally you are entitled to put on a subsidy on that level for home-grown commodities.

Mr. Manhingham-Buller (Daventry)

I do not in the least understand what meaning, if any, can be attached to the last sentence in paragraph (e) on page 6.

Sir S. Cripps

Import quotas imposed under paragraph (e), that is to say, to restrict quantities of like domestic pro ducts, should not be such as would reduce imports relatively to domestic production, as compared with the proportion prevailing in a previous representative period. That means if you want to impose a quota on pig meat at 50 per cent., 50 per cent. must apply to the home market and also to imports during a previous representative period. You cannot completely cut out imports, and allow your domestic production to remain at 100 per cent. It must be an equally non-discriminatory quota for both imports and domestic.

Mr. R. S. Hudson

That means, in fact, that you cannot allow in the operations of the Minister of Food any substantial increase in domestic production com pared with pre war, assuming that the total consumption remains the same.

Sir S. Cripps

That depends on the period which you are going to consider. That is a matter which is left open. I hope that the House will appreciate that it is the broad principles of this matter with which we are concerned, in the sense that that is what we have consented to. No one imagines that this will emerge from an international conference unaltered in many matters of detail. The broad principle of this is that we have these various methods by which we can assess or deal with our agricultural position.

Mr. Hudson

The really important thing is that the application of this principle should not so fetter our discretion and freedom as to make the policy which was announced by the Minister of Agriculture impossible. That is what seems to me to be the danger.

Sir S. Cripps

I entirely agree, and that has been examined with extreme care. We are perfectly satisfied, and we would not have agreed to the broad principles of this had we not been satisfied, that with this exception under paragraph (e) they will allow us to carryout to the full the agricultural policy which has been announced by the Minister of Agriculture. We have no doubt about that at all. My right hon. Friend will bear in mind that this is not the only exception to one general principle here. There are lots of other ways in which one can act so far as agriculture is concerned. There is the prohibition of quantitative import restrictions. Paragraph (e) is merely saying that here are certain exceptions to the general prohibition which is contained in the introductory wording of Section (c) and it does not go beyond an exception to that general prohibition. If I may follow on from that consideration from she agricultural point of view, there arc certain other cases where quantitative import restrictions may be imposed which 1 do not propose to deal with in any detail.

For instance, on page 6 there is a restriction to safeguard the balance of payment which is a very important point. On page 7 there is a provision that where such restrictions are imposed they should be on a non-discriminatory basis. That is to say, when you arc going to prevent imports at all, you must prevent them all equally, and not aim against the imports of any particular country. Then there is the very important reservation in paragraph 5 as regards "scarce currencies" which makes it quite clear that the full right remains under the International Monetary Fund to take action by import restrictions against a country whose currency has been declared scarce. I would stress what the right hon. Gentleman has said that this is one of the most important provisions both of this and of Bretton Woods. It gives us a right in the case that has been suggested here, of the United States refusing to import goods in payment, and therefore of the currency automatically becoming scarce, to discriminate in every way we want to against that scarce currency.

Mr. Boothby

Is it not a fact that the United States are prepared to go on lending dollars to the Fund even if that clause had not been imposed?

Sir S. Cripps

That means to say that the Fund, under those circumstances, would get choked up with dollars, and eventually someone would have to cancel the dollars. That would be the only solution. If I may pass on to the provisions on the next page which deal with the question of subsidies—here, of course, so far as internal subsidies are concerned, that is to say subsidies for consumption or for any other purpose internally, there is no prohibition at all, except where they are of such a size and continue for so long that it could be suggested that they are militating against international trade. In those cases the organisation could draw the attention of the members to them, and could ask them to moderate their policy, but there is no effective power by which it can be done. Concerning export subsidies, provision is made that, after a period of three years, export subsidies will not be allowed at all, except in cases where there is a world over supply of commodities which cannot be dealt with by increasing consumption, or other remedies which can then fall under the provisions of commodity agreements set out in chapter V, but which may permit, in those circumstances, for a period of time an export subsidy, but if so permitted that export subsidy must not be used to gain a larger part of the market for the country putting on the export subsidy than it held in a previous period. This gives good protection in this matter. Then we come to the State trading provisions, and there provision is made by which people, either bulk purchasing through the State with State monopolies or with a complete State monopoly, can come into this organisation. I will not outline the provisions because I think they are quite clear.

Captain Blackburn (Birmingham, King's Norton)

As regards sections D and E, particularly section E (1), would my right hon. and learned Friend explain how it will be possible to plan our export trade over a period of five years in view of section E (1) and section E (3)?

Sir S. Cripps

I am not clear what the hon. and gallant Gentleman has in mind. Does he mean the un certainty of what other people will purchase from us?

Captain Blackburn

The non-discriminatory obligations which we should have to accept under what might be called international free enterprise.

Sir S. Cripps

I think that we should find no great difficulty in planning our export. It is very difficult to assess markets in different parts of the world. Fortunately we have such a wide dispersal of markets that we are not in such great difficulty as many of the countries which are dependent upon one market. Where you have a large dispersal of markets like that, on average it makes it easier to plan than if you have only a few. If I may proceed to the next Section, that of exchange control, obviously there must be some link there between exchange control and those various methods and de vices which have in the past been used for the restriction of trade, links so that membership of this Organisation and the International Monetary Fund shall be common. The exchange control methods of the International Monetary Fund are therefore, in substance, introduced into this document.

Then comes a Chapter on restrictive business practices. Here it is recognised that there may be some international business practices which are inimical to the flow of international trade, and if there are such practices, and complaints are made about them, it is up to the Organisation to make inquiries into them, and if necessary recommend to any country that they should, according to their own domestic laws, take steps to see that these particular practices are not continued. That is a very mild and permissive form of trying to get rid of what has been acknowledged in this document, and in other ways also, as being undesirable in the international commercial field. Finally we come to the Chapter on inter-govern mental commodity arrangements.

Mr. Pick thorn

The right hon. and learned Gentleman referred me to this Chapter, but this time the reference is to "primary commodities." Is there a distinction between commodities and primary commodities, or does the word always mean primary commodities?

Sir S. Cripps

It always means primary commodities. "Commodity" is the word used for the primary product rather than for the manufactured product. In the commodity arrangements spoken of here a distinction is drawn in the first few words. The production of, and trade in, primary commodities is exposed to certain difficulties different in character from those which generally exist in the case of manufactured goods. That is the contrast between commodities and goods. In this case the general principle is that if it is found that a commodity is likely to become surplus, all that can be done is to expand its consumption; that is to say, the first effort is to expand consumption and not to restrict production. It may be that for various reasons it is not possible to expand consumption, or that expansion does not come as has been anticipated from whatever steps have been taken to bring it about. Therefore, if as a result of efforts made it cannot be dealt with in that way, there is then permission under the Organisation to have commodity arrangements or agreements, under which consumers and producers can between them arrange some form of restriction for a limited period of time, subject to review, and subject to efforts being made all the time to cure the defect by some other means. A provision is made that where decisions of importance are to be taken upon these commodity arrangements, there must be equal representation of the consumer and producer countries, which prevents the producer countries from getting away with provisions which might be to their advantage but not to the advantage of the consumer countries.

The final Chapter deals with the question of the Organisation, how it is to be set up. I do not propose to deal with that because hon. and right hon. Gentle men can easily read that, and there is nothing difficult in it. So far, of course, we hear only that the Government of the United States and ourselves believe that it is possible to accomplish international agreement along the lines of this document. We have yet to see how far other countries, including our Dominions, are willing or able to co-operate along those lines.

Mr. Harold Roberts (Birmingham, Handsworth)

May I point out that the document does not say the Government of the United States but Congress?

Sir S. Cripps

It does not, but if the hon. Member will read page 18—

Mr. Roberts

I have read it. It says: …the endorsement of the Executive branch of the Government of the United States.…

Sir S. Cripps

That is the Government of the United States; it is not Congress any more than is this Parliament. Parliament has not yet agreed to it; nor has Congress. The Executive branch of the Government has agreed to it, as the Cabinet here have agreed to it in the sense set out. It is for Congress formally to approve or disapprove as the case may be. We are satisfied that these proposals contain nothing that will unduly hamper us in carrying on the domestic policies we desire to carry on in respect of commodities or industry or agriculture. We are quite certain that if a multilateral agreement could be come to between the principal trading nations of the world along the lines suggested, we should find our own situation in international commerce far easier than it ever was in the chaotic time between the two wars.

Quite apart from any question of financial assistance from the U.S.A., I am convinced that these proposals are an imaginative and practical attempt to arrive at some measure of economic co-ordination in the world upon an expansionist basis, and I am profoundly convinced that quite apart from a specific obligation under Article 7 of the Mutual Aid Agreement, we should make the greatest effort we can to accomplish international agreement and co-operation in this economic field. With out that co-operation our attempts at common action in the political field will be gravely embarrassed, and I believe completely frustrated.

I believe everyone in this House is convinced of one thing at least, that we must aim at an expansionist rather than a restrictionist policy. Full employment will depend to a great extent upon our capacity to achieve such an expansionist policy. This too must be clear, that such a policy depends in no small degree upon the action of other countries. It can only be achieved by international action. The sum on balance of the independent national action of countries is bound to be, in the future, as it always has been in the past, restrictionist in its result. The whole possibility, therefore, of attaining a real expansion of world trade depends essentially upon our being able to get a considerable field of agreement and common action amongst the nations of the world, and it is for that reason primarily that I commend this Motion and this Agreement to the House.

Mr. Boothby

Did His Majesty's Government ever ask for a straight commercial loan to tide us over the next two or three years, on the same lines as the French got one? If they did, was it refused?

Sir S. Cripps

One cannot go back into the whole of the negotiations, but I can say that that policy was very carefully considered indeed.

8.0 p.m.

Captain Drayson (Skipton)

In asking for the usual indulgence that the House extends to maiden speakers, I know that hon. Members will sympathise with me in that I have to follow many speeches of great sincerity, and, I might say, some of a certain amount of obscurity. To my mind, the immediate benefits that we are to receive as a result of this loan, whether I approve of it ultimately or not, is the return to multilateral trade. Undoubtedly, if the world is to get going on a business basis once more, we have to have free communications and commerce between the nations of the world, and particularly must we have a free ex change. We all know the difficulties the German nation got into before the war when they were playing around with blocked currencies which we, under all circumstances, must try to avoid. If we are agreed that the pound sterling must be linked to something, whether it is to be the dollar or gold in some form or other, I think we will also agree that other countries are not prepared at the present time that it must necessarily be linked to the policy of the Socialist Party, because if we agree to that it may not be worth 10s. or 5s. but very much less. If the pound is to be maintained on nationalisation or confiscation, this is a very good reason why foreign countries will want us to be linked to the dollar or gold, so that at least they can get something back while the going is good.

It is natural that these countries look with envy at the high standard of living which obtains in the United States of America. Many of us who have been overseas during this war have felt what an enormous advantage it would be to the trade of the world if the purchasing power of some of the countless millions of populations in the countries in which we have been could be increased by £5 or even £10 per head. Therefore, the prospects of opening up world inter national trade as a result of this loan, will be of inestimable benefit to us all. But are we certain that the hopes ex pressed in these proposals for an inter national conference on trade and employment will, in fact, be fulfilled? It appears to us, and it has been confirmed by what we have heard this afternoon; that they are totally incompatible with the Socialist totalitarian policy which we believe is going to be brought about in this country. I believe that the whole economic structure we had before the war would be able to adapt itself to the changing conditions in the world to day, but I am far from sure that it will be able to do so under the present Government, which I consider is sapping the moral fibre of the nation. No loan, however big, can save this country un less once more we can get our industries on their feet and give our people the tools to do the job. I think that British products can compete in any market in the world, but if we are to carry on with restrictive practices, with working par ties which produce no work, we have little chance of recapturing these markets for which we all hope. Let us have the work and let us have the parties at some later stage.

I am sorry, when I turn to the question of agriculture, that the Minister of Agriculture himself cannot answer many of the queries we would like to put to him. I am far from happy at the situation in which we shall find ourselves as a result of the agreements we may enter into in the future. Are we going to be able to carry out even the Government's five-year agricultural policy? I do not think we have had all the assurances we should have liked from the President of the Board of Trade in what he told us just now. Will we be able to give direct subsidies to our producers in this country? Will that not be looked upon with disfavour by other countries in the world? Are we going to be permitted to increase our pre war standards of production, and, at the same time, comply with any agreements into which we may have entered? We have been told that heavy subsidies will be permitted, but I am not entirely happy at the assurances we have been given. I am sorry the Minister of Agriculture did not tell us these things him self. I am sorry he is not sitting in his place at the present time. During the weekend he must have been most un easy on this matter because, when speaking in the North of England, he referred to this loan as "a pawnbroker's loan." Is that the view of His Majesty's Government? They have not called it so today. The hon. Member for Doncaster (Mr. Walkden) called it a stern, harsh measure, and also referred to it as a "pawnbroker's loan." If these ideas were in the mind of the Minister of Agriculture when he used that term, I am led to believe that his reaction was that he would not be able to carry out the policy which he told us some days ago was the Government's plan. Is he going to welcome this loan and this Motion on which we are to vote tomorrow?

We may be asked on this side of the House, What is our alternative? I believe that if a Conservative Government had been in power, if we had had the same Prime Minister as we had during the years of the war, any loan agreement would have been very much more satisfactory from the point of view of this country. I do not say it would necessarily be because of the policy we were going to pursue, but because our Ministers would be far superior in their knowledge of Americans and of trade than those who have carried out the negotiations. I feel that the Prime Minister, when he went to Congress the other day, did a great disservice to this country in his vain attempts to try to sell Socialism to the American people. I read his speech once more only a few hours ago, and I realised what a grave abuse his remarks were of the hospitality that country was extending to him. They are not a country that is misinformed, and they pride themselves on having a great knowledge of what goes on in the world. It is customary in this House at the present time to decry our tremendous trading efforts in the past. If ever this country needed captains of industry to get the country going again so as to recapture some of the trade we have lost, it is now. We do not want our business to be run by a lot of milk-bar monopolists, or Bloomsbury bankers; we want people who know the job. I welcome the assurance we have been given that the American nation will be prepared to reduce her own tariffs. I believe this country can hold her own in any market in the world where the trading is fair trading. All I would say about this loan offers a slight breathing space in the chaos to which the present Government arc leading us.

8.10 p.m.

Mr. Edgar Granville (Eye)

It falls to my pleasant lot to congratulate the hon. and gallant Gentleman the Member for Skipton (Captain Drayson) who, I under stand, has just addressed the House with his maiden speech. It is apparently becoming the fashion that maiden speeches shall be a little more controversial than they used to be, but the hon. and gallant Gentleman represents an important agricultural constituency and he has undoubtedly devoted a good deal of time and study to this subject. I am sure I am expressing the opinion of the House when I say that we look forward to his future contributions to the Debates in this House.

We have had a number of very interesting speeches since this Debate began. I thought the Chancellor of the Exchequer made one of the clearest speeches I have ever heard him make in the House of Commons on a difficult and complicated subject. I think he made it clear to hon. Members on both sides of the House. He was followed by the right hon. Gentleman his predecessor the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson)—I would say that he is the father and the step-father of these Anglo-American discussions. To the best of my recollection, it was the Chancellor of the Exchequer's predecessor who told us first of all from that Box of the Bretton Woods Scheme, and I imagine that he had something to do with the beginning of these negotiations which we are de bating. Either that, or it means that our experts and negotiators went to Washing ton with no preparation at all. I believe Congress and the House of Commons will approve these proposals, but not without a good deal of heavy criticism on both sides of the Atlantic.

Frankly, I am critical of several of the items; certainly I am critical of the rate of interest. This complex, difficult and complicated financial subject has to be, and is being, debated in the Press and the Parliaments of democracies representing something like two or three hundred millions of people. There are theorists and experts in abundance on monetary and financial problems on both sides of the water, and if the Governments of this country and of the United States of America have to produce an agreement which will satisfy every economic partisan on both sides of the.Atlantic we are going to have a very long wait until we get international agreement. The negotiators who represented this country at Washington have had a very tough job, and His Majesty's Government have had a tough time with this question. Any Government who were faced with the sudden cancellation of Lend Lease within a few weeks of taking office had some thing on their hands. Both the ministerial speakers today have told us some thing of what we might have had to expect unless we had been able to get the beginnings of an international agreement. I have heard it said—and I put it no higher than that—that the previous Government had been told by Washing ton six months previous to the statement by the President that Lend-Lease was to be cancelled, that this would be done at the end of the Japanese war. I can only say if that is true

Mr. E. P. Smith (Ashford)

I think I am right in saying that the hon. Gentle man does not mean the last Government, but the last Government but one?

Mr. Granville

I accept the hon. Gentleman's correction. I meant the national war Coalition Government. If the Government and we in the House of Commons had been told six months before that Lend-Lease would end with the end of the Japanese war, there would not have been the reaction in public opinion in this country that the United States of America had done this in rather a precipitate manner. The hon. Gentleman who was criticising the Liberal Party is not here, but if he were I would tell him that the Liberal Party intend to support the loan and the Bretton Woods Agreement. We are a united party— [An HON. MEMBER: "At last."] We are the only party in the House which appears to be united at the moment.

Mr. Molson (The High Peak)

It is not so difficult when the party is small.

Mr. Granville

The hon. Gentleman may be talking about the future of the Conservative Party, but I am not talking about the attitude of the Liberal Party tonight. The Liberal Party gives its sup port because it believes that this is a step towards a well established Liberal policy of freer trade and economic co-operation. I would like to correct the Chancellor of the Exchequer on one point. He said he thought the International Investment Board was first suggested in the Macmillan Report. It was not. It was, with an International Works Scheme, first suggested in the Liberal Yellow Book which was produced by the late Earl Lloyd-George. If this is a move towards freer trade and economic co-operation, I must make the observation that if some of the countries had stuck to economic Liberalism we might not be debating this question tonight.

What do the critics say in this country? They say the United States have got the best of the deal. They say the loan ought to be interest free. They say "no Bretton Woods," as did my hon. Friend the Member for East Aberdeen (Mr. Boothby), who has perhaps given more time to this subject than almost anybody else in this House, and who, I am sure all hon. Members will agree, today made a great speech on this subject. The critics say "No gold, no loan, no nothing." What do the critics say in the United States of America? They have their critics, and they have to get this through Congress in the same way as we have to get it through the House of Commons; they, as we, have to debate it, study it, and form a conclusion upon it. They say in the United States Press that again the imperialistic diplomats of Britain have outsmarted the inexperienced Washington negotiators. They say with a good deal of repetition and emphasis that this is merely subsidising British Socialism, and they say—I heard it over and over again when I was there—that, in effect, this is a case of the American dollar promoting world Laski-ism. I have seen something of international conferences. I think the President of the Board of Trade put his finger on the point in the speech which he has just delivered. He made it clear that the agreement it is possible to get from an international conference is the largest measure of general agreement, and no more.

The alternative which is suggested to the present proposal is that of the sterling area, or of the Empire bloc, and a tightening of belts. Nobody has told us who is going to do the belt tightening or whether the financial critics will tighten their belts. We are also to have economic war in the grim period which was de scribed to us by the Chancellor of the Exchequer. Well, I choose the Agreement, if that is the alternative. Every attempt made in the last 20 years to get international agreement has broken down because of extreme nationalistic opinions in the various countries. We have tried to get agreement to avoid war. The last war began when those efforts broke down. We have had conferences at Geneva. We had the World Disarmament Conference, the World Economic Conference in 1933, and others, and every attempt to prevent national jealousies and to reach international economic co-operation has broken down in the past because of expressions of recalcitrant opinion in countries which refused to allow their Governments to come together in agreement.

Look at the World Economic Conference in 1933. After the economic blizzard of 1931 we were actually able to get at that Conference held in London representatives of 66 nations. The Chancellor of the Exchequers, the Governors of the banks, economic experts and the whole Roosevelt Brains Trust were there. It is no secret that the Conference had reached an agreement, and I believe that if that agreement had been allowed to become operative it might have prevented the war and prevented Hitler from finding his opportunity in an impoverished Ger many. Who prevented that final agreement? The late Mr. Ramsay MacDonald was President of that Conference. I believe that he received before the plenary session a telegram from the United States in which America said that she could not agree to a franc-dollar-sterling agreement with a five-point swing in it. This, in fact, broke up the Conference. I do not know which section of American opinion was able to get at the Government of the United States, particularly after they had sent Mr. Raymond Moley as personal representative over here to expedite the agreement.

It was M. Litvinoff who said "Peace is indivisible "; so is prosperity. The United States cannot build a wall high enough around America, whatever its reconversion boom in consumption goods may be, and see Europe impoverished, without being certain that from the poverty of Europe will not arise one day an Atomic Adolf. If it does happen that way, the United States of America in the next war might be exposed to twenty atomic civilian Pearl Harbours on the first day. That is a possibility which every country has to consider. Does anybody who has been to the Continent of Europe and has seen the situation there, believe that Britain and Europe will be able to rebuild them selves up by pulling themselves up with their shoe-strings? Many cities in Europe are in ruins, and they can never rebuild themselves. How long can that last? Can they survive one winter, or two, before revolution breaks out in a suffering Europe in such conditions?

A tremendous responsibility rests upon the leaders of the House of Commons, the United States and Russia to produce a United Nations Reconstruction Plan. With the vast scale of production of the United States, with what we can produce and with what Russia can do, a good start can be made. With the large-scale building techniques and "know-how," it could rebuild Europe. The proposals that we are discussing are the ground work for that which will be inevitably brought about by the inexorable march of events. I believe that much of this Debate is shadow-boxing. There has been a good deal of shadow-sparring in this House during the last fortnight. Last week we listened to the Debate on the Motion of Censure, in which Conservative speakers were saying, "Look at America and her fine recovery under private enterprise." In this Debate the right hon. Gentleman the Member for the Scottish Universities and his party were critical of American intentions. Yet I am sure that he must bear some responsibility for these proposals. Our long-term aim must be for world currency so that we can abolish the complaints that we have not enough dollars or sterling, as the case may be, or that there is an Amsterdam gang of currency raiders operating, which was the danger to the Tripartite equalisation fund operations for stability before the war. We must get these things or we shall have another economic war. I hope that the Government will have the courage to go on with their discussions on international trade and co-operation and will present even bolder proposals as a long-term policy.

I believe that the United States are heading toward an expansionist policy and that if we can get a working agreement between them on the one hand and Russian industrialism on the other, we shall be able to follow here a new plan of expansionism, as a development of the Government's planned economy. That is the job of statesmen. Otherwise, the future of the people looks pretty dire. Anyone who has been abroad and comes back here and sees the condition of things in this country can hardly believe that our people can stand unlimited austerity for much longer. I do not believe that our children, after six years of it, ought to be asked to stand another four years. 1 believe that this loan helps that position, and therefore for this and other reasons I shall go into the Division Lobby as will my party and give it my support.

There has been some reference to Imperial preferences. In recent years I have tried to devote a good deal of my time to the question of the democratic conception of the future of the British Common wealth of Nations, and I want to see it preserved as an economic entity. I think that is vital. But you cannot safeguard a Dominion market against a currency raid. When, before the war, Dr. Schacht was trying to get foreign currency for Germany, it did not matter what price was obtained, the German Government said to its German exporters, "sell at any price to secure orders and foreign currency." You cannot fabricate a system of Ottawa agreements to deal with international trading gangsterism of that sort. At the present time, I think I am right in saying, Canada finds it impossible to export to certain.sterling markets be cause of the existing situation. It is sometimes forgotten that Canada is a member of the dollar area and not of the sterling area. I read in the paper this morning that the Canadian House of Commons has passed these proposals. I also read that Canada is discussing a loan to this country of considerable size.

Let us make no mistake about it, Australia and South Africa cannot be held by a policy of preferences alone, they are interested in a policy of Dominion expansion. I support the statement of my right hon. Friend the President of the Board of Trade that this is an attempt only so far to discuss these questions. No commitment has been entered into as a quid pro quo to reduce preferences. I imagine that the Dominion Governments, which are competely free democratic Governments, have views of their own about this. It is not the Colonial Empire we are talking about. 1 hope that one of the Ministers replying from the Government Front Bench will make it absolutely clear that the Dominion Governments have been consulted from time to time as the discussions have been proceeding in Washington.

The gold standard has been troubling many of my hon. Friends—are we going back to the gold standard? One set of experts says that this means a return to gold; another set of experts says it does not mean a return to gold. Which set of experts is right? I think that the Chancellor of the Exchequer has given us a clear account of the adequate safeguards which I believe are there to protect this country if there is any anxiety about the return to gold. In conclusion, I congratulate the Government on having got this Loan. I believe it a step in the right direction, towards economic co-operation and sanity. I hope they will go forward with it. This may be our last chance, just as the World Economic Conference of 1933 was our last chance then, to prevent the nations of the world from beginning another economic war, leading to extreme nationalism. Therefore, my colleagues and I will go into the Division Lobby and give our wholehearted support to the Government, both on the Loan and on the Bretton Woods Bill.

8.35 p.m.

Mr. Frank McLeavy (Bradford, East)

I rise to address this House for the first time upon an occasion which may well be historic. We are called upon to make a decision of vital importance to our people, and, to my mind, a decision which will probably affect a generation yet unborn. Posterity may very well bless or curse the decision we make, but be that as it may, we have to make a decision, and I believe we shall make it with full knowledge of the facts and with determination to serve the best interests of the community. Opinion is divided on every side of the House. It is quite natural that it should be so, on an occasion such as this. Indeed, the difference of opinion will be expressed very freely and very frankly during the course of this Debate, and I welcome such free and full expression of opinion. I regard it as the soul of Parliamentary democracy, without which Parliamentary government would undoubtedly perish. During our lifetime we have had two major wars, two victorious wars, which have left in our hands no glittering prizes, but a loss of blood and treasure, a sad ness of hearts and financial distress. The flower of our manhood was placed on the altar of sacrifice. They gave their all that England might live, that the torch of freedom should burn brightly throughout the world. It was a bitter price to pay, yet we were impelled by a noble motive, all that we held more sacred than life itself, the preservation of our freedom—freedom of thought, freedom of creed, freedom of speech.

We lost our sons, our homes were destroyed, our wealth was consumed, but we saved our souls. Quite apart from our financial sacrifices, we suffered grievously by bomb and rocket attacks, and the official statistics show that houses destroyed or damaged by enemy action totalled 4,000,000. Of those 210,000 were totally destroyed and 250,000 so heavily damaged as to be rendered uninhabitable. We have already paid out £270 million in compensation, and the total damage to property is estimated at £1,450 million at current replacement costs. Looking back over the perilous and dark days of war, the British Commonwealth of Nations can be justly proud of the vital part they played in saving the world from Nazi domination. Our joint efforts in the years that lie ahead will re-establish the industrial prosperity of the Empire and enable us to play our part in the wider field of world trade, doing much to bring about that spirit of good will so essential to the prosperity of the world.

I think we should also pay our tribute to that great English-speaking people of the United States who, under the leader ship of their late President, Franklin D. Roosevelt, a statesman of great wisdom, vision and courage, came to our aid by first providing us with essential war materials on a Lend-Lease basis, followed by active participation in the war. I believe that our close association together in war—personal contact between the British and American forces—will more closely weld together our two peoples in spirit and purpose. I am firmly of opinion that if the English-speaking races throughout the world are united in purpose and endeavour we can lead the world along the pathway of prosperity and peace.

This brings me to my first point upon the Motion before the House—the approval of the financial arrangements between His Majesty's Government and the Government of the United States, including the financial settlement of Lend-Lease and other claims arising out of the war. It is interesting to note that the loan is split into two parts, a credit of £937,500,000 for trading purposes and £162,500,000 as a final settlement of Lend-Lease. The total loan of £1,100,000,000 is repayable at 2 per cent, over a period of 50 years from 31st December, 1951. While 1 feel that the interest rate is excessive, representing as it does a purely business deal and paying very little regard to our great sacrifice in the war, I shall vote for its acceptance because there is no real alternative before the House. I am under no misapprehension as to the heavy responsibility which will fall on the industrial capacity of the nation. Indeed, we cannot hope to repay without full employment combined with American willingness to accept increased imports from Britain. The rate of interest payment clause may be some safeguard, but the debt will still have to be paid.

My second point deals with the proposal for the setting-up of an international trade organisation. T welcome this as a bold step towards a commonsense world wide commercial policy. Shelley wrote: God made man unarmed. But anger and revenge have furnished his hands With weapons invented in hell. The greatest cause of war can be found, not in the struggle of the workers for a decent standard of living, but in the scramble of the capitalist States to corner the world's markets. That mad scramble angers those that have failed, and revenge is sought. War becomes inevitable and the common people pay the price. Yet, if we are to avoid future wars, we must find some collective measure to safeguard the people of the world against threats to peace. We must strive to reach just settlements of disputes among nations—not only by international machinery to deal directly with such disputes, and with adequate power to prevent aggression, but also by economic co-operation among nations. Economic and social maladjustments must be removed. Our aim must be in the words of the Secretary of State of America: Fairness and equity in economic relations between States and of raising the level of economic wellbeing amongst all peoples. I am convinced that tariffs and even Empire preference—necessary in a tariff-ridden world—are detrimental to the best interests of world trade. I am convinced that worldwide free trade can alone bring peace and prosperity to all men. If the new international trade organisation can bring about this changed outlook it will have conferred, in my judgment, a blessing upon society.

My last point is upon the setting up of an International Monetary Fund and an International Bank for reconstruction and development. This is inevitable if we are to take full advantage of the proposed international trade organisation. Trade and finance travel along the same road—neither can bypass each other. They are, in fact, interdependent. There are, of course, great risks in the proposals now before the House. There are also great opportunities. Let us take courage in both hands; let us go forward into the future with great expectations of a better, happier and more co-operative world; let us be prepared, as a nation, to play our part in the cause of human progress.

8.48 p.m.

Mr. Kendall (Grantham)

It falls to my lot to follow the able speech of the hon. Gentleman the Member for East Bradford (Mr. McLeavy). I am sure the whole House will join with me in congratulating him on a very sincere speech and in saying that we look forward to further contributions from him from time to time. I would like to begin by taking up the one or two points raised by my hon. Friend the Member for Eye (Mr. E. Granville). He is a real friend of mine, but when he starts by talking about the very clear and concise statement made by the Chancellor of the Exchequer, he is certainly exaggerating, to say the least, in my opinion. I thought the Chancellor was in great difficulty and that, indeed, he did not like the task he had before him. Had the Tory Party 'been on the Government side of the House on this occasion, I have very little doubt as to the speech that the present Chancellor might have made against the proposals he offered to the House today.

I believe this loan is a very bad bar gain. What is the maximum we are going to get from it? We are going to get some relief in food, it is true; we are not going to have the austerity for the next three years that we would have without it. Nobody wants to live under the conditions of wartime, and it is very natural to want to get relief as quickly as possible from present conditions. What is the price we shall have to pay? My hon. Friend the Member for Eye has just returned from the United States of America. I used to live there. I went to school there, and I have paid frequent visits there since leaving that country a few years ago. I claim to know the people of America at least as well as my hon. Friend does. This loan of £1,000 million is going to cost us our economic liberty and the development of our Empire. That is the first thing. In no matter what walk of life, whether it be in small business, big business, national or international business, the people who hold the money-bags control the policy of the business into which they put their money. If we had insisted upon the original terms in getting this loan, terms which the Chancellor apologised for not having been able to get, the Americans would have understood that plain speaking.

I hope that my speech will strengthen the arguments made in the brilliant speeches of the hon. Member for East Aberdeen (Mr. Boothby) and the hon. Member for South Nottingham (Mr. N. Smith). Those speeches were first-class, and, in my opinion, were the only two real speeches that have been made in the whole of this Debate. It is about time we told the rest of the world, in no uncertain terms, what we did in 1939 and 1940, when we and the Empire stood alone and made it possible for civilisation to live again. That story has not been told frequently enough. I am sure that taking a, loan from the United States of £1,000 million, with all the strings that are attached to it, will not help our relations with the ordinary people of that country. They will say that they had to come over and help us to win a second war, they will say they had to re-finance us after the war, and in the end they will say we were not even able to repay that loan. We shall not be able to repay it in any circumstances whatever. For that loan we are giving away the only real asset we have, the markets of our Empire. We are opening the doors to all the productive capacity of the United States at a time when our home industries are not able to go into the markets of the Empire. We are giving away that major asset for the next 50 years, and if the United States are not able to consolidate their position during that period, then I am very much mistaken about them. Surely, if we wanted a loan of £1,000 million, the thing to have done would have been to go to our friends, our relatives and neighbours, and say, "Lend us the money for the good of the family." Our family is still the British Empire. And I am sure they would not have let us down.

Mr. George Porter (Leeds, Central)

In developing that argument, will the hon. Member remember what happened when New Zealand asked this country for help?

Mr. Kendall

Two wrongs do not make a right. Let us take a lesson from what happened to New Zealand when that country asked for our help. Let us go to the Empire, to the Dominions and Colonies, and say, "We are in financial trouble; lend us some money." I do not believe for one second that the Empire would not come to our aid for the purpose of helping the whole family. To sell out the markets of the Empire for £1,000 million is a preposterous idea. If only there were a free vote tonight, if only hon. Members on the Labour benches and even Cabinet Ministers could vote as they pleased without doing down their Government, many of them would go into the Lobby against this proposed loan. I wonder what the right hon. Gentleman the Minister of Health would do if he were a free man tonight. He has done great service to the House and the country in the past. What would he do on this occasion? What would the Minister of Fuel and Power and the Joint Under secretary of State for Scotland, the hon. Member for Gorbals (Mr. Buchanan), do if there were a free vote? What would the Parliamentary Secretary to the Board of Trade, for whom I have great affection, do if there were a free vote? I think the answer is obvious. Do not sell out the Empire.

I am sure I am right when I say that if we were to reject this loan, the United States would be faced with one of two things: within two years' time it would either have to supply this country and Europe with those things which we so badly need, or it would have to reduce its productivity and cause great unemployment in the United States. If we were to reject this loan, what would it mean to us? It would mean that for two years we would have to tighten our belts a little more. We should have to suffer for another two years, as we have suffered for six years, not only in our cause but in the cause of the whole world. That would be the situation. If the United States want to drive this hard bargain—and it is a hard bargain—then it will be just too bad for them.

In his speech today the right hon. Gentleman the Chancellor of the Exchequer was full of apologies and excuses as to why we had to borrow £1,000 million. Do hon. Members think that whoever has to propose this loan to Congress will be full of apologies? Certainly not. He will say to Congress, "We have made a grand bargain, we are going to loan the money, but we are going to get something good in exchange—more markets than ever before." The Chancellor of the chequer, I think it was he, quoted one example about business over here, and mentioned the machine tool trade. I know something of that. He said we should need to import machine tools from America to re-establish our industries. The President of the Board of Trade and his Parliamentary Secretary know that in. this country today there are some hundreds of thousands of machine tools in either Government factories or storage. If they were let loose on today's British market it would ruin the machine tool manufacturers of England for a long time to come, and perhaps for all time. And the Government talk about importing more American machine tools. We are perfectly capable of making machine tools here for ourselves providing—and I say this to the Chancellor of the Exchequer—that we throw away E.P.T. altogether —the 60 per cent.—to stimulate the industry and get more labour back into industry. Just those two things, nothing else.

If this were a real international agreement there would be some merit in the case, but it is not. It is a United States of America Agreement. That is the agreement it is, because they are loaning the money, and the Government know full well that if you borrow money from someone outside your own family the lender will want 51 per cent. control, and the United States arc not any different from any ordinary banker in this connection. They have to tell Congress the reason why they are going to loan £1,000 million. The reason is that they have a good deal. If they have a good deal, we have a very poor one. I ask the Government to reject this loan and to say, "We just cannot afford to borrow this money from you on those terms. We are willing to help you, but you must help us too." ' Talk straight to the Americans. They will like it and appreciate it and it will build up our name until it stands better, perhaps, than it has been in all the pre war years and in the years between the wars. We have done a wonderful job in the war; every body grants that and we know it; but we have not talked about it enough. We built up what other nations have done, but have not talked about ourselves, in my view, as much as we should have done. Let us not go begging cap in hand to anybody—we, a great nation, the hub of a great Empire—and saying, "In ex change we will give you the only real asset we have." Let us say, "No, we would like to borrow that money from you, but without all those strings attached, to help us, to help you and to help the world." But let us not push ourselves down by borrowing the money under the terms of this Agreement, be cause it will do us harm and will not do us any good. It means we are going to import things which will mean unemployment over here.

I see the Chief Whip and I say to him, "For goodness' sake let the Members of your party vote freely on this, and then you will find that you will not have the support you think you may have." Last week I voted with the Government on the Motion of Censure, because I did not want this Government to be overthrown. They have not had a chance; they have not been in office long enough. But on this matter I am going to vote against the Government because they are wrong, and the majority of their supporters know they are wrong. I say to them, "Do not do it. Reject the American loan before it is too late."

9.4 p.m.

Mr. Rhys Davies (Westhoughton)

I regard this Debate as a very solemn occasion for the House of Commons and indeed for all the people of this country. I have noticed, however, that as the Debate has proceeded, Bretton Woods and the Loan from America have very nearly been forgotten; what has emerged has been the old problem of Imperial preference. I am sure the Tory Party will regret in years to come the decision they are taking today to abstain from voting at all. If they want to help the Isolationists in America they can never do anything better than what they have already decided to do today. Indeed, I hesitate to think what will happen in the Congress of America in February next, when this issue is discussed, and when it is known that, in this Parliament, a pro portion of hon. Members of this House otherwise supporting the Government are going to vote against these proposals; and the whole of the Tory Party is abstaining from voting at all. I have been trying to do a little in my own way to encourage good will between these two great nations. Let me say, as I have said in America, that, if these two great peoples, who speak the same language and understand the same democratic way of life, cannot agree between themselves, to bring the peoples of the world out of their misery, there is very little hope of agreement with any body else. And I say to the Tory Party that their decision today will be reckoned as the biggest blow to the alliance between ourselves and America that has ever been offered by this House of Commons. My hon. Friend the Member for South Nottingham (Mr. Norman Smith) boasted that he had been in the Labour Party for 30 years, and thought we ought to know.

Mr. N. Smith

Thirty-nine years.

Mr. Davies

Well, the hon. Member must have joined very early in life. He said that we must not listen to the experts. Here, I understand, were 44 nations gathered together at Bretton Woods and they have come to a conclusion, which is, in fact, similar to that which some of us have been propounding in this House for a long number of years. Indeed my hon. Friend the Member for Ipswich (Mr. Stokes), who is now opposed, has been saying these things much more eloquently than I have. What have we said? These 44 nations declare in effect, that it is no use merely saying that Hitler made this last war in Europe, that it is a million times more important to discover and re move the conditions that produced Hitler. These 44 nations, in this document, condemn restrictions, Imperial preferences and other barriers to trade. When hon. Gentlemen on the other side talk about Imperial preferences, let them remember that to make a tariff ring round the British Empire is just as obnoxious as American isolationism?

This day is important in the history of these two peoples—the Americans and ourselves. One hon. Gentleman talked about some of us voting with the Government against our will. Well, here is one hon. Member who will never vote unless he thinks the Government are doing the right thing; and, in my view, this Government cannot do anything else except support this Motion on the loan. I was in. America when all this was going on; I addressed gatherings in colleges, universities, churches, trade union and Socialist clubs, and I confess that I came away very disturbed at the attitude of mind of some of the American people towards my country. It may astonish hon. Members to know that, before I ended, I defended my country as best I could and very nearly be came an ardent British patriot in the process.

In spite of all that, I regard the terms of the loan as very hard. I could never understand how it comes about that these two great nations, who pooled their gun powder, navies, armies and air forces, and also pooled £500,000,000 in the discovery of the atomic bomb, could not, after pooling all these discoveries and inventions of destruction, pool their food supplies as well. If hon. Members would realise how low we have sunk in our home situation in relation to footwear, utensils and furniture, they only need to live in America for a month or two, and see the difference. If a dozen British housewives lived in the United States for a month, ate their food, saw their shops bulging with goods of all kinds and then came back here, they would start a revolution against the austerity of their lives at home.

I do not want to put all the blame on the Americans, when we ourselves are to blame in some respects. Here we are in the centre of the greatest Empire in the world. What have we done with all our possessions? Never mind whether hon. Members agree with Imperialism or not: if my hon. Friend the Member for South Nottingham does not mind my saying so, his speech was contrary to all the principles of the Labour Party, because we are not an Imperialist party. We are an international party. We know no class, creed or colour: to us they are all human beings whether they are Jews, Gentiles, Greeks, Italians or anything else. Let me come back to the attitude of Americans towards us. What do they say? They say openly, "You have plundered one-fifth of the world's surface." Americans never forget, by the way, and they are taught this in all their school books, that once upon a time their States were Colonies of the British Empire and that they cleared us out toy force.

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

The hon. Member is getting rather wide of the subject.

Mr. Rhys Davies

i will come back at once, Sir, to the question of the loan. I see no alternative, in fact, to the acceptance of this loan. I can almost guess what will happen in Congress next February. Hon. Members must not be too sure that Congress itself, after this Debate and the Division to follow, will endorse the loan. Incidentally, I would like to meet the man capable of collecting the wisdom or other wise of the 140,000,000 people on that vast Continent of America. I failed, and travelled a good deal. Therefore, I return to the first thing I said, and that is that these 44 nations came together. They agreed, happily, on this international monetary policy. They said in language which has been used over and over again by statesmen, that wars are created very largely by nations trying to capture trade unfairly from each other. As I said, this Debate has very little to do with this loan at all. Hon. Gentlemen let the cat out of the bag; they are terrified lest America should beat them in the markets of the world by the policy adopted at Bretton Woods and Washington. If the Ameri- cans can produce goods better and cheaper than we can and still pay higher wages we have no right to object. More than that, our own country can produce some goods better even than America. When I was there, I was asked several times, "Where is your china? Why not sell it here? We in America can buy the whole china production of Great Britain." Then everybody in America is asking for British woollen goods. The only sound argument for world trade is, surely, that every country can produce some things better than the rest. That is the only way world trade ought to be conducted. I appeal to this House to be very careful what steps we take with regard to this loan. I would not like to see this House of Commons, to which I always pay high tribute, do anything to mar the good relationships between these two English-speaking peoples. I am always terrified lest anything should happen between us that will inevitably lead to a scramble for foreign markets and ultimately and inevitably into a commercial war and maybe a conflict of arms in the end.

Vice-Admiral Taylor

Is the hon. Gentleman basing the good will and friendship of America on the question of this loan? Have we to buy it?

Mr. Rhys Davies

Surely we must have asked for it. The hon. and gallant Gentleman docs not imagine that the American Government would come for ward and say, without our asking for any money at all, "Here is a loan for you at a good rate of interest." I always understood that the British Government wanted a loan from America. I say this, finally, that unless this loan is secured and our people get better food and better clothing in the near future, the very life of this Government will be in the balance straight away; therefore, I support both the Loan and the Bretton Woods Agreement.

9.17 p.m.

Squadron-Leader Hollis (Devizes)

One truth about the gold standard is that there have been quite different gold standards at different times. In the world before 1914 the whole world, with the exception of Mexico and China, was on a gold standard. The gold standard of those days meant not only that countries based their monetary source of supply upon their gold holdings, but that they also undertook the obligation to give monetary effect to any gold that came into their hands. Under those circumstances, and under comparatively free-trade conditions, with Great Britain as the great creditor nation of the world—a free trade nation—willing to accept goods in payment of any debts due to her, trade was, for the most part, an exchange of goods and services against goods and services, and gold was only an exceptional auxiliary. It had an equilibrating effect because when the gold passed from one country to another, that meant so much more money and slightly higher prices in the country that received it, and so much less money, and slightly lower prices, in the country that lost it.

After the war of 1914 we emerged into an entirely different world. America was then the great creditor nation and America was also a high tariff nation. Therefore she demanded to be paid in gold—and she could not be paid in any thing except gold—and if she had behaved according to the rules of the 1914 system, she would have had to give monetary effect to all her gold holding, with the result that by remaining on gold she would have been plunged into violent inflation. Therefore, in 1923 Governor Benjamin Strong, who was at that time Governor of the Federal Reserve Board, announced a new policy by which America would sterilise any gold which might come into her possession over and above what she needed to keep a stable price level. That was the abolition of the old gold standard and, under those circumstances, any other country—we know from experience—whose currency was at all tied to gold was bound to be submitted to a constant deflation.

Now, we are emerging into a third gold standard which is different indeed from either of the two others but worse, because, whereas it was a mere hypothetical probability that all the gold in the world would go to America under the second standard, under this third standard, we start with all the gold in the possession of America already—in fact, 23/28ths of the world's gold is in the possession of America already. America is in this position, not that she merely has gold, but that she has gold beyond her monetary needs. Therefore, as my right hon. Friend the Member for East Aberdeen (Mr. Boothby) showed, the scarcity clause in the Bretton Woods Agreement will never apply against the Americans because they are always in a position to go on putting dollars into the fund. The essence of the Bretton Woods Agreement is that it is going to establish suitable exchanges between the various members of it. The Chancellor of the Exchequer told us that exchange stability was in itself a good thing. Of course it is. No one would deny that. If two nations are both keeping stable domestic prices and they have a reasonable exchange of trade between them there is no difficulty in that case in their having also exchange stability. But the Chancellor of the Exchequer's speech was a very curious one. He spoke about the possibility that there might exist some country which would continually export more than it imported and spoke about it as if this was some Ruritania that might come into existence at some future time. Surely that is the position which America occupies and which she shows no desire to cease to keep.

The question is not how exchange stability can fit into the ideal world but how it can be fitted into this world, if the Americans insist on a vast favourable balance of trade. If the books of the world are to be balanced, and one great country has a vast favourable balance of trade then some other countries must have an unfavourable balance of trade. According to the Bretton Woods Agreement very vast penalties are put on the 'shoulders of anyone so unfortunate as to have an unfavourable balance of trade. To my mind this will lead to cutthroat competition between all the other nations of the world to try not to lose in this game of musical chairs. How can they carry on that competition? They can only do so by a process of cutting prices and cutting wages, and the policy of deflation which the President of the Board of Trade and the Chancellor of the Exchequer have both so eloquently deplored, and which we all deplore, will, nevertheless be the policy which this country will be driven to if it adopts this proposal. We shall be driven to a policy of deflation and cutthroat competition in exceptional unfavourable circumstances, since we have to stabilise after one year by the financial agreement but everybody else only has to stabilise after five by the general Bretton Woods Agreement

The Lord President of the Council has told us that after this war we do not want to do what we did after the last war, and that is have a period of boom followed by a dismal slump. Nor do we. But my fear is that this time we may have a slump all the time. It is perfectly true that it is highly desirable and essential to have an expansionist monetary system, and that is why I am terrified that this Agreement that is leading us into the dilemma that we shall have a deflationary policy in order to honour our bond whereas at the same time we shall need an expansionist policy to solve our problems.

What is the value of the escape clauses. How can we get out of this? The 10 per cent, devaluation seems to me of very little value. It would have been of great value if we could have waited for stabilised currency, until such time as we could stabilise at a proper figure. But we have to stabilise at 4.3, which is a guesswork figure. It is highly probable that we shall have to use up that 10 per cent. simply to correct that bad guesswork. Following upon that comes the scarce currency Clause, which is of little value indeed, as my hon. Friend the Member for East Aberdeen (Mr. Boothby) has shown, be cause that cannot apply against the Americans, as there is nothing to stop the Americans continuing to buy dollars and put them into the Fund. Therefore, it will not apply against the one people against whom it is likely to be needed.

Then there comes the general escape clause, the most popular clause apparently in the whole of the Bretton Woods Agreement. I am not surprised. The Chancellor painted this picture of the new Jerusalem, its porticos and palaces, streets and avenues, but the only part that aroused him to lyrical enthusiasm was when he was able to say" Thank God there is an exit." But is it quite so easy as that? Can we walk into these agreements and walk out of them in a couple of years without anybody minding? What is to be the psychological effect on the world if we are to start this weary, dreary round of international conferences, Press heraldings of the new world coming to birth, and the whole thing being written off two years afterwards, and our having to start again. If that is the best we can give to the world, we shall break the heart of the world. We shall not solve the problem by walking in and then walking out through the escape clauses.

Can we walk in and out as easily as that? By Article 11, once a country comes out it becomes a non-member and has done something known as contrary to the purposes of the Fund, and it be comes liable to sanctions from members of the Fund—from America and our own Dominions. I agree that I cannot see that clause ever being put into action, but it is small recommendation for an agreement that it need not be objected to because it includes things that are so idiotic that they are never likely to be applied.

We are not debating Socialism tonight. We debated Socialism last week. As we know, the other side of the House—the Government—have the confidence of this House. Or, to be more precise, they had the confidence of this House last Thurs day, or, to be more precise, they had the confidence of this House last Thursday at 9.15 p.m. Whether they had the confidence of the House at 10.30p.m. last Thursday was not quite so evident. The Lord President was in rather a skittish mood. He told hon. Members behind him that they were as good as gold. I wondered an hour later whether he thought that phrase was altogether happy. The question is, How good is gold?

As I have said, we are not debating Socialism tonight, tout there is one thing I can fairly state. I remember that the hon. Member for Rugby (Mr. W. J. Brown) once said a very true thing. [An HON. MEMBER: "Only once? "] He quoted it from Bernard Shaw. He said that there was one thing which was worse than Socialism and worse than capitalism, and that was a state betwixt and between the two when neither Social ism could work nor capitalism could work. I am very much afraid that is the position of the Government, and where this new Agreement is likely to lead this country. When we set beside the policy of the Government things that hon. Members have said in the past and the contradictions between what they now say in these documents and what they have said in the past, and the contradictions between the documents themselves, we get a most fantastic picture of Government policy. It is for gold, it is against gold, for exchange restrictions, against exchange restrictions, for low interest rates, for free interest rates—there is not a problem on which it does not declare itself on both sides.

We have not heard much about the Bank. But what is the second main purpose for which the international bank has to be set up? It has to be set up: To promote private foreign investment by means of guarantees or participations in loans and other investments made by private investors. Have hon. Members opposite got a man date for that? What is the policy of the Government? The policy of the Government is simply this, to knock out the domestic capitalist, whom we can tax and control, and put in his place the foreign capitalist whom we cannot tax and cannot control. That is the policy of this Government, and nothing else is now its policy.

I very well understand the Chancellor has confessed, and generally confessed, that it is with a good deal of reluctance that right hon. Members have accepted these conclusions and everyone has an understanding and sympathy with them in the extremely difficult position in which they have been put, and I will not continue belabouring the logicalities and difficulties of this solution, because they are well aware of them, but I will consider the three main points by which I think any one in favour of this Agreement is swayed. I think very few people, either on the Front Bench opposite, or anywhere else in the country, like this Agreement.

Everyone is conscious of its disadvantages, but quite a lot of people are pre pared to accept it. First, they accept it simply because, as people say, we have no option. As the Chancellor says, we must have the loan, and these are the conditions which are insisted upon by the Americans, in order that we may have the loan. On that, I will say, if that be the situation, let the Government state quite frankly that that is the situation. Let here be no talk about welcoming and about a new era. Let us say, courteously, but frankly, to the Americans, "We think this is a bad plan, bad for you, bad for us, and bad for the world; but if you insist on it, we are in such a position we cannot help but accept it." In point of fact, is that the situation? Before this Debate ends, I hope this point will be clarified.

The French have received a commercial loan at a slightly higher rate of interest than we have received this loan. When the Chancellor was speaking, an hon. Member asked him a question, a proper question, as to whether he thought that the Americans would stop exporting if this loan was refused. I do not think the Americans would stop exporting for a moment. I do not think we have any reason to fear a sudden boycott of American goods, but, anyway, the Chancellor made a very extraordinary answer. He said it would be a declaration of trade war. If those words were carefully used, it was a most extraordinary remark. We have sufficient cause for complaint of the terms imposed upon us, but if we were even considered to be guilty of an act of war because we quarrelled with the terms on which we were offered a loan, and turned down the loan, it is an extra ordinary state of affairs and should be clarified. My hon. Friend the Member for East Aberdeen asked the President of the Board of Trade whether the question of a commercial loan was raised, and the only answer my hon. Friend got was that the matter had been carefully considered. Whatever our opinion, I suggest that hon. Members should not agree to passing the Resolution until a very much more satisfactory answer has been given to that question.

What are we going to get out of this? Let us understand it. A lot of people thought it was going to set us up on our feet altogether. In point of fact, we are going to get £937 million pounds. We are undertaking an obligation to re lease some of the block sterling balances. How much that will be is not definite. It does not actually come out of the loan, but it does not matter where it comes from. Presumably we shall have to knock off from that £937 million, £100 million, £200 million or £300 million, so that it will be £600 million or so. According to the Chancellor's own estimate, the deficit for this year is to be £750 million. Therefore, again we want much more adequate in formation than has been given to the House on how that money is to be spent, whether it is to be spent on consumer goods or capital goods, and if it is to be spent on capital goods how the deficit is to be made good.

My opinion is that the Americans are mad keen to export. It is not in the least true that if we refuse the loan they will export the goods to other people or throw them into the sea in order to spite us. Though it be true that we badly need to take a loan, it is equally true that the Americans badly need to make a loan, and it is absurd to pursue this defeatist policy. There are other hon. Members who defend this loan on political grounds. They say the era of nationalism has passed, and internationalism has come, and therefore we must co-operate. I yield to no man in my desire for close Anglo-American co-operation. I would make only one reservation upon that, and that is that before the war a large number of people made speeches about collective security and passed resolutions to resist aggression, but when all the batteries of Hell came against us there were four nations alone, and those geographically furthest removed from the scene of the battle, who voluntarily came to our aid, and they were the four great Dominions of Canada, Australia, New Zealand and South Africa. So we will have our first friendship with our first friends. But, with that one reservation, I yield to no man in my desire for Anglo-American co-operation and friendship. I do not suppose there are many hon. Members in this House who have had more American friends and who have travelled more widely in America than I have. But when the Chancellor said today that if we had turned down this loan that would have been the end of another chance of Anglo-American co-operation and friendship, I venture to think that he was saying exactly the opposite of the truth. I think this will be the most dangerous enemy to Anglo-American friendship there ever has been.

This Agreement is going to come back in a few years' time, and what sort of position are we going to take in the eyes of the Americans? If for no other reason, I oppose this Agreement as one of the most dangerous things there have ever been. Then there is the third point. Some people say this is a definitive recognition of America as the financial centre of the world, but we must recognise facts. The world can only go on if we have a financial centre somewhere. We had it in Florence, and then in Amsterdam, and in the 17th century it came over to London. It is equally logical that it should move now from London to New York. It may be a blow to one's pride as an Englishman to see it move, but we must recognise facts. My answer to that is this. I have no internationalistic prejudices about these things. There may come a day when it will be right that New York should be the financial centre of the world, but no where can be the financial centre of the world, to lend and perform financial ser vices all over the world unless it recognises the technique of money-lending and has a willingness to have an unfavour able balance of trade if necessary, and it is idle to talk about this service being rendered to the world by a surrender to such American demands until America has come to the recognition of the necessities of the technique. That is the basic fact of the American system behind all these technicalities of gold standard, money power, exchanges and so on.

There are three things that the Americans can do. They can refuse to export altogether and consume their production at home. In one phraseology or another they can make gifts to the rest of the world. They can send their goods to the rest of the world and take goods in return. There is no fourth way. If they will not do any of those three things, America is heading for a collapse beside which the collapse of 15 years ago will look as nothing. I remember that 160 years ago the United States established her freedom, and that one of the main causes of the conflict—Benjamin Franklin said it was the main cause—was that we refused to allow the Americans to issue paper money and we insisted upon their doing all their business in metallic money imported from Great Britain. Benjamin Franklin said that, in the nature of things, it would have been impossible for Americans to get out of debt because in the productivity of peace they would have to use more money.

America today is doing exactly what we attempted to do to America then. After the Americans had achieved their independence, a tariff was put by Britain upon American goods, although we had large investments in the American Colonies. Then it was that Thomas Jefferson wrote to Pitt, the British Prime Minister, a 100-page letter in which he laid down the classical statement of the doctrine that, for a debt to be carried out, there was not only the obligation on the debtor to pay, but there was the obligation on the creditor to receive. Today, in opposing this Motion we stand in the whole full stream of American tradition. That tradition was shown 1oo years later when the Republican Party had been in power too long and the great Democratic revival began, stemming upon one phrase: "You shall not crucify mankind upon a cross of gold." On that phrase the Democratic Party rose to power. At the World Economic Congress in 1933, it was to be demanded of the Americans that they should abdicate their monetary freedom and tie them selves down to a policy of deflation. Franklin D. Roosevelt's first act as President of the United States was to refuse to do that, and so he broke the World Economic Congress, and saved the world.

We can at least ask if we ask no more that consideration of these monetary matters shall be left over until some sort of settlement has been come to in trade matters. Shall we tie ourselves down to a definite settlement of monetary matters while the trade settlement is indefinite, and we do not know whether it will turn out to be good or bad? That is not statesmanship; it is mid-winter madness. It is madness to which the United States itself bears witness. There is no more admirable book in the United States than "World Economy ", produced by the United States Department of Commerce, in which these words occur: Based on the experience of the entire inter-war period strongly reinforced by events towards the end of that period, it is clear that whatever may be the other requirements, stability in economic relations generally, and in foreign exchange rates in particular, can not be assured solely or chiefly through technical financial arrangements, but must be firmly based on a vigorous and regular functioning of domestic economy. It is not that it is undesirable, it says it is impossible. That is what the Americans ask us to do—something that is impossible. I, therefore, call on hon. Members to oppose this Motion, for I say in all sincerity that if it should be passed, I have a great fear that it will prove to be nothing less than a suicide pact between the last two great free nations of the world.

9.46 p.m.

Mr. Benson (Chesterfield)

Two extra ordinarily interesting speeches have been made against the Government today, one by the hon. Member for East Aberdeen (Mr. Boothby) and the other by the hon. and gallant Member for Devizes (Squadron-Leader Hollis). I do not think there is any doubt that the hon. Member for East Aberdeen is one of the few real orators in this House. I feel that every time I listen to him, but 1 also feel how unfortunate it is that he never took to heart the advice the Duchess gave to Alice, when she said, "Take care of the sense, and the sounds will take care of themselves." The hon. and gallant Member for Devizes has obviously read his Lewis Carroll. He started his speech by saying that there are all kinds of gold standards. He has taken for his inspiration not the Duchess, but Humpty Dumpty, who said that he had the power to make words mean whatever he wanted.

Squadron-Leader Hollis

If he paid them extra.

Mr. Benson

The hon. and gallant Gentleman wants to do it without paying them extra. The hon. Member for East Aberdeen, in what I might say was a very typical example of his method of argument, read the Bretton Woods phrase stating that the par value of currencies shall be expressed in terms of gold, and within two minutes he was using that phrase as if it had read "anchored to gold." "Expressed in terms of gold" and "anchored to gold" are two entirely and fundamentally different things. We may be anchored to gold, but if we are we have got not an anchor chain, but a piece of elastic. [Interruption.] It is the hon. Gentleman's phrase, not mine. As a matter of fact the essence of a gold standard is that it gives rigid, unchanging exchange rates. The possibility of variation of exchange rates under a gold standard was.5 per cent. Under Bretton Woods, as the Chancellor made perfectly clear, and as must be obvious to any person who takes the trouble to read the Agreement, there is an extraordinary possibility of variation of our exchange rates.

I want to deal first with the question of variability. I do not want to read to the House what is in the Bretton Woods' Agreement, but there is provided a com- pletely free variation of 10 per cent., which is an enormous variation, of ex change rates in normal times and, in abnormal times, there is no limit to which currency can be depreciated or appreciated with the consent of the Fund. That is put in to prevent disorderly unilateral juggling with currency, which everybody admits does an enormous amount of harm. Let us take the question of whether the fact that currencies are expressed in gold, really means we are tied to gold. Currencies are expressed in gold under a gold standard, and they can be expressed in gold under a free currency. We are not on the gold standard now, and not even the hon. Gentleman the Member for Aberdeen will claim that we are. If he turns up the "Economist" for any week, he will find the £ expressed in terms of gold— 172s. 3d. per fine ounce.

Mr. Boothby

May I draw the hon. Gentleman's attention to the fact that that does not apply to the Bombay market?

Mr. Benson

The Bombay market is expressed in rupees, not in £s. Further more, if the hon. Gentleman takes the trouble to turn up the financial column of any newspaper in the country he will find the £ expressed' in terms of silver— 44d. to the ounce. Does that mean that we are on a silver standard? He will find the £ quoted in terms of iron, in terms of copper and in terms of any commodity he likes. Expression in terms of gold means nothing. So long as there is sterling and so long as there is gold, sterling can be expressed in terms of gold, or gold in terms of sterling. It does not matter what your standard is or if there is no standard at all. So long as two articles are not what the mathematicians call "incommensurables," they can be expressed in terms of each other. That is what Bretton Woods does; it expresses gold in terms of sterling and vice versa. But the equation can be varied within 10 per cent., and to any amount by the consent of the Fund. It is just playing with words to pretend that Bretton Woods puts us back on the gold standard. The hon. Member for East Aberdeen said the whole of these agreements were designed to prise open the markets of the world for the United States surplus. The hon. and gallant Gentleman the Member for Devizes echoed that phrase in rather different terms. He said that we should have to meet an enormous United States surplus, which would plunge us into slump all the time. He made the further extraordinary statement—I will deal with the United States surplus in a moment—that under Bretton Woods we should be forced into deflation. The very purpose of making exchange rates flexible under Bretton Woods is to prevent deflation, and, so long as ex change rates are flexible, there is no need for deflation.

Let us look at the question of the vast United States surplus. I hope the House will forgive me if I deal with this rather fully, because, so far as I can judge, the real fear of these agreements and of the future world in the minds of most people is this enormous surplus which will continue to roll out of the ports of the United States, year after year. It is true that these agreements are designed to increase the possibility of American sales to the world. They try to establish multilateral trade and currency, both of which are important if international trade is to be expanded. They try to facilitate tariff reductions. they try to get rid of discrimination and preference. These agreements are aimed at getting rid of that vast jungle of obstructions which is the legacy of the 1930 slump, and which was one of the main reasons international trade never recovered to its preslump level. But it is not only to the United States that a large expansion of international trade is important. Surely it is even more important to this country. The United States wish to export to maintain full employment; we have got to export in order to maintain full stomachs. If we are to obtain the best possible conditions in which to expand these very vital ex ports, we need multilateral currency, multilateral convertibility and multilateral trade.

I want to argue with great seriousness that the American surplus and the American loans which will make that surplus possible are not a threat to this country, but a vital necessity if we are ever to recover our export trade and expand it until we can get a trade balance. The American surplus is going to be our salvation and not our bane. A large American surplus based upon large loans is not a new thing. It happened in the 20's. In the decade after the first world war, the United States had an export surplus of over 9,000,000,000 dollars and that export surplus was made possible by the fact that the United States lent abroad approximately the same number of dollars on long term.

Squadron-Leader Hollis

Then she stopped lending.

Mr. Benson

I will deal with that later. I want, first of all, to examine the effect of an America surplus which is the out come of American prosperity, and then I will return to an American slump. Let us examine in detail what was the effect of this enormous American surplus in the 20's. Did it damage or harm us? [An HON. MEMBER: "Very much."] All I can suggest is that the hon. Gentle man takes the trouble to look up the figures. While America was pouring out those enormous loans, instead of robbing us of our trade, it gave us a favourable balance. From 1924 to 1930 we had a balance of payments of £430,000,000. It may interest hon. Members to know that although America had enormous exports, although she exported far more than we did in those inter-war years, the United States is also an exporter of raw materials on a large scale, and that if we compare the things that we can export with the things that the United States can export—manufactured and semi-manufactured articles—this country exported more in the inter-war years than the United States did, and we did it because of the fact that America was pouring out enormous loans.

Let us look a little further into this question. There are three factors which integrate. In any one year in the twenties in which American loans went up, American exports went up and in the same year our favourable balance of payments went up. When American loans dropped their export surplus dropped and our favourable balance of payment declined' In the '30s when, as the hon. and gallant Member for Devizes said, America ceased to lend, and her exports collapsed, what happened to us? We developed an adverse balance of payments. These correlations are not accidental. They are far too close and consistent to be mere fortuitous parallels of figures. There is a really good reason behind them all.

When countries think in terms of ex ports they tend to ask themselves, "How much are we going to sell? "That is not the fundamental question at all. The fundamental question is, "How much can other countries afford to buy?" What other countries can afford to buy depends entirely upon their national in comes. I do not know whether hon. Members have ever taken the trouble to compare the national incomes of countries with their imports. There is an extra ordinarily stable ratio between the national income of a country in any year and its imports. The ratio differs from country to country, but for any individual country the ratio is extraordinarily stable. Perhaps I might quote one country as the most striking example, and it is also the country of which we have more statistical information than the others. The national income of the United States of America between 1909, before the last war, and 1929 varied and fluctuated. At one time it was three times as great as if was at another, but year by year, with one exception, the year 1920, despite the trebling of the American income, American imports bore to their national income a rigid ratio of between five and six per cent. The one exception was the year 1920, due to restocking. After the slump there was a drop in the ratio but it settled down again to stability. In other countries we find exactly the same phenomenon—the stability of the ratio between the imports of a country and its national income.

What was the effect of the American loans in the '20s? It was to produce a very large expansion of the national in come in every country of the world, except ours. It stimulated their trade, stimulated their production, and anybody who is familiar with Kahn's theory of multiplier knows that that stimulation by American loans, led to a very much greater increase in the national income. That increased national income led to increased imports, and that, in turn, led to increased exports from this country.

Let me give one example. The United States lent some 300,000,000 dollars to the tiny South American republic of Colombia. The affect of that was to double British imports into Colombia. The prosperity of the twenties, which was universal except for this country, was based almost entirely upon American loans, and our exports benefited because of multilateral trade and convertibility of currencies. In the future, our exports are going to depend on the national income of our customers which in the war shattered conditions of the world will depend upon the assistance they get in the way of loans from the United States. Therefore, if we are to build up a really large export trade, we ourselves are dependent upon that large American surplus flowing into the rest of the world to stimulate and increase their national incomes and put them in a position to buy our goods.

Mr. Vernon Bartlett (Bridgwater)

The hon. Gentleman is an expert, and I am not. Would he explain this point? I do not think we can forget the time when America was pouring out money, but that money had to go back to America, and did not that create a slump? Is the hon. Gentleman coming to that?

Mr. Benson

Oh, yes, I promise the hon. Gentleman that I shall come back to that. If we are to get the biggest advantage from the American surplus, we must have a great freeing up of the markets of the world, and we must, above all have the multilateral conversion of currencies. Now let us, get to the question of a United States slump. The question that we have to face now is not whether a slump is coming in the United States, but whether Bretton Woods will leave us defenceless in the face of that slump. The probability is that the slump will come; but it will come, if it comes at all, whether we sign the Bretton Woods agreement or not. Refusal of Bretton Woods, is not going to make America permanently prosperous.

The only question that concerns us tonight is whether, if there be an American slump, we shall be better armed, with or without Bretton Woods. If there is an American slump, I do not believe that we can insulate ourselves against it, no matter what steps we take. Bretton Woods or no Bretton Woods, we cannot completely insulate ourselves against its disastrous effects. The United States is too big a factor in the world—not only her markets, but her loan system. We have adopted in this country the full employment policy adumbrated in the White Paper. Theoretically, that might work in the face of a world slump. In actual practice, however, I do not believe that that is possible. In face of a world slump, no internal remedy will meet the situation. There must be a world remedy, and I claim that Bretton Woods gives us the most effective weapon that has hitherto been suggested, because it gives us a weapon which will work upon the inter national plane, whereas our White Paper and others merely attempt to work on the internal plane. That weapon is the "scarce currency" clause.

Before I discuss that clause, I want to suggest that world opinion has moved very largely since 1930. The publication of Lord Kcynes "General Theory" has had a revolutionary effect upon economic thought not only in this country, but all over the world, including America. And do not forget that the United States did more for reflation and compensatory spending in the 'thirties than all the rest of the world together. If a slump comes to the United States, as no doubt it will in time, I think we can look forward to that slump being tackled, not only more energetically than was the 1930 slump, but much more intelligently because we all know far better the mechanism of slumps. But let us assume that America does get into a slump. She will, unquestionably, radiate depression throughout the whole world; all countries of the world will be affected by it. But there arc some countries which, like ourselves, if they find a slump spreading from America, will take strong and energetic steps to counteract it by trying internal reflation. There will be a very large block of countries trying to do that. They will be countries in the sterling area, and a number of other countries beside.

The effect of the "scarce currency" clause is that we can start our reflation and the clause will form a cordon sanitairce between deflationary countries and the countries trying reflation. Any country that fails to do that will find its currency becoming scarce, and will be pushed on to the other side of the cordon. The "scarce currency" clause would work almost automatically in separating the countries of the world into those prepared to suffer deflation and those actively combating deflation. It is a very powerful sanction against the countries that go in for deflation. It and other agreements give power to put up barriers if our balance of trade is affected. What is the alternative? Supposing we scrap this and relapse into the anarchy of pre-war years, it means uncoordin- ated restrictions between one country and another. It means bringing back that wealth of embargos, quotas and restrictions that strangle international trade. It means the permanent contraction of inter national trade. That is the alternative. It is not a choice between Bretton Woods and permanent prosperity. It is action of facing the next slump with a planned defence, or facing it by relapsing into anarchy.

I have only one more point and that is in regard to another statement made by the hon. Member for East Aberdeen. He told us that these agreements would break up the sterling area, the Empire. Apparently the Empire can only be held together, in the opinion of the hon. Member, by giving tariff preferences. I do not believe it. But what is his proposal? This afternoon he talked about "goods or gold." I have a little pamphlet here issued by himself. Apparently, because he took the trouble to have it printed, it is the quintessence of his own wisdom. This is how he proposes to deal with the sterling area and our Empire: Before the war Germany used the pulling power of her own market to exploit the peoples of Europe, and forced them to take goods they didn't want by means of bi lateral agreements. After the war we can use our position as the trading and financial centre of the Sterling Area to enable holders of sterling balances (1) to export the raw materials which the industrial countries of Europe, including ourselves, require; and (2) to purchase, over a comparatively large field and with a wide range of choice, the capital and other goods of which they stand in need. He takes Dr. Shacht as his exemplar, and proposes to apply to our Empire methods similar to those which Shacht applied to the Balkans. That is how he proposes to hold it together. One more point, and then I will give way to the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton). [HON. MEMBERS: "Hear, hear."] If hon. Members want me to go on, I will do so. The hon. Member for East Aberdeen said he believed in a planned international economy, and he was surprised that the Labour Party were going back to the anarchy of the pre-war years. There is only one question I want to ask in reply to that: has the hon. Gentleman taken the trouble to read the proposed trade agreement?

10.17 p.m.

Mr. Oliver Lyttelton (Aldershot)

I apologise to the hon. Gentleman the Member for Chesterfield (Mr. Benson) for having broken the tapes before the flag fell. I will set myself two objectives tonight: one is to be short, and the other is to be simple. If I succeed in either, or both, I am sure I shall earn the commendation of the House.

I am disqualified from being very critical of the United States in these matters. My memory of the help which we have received, and of the sympathy and under standing which our war difficulties met at their hands, is too vivid. I am much more conscious of their difficulties than I am of their faults—and we all have faults. We ought to remember, I think, that no country in the position of the United States has ever been called upon to act the role of the world's largest creditor. It is a self-contained continent, or more or less self-contained. It has probably large undeveloped natural resources of its own, that is to say, an outlet for its 6wn capital within its own shores. Let us remember, also, that the United States has changed from the world's largest debtor to the world's largest creditor in the space of about 30 years, and that is but the twinkling of an eye in the history of a nation. Let us also remember—and this has hardly been referred to—that she has had a disastrous experience in international finance since the last war, of trying to collect claims which she thought were due to her as a result of the last war, or due to her from the commercial, governmental and municipal loans which she made to Europe in the 1920's.

I believe that the role of international creditor cannot be learned only by theory, and many of the speeches to which we have listened this evening confirm my view that, in these matters, theory has to be reinforced by experience. The balance of advantage in the policy of a creditor nation has to be driven home by trial and error. Our own position before 1914 as the world's greatest creditor was due to the fact that we were first in the field in the industrial revolution; we were geographically situated to serve both hemispheres; and we were forced by circumstances, owing to the small extent of our island, to lend abroad whether we wished it or not. I think that it is neces- sary to state these things before we look at this particular question. On the other hand, the Americans must not regard as critical, an analysis of these proposals, by a country whose whole economy and whose present position differ so widely and so fundamentally from their own. I say this with deep sincerity, and I hope what further remarks I have to make will be read in the light of that statement.

The Motion on the Paper has led to some difficulty because the Government have dealt with the financial proposals and the Bretton Woods proposals and the commercial agreements as one. The Motion deals in fact with three interrelated subjects. The Bretton Woods proposals and the commercial proposals are to be discussed at an international conference, to which, I understand, His Majesty's Government have subscribed in principle. The President of the Board of Trade drew a picture, which I found it difficult to follow, of someone who has accepted objectives in principle and who at the same time considers himself entirely free. The plain fact is that His Majesty's Government have announced that they accept the principles of this extraordinary document.

I will deal first with the loan and the financial agreement. These matters have been discussed at length, and I do not want to reiterate the arguments which have been put forward. I do not know the answer to the Chancellor's question— I want to make that absolutely clear. He said, in what I thought was an extremely lucid and forceful speech on this matter, "What is the alternative to a loan? "I do not think any hon. Member who has spoken against these proposals, has answered that question. I cannot answer it myself, and, therefore, I should not be able conscientiously to vote against the Government Motion. I think that it is true that we could, for a certain time, finance the purchase of food and raw materials, the one to nourish our population, and the other to feed our industries, out of the reserve of dollars which we have so parsimoniously collected during the war. But that period would be very short. I am absolutely certain as anyone who has access to the facts will be, that a sharp fall would take place in our standard of life—and that at a time when the population has already suffered so many hardships. That would indeed be a sorry reward for those who, like ourselves, have been the first outposts, and the saviours of civilisation on the Anglo-American model.

I also believe that it would be unfair to our creditors, because it would delay indefinitely the conversion of their block sterling, either into goods to be bought from this country, or into the currency with which to buy them. It would mean the continuance of the wartime system by which we have availed ourselves of their hard currency earnings, and paid for them by means of credit in the books of the Bank of England. Whether they would be willing to agree to such a system being continued into peace is, in my opinion, more than doubtful, and I register my own view that they would certainly refuse to be parties to such an agreement, if we, on our side, refused a loan which might bring convertibility, to put it no higher, a day's march nearer home, unless, of course, the terms of the loan could be demonstratively shown to be intolerable and usurious. So a loan, in my opinion, is an absolute necessity for this country and a necessity which, I must remind our American friends, is brought upon us by the singleness of purpose with which we first waged the war alone, and afterwards stood by their side to finish it and to achieve victory.

Amongst the measures which we took and to which the right hon. Gentleman has referred is the slashing of our export trade as a matter of policy, to release workers and materials for the factories. We have no reason to be ashamed of our necessity, and we have every reason to be proud of it. None the less, we must recognise it, and this is where I am in conflict with one or two of my hon. Friends who have not produced in their speeches any convincing alternative proposal showing how we are to get through the next nine or ten months—

Mr. Boothby

I did produce an alternative. I suggested a perfectly straight commereial loan to this country on the same lines as that which France had, at a negligibly increased rate of interest.

My Lyttelton

I have no reason to suppose that such a loan is available.

Mr. Boothby

Has it been refused?

Mr. Lyttelton

That is not a question which my hon. Friend can address to me. 1 have no information to show that such a loan was available. I say we cannot do without a loan, and I sympathise with His Majesty's Government in entering into negotiations in such an unfavourable posture from the outset The result is—and I am not saying it is surprising, I am not trying to impute blame, I am only trying to state the facts quickly—that in many respects the bargain is a thoroughly bad one. The terms of the loan are onerous; some of the machinery concerned with it is premature, some of the objections to the commercial arrangements are undeniably material, and many of the methods of attaining the arrangements are unworkable.

I pass over the rate of interest and the rate of amortisation of the loan and turn to one of the most important factors. I must turn aside here to answer one point made by my hon. Friend the Member for East Aberdeen (Mr. Boothby), who com pared the Baldwin settlement after the last war with the present settlement. It is fair to say that there is a great difference between the two. The Baldwin settlement ended in the funding of debts incurred in the past, whereas this arrangement does, at any rate, give us the use of new money;. But when we turn to the other terms connected with the loan we begin to find it is onerous indeed. The so-called transitional period, the period in which we are trying to reconvert our industries from war to peace—a period which to those of my political complexion is being unduly and inefficiently prolonged—is knocked down from five years to one year. The Government have to be five times as fast in performing the task they have under the original Bretton Woods scheme. In one year's time, we are under an obligation to meet all sterling balances arising out of current transactions; that is, in respect of all transactions of buying and selling after Congress has ratified the Agreement, we are under an obligation to make these convertible.

The effect is easily illustrated. Supposing in 1946, we were to buy £1,000,000 worth of jute from India, and the Indians could not buy, or did not.want to buy goods to the value of the £1,000,000 in Great Britain, we would be obliged to make that money available in dollars, so that India would be able to buy American machinery or textiles, or what you will. This is over-simplified, but it is not far from the truth to say that our purchase of Indian jute would serve to stimulate, in that particular case, the export trade of machinery from the United States to India. This flow runs counter wise, in my opinion, to the long-4term interests of the United States as well as our own, and, on short term, it lies in favour of the United States and against us, and will inevitably delay the re-establishing of internal stability and reduce our ability to repay the loan and find the interest on it.

Before I leave the subject I think I ought to say that I consider the loan insufficient. The Government have estimated an accumulative deficit on national balance of payments, of about £1,250 mil lion sterling by 1951. I, personally, think this estimate is over-optimistic, from the facts as I judge them. I think the deficit will be nearer £2,000 million. That is to say that this gap has to be filled by a loan of £940 million, leaving a deficit of about £550 million on the Government's own figures, or on my computation, of something like £750 million to be financed out of our present dollar and gold reserves. These reserves will be largely required to meet the sterling convertible which arises on current transactions, and that liability is now only one year or fifteen months ahead. I leave this subject of the loan by summing up thus. It is absolutely essential to us during the next ten or twelve months. It is inescapable, but it is, at the same time, insufficient to meet the deficits which will arise, and it is so onerous in its terms as nearly to defeat the objects which both the borrower and the lender have in transacting the loan. So much for the first of these three co-related subjects.

The second one to which I turn is the Bretton Woods Agreement and the Government arrangements, to which we are apparently bound in principle, on the commercial agreement. "Adverse balance" is an economist's term that describes the situation where a country buys more abroad than it sells, whether those sales are visible or invisible. If it goes on in this way, it owes more foreign exchange than it can collect by selling, and thus the adverse balance arises. What measures can a country take in those circumstances, to rectify its position. There are obviously only three. It can decrease its imports from the country with which the invisible balance has arisen. It can increase its exports to that country, or it can depreciate its exchange, as an act of policy, or allow the exchange to find its own level.

The first of these methods requires no explanation. If you decrease imports you will have lowered the requirements of the currency in question, and if your exports increase, you will have more of the currency available. It is quite possible that these two methods taken in conjunction bring about an equilibrium. The third alternative is an extraneous method of bringing about the first two. If one currency is depreciated in terms of another, two things happen. Imports cost more to the depreciating country and produce a natural check against buying imports, and exports from that country become very attractive, because they are cheaper to buy. Therefore, the third method of depreciating exchange, is a practical means of encouraging the in crease of exports and the decrease of imports. These three methods are open to a country with an adverse balance of payments, and I say that all the agreements, which are concomitants of the loan agreement and attached to the loan terms, are designed to prevent the country which is buying more abroad than it is selling, being able to adjust its position by these means. That is why I feel I cannot vote against the Motion, because I consider the loan essential, but I cannot, in conscience, say that I welcome and accept these other provisions which, I say, will have the effect of preventing a country from adjusting its balance of payments by the normal means.

As to the decrease of exports in the commercial agreement, the country buying more abroad than it is selling—and this is one of the most extraordinary things in the document—is permitted to lower its imports by quantitative restrictions, provided, among other things, that such restrictions are designed to promote the greatest amount of multilateral trade. Of course, these two things are absolute contradictions in terms. You are permitted to take as little as you will, provided always that this will lead you and all others to take the largest total amount you can. It requires Venetian subtlety to bring these two extraordinary contradictions into any relation at all, and I was much amused—and I should like to ex press my admiration—at the efforts of the President of the Board of Trade, by meta physical arguments, which were of such a character as to be almost above comprehension, to reconcile two things which are, of their nature, irreconcilable. To have this in the document, a thing which is so palpably impossible, frightens me. But it is even worse than that. Supposing I am short of dollars, with which to buy American cotton, and have Egyptian pounds with which to buy Egyptian cotton, I must, nevertheless, reduce my purchase of Egyptian cotton pro rata to my purchase of American cotton. Otherwise I should be discriminating against the United States. What we have not heard in this Debate is how that particular course in this Agreement marries with the "scarce currency" clause in the Bretton Woods Agreement. Here, once again, we have an instance of two things which are mutually destructive. The Bretton Woods Agreement allows discrimination against countries whose currency is permanently scarce, but this document says that, in doing so, I must pro rata—with every other "pro" I can think of—reduce imports into my country, from all other countries, even though I may be possessed of their currencies.

Sir S. Cripps

The right hon. Gentle man has not observed paragraph 5, on page 7, which deals with scarce currencies specifically, and which excepts scarce currencies from the prohibition against quantitative restriction. It says: Members should not be precluded by this Section from applying quantitative restrictions in pursuance of action which they may take under Article VII of the International Monetary Fund Agreement, relating to scarce currencies.

Mr. Lyttelton

They appear to me to be mutually destructive, but if the right hon. and learned Gentleman says that the Bretton Woods proposals override the others, I will accept that. I turn now to the second means by which a country buying more abroad than it can sell can adjust its international balance of payments, and that is by exporting more. I think these provisions are a great bar to that form of adjusting the position. It is obvious that at the present time the large holders of sterling balances have a great inducement to get rid of them, to revalorise them, and make them into useful balances for their own benefit, and consequently there is every inducement for them to buy whatever they can from this country. But under the present arrangements, subject, of course, to the deliberations of the international conference, which will certainly last a very long time if they have to reconcile this document with ordinary common sense,these inducements are to be in a large measure removed altogether after one year, because at that moment sterling arising from current transactions becomes converted, and therefore, the inducement to buy with blocked sterling our goods is to that extent reduced, and since deliveries from the rest of the world are going to be much quicker than those which we can make, that will be a great blow to our export trade. The inducement which at the present moment gives the foreigner a desire to repay himself slowly by buying British goods is replaced by an inducement to convert his sterling quickly into dollars and buy quickly from the United States. By these means—and there are many others—a country which buys more abroad than it can sell is prevented from taking the first two of the ordinary natural methods of adjusting its own balance of payments. I say that that runs all through the agreement. This is an attempt to balance something which cannot be balanced by these means.

I turn to the third reason, the depreciation of exchange. I, personally, am a believer in the Bretton Woods Agreement, but with certain very large reservations. I consider that the instrument, the organisation, provided, is a very good one if the object is to keep in equilibrium exchanges which have already reached some measure of stability. That stability, I say, can only be reached by trial and error. It cannot be guessed at now. Is there any hon. Member who would wager his own money in a guess about the international value a year hence of the Italian lire within 1oo per cent. tolerance, or of the Belgian franc, or the drachma, or the French franc, or for that matter, coming further West, within 25 per cent. or 50 per cent., of the £ sterling? The Bretton Woods arrangement is a very fine instrument, but it is altogether premature to use it now. If it is attempted to apply the Bretton Woods agreement, which is a fine instrument, in the middle of this economic blizzard, the greatest damage will be done. It is not the least good putting up a mosquito net to try to keep out a charge of wild elephants in the jungle. That generally leads to disaster to the sleeper. The Bretton Woods agreement is in just that position, but it does, in fact, prevent the free adjustment of exchange at this time.

So on the three counts, the ability of the country to adjust its own exchange position is hampered, its ability to restrict its imports is hampered, and its ability to increase its exports and depreciate its exchange is hampered. There are other great bars to our export trade contained in these agreements. I was very much reassured by something the President of the Board of Trade said with regard to Imperial preferences. As I undestand that statement, my fears, which were largely centred upon the unfortunate juxtaposition of the words "reduction of tariffs" and the words "elimination of preference," were based on just one of these things which arise by mistake in a document—

Sir S. Cripps

I did not suggest that. I said that it came from the wording of Article VII and is so stated in the document.

Mr. Lyttelton

It is extremely unfortunate, because it would lead the ordinary reader to suppose that we might find our selves in a situation where tariffs were reduced and Imperial preferences eliminated. That is a situation into which we should not get, but I think the reassurances of the right hon. and learned Gentleman has given, when we come to read them in Hansard, will perhaps be found sufficient, if they are accepted by those who drafted the original document.

To sum up, therefore, I say that, in my opinion, the loan is essential to the immediate life of this country, and, therefore, I cannot conscientiously vote against the Government Motion. At. the same time, I cannot vote for the Government Motion, and that is the Government's fault, because I am asked to "welcome" and "approve" things which are extremely unwelcome to me and of which I profoundly disapprove. I cannot vote for the Government Motion because it would place me on record as believing in this cantilever system, this jumble of various pros and cons which I believe to be unworkable and which I believe to be against the interest both of the United States and ourselves on the long-term view. I do not think these terms are m the best interests either of the lender or the borrower, and will prove a burden in attaining those objects which all of us, both in the United States and here, wish to see achieved. I think the Government have made a far worse bargain than the Coalition Government would have made. I. think that there is evidence in this agreement that they have lost the confidence of the United States, and I conclude by saying that I think the bargain is necessary, but that its terms are thoroughly bad.

10.48 p.m.

Mr. Belcher (Sowerby)

I ask the House for its indulgence on rising at this late hour to make a maiden speech on such an important subject, and after such expert testimony as we have been listening to for some hours past. My only reason for intervening in this Debate is that I feel this matter is of such importance that every hon. Member ought to make some contribution either by speech or by vote to the discussion—a discussion which, as has been said, may well affect the well being of future generations of our people. In those circum stances, I am rather surprised that hon. Members opposite, belonging to a great party, should have decided to sit on the fence. I may be excused for saying such a thing in a maiden speech, but that is how it appears to me.

Having listened to the arguments and studied the documents, I find that I am left with two propositions on this subject. One is: Is the loan necessary? And the other is: Is there any conceivable alter native? So far as the necessity of the loan is concerned, I am very glad to follow the right hon. Gentleman who has just sat down. Two things are obvious from a study of the figures in the statistical document, which I hope all Members will read—what our position was in the years immediately preceding the war, and what happened to us in the years of the war. Having regard to the material damage which has been done to the industrial life of this country and the wastage of our resources, it is clear that unjess we have this loan, or unless there is some feasible alternative, our people are in for a considerable spell of con tinued austerity, possibly even greater than that which they had to endure during the war, because, at least, then we had the benefit of Lend-Lease. I do not believe that our people ought to endure a continued spell of extreme austerity, nor do I believe that they would willingly tolerate it. I think it is the duty of His Majesty's Government, and of everybody who can play any part in it, to spare our people as much as possible of this continued austerity.

That, of course, is the purpose of this loan. I have listened eagerly to the opponents of the Motion for an alter native, but, so far as I can gather, there is only one, which was enunciated most clearly by the hon. Member for East Aberdeen (Mr. Boothby). It is that either this country alone, or this country together with the remainder of the sterling bloc, shall endeavour to stand up against the United States, and enter into some kind of economic warfare with them. That may be putting it crudely, but that is what it boils down to. What would happen if the alternative were accepted? Suppose that we, either individually or as part of the sterling bloc, oppose our selves to the United States in the world markets. I suggest that the first and obvious consequences would be a sharp decline in our standard of living. We should, at one stroke, cut ourselves off from a very large source of essential supplies—not only foodstuffs and cigarettes—such as those which the hon. Member for East Aberdeen so dramatically produced from his pocket as a conjurer produces a rabbit out of his hat. We should be cutting ourselves off also from essential raw materials.

In our present position as a country which has suffered the ravages of war to a greater extent than our Allies on the other side of the Atlantic Ocean, what chance should we have against that country with its undamaged productive resources, which have actually increased during the war by something like 50 per cent.? I believe we should be.fore doomed to lose. What chance is there of a world of peace in the future if we are to embark in the immediate postwar months, on an economic struggle against the country which was our Ally during the greater part of the war years. I am compelled by the facts, as I believe the majority of Members of this House are compelled by the facts, to accept the loan as something to which no effective practical alternative has been posed.

There has been criticism of the terms of the loan. I would like to echo what my right hon. Friend the Chancellor said about the interest, although I agree with the right hon. Gentleman opposite, that the interest terms are perhaps not so important as one might think. But it would have been a decent gesture on the part of the United States to recognise the paramount contribution which the good people of this country made to the winning of the war, particularly during the 12 months or so when we, and we alone, faced the enemy. Unfortunately, we cannot deal sentimentally with these matters. We have to face the facts, and recognise that no matter how much good will there may be in the White House— and I believe it is there—however much good will there may be in the United States Administration, there is a very considerable and powerful political element in the United States, which stands in the way of any such gesture on the part of the Administration, being carried into effect. I derive some comfort from the fact that, even as it is, the rate of interest, allowing for the five years period of grace before we are called upon to pay, is somewhat lower than the overall rate of interest at which the United States usually borrows its funds, I think something like.4 per cent. That might be some mild comfort.

My hon. Friend the Member for South Nottingham (Mr. N. Smith), one of the opponents of the Motion on this side of the House—I do not think he could have read the document as carefully as he should, and I am sorry that he is not here to speak for himself—made a great point and there was a proviso that we should not, during a period of years, borrow from say one of our Dominions, on better terms than the terms of this particular loan. When it is pointed out that the "better terms" proviso applies to the lender, and not to the borrower, that particular point loses a great deal of its significance. All we are forbidden to do under the terms of the proposed agreement is to borrow from somebody else, at a rate of interest higher than that at which we are borrowing from the United States. I do not think anyone objects to that. It would be quite different if we were forbidden to borrow at a lower rate of interest.

The criticism is made that we are compelled, as a condition of this loan, to accept the Bretton Woods Agreement. At this late hour I do not propose to go into details about the Bretton Woods Agreement, much as I would like to do so. I would, in passing, however, like to make one or two remarks about the accusation which has been made that it represents a return to the gold standard. To my mind the essence—the bad essence—of the gold standard, from which we departed in the interwar years, was, as my hon. Friend the Member for Chester field (Mr. Benson) said, that it was rigid, that there was hardly any possibility of manoeuvring inside that standard, that it was unmanaged, that it was arbitrary and automatic. It appears to me that the essence of the Bretton Woods Agreement, whether it ties us to gold, whether it expresses our currency in terms of gold or not, is that it is an internationally managed system. That, to me, makes all the difference in the world. We are not dealing with something completely arbitrary, but with an international organisation that has a measure of control, and we have a quite formidable part in that international organisation. Together with our friends we constitute a very great part of it indeed.

The hon. Member for East Aberdeen regretted that he had had to teach hon. Members on this side of the House elementary economics, but I rather think he had a first class lesson on that subject himself from the hon. Member for Chesterfield, who made a brilliant speech. The hon. Member for East Aberdeen said the Government were leading this country back to 19th century economic anarchy. He said, "You cannot have a balanced national economy in a laissez faire world." I presume he is opposed to such a world. So am I, and so is the Chancellor of the Exchequer. We are proposing a balanced world. We not only want planning in our own country, but we want international planning, into which we can fit our own plan. To suggest that the setting up of some kind of international organisation, which is going to attempt sensibly to regulate international financial trans actions, is a return to the 19th century laissez faire world is, to my mind, almost too ridiculous to be repeated.

I would say particularly to my hon. Friends on this side of the House who are opposing this Motion, that as a Socialist I will support any effort to regulate the exchange of goods and services between countries and to regulate their financial affairs. I believe this loan to be necessary. I believe the conditions attached to the loan in the form of international agreements and international institutions can be made to work. One pre-eminent condition is that the United States will behave as this country behaved during the 19th century as the greatest creditor country. The other condition is that we in this country should bring all our force to bear on the development of our industries, to develop our exports, to nourish our ex ports, and direct our national finances and our capital resources into economic ally favourable channels. I believe if we do that, we need not fear at all that borrowing this money from the United States on conditions that perhaps are more onerous than we ought to expect, and the entry of the United States and all the other countries into international agreements for the future regulation of the economic forces, will be anything but good for the future of this country.

11.4 p.m.

Mr. Gallacher (Fife, West)

This is the first time in ten years I have had the opportunity of congratulating a Member on his maiden speech. The speech to which we have just listened from the hon. Member for Sowerby (Mr. Belcher) was very able, intelligent, and, in the circum stances existing in these discussions, a lesson in loyally to some of the hon. Members on this side of the House which I hope they will note. I am sure I am ex pressing the feeling of the House when I say that the hon. Member will be heard again with pleasure. His concluding remark was, in effect, in line with what I intend to say. I would say to Members on this side of the House who are concerned about the loan and the agreements, that there are dangers in connection with it, but I also say that there are greater dangers. It would be a greater disaster in the circumstances that exist if any encouragement were given to the crippling or the handicapping of the Labour Government in the task they have to carry through. That is something that is being worked on by Members on the opposite side of the House, and those on this side should always take that into account. They may have an understanding of how to make a good financial balance, but they must be able to match it with political balance. It is dangerous to utilise this issue on this side of the House against the Labour Government.

We hear continual talk about America, and one would get the impression that the 160 millions of people in America were a homogeneous population. They are not. There is a crowd of hard faced men in America quite prepared to take the torch from the hand of the Statue of Liberty and substitute the sign of the three brass balls. There is a great political awakening in America—the C.I.O. is an example. These have to be taken into account. I hear the hon. Member for South Nottingham (Mr. N. Smith) say we cannot repay, and I hear the "Dismal Jimmy" on the other side, the hon. and gallant Member for Devizes (Squadron-Leader Hollis) say the arrangement will collapse in a few years. We have this sort of thing served up. Are we going to allow the arrangement to collapse? Are we going to default? Or is it not possible that we can take this loan, and in the five years breathing space it gives us do some thing to ensure that we will repay it—that there will not be a collapse?

Very often the housewife is used as an example of national economy. To use Micawber's yardstick, if her income is a pound, and she spends nineteen shillings, she is financially sound; but if her in come is a pound and she spends twenty one shillings, she is on the road to bankruptcy. What is she to do? Of course, she may get a loan from a friendly neighbour, but if she cannot, she has to go to the pawnbroker or a moneylender, and then she is in very difficult circumstances. It becomes necessary for her either to stop all unnecessary spending or to build up her income. If we are to make the best use of this loan, every part of it should be used to bring in essentials, raw materials and capital equipment, and nothing else—no luxury goods of any kind.

Squadron-Leader Sir Gifford Fox (Henley)

Will this Government do that?

Mr. Gallacher

We must get this Government to do it. There must be no unnecessary spending. Here we are, giving £60,000,000 compensation in regard to the Bank of England.

Sir William Darling (Edinburgh, South)


Mr. Gallacher

No unnecessary spending. We are going to nationalise the mines, and I advise the Government not to give £175,000,000 or £200,000,000 to the when they nationalise the mines. No unnecessary spending. I would urge the Government if I had time to reduce to an absolute minimum investors' interest in the National Debt. So far as the big investors are concerned I would reduce it to vanishing point. There should be no unnecessary spending, but only spending that will build up the health and wellbeing of the people of the country. That is the big essential. We will fight for that. Why should the mine owners and the bank directors, or anybody else, be a perpetual drain-on the public good of this country? They have been paid for their services. The mine owners have more than taken out what ever they have put into the mines. The bank directors have been paid for their services. Why should they have perpetual pensions? We are going to put a stop to that; make no mistake about it. By cutting out luxuries and parasites and by building up our assets, we shall be able to meet our obligations under the loan. During the next five years we shall be able to stabilise our finances and build up our assets in steel, cotton and coal—and the biggest of these is coal. We must get the manpower into the pits. It is not simply a matter of bringing the men out of the Army. It is a matter of improving conditions so that manpower will be attracted to the pits, and not driven away from them. If we can get coal in abundance, we can get steel and cotton and if we have steel and cotton, we can conquer poverty and put our finances on a firm and sound basis.

Mr. Speaker

The hon. Member must not discuss on this Motion the whole re construction of our domestic affairs.

Mr. Gallacher

I was attracted into doing that by the argument 'that has been made that we shall not be able to meet our liabilities and that we will collapse. That was one of the main arguments of the hon. Member for South Nottingham. His culminating argument was that it was no use going on with this loan because we would not be able to repay it. The hon. and gallant Member for Devizes said there is bound to be a collapse in two or three years. I am pointing out that there is no necessity for the collapse if we use the five years breathing period which this loan gives us to build up our assets and if we economise in such a way as to stabilise our finances. I paid great attention to that part of the Chancellor's speech in which he said that we 'can go into the Monetary Fund provided that we have the financial strength necessary for the purpose. How are we to get the financial strength unless we economise and build up our assets?

Reference has been made to the Colonies and the Dominions, and how we should work with them. We are all agreed on that. If the Dominions were brought together and their resources unified, we could have all the resources we desire, but in this talk about the Dominions, I did not hear anybody mention India. In India there are as great potentialities as in the United States of America. There is a population of 300,000,000 and all the natural resources that can be desired. If we had a Free India freely and voluntarily co-operating with this country, there would be an opportunity of building up our economy and our finances.

During the coming five years we shall have a great responsibility of joining with other countries in the reconstruction of Europe, and if we use these five years, in association with the Soviet Union and the new free Governments of Europe, to reconstruct Europe, we can go into a new era of prosperity in Europe out of which we will have the fullest share, and we shall be able to meet any obligations that may come up against us in the times that lie ahead. It is along these lines that the Government will have to carry out their policy in order to make certain that we have full employment and a high standard of living for the people, as our contribution to the international agreement that is associated with the loan, and which will enable us to meet any obligations which might arise out of the loan. But whether it is with India, or the peoples of Europe, or with the Dominions, it must be a progressive Socialist policy; nothing else but that can get us into a position of economic and financial stability that will enable us to meet all our obligations, and to lead our people forward into peace and prosperity.

Lieut.-Colonel Sir Thomas Moore (Ayr Burghs)


It being a Quarter past Eleven o'Clock, the Debate stood adjourned.

Debate to be resumed tomorrow.

  1. ADJOURNMENT 17 words
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