HC Deb 07 August 1947 vol 441 cc1654-770

[Second Day's Debate]

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. William Whiteley.]

3.54 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

These are days when history is being written, and when the eyes of the world are upon us in this little island of ours, as we face a very grave national emergency, and as we debate the action to be taken. We here are the elected representatives of the unconquerable British people, and we must not fail in our trust. We have run into a great storm, and this storm has sprung up very swiftly, as I shall indicate. [HON. MEMBERS: "Hear, hear."] I have a good deal to say and some statistics to deploy, and I have already called up all my reserves of patience for any interruptions I may have. This storm, as I shall show with detailed figures, has sprung up very swiftly, and the force of this storm is measured today by the rate of exhaustion of the United States line of credit; that is the measure. It has sprung up very swiftly, but it has been brewing for a long time—long before most hon. Members opposite were elected to this House.

One of the most notable speeches yesterday was made by my hon. Friend the Member for North-West Hull (Mr. R. Mackay), who showed how, away back in 1932, the late Mr. Neville Chamberlain was also faced with a problem. [Interruption.] What I have to say, I shall say, nor shall I sit down until I have said it. Away back in 1932, Mr. Neville Chamberlain had to face a problem similar in character, though less grave in extent than this, and he called to his aid a general tariff in order to redress an adverse balance of payments. It is an adverse balance of payments which we must redress today. For a very long time past—for at least a generation, if not more—this country has never paid, under any Government, or in any economic situation, whether of boom or of slump, for its necessary imports by its exports alone. That is a task which has never been accomplished under any Government for a generation past. These are platitudes to all who study the subject, though they may surprise those who have not.

The change which has come upon us is that, in two world wars, a great part of our overseas sources of means of payment for our imports has been destroyed; that is to say, the foreign investments which we slowly accumulated through the 19th century have been dispersed through the war effort twice undergone by us in two world wars. Therefore, the period of living on our 19th century investments is over, and that chapter in our history has come to an end. This fundamental change in the conditions of our national life has been cloaked in recent years by many factors. During the war, as my right hon. Friend the Prime Minister said yesterday, it was cloaked by Lend-Lease, when we got large quantities of food and supplies without payment at all, and we deliberately dismantled our export trade in order that that might be diverted to the war effort. This fundamental change of which I have been speaking, slowly making itself felt through years of peace between the wars, was cloaked by Lend-Lease during the war, and it has been cloaked in the interval since the war by the United States and the Canadian lines of credit.

I said that we have run into a great storm, and I will seek to put to the House the immediate causes of it in this simple form. First of all, there is the steep rise in the prices of our imports since the end of the war. I am going to quote a number of figures. I have been asked to do so by hon. Members opposite, and, for that reason, I ask indulgence if, in the course of my next quarter of an hour or so, I give more statistics than I usually inflict upon the House, but they have been asked for and it is right that they should go upon the record. These statistics are all drawn from official sources, and I think I can say that none of them are open to any doubt at all. They can all be readily verified.

First, with regard to this steep rise in the prices that we have to pay for our imports—prices which have to be paid in dollars. The American index of wholesale prices, which is as good an index as we can get, and which takes 1926 as the base year, or 100, stood at 107.1 in January, 1946. In July, 1946, it had risen to 124.3, and in July, 1947, it had risen to 150.6. That is to say, in broad figures, it had risen by 50 per cent. from January, 1946. If within this total, we take the prices of farm products, which are of great importance to us, this index had risen from 130 in January, 1946, to no less than 182 in July, 1947. Roughly, one may say—I think this is simple arithmetic, which has been worked out by those who study these things—that the cost of the commodities that we are buying from the United States has increased by between 40 per cent. and 50 per cent. since the loan was concluded at the end of 1945, and it has increased by 20 per cent. since 12 months ago. So much for the rise in prices. As I have said before, these are not the same dollars. We borrowed dollars at a certan price level, but, in fact, the value of these dollars has depreciated in the measure which I have indicated. These are not the same dollars that we borrowed, by reason of the depreciation in their purchasing power. That is the first reason why this storm has suddenly risen, and why there has been this steep rise in prices of what we need to buy with dollars.

In the second place, there has been a setback to our hopes of the export drive, as we felt them last winter. That has already been dealt with. The estimated loss of export income for this calendar year, 1947, by reason of this setback due to fuel and weather difficulties, is £200 million. In the third place—and, in some respects, this is the most fundamental reason of all—throughout the world, touching not only us but many other countries, some of whom I will name, there has been a spreading dollar famine which has been rapidly intensifying in the last few months. I emphasise this, and I will give statistics to prove it. One nation after another has been running out of dollars, using every means it can to acquire more dollars, and using in particular every means of converting any other currency—sterling, francs or what you will—into dollars as speedily as possible; all the nations collectively and each of the nations separately have been importing far more from the United States and from the other countries of Western America than they can pay for. I will give figures to illustrate this in a moment.

Therefore, in the third place, the cause of the rapid rising of this storm is the speedy growth in dollar starvation all over the world. This has not only embarrassed us, although today we are naturally concerned with our own embarrassments; it has embarrassed many other countries in the world as well. It has gravely embarrassed our good friends in Canada, I shall speak of them in a moment; they are in grave difficulties by reason of the same situation. They are importing far more from the United States than they find themselves in a position to pay for. It has embarrassed the economically strong countries of Latin America such as Argentine, Brazil and the rest, who were not in the war and are not at all war-scarred. It has embarrassed a relatively strong, though small, neutral such as Sweden. All these countries have been conscious of a lack of dollars. The measure of this total dollar famine in the world may be appreciated when I say that the United States exports at this time are running at the rate of 21 billion dollars a year, as against imports into the United States of some 8 billion dollars a year. They are exporting more than twice what they are importing, and this difference between these two figures represents the total adverse balance in the current overseas account of ourselves and all the other countries in the world.

Why is this? There are many reasons, but the reason which sticks out a mile is that both the continent of Europe, ourselves—this island outpost of Europe—and large parts of the continent of Asia, have been war-wounded, ravaged, bombed, invaded, and occupied by the common enemy whom, with such tremendous effort, we defeated; and their recovery of productivity has been much slower than we and the Americans hoped. [Interruption.] I am not making party points. Perhaps that may be left to a later stage. I am talking straight statistics. I am saying that all these countries in Europe and Asia were war ravaged in a way that the new world was not; neither of the Americas was. Therefore, the unbalance which before the war was already showing itself—in that the productive powers of the Americas were growing, in relation to those of the old continents of Europe and Asia—has been tremendously stimulated by the war and its consequences. I return to the figure which I quoted, before I pass to the next point. The United States have an export surplus this year of 13 billion dollars—goods going out which it is found increas- ingly difficult for all the recipients to pay for; that is, 21 billion dollars as against 8 billion dollars. There is nothing controversial about this.

So far I have given reasons why this storm in which we are has blown up with such suddenness. The third and the most important of the three points which I have made is the rapidly increasing surplus of United States exports over United States imports. Some of us have said words of warning about this. It is thought by some that this has come upon us overnight. I think it was the hon. Member for Flint (Mr. Birch) who was so kind as to quote last night from some observations I made as long ago as last February on Tyneside at Newcastle. I asked him to read on. He did not do so, and I shall, therefore, quote now what I said then. I said on 2nd February at Newcastle: We are only able now to import, more than we export because we are living on tick "— I wanted to put the thing so simply that everybody would understand it— which we are getting from the American and Canadian lines of credit. I said: When these come to an end we shall have to pay our way without 'tick.' This means that we must either export more or import less or both. If, therefore, we have to reduce our imports it will mean "— and then I indicated various reactions that would come upon our standard of life and employment, and so on. I said: In other words, you would in this case have a lower standard of life and less employment. That is the danger we have to defeat. It was perfectly clear to all of us at that time that that was the danger. I will quote only one more thing that I myself said, and that was when I was speaking at Margate, where the Labour Party held its recent conference. I devoted some part of my remarks to the same subject on that occasion because I desired to bring home to all those represented what was the big problem confronting us. I said these words: By far the greatest and the gravest of all the immediate economic problems that are now facing us is the question of how quickly we can close the gap between our exports and our imports. We must not count "— I used the word very deliberately— We must not count upon raising any further overseas credit. I hope that we shall prefer to take the view that we must strain every nerve and make every effort in order to stand upon our own feet as soon as possible, and to pay with our own exports for the necessary imports that we need for the standard of living and the employment of our people. I think that that was perfectly clear. I could not have made it clearer. I added, to give the thing the note of urgency, which I felt to be necessary: Time is pressing very hard. The export drive must be stimulated to the utmost, otherwise, if your exclude the possibility of further overseas credits, there is only one other way of bridging the gap, and that is by heavy cuts in imports, both of food and of materials. And I finally said: In importance this question"— that is, the adverse balance of trade— blots out all others. It is the greatest test that is going to face this country or this movement, either politically or industrially. I quote these things in order to show that I have already spoken clearly to all who will hear me on this subject.

Mr. James Stuart (Moray and Nairn)

But not given the solution.

Mr. Dalton

I shall deal with that in a moment. I shall tell the former Chief Whip of the Coalition Government, for whom in those days we used to have very kind regard, which has not vanished, everything in due course. If he will contain his soul in patience, nothing shall be withheld. I claim, therefore, that warnings have been given. I have quoted my own statements because for them I am responsible; but similar warnings have been given by others of my colleagues. Thus it is plain, as I have endeavoured to show, that this has not come upon us unawares or overnight.

I wish to say a word or two on what the general situation would be if we had not taken the American loan in 1945, with all the terms and conditions attaching to it. There are some who think—I think that the hon. Member for East Aberdeen (Mr. Boothby) is of the opinion, and some others share his opinion—that it would have been better to have refused the American loan.

Mr. Boothby (Aberdeen and Kincardine, Eastern)

Hear, hear.

Mr. Dalton

It is an opinion which can be supported by argument, but argument can be deployed on the other side. I wish to face this question quite frankly, because it was part of my duty to present that Agreement, with all its defects and difficulties, to the House. We got a majority vote in favour of it—not quite a straight party vote, for some hon. Members of the party opposite voted with us, and some of my hon. Friends on this side voted with the other side. It was not a straight party vote, but it was a decisive vote, none the less. I wish now to justify that vote which I advised the House to take. Suppose we had not taken the loan in 1945 on these terms from the United States. We should have run into this same storm in which we are, and we should have run into it more than a year sooner. That is plain fact. We are in this storm now. We delayed this storm by just over a year by taking the loan then. I do not think that that can be disputed. I shall give figures in a moment about our reserves and so on. But it cannot be disputed that this same problem of having a vast surplus of import requirements over export possibilities would have faced us just as it faces us now. We should have come into the storm more than a year earlier. And I submit that more than a year ago we were less strong to face the storm than we are now. I shall give reasons for thinking so.

I submit that in the period that has passed we have increased our strength to face this emergency. I shall give reasons for this though some hon. Members may prefer not to believe it. We are stronger now than then in many respects. We are thinking now, remember, back to the end of 1945 and the early part of 1946 when this loan was under debate in the House. There was a further period, of course, when the loan was being debated on the American side in Congress; but our decision was taken at the end of 1945. Therefore, what we have to compare is the strength that we had at the end of 1945 with the strength we have now. I say that without doubt we are far stronger now. First of all, in this interval we have carried through the demobilisation of very large numbers of men from the fighting Forces—with a smoothness and sense of equity which is totally new as compared to what happened after the first world war. The considerations of age and length of service and the absence of wicked wangling and wire-pulling have created a quite different state of affairs, and the credit can be shared widely for that, for they proceeded upon plans prepared in the days of the Coalition Government, and nobody need be afraid to claim his share of the credit for that. We have carried through the demobilisation of large numbers of men from the fighting forces and women from the auxiliary forces with a greater smoothness and sense of justice among the people than before, and others can share the credit for it. That was a hurdle which we had to surmount, and that hurdle has been surmounted. The credit for it can be shared widely—I am not seeking to take special credit for this for one section rather than another—that we have achieved the immense physical task of the reconversion of our industry from a war footing to a peace footing. This has been carried through. It had only just been begun at the end of 1945. That has been carried through, and all have played their part in that. These are very important considerations.

In addition—and this is controversial: hon. Members opposite will disagree with it, but I am sure it will be supported by a majority of this House—I believe we have better prospects now than then of increased productivity because—I expect this will be argued, but I am anxious to keep the thing on a reasonable level of quietude, and the fact that I was not loudly interrupted from that side of the House or applauded loudly over here just now was a good thing, on the whole, for the purposes of the Debate—but now I say that the prospects of increased production of coal are infinitely better now than they were then. The miners are now working for the nation. The miners were not working for the nation when the American loan Debates were taking place. The process of re-equipping the mines—and much re-equipment is, admittedly, necessary—of re-deploying and re-arranging the labour force within the mines, and of recruiting new labour to the mines, is going forward. It has begun under the new regime, under the National Coal Board.

I speak with complete frankness on this matter. I wish, throughout my speech, to hide nothing. We have still a long, long way to go before our coal output is adequate to our national need and to what Europe urgently needs from us, as part of the general scheme for the building up of productivity on this and on that war stricken plot. We have a long way to go, but we have a far better chance of going that long way now than we had under the previous regime at the end of 1945. We have a much better prospect than we had in previous days of increasing the output of coal in the months ahead. That applies in other respects also. Although I do not at this stage wish to develop the argument in detail, I believe that in agriculture, in consequence of legislation being passed by this House—the great Agriculture Bill, which has not been very controversial, contains many guarantees for the future with regard to prices, and so on—we are in a far better position now to look forward to a rapid increase in production than we would have been without that Bill. I say the prospects are much better now than they were then.

It has been good that we have had this period in which to strengthen ourselves, both in the present and in relation to future possibilities. When this loan was negotiated both we and the Americans thought—and all the experts thought—that the loan would give us some three years of help towards reaching an equilibrium in our balance of payments. For reasons given by my right hon. Friend the Prime Minister yesterday, we shall, in fact, have not three years, not 36 months, but only some 15 months of breathing space. This shortening of the period has gravely accentuated the difficulties which all of us foresaw, but the character of which has been much intensified by the factors I have been mentioning. It is common ground—here again I think everybody will agree with what I am about to say—that some of the obligations in the Loan Agreement were imposed upon us prematurely. That was the view of the Government; that was the view of our negotiators; and that was also the view of hon. Members opposite, whether, on balance, they supported the loan or opposed it.

There were features of the Loan Agreement which we disliked, and which I, speaking in support of the agreement, and other right hon. Members on both sides of the House, speaking in that Debate, emphasised at the time. We did not like it. Our negotiators struggled hard against it. They struggled so hard that in the case of Lord Keynes, who rendered such conspicuous service, I am sure that struggle shortened his days upon earth. They struggled hard against it, but, in fact, we were not able to avoid these obligations as necessary conditions to obtaining the dollars. There was nondiscrimination prematurely on 1st January, 1947, and convertibility prematurely on 15th July last. It is common ground that those were highly disagreeable features of the Loan Agreement. What remained to debate between us was whether we could not get it without these conditions, and every effort was made so to get it. Faced with the alternative of loan on these conditions or no loan, which should we choose? The majority of the House chose—in my judgment quite rightly—the loan even with these conditions.

Over and above these conditions it is further true—and our negotiators fought a hard battle on this, also unsuccessfully—that the amount of the loan was insufficient to leave any margin for any unfavourable further events which might not have been foreseen. Such an unfavourable turn of events has occurred. When all is said, we accepted those conditions at the time we signed our name, and we have punctually kept our word to date; and we are entitled to be proud of it, because that is part of the British way of life, that when we sign a document we keep to it.

Mr. Brendan Bracken (Bournemouth)

So do the Americans.

Mr. Dalton

Certainly. I am speaking of it from our end. I am not making any point against anybody. Speaking from our end, we accepted conditions which we knew to be hard, and which we thought to be prematurely operative; but we accepted them since we could get no better, and we have kept our word.

I am afraid that at this stage I must deploy some figures, at the request of the other side of the House. No doubt my hon. Friends behind me will also wish to have them. It has been alleged that the loan has been squandered. I do not know whether or not that is believed in this House. I have commented upon the quiet tone of the House, and the lack of cheers, but I thought I might have drawn one there. [An HON. MEMBER: "Speak up."]—[HON. MEMBERS: "Hear, hear."] My hon. Friend has awakened the Opposition to life. I was saying that some people have alleged outside this House that the loan has been squandered, and I was waiting to hear whether that would be picked up by hon. Members opposite. So far it has not. I propose to give details of how the loan has been drawn and how it has been spent. I apologise that there are so many statistics, but I have been asked for them and it is right that we should have them.

How has the credit been drawn? The total of the United States credit was 3,750 million dollars. In 1946, in the third quarter, we drew 400 million dollars; in the fourth quarter we drew 200 million dollars. We were doing well in 1946. As my right hon. Friend the Prime Minister pointed out yesterday, we had, on the whole, a very encouraging year in 1946, though we have had a set back since. In 1947 the speed of drawing increased. I will give the figures by months. In 1947, in January, we drew 200 million dollars; in February, 100 million dollars; in March, 200 million dollars; in April, 450 million dollars; in May, 200 million dollars; in June, 300 million dollars. That meant a total of drawings, from the beginning of the loan, of 2,050 million dollars out of 3,750 million dollars. Then we come to the very startling figure in July, of 700 million dollars. I shall speak about that later; I shall conceal nothing from the House. It was a very startling figure to all of us, including myself. I was deeply disturbed about it, and I will comment upon it later. That is the figure to date.

I wish now to speak without any undue attempt at prophecy. The figure for August will not be known till August ends, but I have good reason for hoping that the August figure will be substantially less than the July figure. I emphasise "good reason for hoping," and I choose my words with care; I will not underline or exaggerate. With regard to the July figure I make the following points, which the House and the public should know. In the first place, at the request of the United States' Government we postponed until 1st July a drawing of 150 million dollars which we had desired to make, and which we really needed in June. That 150 million dollars was deliberately transferred from June to July at the request of the United States' Government in connection with their detailed arrangements for appropriation which run, I understand, upon a monthly basis. In the second place, July included one of the large periodic dollar payments on behalf of the Germans, to keep them alive. In July nearly 50 million dollars was drawn to feed the Germans. These payments to feed the Germans come periodically; they do not come month by month, but at intervals.

Furthermore, in July we began to make payments—and we make prompt payments, of course, in this connection—for the Canadian grain shipments under our four-year contract, which are always concentrated in the few summer months when the River St. Lawrence is open. During these months the Canadian wheat flows at an exceptional pace across the Atlantic. There was an additional payment of 40 million dollars in respect of Canadian grain. American and Canadian dollars are the same. I will speak later of our special relations with Canada. The precise statement is that we had to find 40 million dollars, part American and part Canadian, during these months. These were drawings on the United States dollar credit. I shall explain the relation between the drawings on the United States and Canadian dollar credits in a moment.

There is a distinction to be drawn between drawings and spendings in any month. All the 700 million dollars that were drawn in July were not spent in July. A number of them are carried forward into August. It is, therefore, the case that if you are looking at. the rate of exhaustion of the credits, it is more useful to have regard to the spendings from month-to-month than to the drawings. The two are connected, but the spendings area closer guide. It will now give the House some figures of the spendings out of the dollar credits. The convenient way to express these to the House is to take the net drain on our total resources of dollars, which means for this purpose the United States credit plus the Canadian credit. The net drain on our total resources of dollars, adding together the United States and Canadian credits, and gold—although in fact we have not drawn down our gold reserves, in spendings—is as follows. I will give the figures in millions of dollars. The Canadian dollar and the United States dollar now stand at parity, and for the purposes of arithmetic no distinction has to be made. The figures for 1946 are, for the third quarter, 210, and for the fourth quarter, 369. I will again give the figures for 1947 in months. They are: January, 137; February, 224; March, 323; April, 307; May, 334, and June, 308. In July, there is an upward leap, the reasons for that I have given, which is not quite so sharp as in the drawings, the figure being 538. I repeat that when we come to August, I hope these figures will show a decline.

I wish to give some more figures in relation to the suggestions that have been made that these moneys have been ill-dispensed as between different objects. How has the total expenditure been divided? We have, in the first place, direct United Kingdom purchases in the United States. In the 12 months ending 30th June, 1947, we had spent 1,540 million dollars in direct United Kingdom purchases in the United States, as against the earnings in the United States from exports, visible and invisible, of 340 million dollars; that is to say, there is an adverse balance direct with the United States of 1,200 million dollars. How were our spendings on direct purchases in the United States—and this is not the complete story, but only the first item—distributed between different objects? Of our total spendings in the United States direct, 25 per cent. was on food; 27 per cent. on raw materials, including petroleum; 14 per cent. on machinery; 7 per cent. on the purchase of ships—a special case of capital goods acquisition; 12 per cent. on tobacco; 4 per cent. on films, and 11 per cent. on food, etc., for Germany. These add up to 100 per cent. and these are the divisions of the total of 1,540 million dollars divided in percentages over these 12 months. These are direct United Kingdom purchases in the United States, but this, of course, is only the first item in the account.

There are also United Kingdom purchases for dollars in the rest of the Western Hemisphere—Canada and South America. During this same period we spent 615 million United States dollars. Dividing it into the main items, we spent 220 million dollars, practically all on food, predominantly wheat, in Canada; 260 millions, principally oil and sugar, in Central America, and 135 millions principally on meat, with some cereals, in the Argentine and other South American countries. These are the elements—1 repeat it to try to get it clear—of the total United Kingdom purchases from the Western Hemisphere, other than the United States. We have to pay dollars for them, because neither the Canadian nor Latin-Americans are interested in holding blocked sterling—they want British imports or dollars. This is one of the essential features of the case.

I think the House understands that the question of convertibility is not principally a question of what is written in the Anglo-American Agreement, but what is written in the realities of life of these countries. All these countries, as I have said before, are running very short of dollars, and are increasingly demanding from us sterling convertible at once into dollars, quite apart from any obligations of the American Agreement. If we did not agree to give them convertible sterling, they would invoice the bills in dollars straight away. That should be clearly understood.

This brings me back to the central proposition in the whole exposition of this case, which is that our grave difficulties would be almost over if we could export enough of our own goods and services to pay for the imports we need. Our difficulties all arise from our inability as yet to do this. We cannot yet export enough to pay for our imports. Supposing we could supply exports of British goods and services instead of sterling, there would be no difficulty about convertibility. Convertibility only arises in so far as those who receive our money in return for what they send us cannot turn that money into British goods but have to turn it into currencies of other countries. I have given enough facts about the expenditure in broad categories to show that it would be a complete misuse of language to say that this loan had been squandered. The Leader of the Opposition said, at Woodstock, on 4th August: There were other reasons why the loan had been ineffective.", I expect this will be cheered from the other side— Owing to the follies and indecision of the Government a great part of the loan had been spent, not on the requirements of industry, nor upon the import of basic foodstuffs. Much had been frittered away in American films and tobacco, and in large quantities of foods and fruits, which were not indispensable to our active recovery. We were naturally forced to spend the bulk of the loan on food for our own people and raw materials for our own factories. It was never suggested that we could have gone completely without tobacco, and when I proposed a heavy rise in the Tobacco Duty the Opposition voted against me. There still stands on the Order Paper, unless it has been taken off in the last day or two, a Motion, backed by a considerable number of Conservative Members, asking for the complete abolition of petrol rationing. The Leader of the Opposition has not had very consistent support from his own followers.

Now I wish to say something about the sterling area, and this, again, is uncontroversial. We have all been rather proud of the sterling area during the war. It has been, speaking in broad terms, a band of brother and sister nations, who pooled their resources and stood together, in fighting the war—with the exception of our Canadian friends, who have a special currency system—Australia, New Zealand, South Africa, our Colonial territories, India, and others. We in this country are the bankers for the sterling area, and we hold their gold reserves, about which I will say something in a moment, as I have been asked to do.

When I give the figures for the sterling area, it must be remembered that they are not the gold reserves of this little Island; they are the gold reserves of Australia, New Zealand, and all the rest. During the war, the arrangement was that we banked for our comrade nations in the sterling area; they paid to us the golden dollars they acquired in the course of their trading, and we paid to them whatever they reasonably needed for their trading. I will tell the House the figures for the first six months of this current year and the last six months of last year, so that they will see the rapid change for the worse in the sterling area situation. In the first six months of this year, we were asked to find 205 million dollars for the current trading of the sterling area as a whole. We were asked to find 50 million dollars for South Africa, 60 million for Australia, and 235 million for the major part of the area, including all the Colonies, and India. But Malaya earned for us, on the other side of the account, 140 million dollars by the sale of her natural products, and the net result of balancing one item against the other was that in the first six months of this year we had to find 205 million dollars for the sterling area as a whole. That has been an element in the drain on us.

In the last six months of last year, instead of having to pay out to the rest of the sterling area, the rest of the sterling area paid in to us to the extent, in the aggregate, of 155 million dollars. If we take the two together, they paid in 155 million dollars in the last six months of last year, and we had to pay out 205 million dollars in the first six months of this year. Therefore, taking the area as a whole, our total payment out was 50 million dollars. I quote these figures to show how the situation has rapidly varied, and to give a picture of how the sterling area requirements are to be met.

Now I wish to say a word or two about the so-called sterling balances. These are nominal figures, and I have expressed my view—and I do not alter it—that these nominal figures cannot be regarded as figures which can finally be granted in commercial and trading transactions. I think everybody agrees with that. The totals of these sterling balances arose in two separate ways. Some arose in the ordinary way of trade, the buying and selling of goods which has taken place since the end of the war, but a number arose in special wartime conditions, and they resemble war debts as we have known them in the past, to which there correspond no tangible physical assets at all, except the great and overwhelming asset of victory in war against the enemy. Therefore, the figures I am giving are the total nominal figures in respect of all of which I have reserved, on behalf of His Majesty's Government, our position. I have asserted our view that there should be some scaling down and readjustment of these totals. I have not failed to make that clear in any of the negotiations which are going on.

On the other hand, it has been necessary that we should arrive at certain temporary arrangements—and Members who have asked that we should take steps to limit the drain on convertibility will recognise the importance of this—in order, among other things, to get, if we could, an agreed blocking of the major part of these obligations, until such time as the whole matter can be resolved in a rather less critical atmosphere. The nominal figure on which I have reserved His Majesty's Government's view, and which should be substantially scaled down, stood, at the end of June, at £3,559 million. I should explain that this excludes all liabilities in respect of various credits and loans from the United States and Canada. These are sterling balances in the proper sense of the term. These figures include the balances representing the turnover of trade since the end of the war, but by far the largest part of our balances accumulated during the war, about which there is much debate, and on which I have made my views clear.

I have been seeking to arrive at agreements with various holders of sterling balances, in most cases purely interim agreements, to extend over a further term. We have brought, or are in process of bringing, some £1,700 million of these sterling balances under control by voluntary agreements for blocking. It is a great safeguard against unexpected sterling drains. I am not anxious to conceal anything, and I will answer any reasonable questions which are put to me. Out of £3,559 million we have brought, or are in course of bringing, £1,700 million, that is about a half, under such agreements. The remainder, consisting of £400 million or more, is held by our Dominions, and we have not thought it necessary, in the case of Australia, New Zealand, or South Africa, to enter into the same kind of formal arrangement as is proper in certain other cases. We have agreements with them that are based on good understanding. The sum of £760 million is held by other countries in the sterling area, very largely by our own Colonies, with whom we have our own methods of arrangement. That leaves only some £500 million out of the total of £3,560 million held by all other countries of the world, including some in Europe. I am sure that whatever we may think on the long-term about the equity of a particular figure being fixed for any particular sterling balance, largely accrued as a result of the war, that no one will disagree with my view that it was very important in this critical state of affairs to bring about an interim arrangement, at least as a first stage, to prevent uncontrolled demands for conversion of those large balances into dollars, and it is towards that end I have been directing our efforts.

Mr. Scollan (Renfrew, Western)

Will the right hon. Gentleman explain, with regard to the £400 million that has been blocked, if a final settlement with regard to payment is in suspension?

Mr. Dalton

When it has been blocked, it means that it cannot be drawn upon. It cannot be drawn upon except with our consent, and I have been explaining that we have been seeking to safeguard the immediate position by blocking in most cases from the end of the calendar year but, in some cases, from 15th July. I can furnish details, but I think that it will complicate the matter if I go into them too much now. The short point is that, when a thing is blocked, it means that it cannot be drawn upon except with our consent, and I have been seeking to create a position whereby these things cannot be drawn upon, except with our consent in clearly limited amounts.

I wish now to say a few words, with complete frankness, as to what stands behind the United States credit in terms of our final resources when the United States credit has been exhausted. My right hon. Friend the Prime Minister indicated yesterday that it will be before the end of this year, and, in my view, it will probably be in the month of October. I will not be more exact than that, but that is what it looks like, assuming a decline from the abnormal high level of July. On the other hand, the number of measures we shall take, which my right hon. Friend indicated yesterday to the House, will have effects, some of them quite immediately, such as the stoppage of buying quantities of foodstuffs in hard currency areas; others, less immediate, as in regard to cuts in foreign travel allowances, and so on—the effect of these cuts will, I hope, be somewhat to extend the period before the exhaustion of the United States credit. That was one of the immediate purposes, although, equally, there are other purposes as, in the period after the credit has been exhausted, to safeguard in some degree the reserves that stand behind them and to prevent their too rapid depletion.

Behind the United States credit stand three elements. First, there will be the remains of the Canadian line of credit. At the present time, there is outstanding on the Canadian line of credit 500 million dollars, or £125 million. I wish to put very frankly what the position is about the Canadian credit. Canada has been magnificently generous through the war effort as a whole, and to this country in particular. We owe our Canadian friends an undying debt: They advanced this credit immediately after the United States credit was created. They have run into a heavy storm, the form of which is the same as the storm into which we have run. They are finding great difficulties in paying for their imports from the United States with the export of their own produce and, therefore, our Canadian friends have asked us to go slow in drawing on the credit and, of course, we have accepted. In fact, what has been agreed between the two countries—the Canadian Government and the United Kingdom Government—is that we shall meet our Canadian dollar expenditure—that is, payment for purchases of wheat, in particular, and other things being sent to us—only as to 50 per cent. by drawing on Canadian credit, and as to the other 50 per cent. by drawing on United States credit. That is what they have asked and what we have agreed to do; and what, until we have some new arrangement with them, we shall continue to do. The reason is, having drawn more slowly on the Canadian credit this amount still stands as a further line of reserve of approximately 500 million dollars of credit unexhausted.

In the second place, there is the possibility of drawing on the International Monetary Fund. This fund was never intended to make long-term loans or to correct anything as fundamental as the world-wide dollar famine from which the world is now suffering. Indeed, the latter was not foreseen when this institution was created. The function of the International Monetary Fund was always judged to be limited to enabling those members, including ourselves, if we had the need for it, to iron out purely temporary fluctuations in the balance of payments.

The present emergency is more than a temporary difficulty, not only for us but for the great majority of other members of the International Monetary Fund. Our trading rights—I hope that this is completely clear—under the constitution of the Fund are limited to £80 million in dollars a year for four years—£320 million in all. Some people have said, "Why have not the Government already begun drawing on this?" I am not anxious to hurry towards this because advances from the International Monetary Fund, whether to us or others, carry a rate of interest which rises as the period of the advance extends, and it seemed to me better to hold this among the reserves. This seemed to me the right course for us to pursue, and to take up with the other national representatives on the Governing Body of the International Monetary Fund next month, when they are due to hold their regular annual meeting, the question of whether we should not extend and modify, so far as the constitution permits, the purposes for which the Fund may be used. I quote this as one among the items in our reserves with regard to the use of which further discussion on an international basis is clearly necessary.

In the third place, after the remains of the Canadian credit, and after the drawing powers on the International Monetary Fund, stand our gold and dollar reserves. These now stand at about £600 million. I think that they have varied very little over the past year; they have been practically stationery during that time, and that is a matter that should be understood in the United States. There are some people who apparently think that we have been using the United States credit in order to pile up gold and dollar reserves. Such is not the case. This figure has stood substantially stable with only minor fluctuations, for a little over 12 months. I repeat that these reserves are not the reserves only of the United Kingdom but are the reserves of the whole sterling area, including our friends of the sterling Dominions. We are the sterling area's bankers, and our reserves are their reserves.

Against this £600 million we have liabilities in the form of sterling balances of which I have spoken, and even if we should succeed in writing down the nominal total of our sterling balances from the figure at which they now stand, some £3,600 million, it would still, I think, be true that, taking account of all the factors in the case, our liabilities, not at short term, but our total liabilities, would be substantially in excess of these gold and dollar reserves. That is one more reason for treating the matter with very great caution and for hesitating long before taking any steps, or avoid taking any steps which would mean rapid dipping into them. We all recognise that reserves are no good unless they are able to be used in some crisis. To have unusable reserves is no better than to have no reserves, but, on the other hand, they are- only to be used at a critical moment when there is some prospect that the throwing in of some part of the reserves will bring us victory in the battle and will not dribble out and delay an inevitable defeat. I hope the House—and I think all sides will agree with me—will say that we should be exceedigly careful before we contemplate any policy which would involve the running down in the near future of these gold and dollar reserves to a level much below that at which they now stand.

Mr. Bracken

What about our dollar investments? Can the right hon. Gentleman give us some information about that?

Mr. Dalton

I think that the right hon. Gentleman, on reflection, would agree that it would be most undesirable to begin putting labels on our holdings. Let him think what that does. I am quite friendly about this, and I am anxious to co-operate. I should like, however, to speak a cautionary word on this. [HON. MEMBERS: "Speak up."] I was saying a special cautionary word to the right hon. Gentleman. I was saying that I really think on reflection he will agree that it would not be a good thing to give undue publicity to any such subject in this Debate. That is my considered opinion. Putting labels or ticket values on these things and letting them go-forth would not be very wise. That is all I am going to say. I think the right hon. Gentleman agrees with me. My right hon. Friend the Prime Minister was asked yesterday whether the figure I have given included what the right hon. Gentleman is talking about today, and the answer is "No." I hope I can leave it there now.

I have endeavoured to display the position statistically, and I apologise for the large number of figures which I have used. But I was asked to produce figures about our drawings and spendings and I have done so. I pass from that, and, in view of the situation I have been describing, I should like briefly to recapitulate the steps which are to be taken in accordance with what the Prime Minister indicated yesterday to the House. Our trouble is this wide, yawning gap between our exports and imports. That is the trouble and nothing else; neither less nor more than that. Therefore, all our measures must be aimed at narrowing the gap at both ends; at operating on both sides of the gap to narrow it. We shall only get straight when we can pay with our current exports, visible and invisible, for our necessary imports. That is the goal at which we must aim, and we must accomplish this in any case, whatever temporary alleviations may be got, whether through the international discussions in Paris with regard to Europe or the international discussions in Washington with regard to the part the United States can play.

We must close this gap within at the outside a short span of years. All other devices must be no more than bridging devices over a few years. This country will never be in the economic and financial position it ought to be in until we can pay with our current exports for our necessary imports. The gap must be closed right up. That I have constantly said, and I have quoted remarks of mine to that effect. This means we must spend fewer dollars on imports and on overseas expenditure, and we must earn more dollars by our own exports. These are the only three variables in the case. There is nothing else in it—our own exports, our own imports, including the invisibles, and our overseas expenditure. These three totals must be so adjusted that within a few years at the most we can close and do away with the gap.

Now we are confronted with the size of the gap. As my right hon. Friend the Prime Minister said yesterday, in terms of dollars we are confronted with a gap of £600 million this year so far as the Western Hemisphere as a whole is concerned, including Canada, the Latin American States as well as the United States themselves. With a view to closing that gap we are proposing—and I only summarise briefly what the Prime Minister said yesterday to put it into proper focus and into the picture—to reduce our foreign exchange expenditure with regard to imports of food from hard currency sources at the rate of £12 million a month and with regard to a large number of other items of expenditure which were mentioned yesterday, such as timber, films, consumer goods, foreign travel allowances, and so on, to an order—this is additional to the food saving—of over £50 million a year. The result of this will be, in round figures, that if we are to continue the reduction in food imports by cutting them from hard currency sources, hoping, as was indicated yesterday, to supplement these in considerable measure from soft currency sources, and intending to enter into discussions with the United States forthwith as to means by which this can be accomplished, including the loosening up of those obstacles of non-discrimination and the like——

Mr. Churchill (Woodford)

Hear, hear.

Mr. Dalton

Before the right hon. Gentleman came in I gave some figures on that. As I was saying, if we can do these things which will enable us to buy from other members of the sterling area in particular, the net effect, supposing that these other matters can be maintained for a year, and taking into account what can be got conversely from the soft currency countries, will be a total saving of an annual rate of £200 million a year. That is a fair contribution towards the size of the gap.

In addition to this, there will be the savings in respect of Germany. I have already referred to this heavy payment for keeping the Germans alive. My personal views on this are well known and we have all, including my right hon. Friend the Foreign Secretary, been doing our best to put an end to this inequitable arrangement whereby we have to feed the fallen foe to such a disproportionate extent of the total cost. Over and above the figures I have given, there can be savings which we cannot estimate with precision, but which the Foreign Secretary did indicate on Monday in this House, and I quote his words: What they— that is His Majesty's Government— cannot do, when this present scheme runs out, is to spend any more dollars for this particular purpose. That purpose is civil supplies for Germany. Therefore, it does involve discussions and review, in order to devise other plans."—[OFFICIAL REPORT, 4th August, 1947; Vol. 441; c, 1102.] I hope and believe we can add considerably to the closing of the gap in this regard. This still leaves a wide gap, and I have already indicated that that can only be narrowed by a rapid expansion of our exports, which was dealt with yesterday by my right hon. Friend the Prime Minister, and which is linked up with the whole problem of increasing the productivity of our industries here. I do not propose to re-traverse this ground which he covered yesterday.

I want now to come to another matter, and that is the Armed Forces. Yesterday my right hon. Friend the Prime Minister covered an exceedingly wide ground and he had to deploy statistics and arguments over a wide field. I am not quite sure that the House as a whole completely apprehended the importance of the figures that he gave on this subject on the Armed Forces, and, therefore, I propose to recapitulate them and to add a comment. As the Prime Minister said yesterday, we are bringing back to this country between now and the end of December of this year 133,000 British troops from a number of overseas theatres. For obvious reasons we are not going to tell the House the breakdown between the theatres. If anybody asks for that information it will be refused. The total is 133,000 from the overseas theatres as a whole, and this total will be further raised to more than 200,000 men brought back from all overseas theatres taken together by the end of March, 1948.

Mr. Mikardo (Reading) rose——

Mr. Dalton

I can get along much better if the hon. Gentleman will keep still. I want to explain the whole picture before I answer any questions. In addition to the 133,000 by the end of this year rising to 200,000 and more by the end of March, 1948, we are bringing back from the overseas garrisons 34,000 non-United Kingdom troops, chiefly Indians, to be returned to their own countries, which will also save the Exchequer something.

Mr. Wyatt (Birmingham, Aston) rose——

Mr. Dalton

Before I deal with the total of Armed Forces at home and overseas together I shall be willing to clear up any ambiguity in the statement I make.

Mr. Wyatt

Would the Chancellor make this quite clear? The Prime Minister said yesterday that we had 500,000 troops overseas. Does that mean that by the end of March next we shall have only 300,000 troops in all stations overseas?

Mr. Dalton

Yes, it means that and a bit more.

Mr. Wyatt

And 700,000 at home?

Mr. Dalton

That is true of British troops, but one has also to take into account the fact that, in addition to what my hon. Friend has said, there are the 34,000 troops, chiefly Indians, who are being taken back to India and other places, and to that extent diminishing the overseas garrison maintained by the British Commonwealth and Empire and making a saving for the Exchequer. With that addition, my hon. Friend is correct.

Mr. H. D. Hughes (Wolverhampton, West)

Does that include Germany?

Mr. Dalton

I am talking of the total Armed Forces—the Army, Navy and Air Force together. I have already said that I shall refuse to answer questions about particular theatres.

Mr. James Callaghan (Cardiff, South) rose——

Mr. Deputy-Speaker (Major Milner)

Hon. Members are not entitled to speak unless the right hon. Gentleman gives way.

Mr. Callaghan rose——

Mr. Dalton

If my hon. Friend will wait for one minute I make the same offer at the end of the next passage which I am about to place before the House. The total of which I have been speaking is that for all garrisons overseas.

Mr. H. D. Hughes

Does that include Germany?

Mr. Dalton

Germany is overseas—and a few other places. I repeat that I refuse to state how many of the 200,000 are being withdrawn from each theatre. If my hon. Friend the Member for South Cardiff (Mr. Callaghan) will give me a little longer I am now going to talk about the total strength of the Forces at home plus those overseas, and it may well be that it is on that he wishes to ask me a question. I will give way when I have said what I am now about to say.

With regard to the total strength of the Armed Forces, adding together those at home and those overseas, the Prime Minister stated yesterday that plans have already been made to bring the number down to 1,007,000 by the end of next March. This means that six out of every ten men who were in the Forces at the beginning of 1947 will have been released in the 15 months ending 31st March next. The total so released is 830,000 men. This is a large total and the process has been carried out in an orderly fashion and governed, except in a very small minority of cases, by the age and length of service principle for devising which, as I stated earlier on, the Coalition Government was entitled to take credit. It is a very great achievement of which we should hasten to be proud before we go on further to be critical. It is a remarkable achievement to have released 830,000 uniformed personnel of the Forces in this period with no serious disorders or disquiets. My right hon. Friend the Prime Minister said yesterday: I do not pretend that the Government can contemplate with equanimity the retention in the Armed Forces of so large a proportion of our manpower. [HON. MEMBERS: "Hear, hear."] My right hon. Friend said that yesterday, and it should have been cheered then.

Mr. Mikardo

It was.

Mr. Dalton

All the Prime Minister's colleagues, including the Chancellor of the Exchequer, totally agree with that statement. My right hon. Friend continued in these words: …an exhaustive inquiry has been instituted into the whole future of our Defence policy, and of the shape and size of the Armed Forces required to implement that policy. I would add, "In a rapidly changing world situation in which no one can give snap answers without going wrong." The Prime Minister went on: The results of this inquiry are receiving the most careful consideration from the Government as soon as they are received, and meanwhile we shall not relax our efforts to find any further means of reducing the numbers in the Armed Forces during the current financial year."—[OFFICIAL REPORT, 6th August, 1947; Vol. 441. c. 1510.] I add this obvious thought, that such further reductions can be achieved in only one or other of two ways or by combinations of them—either by quicker releases or by a slower call-up. Both these alternatives are being very closely studied at this time and, as the Prime Minister stated yesterday, we are making what we consider a very important contribution to- wards the balancing of our national economy by having decided already to defer the call-up of all persons engaged in agriculture, whether they are working on the land now or whether they respond to the appeal to take up work on the land hereafter. I see that my hon. Friend the Member for South Cardiff is on the jump, but I ask him to wait for a few more figures before I give way.

I want to separate the three Services because we sometimes go wrong by lumping them together and assuming that only the Army is referred to. At the present rate of rundown the Army will be down to 550,000 men by the end of March, 1948, and to 425,000 by the end of 1948; the Navy will be run down at the present rate to 178,000 by the end of March, 1948, and 166,000 by the end of 1948, and the Air Force will be run down to 279,000 by the end of March, 1948, while the figure for the end of 1948 is still under discussion. I have the authority of my right hon. Friend the Minister of Defence, with whom I have been in close consultation on this matter, to say that whatever further economy can be achieved by the continuance of the most searching investigations into the strength and rates of run down will be at once put into effect. I add, as is not unnatural, that it is my intention as Chancellor of the Exchequer to do my utmost to see that these efforts which are being made to speed up the run-down, without damage to the efficiency of the Forces and the carrying out of the commitments involved in our foreign policy, are crowned with further success.

In particular, one subject which is being very closely studied is whether economy in manpower overseas in garrison duties cannot be achieved by a greater use of air rather than of ground troops. Many people think that that is possible. I say, in conclusion on this matter, that this figure of 1,007,000 is not to be regarded as a target but as a milestone on the road of reduction which, as I have already said, we are determined to leave behind as rapidly as the conditions which I have been indicating allow.

Mr. Callaghan

I am very much obliged to my right hon. Friend for giving way, and I apologise for interrupting him. I want to ask him a very simple question. As he knows, for certain purposes Germany is regarded as a home station. I would like to know whether the 700,000 figure includes troops serving in Germany. If the 700,000 troops we have at home do not include troops serving in Germany, what on earth are those 700,000 doing?

Mr. Dalton

My hon. Friend has asked me a question, the answer to which is "Yes." Now I can pass on. Germany is overseas, and therefore the total of troops serving overseas includes those serving in Germany. I hope that is understood.

I have so far been speaking in purely financial terms, apart from this last excursion into manpower, regarding the external gap in our balance of payments. As my right hon. Friend the Prime Minister said yesterday, we have now to make a two-fold effort to narrow the gap. He indicated a series of positive and negative measures designed to that end. It is clearly desirable that we should concentrate our efforts, so far as we can, on the positive side of extending production and exports rather than be forced back more than we desire on to the negative side of restricting imports. We must do our utmost in both those directions. I am not going over the wide field of stimulating productivity which my right hon. Friend mentioned yesterday, except to say this: We are very much encouraged by the tone and the substance of the communiqués which have been issued in the Press this morning regarding consultations which have been taking place between certain of my right hon. Friends and the organisations of employers and trade unions in this country. There were discussions yesterday with, I think it was, the National Joint Advisory Council representing the employers and employed, and they issued a statement. A separate statement has been issued on behalf of the General Council of the Trades Union Congress. There is nothing but congratulation to be found in the fact that both these bodies have responded in the way they have to the calls made upon them and the facts placed before them by certain of my colleagues. It has been most encouraging.

I wish to say a further word about capital equipment. The right hon. Member for West Bristol (Mr. Stanley)—it is natural that he should have to go out for a moment, but I am referring to him because he raised a point—challenged me, or perhaps I ought to say invited me, to say something about one point, and that was on the question of capital programmes. It is clear now that we must concentrate predominantly upon exports and that certain of those capital programmes must be reconsidered and re-phased.

Mr. Churchill


Mr. Dalton

Re-phased. Some of them must be. I thought that was a military term which the right hon. Gentleman would know very well. These programmes must be rearranged in their time programme. Some capital developments, most desirable in themselves, on the desirability of which we take back nothing we have said, must none the less be put behind the export drive in terms of priority, which is the most important thing which lies in front of us. Next comes the production of the necessary goods for the home market. Therefore we have to slow down in some respects the capital programmes on which we have been working, and that will be done. We shall give particular priority to any capital developments, building and the like, which may stimulate the export drive on the one hand or stimulate import savings on the other.

Here I put home agriculture on the list. Home agriculture, is the biggest dollar saver of them all. We have legislated this Session already in support of British agriculture and we shall continue to do all we can to support it. I have sometimes been chided as being too ready in the expenditure of public money. I think that some of those who have so chided me will agree that money spent on the greater productivity of British agriculture could not be better spent in any alternative manner, except on the other priorities such as the production of coal and steel. We must set it high above all rival commitments, and that is what we are going to do. The Government are going to reconsider and rearrange the total scheme of capital expenditure, including all kinds of building, with a view to stimulating agriculture, coal and other fundamental necessities. That will also involve rearrangement and redevelopment of the labour force. The Prime Minister dealt with that yesterday, and I wish to add nothing to what he said.

I was also chided by the right hon. Member for West Bristol, when he opened the Debate yesterday, on the subject of inflation. I wish to say something about that. It is very clear that what we have to do is to import less and to export more of all the most important things, and that is likely to result in an increase in the inflationary pressure. It is likely to increase the total purchasing power as compared with the total of goods available to be bought in the home market. Therefore we must consider what steps should be taken to prevent this inflationary pressure growing to a point of danger.

I will say a few words about that now. I have been reading in the papers a number of rumours about an autumn Budget. Papers are very prolific in rumours in these days. I can only say that no decision has been taken either by the Cabinet or, at the Treasury, either in favour of or against an autumn Budget. Surely that is how things should stand. We shall not rule out an autumn Budget if it should be necessary to introduce one, but we shall not be rushed into introducing one merely as a symbol or as a more ineffective method of dealing with a situation better handled by other means. Only a week ago we parted with the Finance Bill, which is now the Finance Act, after discussing it at great length. For my part, although it is my duty to do whatever seems right, I should view with horror the prospect of having to embark again, soon after we have assembled at the end of our short holiday, upon another Finance Bill. If necessary, we shall do it, but we have first to be convinced. We do not rule it out and we do not rule it in. The suggestions which have been made for the autumn Budget are quite fantastic. I will not enumerate them. The papers have run riot.

Some people have been saying that a lot of taxes ought to be reduced or swept away altogether and others are demanding increases. They are not quite clear what the autumn Budget of their dreams should be—whether it should increase or reduce taxation. I will leave them to think about it before we reassemble. The Budget can be viewed—as we always have viewed it—in two separate aspects, in what I might call the narrower and the wider aspects In the wider aspects, in which we not only raise revenue and arrange expenditure, but in which we use the Budget as an instrument for influencing the national economy as a whole, it might be—I do not put it higher than that at this stage—desirable to have certain fiscal changes in the autumn. We must watch the position and see. Evidently there is no time to pass an autumn Budget before we disperse now.

In regard to the narrower aspect, I hate to say anything which would seem optimistic, least of all to quote it from the "Economist," but because they are never anxious to praise His Majesty's Government, nonetheless I read in last week's "Economist" these words: Amid the encircling gloom— They will have their gloom. They live on it— one bright shaft of light comes from the Exchequer returns. Week after week, they reveal a robust strength of revenue and successions of surpluses which are almost unseemly at this period of the financial year. That is what the "Economist" says. It is quite true—perfectly true. For the financial year to date, up to 2nd August when the last Returns are made out, the total of the revenue was £1,162 million; and the surplus over ordinary expenditure over this period was no less than £265,750,000. That is over the first four months. At the comparable date for the previous year there was an accumulated deficit of £299 million. This is for the record so that we may see how things are and see the picture as a whole. Even if I were to agree—I have given reasons why I would not—to exclude from the revenue all what I may call the debatable items, such as the war stores, the trading services and the miscellaneous revenues, which amount between them to over £244 million of my surplus, I am still left with a surplus of over £21 million in the first four months of the financial year. I apologise for adding this, but this is the first time for a very long time that this can be said. So much for the Budget in the narrower sense.

The Budget in the wider sense is a different story. I say that there is absolutely no ground in the narrower sense to play about with taxes at all. The taxes are bringing the money in very well and expenditure is falling faster than we were given credit for yesterday. In the wider sense it might be necessary to take some fiscal measures in the autumn to correct any increase of inflationary pressure, but I go on to add that yesterday the right hon. Member for West Bristol seemed to suggest that one element in what he regarded as the inflationary pressure—we all agreed; I have never denied it—was the high level of taxation being levied in the aggregate. He asked whether it was possible to avoid inflation if a certain percentage, which he gave us, was being taken in taxation. In reply to the right hon. Gentleman, I make this submission to the House. The height of the level of taxation in itself does not directly bear on this matter at all. I will deviate for a moment to say that before the right hon. Member for West Bristol came back into the Chamber I had been arguing that an autumn Budget is a matter which should be left in suspense until we see how things move, but many of those who are asking for an autumn Budget are asking for more taxation, and if it be that high taxation is a factor making for increased inflationary pressure, it can hardly be right to ask for an autumn Budget to increase the burden of taxation.

With great respect, I think that those who hold that view are mistaken. What matters is what one is spending the money on and how one is collecting it. A great deal of this high level of taxation and expenditure has been deliberately undertaken with a view to bringing about certain transfers of wealth and purchasing power in connection with a large number of schemes this House has approved in relation to social services and so on. Merely transferring income from a taxpayer to a beneficiary of public expenditure, whether he owns war stock or whether he is an old age pensioner, has no direct effect whatever on inflationary pressure. I say that in order to make a response to the argument yesterday adduced by the right hon. Gentleman.

I think we must hold the autumn Budget in suspense, committing ourselves neither one way nor the other. Two things can certainly be done and should be done now, and if pressed forward with great energy, they would have the effect of reducing any inflationary pressure that may develop. The first, as has already been said, is to increase to the utmost the productivity of our own industry so that we shall have a larger total production—on which we shall have to draw for export, but the larger the total production, the more there will be available for our own people. The other is an intensification of the National Savings Campaign. Nothing can be more assured—and this again is completely un-controversial—than the proposition that the best way to lessen the inflationary pressure is to persuade people not to spend all the purchasing power currently coming into their possession. From time to time we have made great efforts to stimulate National Savings. It has been on a non-party basis. Right hon. Gentlemen opposite and I have spoken together on the platform in the Albert Hall. There are some things on which non-party efforts are legitimate and proper on any view of these matters. In the light of the position in which we are now I appeal to all good citizens of whatever party to do their utmost to stimulate the Savings Movement, and give full support to Sir Harold Mackintosh and others who are carrying on with it. I will do my part, and I hope everybody else will join. [Interruption.] I was not getting at the noble Lord the Member for South Dorset (Viscount Hinchingbrooke): I was merely looking that way. This really is a case where the national need must take preference over any minor differences we may have on other matters. The National Savings Movement must now be encouraged and enabled to recreate the spirit which carried it so magnificently through the war and inter-war years.

Finally—and this has a potential bearing on the autumn Budget—it must be abundantly clear from what my right hon. Friend the Prime Minister said yesterday, that there is to be equality of sacrifice in this crisis by all sections of the community. Those who have sacrificed nothing so far—the "spivs" and the like; I do not know much about them, but they are constantly referred to in Debates and the definition of a "spiv" as one who has sacrificed nothing so far, may be as good as any other—should now be required to make their contribution. All sections should play their part in due order in this affair. That may or may not be reflected in an autumn Budget. I reserve that. But we are deeply conscious, as the Prime Minister stated, that there must be equality of sacrifice for all, and there must be seen to be and understood to be equality of sacrifice for all in the efforts we are now making.

I must apologise if I am talking a long time, but I want to answer questions, and it would be wrong to dodge the issue of the gilt-edged market. I am desired to say a word or two on that, and I gladly do so. During the past three weeks there has been, as we all know, a setback on the gilt-edged market. I regret that very much, and I hope that everybody else regrets it because it is not a good thing.

Earl Winterton (Horsham)

There has been a loss of money on it.

Mr. Dalton

Only for those who have recklessly sold. We must all regret this setback, but we have seen ups and downs on the Stock Exchange before. I am wishing to put the thing objectively and I believe—and this is the language used to me by some of those who give me their views based on experience—it is largely due to sentiment, rather than technical reasons, that a setback has occurred. When I say sentiment, I am not surprised. We have had an accumulation of bad news from everywhere all over the world; not merely on the home front, but all over the world from East and West comes bad news, and it is not at all surprising that there has been this decline.

Mr. Bracken

And too many Government securities.

Mr. Dalton

That is another matter, and I want to keep this on the minimum of agreement between us—[HON. MEMBERS: "Maximum agreement."] I remember very rapid ups and downs on the Stock Exchange in the past, and as with regard to an autumn Budget, so with regard to this, we had better watch and see what happens. [An HON. MEMBER: "And pray."] I am making no promises. I merely say that we have seen these ups and downs, and ups again, and I add this final point: it is a fortunate thing from the point of view of the Exchequer that this is a period in which we do not need large borrowings from the market—I have explained that in my Budget statement—other than, of course, the weekly renewals of the floating debt. There the position is completely unchanged. We still are charging the half per cent.—we still pay the half per cent. on Treasury Bills and the five-eights per cent. on T.D.R.'s, and there is no present intention of altering that. It is in respect of these short-term arrangements that the major saving so far has come from the cheap money policy. That is to be maintained without any change, and I add merely this: it may be only a question of time before other prices for medium and longer-term stocks adjust themselves to the persistently-held level of the Treasury Bills and the T.D.R's. That is all I will say on that.

I do not know whether the Conservative Party will vote—I read in the paper that they will do so—against the Adjournment of the House. I do not know whether they have decided it or not. They are entitled to do whatever they please, of course, and I would not wish to influence them one way or the other. But what I do say is that we, on this side of the House, jointly with them, have gone through a very strenuous Session in which we consider—I do not ask them to agree with this—that we have gathered a great harvest of legislation—[Laughter.] I said they would not all agree with that. My view is that we have carried through a strenuous Session in which we have brought into harbour a large number of exceedingly valuable Bills—some Socialist Measures, some Measures of social reform and social improvement, some Measures such as the Agriculture Bill, which are broadly agreed. We have had a very strenuous Session and many people, no doubt, are a little tired. I hope that some of those who are tired are also tough enough to see it out, even if we have to sit next week.

However, I am sure the duty of all of us, when we have departed for a short time from this place, is to use our rest and reflection in order to gather new resources for resolution to face this conflict, because conflict and national emergency it is. My right hon. Friend the Prime Minister laid out yesterday a very wide-ranging programme of action, urgent and important, to be taken. When we have secured once more a Vote of Confidence in the Government, if the Opposition challenge it, our business is to gear up with no delay at all the administrative machine to all the tasks necessitated by the various decisions indicated by the Prime Minister yesterday. These must be translated into vigorous action, not only by the various Departments concerned, but by all those industrial groups, trade unionists, employers and others who will be affected by them. We must not mistake words for deeds, and we must not mistake general declarations for detailed and effective action.

I would add only this: this is the first step, and many further steps may need to be taken It has been said that it is the first step which counts, and very often that is so. I hope this House will boldly take the first step involved in endorsing the very wide-ranging programme set before the House by the Prime Minister yesterday. This will be the first step in the conditions which I have sought to make clear uncontroversially in the earlier part of what I have said today; the first step towards our keeping control of our own national destiny and becoming pawns of no man; our national destiny as an independent people, friendly to all but dependent upon none; and to reshape our economic life to suit new conditions which, again I have sought to portray, are profoundly different from anything which our fathers knew—profoundly different and rapidly changing from the impact of these two world wars. We must not hesitate—and I am sure the majority in this House will not hesitate—to take any necessary measures to implement the principles that have been laid down as they shall from time to time reveal themselves. We shall ride out this storm in which we find ourselves, as we have ridden out other storms in war and in peace, and we shall come through unconquered and unconquerable. And those people whom we are proud to represent in this House, each for his own constituency, will not in this great hour fail.

5.48 p.m.

Sir John Anderson (Scottish Universities)

This is a grave occasion and, as the right hon. Gentleman the Chancellor of the Exchequer said at the beginning of his speech, we must all endeavour to be worthy of the trust that rests upon us as the representatives in Parliament of this great nation. I listened with close attention to the speech of the Prime Minister yesterday, and I confess at once that my feeling when he sat down was one of profound disappointment. I thought it was a speech in no way "adequate to the occasion. I listened in vain for any ringing call to action. What did the proposals that were unfolded by the Prime Minister, that have been developed but not materially added to by the Chancellor of the Exchequer, amount to? A few cuts, painful cuts no doubt, but obviously insufficient, obviously only to be regarded as a first instalment; a few vague suggestions for reorganisation in the industrial field, although the Government are supposed to have been planning hard all this time; a half-hearted appeal to people to work harder and not to press for more wages.

What a note to strike! Unconvinced, and unconvincing, I thought. We had a suggestion for a longer day in the mines, which we are told on good authority is likely to be impracticable. We are told that agriculture is to be brought back to its wartime peak, but not for four years. The Chancellor of the Exchequer said that agriculture was at the top of the list, but four years is a long time to wait. We have been told about the reductions in the Forces. It is not clear to me how far those reductions go, beyond a mere acceleration of a process which would come about anyhow. No doubt all these small steps are steps in the right direction, but surely they are grotesquely inadequate, even as palliatives, if that word can be used in such a situation. Until the latter part of the Chancellor's speech, no serious attempt seemed to be made to deal with what I, at any rate, regard as fundamentals; and, as regards the latter part of his speech, I confess that I prefer the sombre note that characterised the speech as a whole to the note of optimism on which the Chancellor endeavoured to conclude. This is not the moment for recrimination. As my right hon. Friend the Member for West Bristol (Mr. Stanley) said yesterday, we are all of us in this mess togther, and we must join in order to see what we can best do to get out of it.

I feel that it is necessary for me to look back over a period, in order to see what are the causes that have contributed to our present plight; to see what action has been taken by His Majesty's Government which may have aggravated the situation, and, on the other hand, to see what action has been omitted which might have bettered it. We must look to past experience to see what to do, and what to avoid in the future. His Majesty's Government are in no way responsible for the general situation with which they were confronted at the end of the war. They are in no way responsible for the state of economic and financial exhaustion in which we. emerged after, regardless of consequences, pledging all our resources to the single purpose of achieving victory. Neither are His Majesty's Government responsible for the great inherent difficulty of expanding our exports to the extent necessary to meet our economic situation. Nor are they responsible for the increased prices, upon which the Chancellor laid great stress, of the imports which we have had to purchase from various markets. No doubt also the Government have had some extraordinarily bad luck. They had bad luck in the weather last winter.

Mr. Shurmer (Birmingham, Sparkbrook)

We arranged that.

Mr. Osborne (Louth)

Do not be foolish.

Sir J. Anderson

They have had bad luck in the still slow recovery of Europe from. the war. Nevertheless, there is a great deal in my judgment for which the Government are responsible. I shall endeavour to show that they have taken measures at home which have aggravated the situation. In my view, they are undoubtedly responsible for failure to realise the developing situation because, as the Chancellor admitted, the clouds began to gather a long time ago, and to apply correctives in time——

Mr. Shurmer

Not like you did.

Sir J. Anderson

Perhaps I may be allowed to go on. I think they are also to some degree responsible, although not perhaps to the extent that might have been thought before the Chancellor gave the full figures, for which the House is indebted, for improvidence in the use of dollars. I will develop that point later. But above all, I say the Government are responsible for creating the wrong atmosphere in the period of postwar reconstruction.

I am going to speak very bluntly. When I have been critical before I have spoken with studied moderation, and, I have been forced to conclude, entirely without effect. When I spoke last February in the Debate on the Economic White Paper, I referred to the necessity for getting rid of certain prevalent fallacies which had been established in people's minds by Socialist declarations and Socialist policy over the last 30 years. What I said—I will not repeat it, it is all on record—was dismissed almost contemptuously by the Prime Minister. He said in the speech with which he wound up the Debate that everything I said was either a truism or a fallacy. He should not have said that. I am more convinced than ever of the paramount importance of bringing about a better understanding throughout the country of the basic facts of the situation in which we find ourselves, and I do not believe that any measures which a Government may propose in detail can be effective against the background created by the past declarations of policy of His Majesty's present Government.

Nothing could in fact be simpler than the basic facts of our situation. We are-at present consuming as a community to the tune of some £450 million to £700 million a year more than we are producing. That concerns our standard of life, and it is not essentially a dollar problem. Fundamentally it has nothing to do with dollars, and I want to make that point perfectly clear. The conclusion to be drawn from the simple facts of our situation is equally simple, that we have to produce more, or to accept a reduced standard of life. There is no escape from that, and the detailed considerations that so often are brought forward which fog discussion have no bearing at all on those basic facts.

The Government have known for a long time that this trouble was coming. The House of Commons have known it for a long time. But what have the Government done in anticipation of the development of that situation, which the Chancellor said had come upon us in the end with such startling suddenness, but of which we had long warning, for the clouds have been gathering for a long time? One of the first steps the Government took on coming into office was to bring into operation a system of family allowances, and almost simultaneously greatly to improve the old age pensions of the people of this country. I do not blame them overmuch for that—[An HON. MEMBER: "Overmuch?"]—I think they acted too hastily. My own view has always been that the time for conferring those welcome boons on the people of this country was not in a period of excessive purchasing power and deficient production, but at the moment when the beginnings of a postwar slump were becoming apparent. I always thought that, but I would not criticise the Government unduly for the temptation to do what they did must have been very strong.

In view of what has happened, however, it must be recognised that to have done what was then done aggravated the situation which was developing, because it involved heavy additions to purchasing power of an inflationary nature. That would have been perfectly satisfactory if the ship of State had been on an even keel. As things were it was unfortunate.

Then the Government went on, and they decided to carry out another measure for which they were not primarily responsible, that was, the raising of the school age. I referred to that in the Debate on the Economic White Paper and I was told that what I said was unworthy and mean. The result, if the decision is to be made effective, is that scarce materials and scarce labour have to be diverted to the provision of new school buildings and new equipment, and, at the same time a certain reduction, not perhaps a very large one—this is not a major point—is being made in the labour pool. It is a curious fact that these very measures, the raising of the school leaving age and an improvement in old age pensions, were seriously considered in the last crisis with which a Labour Government were confronted, in 1929–31, in an entirely different situation, in which there was a deficiency of purchasing power and an excess of productive capacity.

What have the Government been doing about higher wages and shorter hours? They know well enough, they have known all the time, that every increase in wages which is not matched by increased production is inflationary; and that it works a double mischief. It means less production and higher costs. We see today, as clearly as can be, the beginning of a vicious spiral. The railwaymen, and there is no more deserving body of men in the country—I say that frankly—make an application, and the court recommends that that application shall be granted, not indeed in full, for what reason? Because it is of the opinion that the terms of remuneration of railwaymen are inadequate by reference by what is being enjoyed by workers in other walks of life. The truth is that those other workers are, in present circumstances, getting too much.

Mr. Mikardo

Which workers?

Sir J. Anderson

We know perfectly well how the thing has been moving from point to point—higher wages for less production——

Mr. Beswick (Uxbridge)

More profits.

Sir J. Anderson

That has nothing whatever to do with this; it is quite irrelevant. The old fallacies keep cropping up. To give higher wages, and to acquiesce in shorter hours of work in the sort of situation that was seen to be developing, was, I say frankly, an offence against the interests of the State. The same thing is true about the extension of holidays with pay. All these things are eminently desirable. No right-minded man would wish to see men made to work longer than is necessary, and have less leisure than they might have or get less remuneration than they might enjoy, if we could afford it.

Mr. Shurmer

Your class.

Sir J. Anderson

There is no question of class involved here.

Mr. Shurmer

The right hon. Gentleman always——

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

The hon. Member must control himself.

Sir J. Anderson

It is a question of what the community can afford.

As a result of all this, there has been created up and down the country a wholly fictitious sense of well-being, quite naturally but quite falsely attributed to the presence of a Labour Government. The fact is that we as a community have, since the end of the war, been living on a gigantic dole from the United States, and that cannot go on. Why have these facts not been made clear to the people by His Majesty's Government? Then there were these very ill-considered Measures of nationalisation, which make no contribution whatever to the relief of our present position, but which, on the other hand, excite needless controversy, and involve at best a great diversion of effort.

I recall that in the earlier Debate on the economic White Paper the Prime Minister used an argument about the Labour Government's nationalisation schemes which he repeated in slightly different terms in his speech yesterday. He said, in effect, that the Opposition had their own way in the war, that Labour had to agree to the continuance of the status quo and to refrain from pressing for changes which they regarded as eminently desirable, and that Labour should have their own way now. Surely the argument is wholly fallacious. Labour gave up nothing by not pressing for those measures during the war, because the future was not being in any way prejudiced. This Government, however, have been pursuing a policy which involves irreversible steps. There is no sort of force in the argument which the Prime Minister used in that connection.

Then we had what I will continue to call the fiction of a balanced Budget. I say that despite what the Chancellor has just said. No doubt the Budget was balanced as a matter of arithmetic, but it was balanced in such a way that it could not bring to the country the advantages that may naturally and properly be expected from a truly balanced Budget. The Chancellor's attitude of self-congratulation in regard to the Budgetary position and the fate of his cheap money policy seems to me to be singularly out of place today.

Before I say a word about the remedies which I think ought to be applied in the present situation, I must develop for a moment what I said at the beginning about the possibility that there has been improvidence in the use of our dollar resources. Despite the full explanation which the Chancellor gave, there is still something which requires explanation. I do not intend to quarrel with anything which the Chancellor said about the Loan Agreement, about either clause 9 or the convertibility clause. I supported the Agreement. I thought that the amount of the loan was inadequate; I thought that the convertibility provision was onerous in the extreme and was not such as we would have accepted had we had any alternative; I thought, and I still think, that the arguments advanced against the non-discrimination clause, although there are valid arguments, were being grossly overstated, because we have always recognised convertibility so far as the sterling area is concerned, and we may well have had to accept convertibility as the price of obtaining supplies from countries outside North America from which we have to get them. But I would ask this: Is it perfectly clear that we have not in a number of cases agreed too readily to buy for dollars goods that we might have done without? I do not think it is at all established that that has not been the case. I want to say just a word in the same connection——

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

Would the right hon. Gentleman say to what sort of goods he was referring?

Sir J. Anderson

I was thinking of fruits, luxury goods and that sort of thing—things that we could have done without. I put the question: I make no assertion—[Laughter.] Hon. Members must recognise that the Government always have certain advantages over the Opposition. They have information that is not available to the Opposition. If we are to criticise, as we are entitled to criticise, we must sometimes be able to ask questions, even questions with an implication, without making ourselves responsible for any positive assertions.

Similarly, I want to ask a question about the agreements that have been come to—provisional agreements, as the Chancellor told us—in the matter of sterling balances. I am grateful to the Chancellor for the very full figures he gave to the House. I think it a very good thing that as much as possible of that top hamper of sterling balances should be removed into-some safe pigeon hole. It may be that we were justified in incurring some obligations in return for securing a voluntary agreement as to how we should deal with these balances. I want to ask the Chancellor in that connection whether he could tell us how much dollar exchange we have had to undertake to make available in respect of sterling balances—not in respect of current transactions—as the price of the agreements that he has made so far.

I would like also to take this opportunity to state my view of how we should deal with the problem of sterling balances. I think we should make it clear, first, that so far as we are concerned there will be no one-sided repudiation. We should make it equally clear, as the Chancellor has done, that we claim the right to draw a sharp distinction between sterling balances arising in the normal course of trade, and balances which represent sterile war expenditure. I think, further, we should make it clear that, while there is to be no repudiation, we recognise no obligation to pay any particular rate of interest, or any rate at all, on those sterling balances, or to repay them by any given date. If those points, with which the Government may find themselves in agreement, are made absolutely clear as the combined, the united, view of this House of Commons, the course of future negotiations may be made a good deal simpler.

I now want to say something on the basic remedies which ought to be applied in the present situation. First, I think we must aim at a real budgetary balance by pruning expenditure ruthlessly—not by increasing taxation but by pruning expenditure ruthlessly In that connection, it is absolutely essential that the Chancellor should make a determined effort to deal with the running sore of the food subsidies. It is not a thing that can be dealt with simply by a stroke of the pen. There would have to be compensatory adjustments. The situation is as unsound and as debilitating as if, in fact, we were all living on charity. Anything that conceals the true facts of an economic situation must work mischief. This is something which requires close attention. Whether or not the Chancellor of the Exchequer is contemplating a further Budget this year, and I say nothing about that, this is a matter which ought to have very close attention. I think that the second point I have to make is equally fundamental. It has become absolutely clear that in this country we must have some measure of controlled deflation. I do not like that prospect any more than any hon. Member opposite, but it has become absolutely necessary.

Mr. Mikardo

What about unemployment?

Sir J. Anderson

There is no immediate danger of unemployment. We must take account of the inflationary pressure that will arise when the great flow of free imports comes to an end. There is no escape from that conclusion. At any rate, there is no escape but one from that conclusion, because this is where the internal economy of our country reacts on our external economy. I strongly deprecate the tendency, which is far too prevalent, to try to draw a sharp distinction between the problems of our internal economy and the problems of our external economy. On that, I say that either the money value of our production must be brought to a lower level or the value of the money that is paid for our production must be reduced. In other words, we must have either deflation or devaluation sooner or later. I think we all ought to think very hard before reconciling ourselves to the second alternative. The second alternative, devaluation, will be inevitable sooner or later if our competitive power in foreign markets is impaired by excessive costs at home. The natural remedy—devaluation is a natural remedy, a logical economic remedy—which may be a cure in the long run may be disastrous in the short run, because the immediate effect of applying it is to put up the cost of all necessary imports, and we shall always be compelled to import and, in that way. to aggravate the situation. There is one further consideration and that is its effect upon the sterling area. It is a very grave question whether the sterling area which means so much—and I agree with the Chancellor entirely in this—could be maintained if we had to face any serious devaluation.

Therefore, the first thing is to restore our internal economy, to balance the Budget not by increasing taxes but by reducing expenditure. The Chancellor may remember that in the course of his Budget speech he said rather airily that the difference between the Government and the Opposition seemed to be that the Opposition were all in favour of reducing burdens and the Government put redistribution in priority. That, I think, was not a correct statement. The outstanding difference was that the Opposition saw quite clearly that unduly high taxation was uneconomic. The Chancellor may have noticed that Lord Brand, in another place, in a speech which is well worthy of study, referred to the fact that in his view the Government were always inclined to stress distribution rather than production. What I do not think he pointed out, and what I want to emphasise now, is that so far as redistribution is concerned it is no longer, as it was at one time, a question of taking from the rich in order to give benefits to the poorer sections of the community. The kind of redistribution that has been going on during recent years has been a process of taking from people of moderate or small means who are not in a good position to protect themselves, for the benefit of others of similar economic status who have greater power and influence in the community.

If that statement is examined impartially, it will be found to be absolutely true, and I hope that we shall hear less in future of the virtues of redistribution. I would say, further, that, in combating the inflationary tendencies that are becoming more and more apparent and in setting in operation the tendency towards controlled deflation, the Government should not be afraid to use the financial instrument. I am very familiar with the criticism that the power of finance has frequently been abused in the past. I think that criticism has been exaggerated, but now that the Government have got the Bank of England safely nationalised, they surely need not be afraid of that any longer, and, inasmuch as inflation is a financial and monetary phenomenon, the financial instrument is the appropriate one to use in that connection. I venture to add that I hope the Chancellor, despite what he said towards the end of his speech, will look again at his cheap money policy. I have said before, and I say it once more, that I think that a good policy and a good instrument has been in danger of being ruined by the Government being too greedy and trying to go too fast.

I wish to say a word now about the proposals that have been put before us by the Prime Minister and the Chancellor. They have to be looked at from two points of view; first, as palliatives, and secondly, from the point of view of whether they will help to cure the fundamental troubles of our situation. I do not want to develop to any extent what I have already said about the details of the short-term remedies that have been proposed, but I am entirely at a loss to know what long-term remedies the Government really have in their minds. They deserve our sympathy, because, in that matter, their task cannot possibly be an easy one. There is so much to be unsaid, so many declarations and promises that will have to be recalled. I remember that, in one of our recent Debates, an hon. Member opposite, who was quite frankly concerned at the situation, asked how he was to persuade his constituents to wait longer for the benefits they have been promised. He obviously did not realise that the account was already heavily overdrawn. These benefits have been received in excess already.

Though the task may be difficult, it is only the Government of the day that can possibly discharge it, and they are entitled to look to us in the Opposition for support for all reasonable measures that they may propose, but they must, of course, expect that we shall scrutinise very closely any new powers that they seek to take and endeavour to elicit from them the fullest explanation of the use to which they intend to put those powers. I believe, however, that, difficult though the task of the Government is bound to be, grave though the situation which confronts us is, the task is nevertheless not an impossible one.

There is one factor which is outside the control of the Government, to a very large extent. I have referred to it already—the rate of recovery of the other countries of Europe which have been affected by the war. Apart "from that, the adjustment that has to be brought about is only an adjustment which is, arithmetically, about 5 per cent. of the national income. As one of the Sunday newspapers put it, it is an adjustment which represents only, the difference between pounds and guineas and, surely, that is not a big one. I have been listening to the terms of speeches from hon. Members opposite, and notably that of the hon. Member for Bolton (Mr. J. Jones), and I have no doubt that, if' the spirit of the people of this country is reflected by those speeches, and if proper guidance be given by the Government, we shall come safely through this trouble.

The first step towards a cure is to create the right state of mind throughout the country, and that is the note on which I wish to end. We have all heard of Aristotle, a very wise man, well-intentioned and upright, who, in the democracy in which he lived, had to face two charges. The first was that he had worshipped false gods, and the second was that he had corrupted the youth of the city.

Mr. Mitchison (Kettering)

To whom is the right hon. Gentleman referring? Was it not Socrates?

Sir J. Anderson

That only shows the deterioration which results from sitting here and listening to very long speeches from hon. Members opposite. It was Socrates, and the charges were that he worshipped false gods and corrupted the youth of the city. He was condemned to die by poison. Hemlock has gone out of fashion; but the present Government have been guilty of much the same crimes. Will they realise that, unlike Socrates, they have time to expiate their offences before inevitable dissolution carries them away.

6.28 p.m.

Mr. Driberg (Maldon)

I am grateful to you, Mr. Deputy-Speaker, for allowing me briefly to complete the remarks that I was making when the Debate was suspended last night. Because I have promised to be very brief, I must resist the temptation of dealing with the speech which we have just heard from the right hon. Gentleman. I can only say that I hope that the Press will give it the widest possible publicity, so that—not so much from its Platonic peroration as from the earlier passages in that speech—the whole nation, and especially the wage-earners, and the old age pensioners, may learn exactly how this situation would have been dealt with by any government of which the right hon. Gentleman would have been a member: dearer food, cut wages, cut social services, workers regarded not as human beings but just as part of a profitable labour pool.

However, I must return to the less controversial subject with which I was dealing last night—a limited, but, I think, important subject. I was inviting hon. Members, and particularly those who represent urban constituencies, to consider the startlingly and uniquely disadvantageous position of agriculture in respect of manpower. I was glad to hear what the Chancellor had to say this afternoon about agriculture, but, on this particular point of manpower, I would ask the Government to consider very seriously that there is no other industry, in all our under-manned industries, which has been asked, as this one was yesterday, for a 20 per cent. increase in output, but which, simultaneously, has to face the loss of 120,000 of its young, fit workers within the next year. I refer, of course, to the German prisoners. I am one of those who believe that we should send them home as rapidly as possible. I was glad to hear the Prime Minister say that we have relied upon them too much; and I was rather sorry that the Foreign Secretary, who is a humane man, saw fit on Monday to use arguments for their retention which amounted to little more than the old slave-owners' arguments.

But, although I believe that we are bound, morally and politically, to return them home as quickly as possible, I realise that that leaves a very serious gap indeed in our agricultural manpower. These prisoners are being sent home at the rate of 15,000 a month—perhaps 30,000 a month after the harvest; I hope so—but can my right hon. and learned Friend who is going to reply to this Debate tell us that the gap can really be filled at the present rate of recruitment? Obviously, it is most desirable that it should be filled by our own people—by those demobilised, and by those attracted from less essential industries. The snag there, of course, is accommodation. We cannot possibly hope by next year, when the prisoners will all have gone home, to have built enough houses in the rural areas to accommodate another 100,000 or 150,000 new agricultural workers and their families.

What is to be done to deal with even this short-term crisis in manpower? Obviously, we must have recourse, temporarily at any rate, to the services of some Poles, and some displaced persons. But, here again, can the Government say whether the Poles, through the Resettlement Corps, or the displaced persons are coming forward in sufficient numbers to replace the 15,000 Germans who are being sent home each month? I do not believe for a moment that they are. Again, the Poles and displaced persons will be free men; they will be civilians; we cannot apply quite the same sort of discipline to them as we can to the prisoners of war—although they are now very humanely treated. They will have to live in camps, I suppose. Will the Government continue to provide transport for them, as it does for the prisoners of war?

All these problems must be worked out in detail now, and I hope that the Government, either tonight or before the House rises, can tell us how the intake of the newcomers is to be regulated, and increased, to fit in with the departure of the prisoners. That is the short-term, acute problem. Essentially, the re-peopling and revival of the countryside depend, not on Poles or displaced persons, but on its being made so attractive to live and work in that the young people will not drift away from it to the towns.

Wages, though important, are not everything. It is more important to have something to buy with the wages—for instance, a fairer distribution of consumer goods to small village shops; and the priorities on housing materials, about which the Prime Minister spoke yesterday, should be very steeply graded indeed in favour of mining and agriculture. But, even more important, is the sense of status, the knowledge, which the coal-miners now have that they are the aristocrats of industry and are really contributing something valuable to the life of the community. The right hon. Member for West Bristol (Mr. Stanley) was, I thought, quite wrong yesterday in suggesting that the Government's campaign in regard to coalmining had been, as he put it, "publicised, if ineffective." The answer to that was given by the Prime Minister when he referred to the net increase of 27,000 recruits this year. I believe that a similar dynamic and imaginative appeal to all the people might make them conscious once more of the true nobility of the vocation of those who work on the land. It is that dynamic—and here I speak generally, and conclude with thanks, Mr. Speaker, for your indulgence—which, I am afraid has hitherto been lacking in the leadership which the Government have given to our people.

I agree very strongly with what was said last night by my hon. Friend for Northwest Hull (Mr. R. Mackay), though I would add to his reference to Western Europe, a reference to the countries of Eastern Europe, whose supplies of timber and food can be so vital to us in the next year or two. I hope most sincerely that this Debate marks the end of the "phoney" peace, and that there will be no mercy for "spivs" of any class, whether the Riviera and Ascot "spivs," or the seedier "spivs" of Soho. The Prime Minister did not make it plain whether he was referring to the "Tatler and Bystander" class of "spivs" as well, but I hope he was. I hope, too, that my right hon. and learned Friend who is to wind up this Debate will say something a little stronger than the Prime Minister's reference to "appealing" to companies not to declare high dividends. You order the workers about: you "appeal" to their bosses. I am sorry that I have over-run my promised time by a minute or two, Mr. Speaker, but I wanted to get that off my chest, and to say that this can be the end of the "phoney" peace if the Government will lead us straight along the Socialist path.

6.37 p.m.

Mr. Clement Davies (Montgomery)

The Chancellor's speech this afternoon contained two statements with which all of us can agree, namely, that we are in the middle of a very great nationalemergency, and that we must not fail in our trust. He then went on to say that the storm had sprung up very quickly. The right hon. Gentleman has several qualities, which we all recognise, but he lacks one which would stand him in very good stead, and that is a long memory, because, towards the end of his speech, having said earlier that the storm had suddenly burst upon us, he said that it had not come upon us unawares and had not come upon us overnight. With the second part of his statement, I absolutely agree. What are the preparations that were made during the time when it was obvious that the storm was coming, and what are the proposals which the Government are now putting forward to meet our difficulties?

I only wish that, instead of delivering that speech, the Chancellor had issued yesterday a White Paper containing the figures which he took so long to give us. I do not think that anyone in this House has ever taken so long to say so little. It was only at the very end that we got two suggestions as to what might be required from him as Chancellor, and only a very mild passing reference at that. The Prime Minister said yesterday that he was not going to dilate at length on these financial matters, but that they would be left to the Chancellor to deal with. All that the Chancellor had to say, in dealing with this great question of inflation, was what we all know, first, that we have got to increase production, and, secondly, that we had better also try to drive forward the national savings campaign. I had expected far and away more definite suggestions from the Chancellor than we have had this afternoon.

In his speech yesterday, the Prime Minister rightly called for a united effort by the whole nation. There can be no doubt whatsoever that that united effort will be forthcoming. Whatever our party and whatever our position—employers, managers or workpeople—we will all cooperate as we did during the war. I am confident also that, in spite of the tremendous difficulties that confront us, we shall pull through triumphantly. Not for the first time has this old country shown its mettle best when the difficulties were greatest. It has fine moral qualities, and there is throughout a high sense of comradeship when we have been tried in the fire, and we then come through not only refined, but stronger and better than we were before.

I must say, however, that what we all need, especially at a time like this, is leadership. There is plenty of courage and determination, and great ready willingness, but we must know in great detail what is required. Therefore, we want not only guidance but decision. Hitherto, both vision and decision have been sadly lacking. No Government, I think, at any time in the long history of this country—certainly not within recent memory—started their career with greater hopes and opportunities than this Government. [HON. MEMBERS: "And greater difficulties."] They still have a great majority in this House. They have also had, more than any Government at any time, a more ready help, willingness and good will from the working people of the country. The difficulties confronting the Government, especially in the transition from war to peace, as hon. Members who have already interrupted me have suggested, were immense; but may I also point out that the greater the difficulties, the greater the opportunities?

There has been a lack of vision, a failure to see the coming storms and stresses, and, consequently, there has been a lack of preparation to meet them. At times there has been so much optimism, as displayed in some of the speeches delivered by Members of the Government and even by their supporters, that one would have thought that there were really no difficulties confronting us, but that all was well. They so continued, in spite of all warnings, and they seemed to disregard such warnings as some of us have been endeavouring to give them, not merely during the period of this Parliament but in the last Parliament, when we were looking ahead to see what might happen when the war was over.

The warning last year was that we had an adverse balance of £450 million, and there then came the need to negotiate this loan with the United States of America and with Canada. In February of this year we were told that it would be unsafe for us to borrow more than £350 million; in other words, that it would be unsafe for us to get into a position where the adverse balance between our export and import trade would amount to more than £350 million. That was just six months ago, and that was the statement made in the document with which we are all so familiar—the Economic Survey for 1947. It would be as well for me to recall paragraphs 77 and 78 of that document. All the arguments either from the Prime Minister or from the Chancellor of the Exchequer have been directed to one point—the dollar shortage, and our difficulties with regard to our position here in the Eastern Hemisphere as against the Western Hemisphere. This was their idea of what would be happening—carefully prepared, and issued to us and to the world: This dollar problem within our total balance of payments can be wholly solved only by the economic recovery of Europe and the Far East and the establishment of equilibrium in all the major trading countries' balances of payments. Paragraph 78 stated: The United States and Canadian credits must last us not only until we have ourselves established a stable balance of payments and are exporting as much as we import; they must last until this special dollar problem is also solved. No one can predict how long this will be. But we certainly cannot assume that world recovery will be rapid enough to provide a quick answer to our difficulties. What of the suggestion of the storm blowing up over night, in view of that statement in February that the Government estimated that the loan must last us until our exports were equal to our imports? Now, in August, we have to admit that the adverse balance is not only £350 million, which is beyond the danger point, but is amounting to £600 million and £700 million. Then the statement is made that the storm blew up overnight. To my mind, that is the most acid comment that one can make upon the lack of vision of His Majesty's Government in dealing with this situation.

It is now plain that the estimate of the Government, with all the best material that was available to them, has been hopelessly wrong, that inadequate steps have been taken to meet the situation, and that the country is now face to face with an austerity such as it was not called upon to meet during the war. What is more, in the last month we have been drawing, not at the rate of £350 million, which is the danger point, but at the rate of £2,100 million, which is the rate at which we were drawing in the month of July. If any further comment on this situation were required, it could be provided by the statement made by the Leader of the House in answer to a question which I put to him exactly a fortnight ago. We had all been told that the House would be rising possibly today or, at the latest tomorrow, and that we would not be called back, as again we have been told today, until 20th October—that this House, which is the trustee of the public welfare, would be going away for all these weeks. Therefore, I put this question to the Leader of the House: Before the House adjourns for a comparatively long Recess, do the Government intend to make any further statement on the economic position, especially with regard to the progress which has been made in Paris?

Mr. Orbach (Willesden, East)

The Opposition did not seem to be very interested.

Mr. Davies

I do not understand what that interruption means. Every one of us, I should have thought, would have been interested I was using the earliest opportunity I could to ask the Leader of the House whether it was possible that the House could debate such matters as we are debating today. May I recall the answer I got? The Leader of the House said: If anything concrete should arise regarding the Paris Conference, no doubt consideration would be given to making a statement, but I did not contemplate, subject to what may arise, that any further Government statement would be made."—[OFFICIAL REPORT. 24th July, 1947: Vol. 440, c. 1617.]

Mr. Tiffany (Peterborough)

Surely, that dealt with the Paris Conference?

Mr. Davies

The question was addressed to both points. I thought the hon. Member was awake and listening. I asked definitely if any statement would be made on the economic position, and particularly—because that had a bearing on the economic position—if there would be a statement on what was taking place in Paris. I dealt with both matters. It is no good the hon. Member shaking his head. I shall be tempted to say what on one occasion counsel said to a judge "It is no good shaking your head, my Lord: there is nothing in it." The greatest disservice one can render at the present moment is to pretend that all is well, or to make friendly comments on the actions of the Government. I think that praise—or un- deserved praise—would be a disservice not only to the country but to the Government themselves.

Frankly, I was disappointed with the Prime Minister's speech. I am sure that the country had expected to see a balance sheet presented, a balance sheet not only showing the present position, but showing quite clearly how it was proposed to meet that situation—what were the proposals, what would be the effect of each one of the proposals, and what would be the ultimate result. All we knew, when the Prime Minister sat down, was that there was to be a heavy cut in food, especially from the dollar countries, a cut of £144 million a year; that we were to have less petrol; less money spent on films; less money to be used by travellers abroad. I think that even in that last measure there may be a danger—a danger that we may lose a good deal of trade if we do not send commercial travellers abroad.

Mr. Austin (Stretford)

That refers to holiday makers.

Mr. Davies

No reference was made to them. There is to be a tiny cut of only 80,000 in the Forces, which will still remain at over one million. There was a call for longer hours in the mines, greater production in agriculture, and a possible—unnamed—cut in houses. We were left to make our own calculations as best we could as to what the effect of this will be.

The adverse balance of our trade is somewhere between £600 million and £700 million. The bulk of that adverse balance is in the very high cost and the very large volume of food and raw materials and machinery that we have to buy at the present moment. There are signs that the prices of foodstuffs abroad are breaking. In so far as this decision will be to lay off buying to the extent of £150 million, it may assist in breaking down the prices of foodstuffs abroad. In so far as it accomplishes that object it is good. But it is the only good thing about it. For we must have food, not only to live on, but in order that we may be able to produce the very goods that are needed for the people of this country and to send abroad. We ought not to reduce our foodstuffs. Nor ought we to reduce our raw materials, for we need them in order that we may make goods to send abroad. The decision even to cut timber by £10 million a year was a grave one, and I doubt very much the wisdom of it. I am glad that, apparently, there is to be no cut in machinery. That is quite right, for we must maintain our position so that we may be able to produce goods as cheaply as those other countries which were able to build up during the war.

But when we add all these cuts together, what do they amount to? There is the cut of £144 million on food. The statement made by the Prime Minister was that those purchases will no longer be made from the dollar countries but from the non-dollar countries. These will have to be paid for in exactly the same way as we are paying for food from the dollar countries. So what the saving will be, I do not know. But what is also rather striking is the question—will the food be obtainable in the non-dollar countries? I understood from the Minister of Food that he had combed the world to try to get cheap food, and if, in fact, he could have obtained it in the non-dollar countries before now, he should have obtained it, and not waited until now. So what the saving will be on that, I do not know. Nor has any figure been given us.

There will be a saving of £4 million on petrol, a saving of some £5 million on luxuries, and so on. What will they total up to against the enormous bill of £1,700 million which our imports today are costing us? That is the kind of statement we should have liked to have seen in a White Paper. The Government issued two White Papers in February. I am sure it would have been better for us if this week we had had in black and white the figures which were given to us today by the Chancellor of the Exchequer, so that we ourselves could have looked at them, and discussed them and argued them and what the effect of them would be and then we could have seen what the effects would be of what the Government are proposing in trying to close this tremendous gap of £600 million or £700 million. Is the Government's object, in making some of these cuts, a psychological one? If they will tell us plainly that these small cuts are only meant to have a psychological effect, we can understand them. But let the Government be honest, and fair to the public, in telling what the position is.

Wherein lies the real fault? Last year we received, as we now know, some £450 million worth of goods—food, raw materials and machinery—more than we were able to pay for. Already this year we have had about a similar quantity of goods and materials and machinery, for which we have not yet paid. Some day we shall have to meet the bill, but we have not met it this year. Nevertheless, having had all that come unto us, we are unable to pay our way. We are unable to produce and send out the goods that will pay for these imports. What are we to do? We cannot cut down, and should not cut down, food; we should not cut down raw materials; we should not cut down machinery. Without the food, without the materials and without the machinery, we cannot produce the goods which will enable us to pay our way. That is perfectly clear.

Therefore, what we have to do is to look around at home and see whether anything has gone wrong here. Therein, I submit, the trouble has really arisen. There has been a misuse of our resources, in both men and materials, inside the country, and a misuse in capital expenditure; these, coupled with inflation and the inflationary pressure, constitute the two really giant evils which have landed us in our present position. These two matters are closely inter-related, for there has been a boosting of capital demand, a boosting of capital expenditure, and a spread of capital expenditure in such a way that not even the full benefit of what we might have been able to achieve has been accomplished.

I should like again to call the attention of the Chancellor to the very wonderful address that was made by Sir Hubert Henderson, to whom I referred three weeks ago when we were debating this matter, and to the two articles which he has since written in "The Times," showing that the effect of this spread of capital expenditure over too wide an area has been a loss of production about equal to what we were losing owing to failure in production due to unemployment before the war. That is a very serious statement to make, and the situation to which it calls attention is a very serious one. It is on capital expenditure that the cut will have to be made. The Prime Minister referred to it yesterday, and I was hoping that the Chancellor would be referring to it today.

It is rather unfair to this House that the final statement with regard to plan- ning for capital expenditure cuts will have to be made in the last speech which will be delivered tonight, when we shall not be able to deal with it. I take it that the President of the Board of Trade will be dealing with this, but the House will not be able to debate it, because that will be the last speech made tonight. There will have to be cuts in capital expenditure, and they are bound to hurt. They will affect new buildings, new houses, new roads, electrified railways, new bridges like that over the Severn—all of them needed. There are hon. Members who know that for the 20 years I have been here I have been begging: "Do away with slums and build decent houses. I only wish we could do it overnight, and put these matters right." Unfortunately, we now have to postpone those matters, for we can no longer indulge in non-remunerative expenditure. We must turn our attention to making those things which the people require, and which we can sell. Therein lies our main task.

That brings me to a matter which has caused me more distress than anything else in the Prime Minister's speech, namely, the hint at the direction of labour. It is an easy way of turning labour into a particular channel to issue an order that men should go to work there. It is just the same as conscription into the Army. It is the easy way of getting the men required. But it is not numbers that will count in production. It will be the enthusiasm, the willingness, the zest, the drive and the energy of the men who go to work willingly. What is more, direction of labour offends against the sacred right of every man; and, in particular, it offends against all trade unionism. The fundamental of the trade unionist was the right not only to sell his labour, but to withhold his labour in the same way. Apparently, that doctrine is now going; apparently it is going into—[Interruption.] It is all very well for hon. Members to interrupt, but once you lose liberty you lose everything else. Take my goods, take everything; I may win them back as long as I have liberty. But when I lose my own personal individual liberty, life is meaningless. It would have been meaningless to so many of those who led the movement which has brought those people on to the Government Front Bench today.

I realise that today there is a great deal of misused labour, but I would not direct a single man. I would make it as difficult as possible for anyone to employ people in non-productive labour, by taking away many of the materials which they require in order to give that employment. I would give every encouragement to men to go into productive labour, but I would direct no one.

I now come to the last question, that of inflation. There is an inflationary pressure, and there was at the time the Chancellor introduced his Budget, of £1,000 million; that is to say, there is £1,000 million more of money income in the pockets of the people than there are services and goods which they can buy with that money. All the time, therefore, there has been this tremendous pressure leading to an increased demand for goods, which do not and cannot exist. That demand has been boosted instead of being pressed down. In some way or other we must make up our minds—and this is where I was hoping to hear from the Chancellor this afternoon, but was so disappointed with his speech—what to do in order to bring that pressure down. I am quite sure it would be wrong to try to reduce that pressure by increased direct txation, for direct taxation is already so high in certain cases that we know that it has the effect of discouraging instead of increasing further work and production. We can give any number of instances of that among working people themselves. If that pressure is to be brought down at all by taxation, I am afraid that the only way in which it could be done would be by indirect taxation. That is bound to hurt. Everything that we are about to do is bound to hurt somebody, and all I ask is—and we could find ways and means of doing it—that certain people should not be unduly or unfairly hurt if that method has to be adopted.

The Chancellor himself mentioned the need for an increased campaign with regard to national savings. The object of that is to take the money out of the pockets of the people and to bring it back into the hands of the Chancellor. I was hoping that the Chancellor would make some reference to it today. Is it that the Government are not agreed upon this? Is it possible that there is a good deal of disagreement among his colleagues? If that fails, will the Chancellor then turn his attention to what Lord Keynes sug- gested in 1940? He then suggested a compulsory loan out of income. That would not have exactly the same effect as complete taxation, because when the money is taken by taxation a man loses it for ever, but if it is taken merely by a compulsory loan he may get it back some day. Nevertheless, it has not the same tremendous psychologically depressing effect as increased direct taxation. In those ways I would bring down the demand and reduce, as completely as one possibly could, this inflationary pressure, and put an end to the unnecessary unremunerative capital expenditure. Further, I would renew the appeal that has already been made from the other side of the House to the Prime Minister, to reduce our commitments abroad, and in particular all the heavy cost which that entails for us. Every man in the Army is not only a loss to production, but also takes away from those who are producing.

I am glad that further efforts will be made to increase coal production. I am not going to deal with that aspect, because time and again, over a whole series of years, I have dealt with that point. On the question of expenditure, I wish to ask the Chancellor of the Exchequer to consider, with the Prime Minister, the setting up once again of the Committee of this House on National Expenditure, so that they can go into all these matters and cut ruthlessly, where necessary. There is, for instance, wastage of labour not only in Government offices, but in a great many local government offices. I again beg the Government to reconstruct their Cabinet. I made that proposal first to the Government because I thought that the matters confronting them were so difficult and so immense that it was necessary that they should have a small Cabinet without tremendous executive tasks.

I beg, therefore, that there should be a new form of Cabinet, a small Cabinet of four or five, with no executive tasks, and having alongside them the finest brains and best information in the country. Such a Cabinet would have been able to settle policy and make the decisions for which we have all been waiting. It is no good leaving these decisions to an outside committee of part-timers, paid by their individual firms. This is a matter of high policy, which can be decided only by the Government themselves. There was a letter written the other day by a Member of the Government to one of the papers which supports the Government, repeating what many of us have been asking for. We are face to face with an economic situation such as we did not face in 1931, and it is a moment which calls for the highest possible decision—quick and informed decision. If the Government will do what the country requires them to do, I am sure the country will respond. The one thing that everyone wants, without distinction of party or sect, is the restoration of this old country to the high position it has always occupied. I was glad that the Prime Minister ended his speech yesterday with a reference to the moral and spiritual qualities of this country; but it is no good merely referring to them; we must have informed decision as well. I listened to the Prime Minister and to the Chancellor of the Exchequer. I hoped that they would have a plan to put before us which we could have understood, a plan which would have shown some hopes of settling these matters, but unfortunately I am still waiting for that plan and for a decision. Under these circumstances, if there is a Division tonight, I must record my disapproval of the Government.

7.14 p.m.

Mr. M. F. Titterington (Bradford, South)

I want to congratulate the Chancellor of the Exchequer on the very fine statement he made, and to take up the points he has suggested to us. I want also to offer some constructive and, if necessary, critical comments upon his observations. While my speech may appear to be special pleading, it is nevertheless stating the case for a cooperative effort from the wool textile industry. The wool textile industry, which covers the whole field of operations from the raw materials, to wool combing, distribution and marketing, is in a position to render a very great contribution towards the export drive. Before the war, we outstripped all our competitors in the export of wool cloth. The quality and style of British cloths made them predominant the world over. I hope that we shall be able to do that again. The volume of exports was limited only by hostile tariffs with which the industry had to contend. At the present time, there is a sellers market unprecedented in the history of the economic development of this country. At the moment there are limiting factors in production, and in the requirements of the home market.

The wool textile exports now represent about one quarter of the production of the industry. In the other processes of the industry the percentage is rather higher. In 1946, the value of our exports of tops, yarns and fully manufactured goods was two-thirds greater than in 1938. During the first six months of this year, the value has been 85 per cent. greater than in 1938. Of the exports of cloth, which is the largest item, no less than 31 per cent. goes to hard currency countries, and that is a far higher percentage than most other exporting industries. I do not wish to be tedious, and therefore I will endeavour to summarise the statistics which are in front of me in regard to the position of the wool textile industry. I am sure that the President of the Board of Trade is more or less au fait with all these details, but for the purposes of record they should, I think, be mentioned. On our export side, for the six months in 1947, our woollen and worsted, tops, yarns, and manufactures were in the region of £24,750,000, in contradistinction to approximately £13,500,000 in 1938. Of woollen tissues we sent out 24 million square yards in the first six months of 1947, as against 29½ million in the corresponding six months of 1938. Then corresponding figures for worsted tissues are 11⅓ million square yards, and 15¾ million. . The discrepancy there is indicative of the lack of facilities to which I shall refer.

Now the raw materials of the industry come almost entirely from within the sterling area. Some of its wool supplies come from the stocks held by the United Kingdom-Dominion Wool Disposals Ltd., which is the organisation formed to dispose of wartime accumulations. The British Government have a half interest in the financial proceeds. There is no shortage of raw materials in the wool industry. On the contrary, there is a large surplus from wartime stocks. The Board of Trade could, through the Wool Control and ancillary organisations, intensify the drive for exports, and a programme could be adopted with the object of releasing the maximum possible amount of cloth for shipment abroad, even at the expense of the home market. That programme cannot be carried out unless more coal is available than was the case last winter due to the fuel crisis. The fuel crisis cost the industry from two to four weeks' production despite the fact that it was helped by "windfall" supplies from our local Municipal Sewage Department. There must also be adequate supplies of soap, starch, dyestuffs and bichromates.

As an example of the interdependence of our industry one might quote the case of soda ash. This is essential to the scouring and combing process, and to the finishing of cloth. As a result of representations, an increase in the total allocations to the industry was obtained a few weeks ago. It was at once rendered abortive by the announcement that the suppliers, Imperial Chemical Industries, could deliver only at the rate of 70 per cent. of the allocations, due to shortage of coal. A four weeks' reprieve has been obtained, but the industry cannot afford to have a repetition.

The labour force of the industry before the war was 224,000. The Wool Working Party has set a target of 200,000. The present number is just over 181,000, or nearly 20,000 short of the target. Since last September there has been an increase of about 9 per cent., or 1 per cent. per month. Unless there is a positive incentive to go into the industry it is unlikely that the rate will increase. Further, the increase has been augmented by part-time workers. Over the next 12 months it would be over optimistic to expect an average increase in the labour force of more than 5 per cent. Any large increase in export trade, therefore, can be effected only by a transfer from the home market to overseas markets. The wool textile industry works a 45-hour week, which means nine hours per day. The operative, of course, is in the mill, factory, and dye-house for more than nine hours. In the opinion of many people nine hours is too long for the maintenance of efficiency. If an extension of hours takes place obviously it must mean Saturday morning working. That means getting up steam for half a day's work, and would require more than a pro rata increase in coal. It would not mean a corresponding gain in production either, because many of the women must do their shopping under difficulties, and if they work on Saturday morning they will tend to take a half day off during the week for shopping purposes.

The Wool Working Party's report made suggestions for an increase in the labour force and efficiency of the industry. In the main, these were for better and more attractive mill, factory, and dye-house conditions, the use of automatic looms, and a scaling up of efficiency to the level of the best firms. These are long-term remedies, and cannot have any appreciable effect during the next 12 crucial months. Staggering of hours may appear essential, but there is the doubt that it would reduce production. Any disturbance tends to cause a loss of workpeople, and more absenteeism. Even the Control of Engagement Order would not prevent some workers, for example, married women, leaving the industry if they had to work at inconvenient times. Moreover, there is a bottle neck shortage of production in worsted spinning, and more worsted looms could be run if more yarn were available.

A number of employer-spinners mainly running on electricity have set up evening working periods of 3½ to four hours, and by this means have attracted back to the industry some former employees, principally married women. The additional production has been very helpful, but if hours are staggered it must necessarily cut across these evening arrangements and, in most cases, abolish them. The same plant cannot be used efficiently by day, evening, and night. It has been suggested that if firms running by electricity had to stagger their hours firms running on steam should do likewise, otherwise there will be a movement of people from one firm to another. This is bad policy and bad efficiency. The coal users have had to bear the whole of the burden of shortages during and since, the war. If they get a little advantage out of staggering it will not recompense them for the disadvantages of the past. Longer working hours would bring more production, though not to a corresponding proportion, and would not be welcomed because they would mean the abandonment of the five-day working week. In the circumstances may I epitomise?

The wool textile industry is in a position to render exceptional service in the drive for exports, particularly in hard currency markets, but the sellers' market will not last for ever. Even now we are shipping machinery abroad to enable other countries to make their own tops, yarns, and cloth. Some of us take exception to this. Our competitors, France and Belgium, are going ahead with production at full tilt.

If the industry is to make a prompt and effective, contribution five things at least are essential: (1) adequate supplies of coal and other requirements; (2) no staggering of hours, or at any rate as little staggering as possible; (3) temporary starving of the home market; (4) longer working hours; (5) assurances regarding profit allocations. As an exporting industry, the wool industry ranked sixth or seventh before the war. Its raw material supplies are plentiful, and obtained from sterling sources. The market for its products abroad is still almost insatiable. Nearly one-third of its exports go to hard currency markets. These are the strongest possible reasons, therefore, why the wool industry should be accorded the highest possible priority for coal supplies and other essentials. Even then, there seems no alternative but to reduce the supplies of coal and clothing available for the home market.

Yorkshire people like to pay their way, and those in the industry with which I have been long associated will do that to the best of their ability. Argumentatively, I shiver, with other Members, at the prospect of being deprived of further clothing, but I would much prefer that we should deprive ourselves of suitable materials at home and supply foreign markets, rather than that we should go about for the rest of our lives in sackcloth and ashes. I have put these points forward in no carping or critical spirit, in the hope that they will be of some assistance in meeting the problems which we have to face, and as a modest contribution in the form of helpful criticism.

7.29 p.m.

Mr. Boothby (Aberdeen and Kincardine, Eastern)

I can assure the hon. Member for South Bradford (Mr. Titterington) that I have no sartorial ambitions of any sort or kind. [An HON. MEMBER: "Do not be too long."] All right; but once again I find myself under the necessity of having to deliver, in 12 minutes, a speech which should take 25 minutes, in striking contrast to the Chancellor of the Exchequer, who took 120 minutes to deliver a speech which should also have taken 25 minutes. In his speech the right hon. Gentleman gave us a few flashes of interest, one of which was to quote the late Mr. Neville Chamberlain as having pulled this country out of the economic morass of 1931 by means of a general tariff. I would merely like to remind the right hon. Gentleman and the Government that it was not only a general tariff that enabled Mr. Chamberlain to pull this country out of the economic mess of 1931; it was also because he abandoned the gold standard, multilateral free trade, and free convertibility—all the things which the right hon. Gentleman and his colleagues on the Treasury Bench have been so busy putting us back on during the last 18 months. After that, and last but not least, he went in for a policy of Imperial preference.

I agree with the leader of the Liberal Party when he said that what depressed him most was that the Government had not yet produced an economic plan. A planned economy without a plan makes nonsense. The Government have made nonsense for the last two years. Have they a plan now for national economic reconstruction? No, only targets The Prime Minister talked a lot yesterday about "raising the sights." The sky is the limit so far as raising sights is concerned. I cannot think why he did not raise them much higher. We should have felt far more comfortable and happier; but it would not have had any more effect upon the actual facts of the situation than the greater part of his speech; nor, for that matter, than the Chancellor of the Exchequer's speech today. All the major decisions have still to be made. The yawning gap, to which the Chancellor of the Exchequer referred, still yawns.

There was one encouraging feature, and only one. I think, in the Prime Minister's speech yesterday, and that was his reference to the absolute necessity of increased food production in this country. I think that it is a pity that the Government did not think of this a couple of years ago. Food production has steadily fallen over the last two years and hon. Members opposite know it. We shall not increase it now by waving a wand. If hon. Members opposite are really going to increase food production within the next three years, it will need a great deal of capital expenditure on the land for re-equipment and recapturing marginal land; and 100,000 more workers at least. Hon. Members opposite must realise that they are only keeping agriculture going at the moment by means of slave labour. That is how they have kept agriculture going ever since they took office. We have to get 100,000 new workers on the land; and we have to have houses for those workers, and it is not a frightfully good way of getting these houses to stop the reconditioning of all houses in rural areas, as the Government have done. We have heard a lot about feedingstuffs, but we have still to get them. We have not got them yet. All I say is that these are four vital prerequisites of any serious expansion of agricultural production in this country; and they present four very tough problems, to which no one on the other side of the House has really referred.

Mr. Harold Davies (Leek)

On a point of Order. That is not correct.

Mr. Quintin Hogg (Oxford)

That is not a point of Order.

Mr. Davies

I am addressing Mr. Speaker and not the hon. Member for Oxford (Mr. Hogg).

Mr. Hogg

Mr. Speaker will give you the same answer.

Mr. Davies

On a point of Order. I distinctly heard the hon. Member for Maldon (Mr. Driberg) referring to exactly the same problem as the hon. Member opposite.

Mr. Boothby

I withdraw so far as the hon. Member for Maldon (Mr. Driberg) is concerned. I thought that he made an unusually good speech. That gives me another minute for my own speech. I agree with the right hon. Member for the Scottish Universities (Sir J. Anderson) when he complained of the continuing and enormous subsidies to consumption which the Chancellor of the Exchequer is giving year after year. They are bound to be inflationary; whereas subsidies to production, if the added production or export exceeds the cost of the subsidy, are counter-inflationary. I do not say that these food subsidies can be abolished overnight or in a hurry; but I think that a start should be made because they are definitely inflationary in character, and conceal from the people of this country the truth in that they conceal the real cost of production. This is only one more example of our present situation, which is, that we are consuming far more than we are earning. The pressure of money consumes everything. There is a partly concealed inflation, operating over the whole field, which the Chancellor has so far done little or nothing to stop.

A purely monetary deflation is not, I think, the answer. It is unfair in its incidence; it must involve contraction; and, in order to function, it requires a free market economy, which is impossible when there is a world-wide shortage of raw materials and also a local shortage of manpower. At the same time, I would suggest to the Government that it is really fantastic to apply to the present situation the remedies which Lord Keynes put forward at a time when the position in which we found ourselves was the precise opposite to that in which we find ourselves today—with a glut of labour, a glut of goods, and a steadily falling price level. There are, as the Chancellor said only two remedies—drastic cuts in unproductive Government expenditure, especially overseas, and on non-essential capital projects; and, secondly, a great expansion of production. One of the things that disturbs me most is that the present proposals of the Government are, in essence, contracticnist. It is an inevitable result of the attempt to restore multilateralism in a hopelessly unbalanced world.

I want now to say one or two words on the subject of the international disequilibrium, which is the root of the problem which confronts us. It takes two forms. There is the disequilibrium between primary producers and the manufacturers of industrial goods; and the disequilibrium between the United States and the rest of the world. The former is caused by under-production in Europe and Asia arising from the war; and the latter by the enormous industrial development of the United States under the impetus of war; and, at the same time, the industrial collapse of Europe, also arising out of the war. Although I was amazed that the Prime Minister did not mention it, I had thought that the Government at long last meant seriously to attempt the economic reconstruction and integration of Western Europe—a task which they should have undertaken a couple of years ago. I was astonished that the Prime Minister devoted practically no attention to it. The fact remains that they have climbed on to this boat with 16 other nations in Europe, who share our political and economic interests; and, now we are there, we must make the land in that ship or sink.

There is a second way out, on a long term point of view, and that is Colonial development to increase primary production, and reciprocal trade agreements with our own Dominions. I do not see why at long last we should not put very great faith in our Commonwealth and Empire. It will not be misplaced. They have never failed us in the past. They came to our rescue in the political field at once; and I see in the Press today that offers are pouring in again to help us in the economic field. I am not exonerating my own party in this matter before the war, although the economic situation in respect of commodity production was fundamentally different. But there is now no excuse for not doing everything we possibly can to increase our supplies of primary goods from our own Empire.

This brings me, in conclusion, to the fundamental issue which confronts us—an issue about which I feel very strongly. I would like the President of the Board of Trade to tell us whether or not we are now going to continue this insane attempt to revert to the international economic system of the 19th century. I think that there is a certain pathos about the belief in this country that we can get back once again to being the greatest manufacturing and trading country in the world. And I hate pathos. It makes me feel uneasy. In the modern world multilateral trade between a multiplicity of separate sovereign states of varying size is a mirage; and the creation of huge export surpluses a disaster. What we want is the mutually advantageous exchange of goods between countries which have complementary requirements; and the way to get it is not multilateralism but regionalism. That involves, in the first phase, bilateral trade agreements; and, therefore, discrimination.

The Chancellor of the Exchequer referred in his speech to the American Loan Agreement and said that those who were opposed to the loan have proved to be completely wrong. I do not know, but I remember saying myself at the time that within a year we should be plunged into the icy waters of free convertibility and multilateral free trade, and that I did not see how we were going to get out of that icy sea. Here we are in it; and the Government have certainly not shown us how we are to get out of it. I do not think that we were so far out in our prognostications. We could have got far more from purely commercial loans from the United States, without the crippling conditions attached to them which we finally accepted, if we had shown more guts at the time. Furthermore, I think that if we had made a greater effort to stand on our own feet a year ago than in fact we made, it would have been to our great advantage. Nevertheless, that is done, and is in the past. What has been done has been done. The Government have had their hour: and now they face their problem.

I think that we might now well concentrate on persuading the United States that the best way that they can help us, and help Europe, is not by any more Government loans, but by doing what we did to the United States in the 19th century—by investing money in this country and in Europe. I do not think that it will be difficult to convince them that such investment will only be worth their while if the doctrines of nondiscrimination and free convertibility are abandoned. We are also entitled to remind them that when we poured capital into the United States, built their railways, their steel and their textile industries, we did not impose conditions of any kind; and we never sought to reduce their protective tariffs, although we took all their goods in exchange freely into this country. We did not make any conditions whatever. We put capital in, and we developed their country. Later we reaped the rewards which were our due. I think the United States might fulfil their role much better as the great creditor nation of the world if they took a leaf out of our book, and did not seek to impose conditions which make it difficult for us to recover. They should invest their money in this country, and in Europe. Our only hope of economic survival is to adopt a purposeful economic power policy, which meets our requirements in this 20th century, rather than a policy adopted to the 19th century. For this we require a purposive direction of the national economy as a whole. Nobody knows that better than the President of the Board of Trade; nobody knows better than he, that there is as yet no sign of purposive direction on the part of the Government.

7.43 p.m.

Mr. Frederick Lee (Manchester, Hulme)

Like the hon. Member for East Aberdeen (Mr. Boothby), I propose to murder what undoubtedly would have been a brilliant contribution to this Debate in order that other hon. Gentlemen may have an opportunity to speak in it. I agree with my hon. Friend the Member for Maldon (Mr. Driberg) when he pointed out that unless this Debate signified the end of the "phoney" peace, the House will rise for its Summer Recess with the country still unaware of the real implications of the problems which he before us. I believe that it is the duty of this House to place before the people not only the magnitude of the task, but also a broad flexible plan, capable of bringing us through this trying ordeal. I have got to submit that up to now we have heard no plan sufficient to deal with the tremendous job which faces us.

The drastic cutting of our imports by the Government, necessary as it is, will accelerate the present tendency to contract the total value of world trade, and against that position I should like the President of the Board of Trade when he replies, to tell us how he believes that by the end of next year we can hope to attain 160 per cent. of our 1938 export level. Yesterday the Prime Minister told us that we must be more careful in the type of thing we buy because of the contraction of world trade. I believe it is even more necessary that we should discriminate very carefully in our selection of the type of thing which we produce. When increasing our volume of exports to the soft currency areas we must decide the type of thing that those countries, in fact, need. The Foreign Secretary has told us on many occasions how important coal would be to him in his negotiations with other Powers if it were available now for export. I would remind the Government that the same thing undoubtedly applies so far as agricultural equipment and capital equipment, et cetera, are concerned for those countries with which we are trying to negotiate for vast wheat supplies to this country. How much more efficient and successful our negotiations would be if, instead of speeding up motorcar production to colossal figures, we could promise at short term delivery, supplies of agricultural implements and things of that kind.

I should like to ask the President of the Board of Trade how long is it going to take to tool and standardise the motor industry? As an engineer, I believe that cannot possibly be done in two years. By that time the opportunity we have of competing with any effectiveness in a world market which is a sellers' market will, in fact, have long since disappeared. I believe it is most vital that we should realise that we are not merely planning to redress an adverse balance caused by the war but, in fact, we are trying to rectify an economic unbalance from the 1914–18 war which came to a crisis in 1929 and was covered up in the second half of the 30's by the armaments drive.

The Prime Minister referred to the sacrifices which are undoubtedly necessary. I have heard it said that sacrifices should seem to be fair as well as being fair. I want to impress on the House that the sacrifices must not only seem to be fair but must, in fact, be so, and based on the policy of sacrifice by every class of society. In this respect, I was most grievously disappointed, because I think it is fair to say that the policy as outlined by the Prime Minister was merely to ask the workers in the heavy industries to give more effort, to work harder, providing the supplies are available, in the interests of the country at this critical period but did nothing in regard to those people who tell us that they are only short of shirt tails and that they have everything except that. They can go along to places like Lewis's and give reports to their directors of profits which are higher than ever before existed in the history of these combines. At the same time the workers are expected to make great sacrifices.

I believe this afternoon the time was opportune for the Chancellor of the Exchequer to have told us that the Government were prepared to accept a profits policy, which would, in fact, have been an inspiration to the whole of the working classes. If my time were not so short I would tell the House precisely what profits tax could, in fact, be put into operation. I know that the right hon. Gentleman the Chancellor of the Exchequer has got a copy of the scheme, and I hope even now he will realise that it is not sufficient to ask one class of people to do the sacrificing and then appeal, especially knowing what type of response he got to his appeal of last year, to other people not to show clearly so much of the profits this year or the boys in industry would get a little disturbed about it.

I still hope that we may hear a progress report which will show precisely what has been done since March last in manning up those vital industries upon which we are dependent for success in the great ordeal which now lies before us. Before this Debate concludes we should have a picture given to us through the latest information available of the incidence of the build-up of these trades, and whether we are expecting any diminution in the numbers now employed in the luxury industries. On a number of occasions in this House recently I have heard questions and comments on the necessity for importing foreign workers into the country, but I still believe that the major problem of the Government is to redistribute the labour power we have available and not to worry too much about the importantion of foreign labour. When we consider, for instance, the difficulties of language, of housing, and of training these men, we realise immediately that it would be a long time before we could expect to obtain any real return for the expenditure in money and time on that kind of thing. On the other hand, we have a great reservoir of women labour power in the country still effectively debarred from going into industry by the lack of nurseries, créches and so on, and the failure to accept the principle of the rate for the job. I would challenge the Chancellor of the Exchequer on his inflation argument as applied to women who would go into productive industry and replace men. I believe that that would not by any means be inflation, if granted the rate for the job, but would result in a great increase in the wealth and production of the country as a whole.

In the few minutes I have left I want to refer to workers themselves. I have heard arguments in this House with which I could not agree regarding the relations between employers and work people in industry. It does not do a great deal of good for people who do not, after all, know a great deal about the matter to suggest that these relations are conducted on a cat-and-dog basis from beginning to end. There is a very appreciable degree of negotiating machinery and powers of conciliation at our disposal now in industry, and for every unofficial strike or for every reference which goes outside a factory 99 or even more cases are never heard of because they are settled amicably over the table inside the factory.

I believe that the time is now appropriate for the Government not merely to ask the Ministry of Labour to try to have works councils established in industry but to give us those works councils by legislation. We know that the progressive type of employer, the man who is willing to negotiate and to establish the best conditions, already has his works council. The type of person against whom we set our faces is precisely the man who has not got his works council and will not have it unless we obtain power to enforce it in his particular industry. I believe, therefore, that we should establish works councils and link them with the regional organisation which the Ministry of Labour is now setting up in order to bring to a speedy end any dispute which may emanate from the factory level. This question of giving responsibility to the workers is most vital. I know that we can impart that feeling that one is part of the effort only if we can give that responsibility. I know from my own experience that when I had people who were over-critical of my administration the first thing I did was to give them a job with a bit of responsibility and thus rid myself of a very disturbing critic.

May I turn now to one particular industry and speak for the next two or three minutes as an engineer on behalf of engineers? I hear a great deal of talk of engineering unions not accepting Poles, and I read Questions on the Order Paper on this issue, but I feel that it would be very dangerous to pursue that kind of thing in this House. This applies particularly to people who do not know the type of negotiation which is going on and the effort which is being made to bridge the gap. So far as the Amalgamated Engineering Union are concerned, I am extremely proud of the history they can show. Whenever danger has threatened this country from without we have seen the ability of the engineers to take into the industry hundreds of thousands of people who never have a vestige of a chance of going in before, and teaching them every trick of the trade in order that the country might be brought through a great ordeal. From a bad start in 1939 we were able, because we brought these people in and showed them the rudiments of our craft, to attain a position in 1942–43 where we could outmatch in production any other country in the world, friend or foe. It does not do for people in this House to throw any kind of mud at unions and men who can do that kind of thing.

I hope that it will be realised that so far as engineering is concerned we have a great body of wholesome support for any worthwhile effort, whether it be for war or to bring this country through an economic crisis such as we now have before us. I am convinced that if the Government will in fact plan this thing in such a way as to show that sacrifice is not to be one sided, if they will prove to the people that we can enter this great ordeal which faces us in the same spirit that characterised Dunkirk, and if they can show us that beyond the end of the crisis there is something worth fighting for, then as far as engineers are concerned, and the A.E.U. in particular, I can promise them that 820,000 of its members will play a tremendous part. They will play this part not only so far as their own production is concerned, but they can supply other industries with the basic things which only engineers can produce. If the Government will give us that lead before the end of this Debate tonight, then the country can expect the same ability as was displayed in the terrible days of the war.

It is not a question of setting up a demagogue to lead a nation—which is the kind of tripe of which one hears so much from hon. Members on the other side. During the war period we knew quite well what it was that the individual was asked by the Government to fight for. We knew that we fought for our very lives and for the betterment of the nation, and if this Government will in fact try to inculcate that spirit in the workers again, in two years from now we shall be able to throw back in the teeth of the pessimists the things they have said today.

7.58 p.m.

Brigadier Low (Blackpool, North)

The hon. Gentleman the Member for Hulme (Mr. Lee) has accused the Government of a lack of leadership, a charge which has been made frequently from all sides of the House during the course of this Debate. It occurred to me during the hon. Gentleman's closing remarks that if he and the men in his union, many of whom, although not all, will be supporters of the Government, have no confidence in the Government, he can hardly expect the vast majority of the country to have confidence. It is the spreading of confidence throughout this country which is the Government's main task at this time. At any rate, that is what I mean when I ask them for leadership.

The Prime Minister's speech was a great disappointment. I never expected to hear, even from right hon. Gentlemen on the other side of the House, such an inadequate plan for dealing with the present crisis. When I heard the right hon. Gentleman the Chancellor of the Exchequer today, all the small good which the Prime Minister's speech might have done in emphasising the direness of the crisis, seemed to me to be about to be undone. It was a tragedy that the Chancellor of the Exchequer should try to persuade us of the robustness of our economy at this time. It is this confusion in Government statements which has contributed so much to the doubt in men's minds today, although many other things have made their contribution. I have tried—as I am sure have many other hon. Members on all sides—to find some reason for the lack of decision on the part of the Prime Minister and the Government at this time. Have they refused to change the policy which the Lord President of the Council put to us on 8th July, when he said that they would not impose cuts on a scale which would require a drastic adjustment of our standard of living unless it was perfectly clear and certain that that was the only course open to the Government? Do they still rely upon support from outside? It has always seemed to me that if they want help from outside the one way in which they are most likely to get it is by showing the world that this country is a very good investment and that we are prepared to help ourselves.

Let us examine some of the steps which the Prime Minister said he was taking. Let me refer shortly first of all to the Armed Forces cut. It was apparent when the House listened to those cuts that a large number of hon. Gentlemen belonging to the party opposite were dissatisfied with the cuts. It was apparent today, when we heard questions and attempted questions from hon. Members, that they still did not understand the position.

Mr. Wyatt

We do understand it.

Brigadier Low

I do not understand one or two things, and I think many hon. Gentlemen opposite will agree with me.

Mr. Grossman (Coventry, East)

We do understand it.

Brigadier Low

Perhaps the hon. Gentleman will have an opportunity of telling us. When the Prime Minister said there were going to be 700,000 members of the Armed Forces in this country, I raised my eyebrows, and I began to remember that we had never been given the details about the Armed Forces which would enable us to decide whether there are too many or too few. That is the position in which the House finds itself at a time when it is responsible for supporting the Government in the field of manpower. I support the Front Bench opposite when they say that they are not prepared to cut commitments, but what are 700,000 or 800,000 men at home doing, in all those numbers? [HON. MEMBERS: "Hear, hear."] I am very glad to get support from the other side. I say to the Government with great seriousness that there is a certain amount of feeling in the country that there is waste. That feeling cannot be good for the health of the country at the present time, and it is time that further facts, explanations and details about this matter were given by the Government. The Prime Minister said that the whole future defence of the country was being gone into. It ought to have been gone into since 1945 when the right hon. Gentleman took over. That cannot be much of a palliative.

Let us come back to the home problem. The Chancellor of the Exchequer spent a great deal of time today talking about the dollar situation. I was very glad when my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) pointed out to him that that is the best way of fogging the whole issue at home. What the Chancellor ought to have done today was to tell us how he proposes to avoid inflation in the future. He has stood at that Box and impressed upon us the danger of the inflationary pressure; but the cuts in imports, the increase in exports and the increased wages for increased productivity will increase the inflationary pressure. It is up to the Chancellor to give us and the country some indication of the steps he is going to take to put things right. All he mentioned was an increase in savings. I want further guidance. I want him to use the financial instruments for keeping the value of the £ right and avoiding inflation. It seemed to me that he, and indeed other right hon. Gentlemen opposite, are far too apt to sit back on a couch made of the many difficulties throughout the world over which they say they have no control, or over which they do not have any immediate control. The task of the Government is to tackle those problems over which they have control. This is one of the most serious problems.

Another way, and possibly the most important way, in which the Government can help the people of the country who are to increase productivity is that the workman and the employer and the many people who try to help them should be assisted by the Government to get clear of the fog which surrounds the present position. The hon. Member for Hulme said that during the war everybody understood the purpose for which they were working so hard; do we understand the full situation now? Do we understand the real necessity for real hard work today? I ask the Government to do all they can to clear away the fog. No doubt there are Members in this House who did not, until very recently, realise the gravity of the situation. No doubt many hon. Members receive letters from their constituents showing that even today they still do not realise the gravity of the situation.

The fog must be cleared away, and the sooner the better. It can be cleared away only by a positive statement and a plan. It will never be cleared away if the Minister of Defence makes a clear statement of what the Government are going to do and of the gravity of the situation and then, next day, the Minister of Food makes a statement showing how very cheerful and happy the food position and the general position of the country are. Such conflicts of statement must stop. I want to ask the Government to make things clear not only to the working men and the employers in the immediate productive industries, but to all men and women. A great effort is required from every man and woman in the Services, in the distributive services, in Government offices.

Mr. Follick (Loughborough)

And from Members of Parliament.

Brigadier Low

Yes, from Members of Parliament, too. Members who live in glass houses should not throw stones. It is a misfortune that those who speak late have to cut out much that they would like to say. I should like, however, to mention another point, which is, that the Government's administration must be efficient land economic in expenditure, and framed so that it does not call for extra and unnecessary effort from men and women engaged in productive industries. The danger of this vast machine which right hon. Gentlemen opposite have built up is to be seen in the number of men whom they have drawn from productive industries and also in the number of hours which are wasted by men engaged in productive industries on other work. I ask the Government to remember that. The hon. Member for East Aberdeen (Mr. Boothby) stressed the importance of co-operation with members of the Commonwealth in a Commonwealth economy. Many of us have spoken often about this, but what did we do about it? We have made plans, but do we encourage any of our men and women to contribute to that great purpose? Without the skill, energy and leadership of this country, we shall never really get the development of our Commonwealth economy.

My last point is to ask the Government to remember that in the long run it is the spirit of the country which will govern the immediate efforts which the country makes. It is the. spirit of the country which has been wounded by the disunity which has come over us since 1945. It is the spirit of the country which has been wounded by the Socialist propaganda of the last 30 years. [HON. MEMBERS: "Oh."] Hon. Members will not like that. It has discouraged skill and good work.

Mr. Shurmer

Has the hon. and gallant Member forgotten the period between the two wars?

Brigadier Low

It is the spirit of the country which requires to be mended and it will only be mended while right hon. Gentlemen are in office, if right hon. Gentlemen make some effort to get the confidence of the country.

Mr. Shurmer

What about the three million unemployed?

Brigadier Low

They have failed today and they failed yesterday, and I hope they will go back tonight and think out a proper plan and banish the two curses under which they live, the tinker's curse and the curse of fiddling.

8.12 p.m.

Mr. Hubbard (Kircaldy)

I would be the very last to claim that there is any particular Scottish interest in this Debate. The problem that confronts us today is one that confronts the people as a whole. It is perfectly true that no matter how well phrased speeches may have been in this House yesterday or today, the response of the people outside is the thing which will determine whether or not we shall survive this crisis. However, even at this late hour I appreciate the fact that at any rate one voice from Scotland on this side of the House has entered the Debate. This afternoon we have had speeches from two hon. Members opposite representing Scottish constituencies, the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) and the hon. Member for East Aberdeen (Mr. Boothby). I would be very sorry to think that the people of Scotland would be led to believe by looking at their newspapers tomorrow that the subject matter those two hon. Members placed before the House was representative of the people of Scotland, who by responding to the appeal will help in the survival of this country.

I was amazed to hear the right hon. Member for the Scottish Universities suggest that it was the wrong time, and that we had made a tremendous mistake, to give the country's producers a better return for the work they put in. I was amazed to hear him say that we had made a blunder so far as time was concerned in giving them holidays with pay, and that we had made a blunder in giving the old people and the very young people concessions less than two years after the war. Does he not realise that the people of whom he speaks in this way are the people to whom he is appealing to take us out of this crisis? Does he think we shall get the good will of the people simply by telling them that they have to wait and wait before they get something to indicate that they will have a future better than the past? Therefore, I regret that a man of the standing of the right hon. Member for the Scottish Universities should at this time insult the people on whom we are depending to bring us out of the crisis by saying that they ought to be content with longer hours and that it is wrong to increase their wages.

All agree that we depend upon coal to bring us out of this crisis. How can we attract men back to the coal mines under threat of lower wages? In that industry we were losing men to the extent of 40,000 a year up to the time of the war. Would any miners or their sons, or anybody else, be attracted back to the mines unless they had some guarantee that conditions would be better than they were before, and particularly during the time when the present Opposition held office. I, therefore, think that the Opposition have not made much of a contribution.

It is true that the present Government are on trial. Of course, they are. The Government and those who support them are on trial, but so are the Opposition on trial, and the contribution that they make to the survival of this country has to be something better than merely suggesting that those who are to be responsible for the increased production will only receive the same kind of treatment they have always had. They have always been the first to sacrifice, and they are asked to continue to sacrifice. Therefore, I commend to the Government that, far from making any differentiation, as seemed to me to be suggested, we should appeal to those who make profits, at the same time as we direct those who are the producers. While I am not satisfied with that, at any rate it is something better than those sitting opposite seem prepared to offer.

Something was said to the effect that people could probably be taken from the non-essential to the more essential industries. First of all, however, I would like to see those who make no contribution at all put into some industry or another. Wth regard to another method of rationing, I would suggest that one way out of this crisis would be to issue ration books only on proved employment of some kind or another—[An HON. MEMBER: "Russia."] If that were done then we would find the "spivs," whether they were at the race courses or dog tracks. It is no use expecting people to tighten their belts while it is made possible for other people, who make no contribution to production, to go from one restaurant to another where they can have 10 lunches if they so wish, or as many more as they are able to tuck away inside their belt. That is completely wrong.

I agree, however, that if there has to be an alteration in the amount of rations, it is proper that there ought not to be any interference with the existing rations of those engaged in heavy industry, though it would perhaps be difficult to measure just who is in heavy industry and who is not. Indeed, perhaps those in the heaviest industry of all in this country are the housewives, who would appear not to be considered as being in industry at all, yet if those who are in heavy industry have to work longer hours, then they will require more attention than ever. I would suggest, therefore, that if there is to be anything at all in the way of additional rations, or even a differentiation in existing rations, the housewife ought to receive full consideration.

The suggestion to cut down by £10 million our timber imports has been an extreme disappointment to me. I cannot see how we can reasonably expect people to make a better contribution and, at the same time, tell them that the possibilities of getting a long awaited house are to be less. It is true that certain arrangements have been made in mining and agricultural areas to give them a type of house, but we cannot attract people unless we give them some guarantees. The hon. Member for East Aberdeen spoke about the need to attract people on to the land, but we know something about that. We know that there was mighty little attraction to the land when he was a Member of a Government. We know the attraction there was for land workers at that time—the "attraction" was round about 25s. a week. While I congratulate the Government on, at any rate, making an equal attraction for the agricultural worker with any other industry, the Government must also do something more, because a place in which to live is perhaps the greatest attraction of all.

Like others who have been called to speak at the end of this marathon, there is no possibility of my making a speech; I can make a few headline statements only, and I would finish on this note. The end of all this will be determined by the good will of all. It is right and proper that one should try to find out how we got into the mess, but the important thing is to find how we can get out of the mess, and we are not going to get out of it by grand, academic phraseology. We are making an appeal to the good will of the people, and we have to give them some guarantee that at the end of this we are going to give them something which has been promised and withheld from them far too long.

8.20 p.m.

Mr. Eden (Warwick and Leamington)

The hon. Member for Kirkcaldy (Mr. Hubbard) seemed to have two considerable concerns. One was in respect of the cut in the import of timber by 10 per cent. I share his sentiments in that respect, but I would be more concerned if the cut were a real cut in timber. As he will realise, it is only a cut in expectation, and perhaps not so formidable as it otherwise would be. Like other activities of the Government, it is more in anticipation than in fact. The second anxiety, in which I also join with him, is about people who have 10 lunches. That is indeed a formidable catalogue, and I think that he will look neither to the figure of the President of the Board of Trade nor to mine to justify that censure. I would also agree that if there are any who have 10 lunches, it is undesirable that they should continue that practice. Personally, I should have thought that the ordinary course of nature would settle the matter for them, but, if not, steps should be taken. The hon. Member will also agree that the problems with which we have that deal are a good deal wider than that and in reducing those who have 10 lunches to one lunch we are hardly likely to bridge the gap.

I have listened, as the House have listened, with growing concern to the course of this Debate during the last two days. We have all our party views and party faith in whichever part of the House we sit, but over and above that, there is a concern for the future of our country. I had sincerely hoped, and I say this to the right hon. and learned Gentleman who is to follow me, that as the outcome of this Debate we would have been presented with a comprehensive and coherent plan to lead our country out of the present quagmire on to the firmer ground of solvency and self-respect. That is what I had hoped for. With real reluctance I am bound to say that I cannot consider that the Government have produced any such plan at all. I am indeed disappointed at their proposals, and several of their own supporters have expressed themselves as disappointed during the last two hours. Their proposals seem to me 1o be just a hasty improvisation, ill-considered and incomplete. In many spheres we are called upon to consider not policy, but hopes. "The Times" says this morning: Too much of the Government's programme is still in general terms or provisional. The cuts in respect of foodstuffs, for instance, are real enough, but when it comes to proposals for increasing output and increasing exports "The Times" again says: The programme announced yesterday is most vague and unfinished.

Mr. Gallacher (Fife, West)

On a point of Order, I am sorry to interrupt the right hon. Gentleman——

Mr. Eden

It is all right.

Mr. Gallacher

—but as a Member of a minority party, I want to lodge a very strong protest against the treatment I had from Mr. Speaker in this Debate.

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

That is a reflection of the conduct of the Chair, and should not be made.

Mr. Gallacher rose——

Hon. Members


Mr. Deputy-Speaker

I must ask the hon. Member to withdraw that remark.

Mr. Gallacher

No, I will not withdraw.

Mr. Deputy-Speaker

I again ask the hon. Member to withdraw that remark.

Mr. Gallacher

He was very offensive. You can tell him that; I will tell him myself.

Hon. Members

Order. Name him.

Mr. Deputy-Speaker

I have to inform the House that I have to instruct the hon. Member for West Fife (Mr. Gallacher) to leave the House, in view of the remarks he made.

The hon. Member withdrew from the House.

Mr. Eden

I am sorry that more hon. Members have not been able to speak in the Debate. I do not think it is the fault of the Opposition that that has happened; I am not complaining, I understand the difficulty. Before that unfortunate interlude, I was just about to make a comment upon exports, if I may come to more mundane matters. I was about to say to the right hon. and learned Gentleman who is to reply for the Government that the target which he has set himself for next year for exports does not seem to be one which we can expect to be realised. That is because that target has to be realised in conditions not truly comparable with those of 1938, although the figures are comparable with 1938, for in that year we were not only exporting manufactured goods but raw materials, principally coal. Therefore, if the right hon. and learned Gentleman is to realise his target for next year, he has really to increase our exports of manufactured goods by 100 per cent. That is the increase which he has to produce over 1938. I have no doubt whatever of the sincerity of the intentions of the right hon. and learned Gentleman, but I am bound to say that in the present state of world markets, I do not believe that that can possibly be achieved. It is no more likely to be achieved than the increase which we have failed to realise this year.

I turn for a moment to the speeches which we have heard today from the Chancellor of the Exchequer and others. I must say that I was disappointed in the speech of the Chancellor of the Exchequer. I have always regarded him as one of our most expert Parliamentarians, but I must tell him that I thought that today he took an incredibly long time to say incredibly little. He spent nearly two hours taking the Prime Minister's mouse, putting it back into its hole again, and then pulling it out again for the benefit of the jury, and, as always happens on these occasions, the mouse only deteriorated in the course of the two hours. I thought that the whole process might have been a little concentrated. Then, he gave us lots of metaphors. He was rich in metaphor. He told us that we had run into a storm that we had known for some time was brewing. I felt that all that the crew had been doing during this interval was to move the furniture from the third-class to the first-class, and that that was the only result which we could show while the storm was brewing. I do not think that the right hon. Gentleman can congratulate himself on this afternoon's Parliamentary performance. I have a sort of feeling that each Member of the Government is trying to rescue the one that went before. The last in the line is the President of the Board of Trade, and I am sure that he will do what he can to redeem the irredeemable.

The Prime Minister yesterday made a good deal of play with the undoubted fact that any Government in power at this time would have grave difficulties to face. We do not deny that, but what we do say, and what the right hon. Gentleman's speech did much to confirm, is that in facing these difficulties the performance of the present Government has been wholly inadequate. They have stumbled undecided, unprepared and without a plan, into a crisis which they had not foreseen. As far as we can judge from this afternoon they appear to hope to stumble out again in the same way. The Prime Minister's statement was not a coherent or a clear cut plan to overcome an imminent danger. It seemed to me to be a hastily contrived collection of expedients, not designed, because there was no design in them at all, but produced in the hope that they would do something to meet a situation which clearly the Government do not even yet seem fully to understand. Let me remind you, Sir, that there is a remarkable contrast between what the Prime Minister had to say yesterday and what the Lord President of the Council and the Chancellor of the Exchequer had to tell us in the Import Programme Debate as recently as 8th July. I have looked up the Lord President's words. He said this: The only remedy, pending the restoration of European agriculture and industry, lies in devising some means whereby billions of dollars worth of North and South American production can be transferred across the Atlantic without the necessity for immediate payment in the form of an equal and opposite flow of European goods."—[OFFICIAL REPORT, 8th July, 1947; Vol 439. c. 2076.] That is the Lord President on 8th July. Yesterday we had the Prime Minister: It may be that the chain of events started by Secretary Marshall's speech will lead to further American help towards the recovery of the Old World, and that we shall share in this help. But we cannot and will not base our plans on that assumption."—[OFFICIAL REPORT, 6th August. 1947: Vol. 441 c. 1501.] In other words, the only assumption on which the Lord President on 8th July bases his plan, is repudiated by the Prime Minister less than a month later—[HON. MEMBERS: "No."]—Well, it is true. Let hon. Members themselves confirm the quotation. On 8th July the Chancellor of the Exchequer himself argued against an immediate cut in our import programme. He said that it was not the right thing to do at this moment. Yet, yesterday the Prime Minister announced, and today the right hon. Gentleman endorsed, these extensive cuts in. our food supplies. If they are right today, why were they not right on 8th July, or why were they not right at an earlier date still? The right hon. Gentlemen cannot be surprised, and the Government cannot be surprised. With such conflicting voices from the Treasury Bench—and there is the Attorney-General, the prize conflicter—how can the House or the country have any confidence in the Government's ability to understand the situation or to plan the way out?

The Prime Minister said how many were the difficulties which the Government had to face. Of course, we admit that. The Prime Minister went on to say that, in all the circumstances, the Government were not unwise to hold a balance. That is precisely what the Government have not done. They have held no balance. On the contrary, week by week, Ministers have made a number of contradictory-statements. What the learned Attorney-General says one week, the President of the Board of Trade contradicts the next. I can give quotations if anyone would like them. The trouble is that the Government mistake a see-saw for a balance That is their policy. What has happened? Let us analyse this matter again. Before the war—and this confirms what the Chancellor said; I agree with him in this respect—we lived to a very considerable extent upon our overseas invest- ments, the result of the thrift of our ancestors, or if hon. Gentlemen like it better——

Mr. Harrison (Nottingham, East)

Hear, hear.

Mr. Eden

I thought they might like it better—or the wicked capitalist instincts of our forbears. On that we have lived for a considerable time. We also benefited before the war largely from invisible exports, that is to say from our shipping, our banking and our insurance business. To a considerable extent, these sources of income are now reduced, but, despite this impoverishment, we have behaved as if we are richer than before the war, and this applies particularly to capital expenditure, about which I want to say a word or two. In that respect, I say to the House that we have been trying to do too much, and this is a warning which I have been repeating to the Government for many months past.

Let me try to put the picture in military terms. Let us suppose that we are back in the darkest days of 1940, with which a parallel has been drawn many times in this Debate. Suppose the War Cabinet of that day, after the collapse of France, decided that they wanted to set on foot, let us say, 100 divisions. When the time came to work out our resources, that War Cabinet would have found that there just simply was not the manpower available to give them that 100 divisions, and so they had to cut their coat accordingly, and decide, perhaps, that they could raise only 50 divisions and a certain number of air squadrons, while maintaining our indispensable naval forces. I say that there has been no similar calculation by the Government in reapect of the period of reconstruction. Has there ever been, I ask the President of the Board of Trade, any budget of our expenditure on capital reconstruction? The truth is that, despite their avowed belief in planning, of which we have heard so much from the Government and their supporters, it is precisely in the broad strategic planning of national resources that the Government have shown their worst failure.

For a long time, my colleagues and I have been telling the Government and Ministers that they have been trying to do far more at one time than is possible with the nation's resources. Let us look at what they are trying to do. There is the fulfilment of our commitments overseas, on which, although there may be differences among back benchers, the Government and we are agreed must be fulfilled. There are new factories in the development areas, new social services, new hospitals, new schools, all highly desirable in themselves; higher wages, shorter working hours, all these, too, infinitely desirable; the development of great schemes of town planning, of capital investment of all kinds, all to be welcomed in themselves; but what, surely, must have been apparent long since to all but hon. Gentlemen opposite is that to try to attain all these things together now, at one time, might mean failure to attain any single one of them. It is all a question of priority.

I am stating what I believe to be our national position. Of what use is it, for instance, to build new factories to use steel, if the existing factories working for export have not enough steel for their own use? The right hon. Gentleman knows that there are examples of it. I hope he will tell us of what value it is. Is it not true, for instance, today, that the motor car industry could increase its production for export if its full steel requirements were made available? That is so; it is not disputed. Then, where are we going in our planning, if that be so?

I turn from that to what was said by the hon. Member for Bolton (Mr. J. Jones) in his speech yesterday. There were not quite so many hon. Members here then, and I would like to quote his remarks on this very issue. He made it perfectly plain, that in his own industry at the present time, full time is not being worked because of the lack of fuel. All these matters have got to be related, and any plan that is of any value relates these factors. I turn to food. The right hon. Gentleman the Prime Minister told us that our food supplies from the hard currency areas are to be cut by £12 million a month. I do not know what are the factors that brought the Government to achieve that particular figure. Why £12 million, or even £10 million or £15 million? I do not know. Perhaps they will tell us. I reckon that this cut means a reduction of at least 40 per cent. in our present food supplies from the so-called hard currency countries. This would, indeed, be a formidable reduction in our standard of life if the supplies cannot be replaced from anywhere else.

Let the House note this. The Prime Minister did not tell us yesterday that of the food supplies which we at present receive from these hard currency areas, about 55 per cent. are, I think, staple foodstuffs—grain, meat, dairy produce, and sugar. If I understand the Government aright, they propose to replace part of this loss from the soft currency countries. I would ask the President of the Board of Trade to tell us how this is going to be done. I feel certain that the Government cannot have decided on a cut of this kind—so drastic—without having a clearer view of the consequence than was given by the Prime Minister yesterday. How much of this cut do the Government think they can replace from the soft currency areas, and from which of those countries do they expect to obtain the necessary supplies? We really must know that.

During the past two years, presumably, the Government have been obtaining as much of our foodstuffs as they could from the soft currency countries anyway; they would have been open to grave censure if they had not. How can it be that, all at once, they see the possibility of increasing our supplies from the soft currency areas to anything approaching the very large figure of £12 million a month? I hope that the right hon. and learned Gentleman will enlighten us about that. If they cannot increase their purchases by £12 million a month, or near it, from the soft currency countries, is it not clear that there will have to be drastic cuts in the rations? We really must be given the full facts of this situation tonight so that we can judge. I say, quite frankly, that we on this side, equally with hon. Members opposite, and the country as a whole, will not flinch if told the whole truth, but I think that we have still only been given a part of the picture. The Government must not be surprised if we complain that they have not, in past months, prepared the country for just the state of affairs which the Prime Minister described yesterday.

I must remind the right hon. and learned Gentleman that it is only a few weeks ago that we had the pleasure of listening to the Minister of Food in this House. He was enthusiastically cheered by his supporters. I do not blame them; but we were all derided for not joining in the cheers. The Minister was telling them that there was no need whatever for the housewives or the people of this country to feel that it would be difficult, or impossible, to obtain, partly from home and partly from abroad, the food they need. How in the world can that be reconciled with a 40 per cent. cut in our food imports from the hard currency areas which has been announced by the Government today? I would like to appoint the right hon. and learned Gentleman the President of the Board of Trade, for whom I have a great respect, to a new office, that for the co-ordination of Ministerial speeches.

Now I come to the next topic about which we are far from satisfied—agriculture. Is it not true that, in fact, there has been a decline during the last two years in every section of the agricultural industry, except milk production? The cattle population has gone down; the sheep population fell by half a million even before the appalling weather conditions of the early spring of this year. The pig and poultry population declined by about one-fifth in numbers, and the total area under arable crops in this country at this time last summer was half a million acres less than when this Government took office, and, at the moment, it is declining still further. I must say that, in our opinion, the Government's target of £100 million of increased output by 1951–52 is inadequate, and I will tell the Government why I think that. In the first place, that target only gets us back, four years hence, to the value of our output two years ago in 1945. That is not very glorious, in view of the present difficulties. At that time, the House will recall, our production was mainly cereal crops, while the hope is that by 1951 the increase will be mainly livestock. Therefore, we ought to expect it to be much more valuable. So I say that that target is not at all sufficient.

The industry is woefully short of labour, and simply because of lack of accommodation. If labour is to be attracted or directed, accommodation must be provided. Apart from the question of new houses, would it not have been a help through this period if the Housing and Rural Workers Act had been continued? Would we not have been better off? Two years ago the Minister without Portfolio promised us that some substitute for this Act was going to be produced. We are still waiting, but nothing has yet materialised.

The next point I wish to raise in connection with agriculture is that, as the right hon. Gentleman knows very well, great strides were made in the mechanisation of the industry, and many of the machines which the industry now possesses, such as tractors and harvesters, are today idle for want of spare parts, and many more new machines are needed. What has been going on? In spite of this shortage at home, and of what the Chancellor calls our first dollar saver—and I agree with him—over £6 million worth of agricultural machinery was exported last year, and over £3,500,000 worth has already gone abroad this year. Can this be justified?

Mr. Parkin (Stroud)


Mr. Eden

Groundnuts! Is agricultural machinery going to be exported to harvest groundnuts, when there is not yet enough machinery available at home? Is the production of food at home a No. I priority, or is it not? If it is a No. I priority, then the steel required is trivial in comparison with the output of food that would result. I say to the President of the Board of Trade that there ought to be a revision of the steel allocation, so that the agricultural industry can receive its full requirements of new machinery and spare parts; and only after those requirements have been met should consideration be given to the manufacture of agricultural machinery for export. Our home needs must come first in that sphere.

With regard to livestock production, we have been retarded in that sphere by want of feedingstuffs. The Prime Minister said that the Government had been doing their utmost to get feedingstuffs. No doubt they have, but hon. Members will readily understand that it is not much good doing one's utmost if one comes last in the race. Certainly we have been infinitely less successful than anybody else. [HON. MEMBERS: "No."] If we have not been less successful, will hon. Members please explain to me how it is that countries like Holland, Denmark and other European countries are now in a position to export to us pig and poultry produce? Does not that mean that they have been able to get feedingstuffs over and above the requirements of their own people? [Interruption.] I do not think I quite caught that remark. Did the hon. Gentleman say they are eating groundnuts? It seems to be the universal explanation of all the Government's troubles. I wish to deal seriously with the present position of feedingstuffs, and I would like the right hon. and learned Gentleman to give me some information. They are available to an increasing extent in the world today, and if we are going to cut our supplies of foreign meat to the extent that, apparently, we are to do, judging from the figures given us yesterday and earlier today, it is essential that we should have greatly increased imports of feedingstuffs in order that we may, as far as we can, make good the cut that will otherwise have to be made in our rations.

I am told that the exportable surplus of Argentine maize this year is estimated at between 5,000,000 and 6,000,000 tons. All we know so far is that the Minister of Food hopes to obtain some 700,000 tons of this, but if, as the right hon. Gentleman says, we are to expand our livestock production, we need, at least, three times that much. I do not know how much more the Government can get. We want three times more than what we are said to be getting now. The feedingstuffs position would be enormously eased for our farmers if they were allowed to retain from this year's harvest up to 20 per cent. of their wheat and barley for stock and poultry rations. If the industry is going to be called on to play its part it must be provided with the means. So I ask the Government what they can do in that respect.

I turn now to the next subject, and it is a vexatious one—to what the Prime Minister had to tell us about the direction of labour. It seemed to me that the Prime Minister's references to this subject were far from clear. Let me say at once that I hate the direction of labour and all that it implies. Such a restriction is wholly foreign to our national conception of freedom of choice in time of peace. But if anything of the kind is intended let it be clearly defined. How far is this direction of labour to extend? What categories are to be affected? And what penalties are to be imposed and exacted? For instance, are women to be included? These are grim questions, but they are questions to which we must have an answer. I must repeat that the sacrifice of the principle implied in the limited direction of labour—even though it be limited—is as odious to me as the general direction of labour. I am not at all sure that in some respects it is not worse, because if we are all subject to the same restrictions there is a certain rough justice in the event, whereas the subjection of selected groups of workers to this direction seems to me to be dangerously open to abuse. But that is not all. Let us suppose for a moment that the House will be prepared, under the stress of present conditions, to accept that principle. Are we sure, even then, that to apply it in present conditions is going to solve our problems?

I thought yesterday that the Prime Minister's speech did not face reality, because it did not meet what is our fundamental problem. It is really no use for the Government to appeal to workers in all productive industries for a greater effort unless those workers can be assured of the necessary supplies of raw materials with which to make that effort. I ask the President of the Board of Trade, let him go outside and look at the nearest Government poster, and there he will find written up: We need 11 million tons more coal. What for? In order that industry shall work at full production instead of at two thirds production as it is doing at the present time. I say to the right hon. and learned Gentleman that nothing is more exasperating to workers in an industry than to be appealed to for greater efforts when they know they have not got the fuel and materials available with which to work.

Here I turn to what was said yesterday by the hon. Member for Bolton to which I draw the attention of the President of the Board of Trade. The hon. Member for Bolton said: Our steel industry wants to do more, but again more coal is necessary. I pointed out at one of our recent meetings that the works in which I have had the privilege to work for 32 years closed down for a fortnight, the first time they had closed down since the General Strike of 1926. I hope the Chancellor will not tell me again that there is no serious industrial crisis, as he told me a while back. They closed down three weeks ago because they had used up their allocation of coal and had to put the rest of their coal to stock, with the result that 16,000 tons of ingot steel was lost."—[OFFICIAL REPORT, 6th August, 1947: Vol. 441, c. 1550.] That is the situation confronting the Government, and it is not the slightest use appealing for longer hours or greater effort unless supplies of material are dealt with above all. I ask the Government: Where are we on this issue of coal, which is fundamental to our efforts? Everybody admits disappointment with the output figures so far this year. I confess that, though I do not pretend to be an advocate of nationalisation, I had hoped that when the mines were nationalised we might well see—because I knew it was a step dear to the hearts of the miners themselves—an upsurge of production due to their contentment at the new conditions.

Mr. Kirkwood (Dumbarton Burghs)

There has been.

Mr. Eden

The hon. Member cannot call it an upsurge. We have only to compare the figures today—as I have done in this House more than once, unhappily—with the figures for 1941, when the miners were away fighting at the front in, for instance, the 50th Division, which won unrivalled glory. In 1941, with fewer miners and less machinery, we produced 206 million tons of deep-mined coal. Should we not be feeling much more content if we were producing that this year? I ask the President of the Board of Trade to tell us this, which we have not been told yet, and which is fundamental to the whole of our Debate: what is the Government's estimate of the increased production they will get by the extra half-hour a day? We have been told by my hon. and gallant Friend the Member for Fylde (Colonel Lancaster) that the increase will be negligible in the mechanised pits and I have heard no contradiction of that. Indeed, it seemed to me to be quite unanswerable. What, then, is the increase which the Government expect? And if they do not expect an increase, what is the use of doing it? Have they considered the alternative proposed by my hon. and gallant Friend, of an 11-day fortnight?

In that connection there is another matter to which I can refer but briefly because of the time at my disposal, namely, the remarkable speech of the hon. Member for Houghton-le-Spring (Mr. Blyton) who referred to the limitations placed on the powers of an area manager. This confirms much information which has reached me, to the effect that administration under the Coal Board is far too rigid, and this, in its turn, is affecting output. I hope the Minister will examine that speech, and if the hon. Member's facts are justified take steps to remedy them.

I now come to what is the most important immediate question in this Debate on the home front: What is the Government's coal budget for this winter? What tonnage do they say will be available for industry? What is the extent of the shortfall? And what do the Government propose to do to deal with the shortfall, if there is one? I repeat: This is the heart of the matter, because unless industry can be assured of the coal, all these appeals which the Prime Minister made, with so much eloquence yesterday, are worse than useless. Hon. Members opposite know that this is true. What has Mr. Horner told us? He told us that we shall not even reach the 200 million tons target, which everybody agrees is not enough. Mr. Horner has placed the figure at 195 million tons. Do the Government agree with that? Do they think Mr. Horner is right, or what is their estimate? If Mr. Horner is right, how do the Government propose to deal with the situation which the shortfall will create? That is the immediate problem of this winter, and not some wholly imaginary export target for next year.

Now let me turn to the Government. The Government have not presented us with a plan. They have presented us with a series of expedients which are to take the place of a plan, and there are many gaps in the Government's proposals. They speak of a reduction of the Services. As far as I can judge, the run-down of the total in the Services, by the Government's plan, has not really been very greatly accelerated. I am not awfully impressed by it. Indeed, the reduction in total strength by 31st March next is in the order of about 7½ per cent. It ought to be possible to achieve that by the operation of the table, with which my right hon. Friend is very familiar, without any considerable loss of efficiency. But we do not know what is the size of the previously intended repatriation figures, and so what the Government have told us about reductions abroad is impossible to assess. We have never been told the original programme, so it is impossible to judge the significance of the revised programme. I take note of what the Prime Minister told us, that the Government propose to maintain their foreign policy, and to fulfil their defence commitments which result from their foreign policy.

I must point out that this reduction in the Armed Forces is in most marked contrast to what is happening in the Civil Service. Is there to be no reduction there, or are the swollen figures to continue? I am casting no reflection in any way on the industry of civil servants, and I join in the warmest tribute to the hard work they are doing; but the question is, cannot their tasks be reduced, as the tasks of the military, naval and air forces are to be reduced? I cannot believe that this is beyond the wit of man to devise; yet, there is not the slightest indication that the Government intend anything of the kind.

I must say a word to the Prime Minister about his appeal in respect of the Dunkirk spirit. I think I understood what moved the Prime Minister to make that appeal, but I must ask hon. Members to be as patient as they can with the reply I have to make to it. It seems to me that the Prime Minister did not understand that his speech of yesterday—and the Chancellor of the Exchequer today did not seem to understand it—with all its insistence upon Socialism, destroys completely the Dunkirk parallel. It is quite true that after Dunkirk this nation made an unprecedented effort, but it made that effort as a united nation.

We did not attempt, although we were a majority in Parliament at that time, and had an overwhelming majority, to pass any party legislation. [HON. MEMBERS: "Oh."] If any hon. Member can point to a single party measure we introduced after 1940, I should be glad to know of it. [An Hon. Member: "You kept things as they were."] Our supreme crime apparently was to keep things as they were, but we also had another job, which was to keep Hitler out of this land, and we did both. [Interruption.] I am not claiming that I did it personally. The hon. Member need not be so impatient. I never suggested that I kept the Germans out of Britain. What I was pointing out was that the war Coalition leadership made a certain contribution to the defeat of the enemy. [An HON. MEMBER: "Coalition?"] Of course, it was the Coalition Government. That is what I have been saying for the last ten minutes. The whole of my argument is that it was the Coalition Government. I am claiming no particular credit for our party in that respect. Do Members opposite really think that my purpose tonight is to claim credit for my party for the country's victory in the war? Of course not. I know that the war was won by the efforts of a united nation. Do they think that I, as Leader of the House at that time, thought anything else?

Mr. Messer (Tottenham, South)

Then what is the point in saying that no party legislation was introduced then, when there was a Coalition?

Mr. Eden

If the hon. Member will have a little patience, I think I can make myself clear. The Prime Minister yesterday appealed for a Dunkirk spirit. I am trying to point out that at the time of Dunkirk, when there was a majority of our party in the Government, we interpreted the Dunkirk spirit in the sense that we brought in no legislation which represented our party point of view. We could easily have done so, with our large majority. It is now impossible for the Government to appeal for a Dunkirk spirit and, at the same time, announce that they intend to bring in the most violent partisan legislation. I will give one example, the iron and steel industry. [HON. MEMBERS: "Ah."] That is precisely the answer I expected. Members opposite know that to all of us on this side—and even after the last Election we had the majority of voters—to proceed with that policy at present is anathema. Whatever the Government Front Bench may wish, Members of the party opposite clearly wish to proceed with that policy, yet, at the same time, are calling for a Dunkirk spirit. The position is utterly unacceptable.

I will sum up my complaint against the Government's present policy. They have told us that Europe and Asia have taken a long time to settle down. That is true. But when did the Government first discover that? It must have been apparent, even to the least informed observer, a year ago, so why could not some of these proposals have been brought before us then? My main charge against the Government is this: even at this stage of the Debate we have not been given a clear picture. We still have not been told what the continuing rate of exhaustion of our dollar resources, including our reserves, is likely to be. We have not been told what the cumulative effect of the Government's proposals are likely to be. Neither the House nor the country have been given any indication of how long this struggle and the privations are to last.

I say, as I have said before, that the people of this country will always respond to a clear and definite lead. Tell them clearly what is required of them; show them the size and nature of the task; tell them clearly what has to be endured, and for how long; set a term to their efforts and sacrifices. Then you will get from them the response for which you ask. Up to now they have been presented with nothing but muddle, confusion, conflicting Ministerial statements, and a dreary vista of continuing shortages. More than once we have said plainly that we would support the Government in any constructive effort they might make to meet our present difficulties. That undertaking stands. But we cannot regard this present hotchpotch of certain cuts and uncertain hopes as a serious remedy for our ills. We must, therefore, vote against the Government on the Adjournment tonight.

We cannot be content to agree that Parliament should adjourn from now until the end of October, a date by which, on the Chancellor's showing today, the American loan may have completely run out, with a mere declaration of the Government's intention, which they themselves admit is unfinished. We hope that the Government will agree that Parliament must return to review this situation at some agreed date in a few weeks' time. We hope that the Government themselves will see the value of this proposal and will agree to it, but if they are not prepared to agree to it, we must tell them that we shall move an Amendment to the Motion for the Adjournment when it is proposed. The Government have a responsibility in this matter. I admit that theirs is the paramount responsibility, but this House has also a responsibility. We cannot feel that the Government have worthily discharged their responsibility. We must, therefore, insist on our right to discharge ours.

9.12 p.m.

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

When I first entered the profession of the law, I was taught as an advocate that when one had no case one should attack one's opponent. I think that the speech of the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) is an extremely good example of that principle. In the early stages of his speech I recognised some familiar phrases, and for a moment I could not think from where he got them, but it then occurred to me that he might at last have been reading the Economic White Paper, so I sent for a copy, and I found reproduced, almost exactly as regards the capital equipment programme, the arguments which the right hon. Gentleman has put forward. I am delighted that at last he and his friends have woken up to a realisation of the problem which confronts the country. Not unnaturally, as with all new converts, they are very anxious that it should be understood by everybody that they have appreciated the point. If anybody is interested in realising whether that is a fact, they need only look through the records of HANSARD for the last two years to find continued pressure from the opposite side of the House against the policy of increasing exports, which we have pursued. There is hardly an article that we export concerning which it has not been suggested that we should retain more of it for the home market.

The right hon. Gentleman asked me one or two specific questions to which I would like to reply before coming to my main argument. First, he mentioned foodstuffs and gave the figure of 40 per cent as the cut. I think that he is under a complete misapprehension there. It is about 40 per cent. of the hard currency purchases, but that is less than one-sixth of the total. The question he put was how, with a cut of so much as 40 per cent., we could make up the ration? [Interruption.] I am only making it clear in order that it will not go out wrong. A cut of £12 million a month is one-sixth, or rather less than one-sixth, of the total expenditure upon food, and we have not, of course, suggested that the whole of that can be made up. What we have said is that we will make up what we can from soft currency countries, but large portions of it might have to be cut off, largely points foods, as was said by the Prime Minister yesterday.

With regard to agriculture, the right hon. Gentleman drew attention to the fall in production over the last two years, but he is conscious of the fact, as I am, that during the last two years feedingstuffs-have been unobtainable in the world. In fact, as everybody knows, the destruction of flocks of poultry, of pigs and of cattle as well has been necessary because of the shortage of feedingstuffs. It is easy to knock the total down in six months or three months, but to build it up, especially breeding stocks of cattle, must take a considerable number of years. As he said himself, the expansion has got to be chiefly on the livestock side.

The right hon. Gentleman also commented on the export of agricultural machinery. We have had to export something from this country, as he knows, and agricultural machinery is one of the most profitable exports in that it goes largely to soft currency areas, from which we can get food, as, for instance, the Colonies. It does not go, of course, to America and the hard currency areas, and therefore, in the development of the food supplies of the world, this agricultural machinery has played its part. It has also been of compensation to us and has given us exports for which we could get food in return.

With regard to coal, the right hon. Gentleman asked me a question about the extra half hour. As the Prime Minister said, the position was that we asked for an extra half hour, because in the Reid Report it is suggested there should be a five-day week with an eight-hour day, and the extra half-hour would bring it to that. We thought, therefore, that that would be a convenient way of doing it, and the matter is now being considered by the National Coal Board and the miners, in association with other suggestions, such as the Scottish suggestion for the 11-day fortnight. We hope that they will come to the wise decision which will give the greatest production, and that they will be willing, on behalf of the miners, to do these extra hours of work. How they should fit in and what is the best way in which it can be done, I think must be left to them to decide. As regards winter supplies, plans have been got up for dis- tribution upon the basis that there will be enough for industry in this country. As the right hon. Gentleman knows, the figure given by the Prime Minister was 4 million tons of deep-mined coal and a quarter of a million tons of opencast. If we get that, we shall certainly have enough for our industries and perhaps even a little to spare, and it is upon that basis that we are arranging the allocation, with a stand-by scheme in case we do not get enough, under which we could deal with a situation in which there was a considerable shortage. Therefore, I hope that that is properly planned and being looked at.

The whole course of this Debate has been an interesting one, and broadly speaking it has given support to the ideas of the Government and has signally failed to show any alternatives at all. It is easy enough to criticise and to say, "This is not drastic enough," but it is no good criticising in that way if, at the same time, you say, "You must not do the things you have proposed"—and that has been the nature of a good deal of the criticism. It seems to me that it would be most helpful if I could try to sum up the conclusions without attempting further to give individual answers to the points raised, although I hope that I shall cover most of them in the course of what I have to say.

There is one general consideration with which I should like to deal first. It is to emphasise that in the course of this Debate we have been dealing specifically with the short-term, immediate necessities to meet the present critical situation in our balance of payments. That does not mean that because we have not recapitulated in detail our general long-term programme we have, therefore, changed or abandoned that programme. My hon. Friend the Member for North-West Hull (Mr. R. Mackay), in a very remarkable contribution yesterday, seemed to me to realise more than many people both the full difficulties of our present situation and the inter-relation between our short-term and our long-term difficulties. It is this appreciation of the problem with which we are faced that I regard as of such very great importance—not the attaching of blame to one person or another, but the appreciation of what the situation is. I would, therefore, like to say a word or two on that.

It is the fact that the economic relationships of the world have vastly changed since before the first world war. As has already been remarked, the Western Hemisphere, which was by that time beginning to emerge as the greatest mass producer of manufactured articles—no longer merely of primary commodities although those were produced as well—has, during the two wars and the intervening years, leapt ahead in its producing power, while the rest of the world, including Great Britain, has been unable to make any such corresponding advance owing to the two world wars, and indeed, in these immediate post-war years, has suffered a considerable recession. This has emphasised the unbalance which was already showing itself markedly in the years between the two wars. In other words, there has been an upheaval in the world economic situation as the result of which the rôles of the Eastern and the Western Hemispheres have been completely changed over. Europe, which was the main source of supply of the world for manufactured articles in exchange for the raw materials and foodstuffs which it imported, now finds itself deficient in both manufactured goods and primary commodities, while the United States has become the great supplier of all these things and so, incomparably, the greatest creditor nation the world has ever known.

At the same time the spread of certain industries, in particular, has made available, or is making available in most countries throughout the world those manufactured consumer goods, such, particularly, as textiles, of which Europe again was once the main source. This is not a temporary phenomenon. It is an historical tendency in the light of which the older manufacturing countries must adjust their economies. It is the immediate' and excessive acceleration of these tendencies, due to the incidence of the two world wars, that has brought about the present acute crisis.

We must not allow ourselves to be blinded to long-term developments by the intensity of the short-term difficulties. Nothing that we can do will change this tendency because it is already an accomplished fact in the world, and no praise of our own capabilities or of our determination can reverse that historical development of world economy. We must, therefore, face long-term measures for adjusting the European economy and our economy, if we are ever to free Europe and our own country from a continuing dependence upon the generosity of the Western Hemisphere. As has been pointed out by hon. Members, the effects of this change in world economy have been cloaked first by the Lease-Lend provisions, then by U.N.R.R.A., and by the various credits that were granted by the United States, including, of course, our own credit.

These have enabled the rest of the world to absorb billions of dollars' worth of American goods without any immediate need to repay. The rest of the world has, of course, benefited enormously by that generosity on the part of the Americans, but it has almost completely obscured the true economic facts of the situation, which are now coming to light. The fact is that, on the present basis of world production and consumption, there is a balance of production in the United States of some 12 to 13 billion dollars a year, which must, however, be transferred somehow to the rest of the world, or else the rest of the world must go without. Nor, it must be remembered, does the U.S.A. require to import 12 billion dollars' worth of goods in exchange, even if, which is an impossibility, the rest of the world were able to supply commodities to that value at the present time.

These are, therefore, the inescapable facts of the situation. We had hoped, as hon. Members have pointed out, and as most countries had hoped, that somehow or other we should be able to achieve an expansionist world policy, based on multilateral trade. By increasing the volume of world trade it was hoped that we should be able to even up the productivity of the rest of the world so as to obtain at least an approximate balance with that of the Western Hemisphere. It has become quite obvious that such a balance is much further off than we had hoped and that far more fundamental measures than had been anticipated will be required if ever we are to attain that balance.

A great many small and economically separate nations cannot deal individually with this situation. None of us is large enough in ourselves to command the necessary resources. That is why the suggestion put forward by Mr. Marshall for an integration of European economy is to be welcomed, so that Europe as a whole can tackle this problem of the unbalance of trade and productivity. We have, let us remember, great resources in our Commonwealth, but their mobilisation, unfortunately, has been most sadly neglected in the past. We must now, through their development, place ourselves as a Commonwealth in the position not merely of exchanging manufactured goods for raw materials within the Commonwealth, but also of exchanging both the primary and manufactured commodities of the Commonwealth with the rest of the world, if, that is to say, we are to be in the position to acquire from the Western Hemisphere the goods we shall always need. It is not towards autarcky that we want to move, but towards the development, with other countries, such as those in Europe, for example, of increased exchanges of goods. All this is against a background of continuous and concerted efforts to expand the totality of world trade.

In the meanwhile, however, this integration of economies will have to be worked out and we have our own problem to deal with of the balance of payments, and the major part of that problem must be the increasing of our own production. The cutting down of imports can, and must, in the emergency make some contribution to easing the present situation, but we must not try to solve our difficulties by a permanent lowering standard of living of the people of this country, which, of course, such a cut implies.

Let us, however, have it quite clear in our own minds that nothing we can immediately do, either by saving imports or by increasing exports, can in the present world situation bring a permanent solution to our difficulties. So long as there is an unbalance of the order of 12 billion dollars a year between the exports and imports of the United States of America, no individual country which is compelled to purchase largely from that country can hope itself to bring about a balance of overseas payments. We may hope to bring the balance within manageable proportions, but that is the best we can do by short-term expedients, and the rest must be left to the longer-term and more fundamental action along lines such as I have already mentioned.

Let me turn now to the short-term expedients, especially the question of our productivity and our capacity to export. First, let me deal with exports, assuming for a moment that we can get the necessary production. The right hon. Gentle-man said that, taking our figure of 140 per cent., it would mean, excluding coal, 200 per cent. Figures that have so far been published are over-all over 1938. When we reach a figure of no per cent. it means over-all, including the fact that we used to export coal, but do not do so now. Say it is a figure of 140 per cent. Then we must not multiply that figure up and say it ought to be 200 per cent. or we shall get out of relation with the statistical figures which there are. What we are aiming at is 140 per cent.

The Prime Minister has already emphasised the difficulty with which we are faced in trying to build up to that figure and afterwards to 160 per cent. In July—the figure has just come to hand—we have reached a figure of rather over 120 per cent., but that is a particularly favourable figure, as the July figure always is just before the holidays, because of clearances; and also the import figure for July is unfortunately a new high record, which makes us worse on our balance of payments for July, despite the fact that we have got 120 per cent. of our 1938 exports. That is no doubt partly due to the exceptional shipments of Canadian wheat which my right hon. Friend has already mentioned, but the rest of the climb from now onwards is bound to be more and more difficult.

We are already beginning to suffer, as I have constantly warned the country, from the change of the sellers' to a buyers' market. We are already meeting the import blockages from countries which are suffering from just the same difficulty as we are—an acute shortage of foreign exchange. That makes it, of course, more and more difficult to expand our markets. In this state of affairs we may hope possibly to get some temporary help for sterling exports due to the very fact that there is an acute world shortage of dollars, but even then, unless there is some temporary invigoration of world trade by an injection of dollars or dollar goods, we are bound to find the greatest difficulty in expanding our own export trade and, in the long run, it will be impossible to maintain that expanded trade unless we find a long-term cure for this unbalance between the two hemispheres. Do what we will, therefore, our capacity to export must remain subject to world economic forces which we cannot ourselves alone control.

The working out of the export programme is, of course, a matter for consultation between the Government and industry, and that consultation has long been proceeding through a regular machinery, but it will require further and more intensive development in view of the need for greater exports. Arrangements will have to be made through the machinery for the allocation of materials and labour to see that exports get still further preferential treatment in raw materials and labour, and this will be made possible, we believe, by the reduction in the capital investments programme which will have to be severe, as my right hon. Friend the Prime Minister stated yesterday. However, that capital investments programme must not be done just as a percentage cut; it must be done by a careful examination of every single project to see whether or not it is such as is to be of immediate use to the purposes which we are now pursuing in our economy.

Now it is hoped that the longer hours which are to be worked in those industries which can be assured of supplies of raw materials, fuel and power—because it is no good having longer hours otherwise—will enable us to increase both exports of capital and consumer goods without an undue diversion from the home market, though there is bound to be some diversion for both the capital goods and the consumer goods. One thing that we must not permit, and which we can control of course, is that we must not allow our export programme to fall down because of our failure to produce. There is no doubt whatsoever that we are capable of producing more than we are doing now, both for own internal consumption and also for exports, and that applies to foodstuffs, raw materials and manufactured goods. I think everybody is agreed upon that proposition, but people are not so well agreed upon how we should proceed to implement the programme for getting that extra production.

I cannot emphasise too strongly that, however we manipulate our trade or finance, whatever political system we follow, and whatever arrangements we make with other countries, the fundamental fact must always remain that our standard of living as a people will and must depend upon the volume of our own production, and nothing can give us a higher standard than we can support by our own efforts. Do not let us, therefore, in a maze of conflicting policies and theories, ever forget that basic, fundamental truth. How we distribute that production through the mechanisation of individual incomes is a matter we can debate and decide when we have achieved the production; but no amount of increasing incomes or decreasing expenditure will give us more to divide than we actually produce. We are in a period of acute scarcity and of difficulty so far as our production is concerned on the home front, and none of us should attempt to use those circumstances for our own individual benefit, or to advantage our own position whether it be a matter of individual earnings by way of salaries, or wages, or profits, or rents, or in any other way, not excluding the forcing upon the country of our own pet theories—which does not mean not carrying out our political programme.

In order to get this increased production, we must carry out our planning in an orderly way. We must secure raw materials and sources of power first of all for producing things like coal, steel, transport, agricultural production, and those primary things that are the basis of the whole of our industrial life, and, having secured a sufficiency of those primary things, we can then turn to the semimanufactured goods of importance, and finally to the completely manufactured goods. I am sure there is no need for me to emphasise the stress we have to place upon coal, steel and transport as the fundamentals of our whole industrial production. I have no time to reiterate, nor would it be proper to, the details my right hon. Friend gave yesterday of the various factors we have to take into account, and upon which we must operate, but I would like to say a word or two upon what is perhaps the most important factor of the whole situation.

How are we to attain that programme of production? How are we to get our people to do that which we know them to be capable of doing, but which at the present moment they are not doing? That raises a number of important questions which can be divided under four main heads—political considerations, deployment of the total labour force, improvement of efficiency, and incentive. I would like to deal shortly with each of those in turn.

A number of persons, both inside and outside the House, have suggested that to get a united effort by the nation—the right hon. Gentleman suggested it this evening—for the time being we should set aside our political policy. Such an idea is based upon the profound fallacy that this is merely a temporary difficulty of short duration, and that we shall before long be returning once again to what we might refer to as normal circumstances. I hope I have been able to show that that is not the position. At the same time as we are dealing with the short-term aspect of our difficulties, one must deal with the long-term aspect as well. At the last General Election it was largely because of the economic difficulties then looming ahead that the people decided to give the Labour Party a large majority in Parliament, so that it could carry through its announced programme. That programme was, of course, long-term in character. It aimed principally at two things: first, to give the mass of the workers what they regard as their rightful place and influence in the economic life of the country, and, second, to make possible an economy which could be planned in the national interest, rather than for individual profit, by nationalising a limited range of essential industries and services, and by some forms of controls in a planning partnership with the other industries.

We believe that these are essential aims if we are to increase our standards of production, and so raise or even maintain our standard of living today. We cannot abandon these long-term aims because of the immediate difficulties, and, indeed, the difficulties are a reason for intensifying and not for abandoning what we regard as the only means of securing the maximum production, not of any or all goods but of the things that we as a nation most urgently need today. In times of economic crisis and difficulty it is essential to have a policy, and not to wait for it until we can get the Government servants to help us to make it. The one thing that would be fatal would be for all parties to abandon all their policies today, and so arrive at an amorphous negative attitude which would never get us anywhere. We must have some aim and some policy, and in a democracy that can only be the aim and policy of the majority party. There is, therefore, no question of the Government abandoning these broad, general policies.

We now come to the second point, the deployment of the total labour force. That involves two things, the utilisation of the total labour force on useful production work, and the full manning up of the more essential industries. The unemployment figure has got down to a low level, except in the development areas. Therefore, we must concentrate on finishing our job in the development areas, to provide the right type of employment to absorb the labour which is there. Secondly, it has been decided to stop, by negative control, further people from going into the less necessary industries. If, at some future date, further and more stringent measures become necessary, we can then consider the question of the direction of labour, but my right hon. Friend the Prime Minister said it was only in a marginal case connected with the negative control that that power might possibly be used under existing circumstances, not as a general proposition. The alternative, of course, is that we should persuade people, wherever possible, as we have been doing, to go into the more essential industries, and we hope that with the negative control, with the needs of the country made clear, we shall get a better and readier response.

The third point is the improvement of the efficiency of the existing production units. We are not thinking in terms of ultimate improvement by re-mechanisation, but of immediate improvement here and now. That means reconsideration of the allocation of material in the light of the new necessities, an assurance of full supplies of fuel and power and a redeployment of labour, wherever that is shown, as has been shown in the cotton industry, to increase production, together with the highest efficiency of management, in particular in the area of labour relations. To obtain these results from both sides of industry, they must show themselves flexibly minded, and must be prepared to give up theories or practices which are restrictive. That is absolutely essential, and is something which no Government can do, but which can be done by enlightened leadership in industry itself, and through a thorough appreciation of the facts of the situation by workers and managements alike. It means, too, the taking of the workers into the fullest consultation at all levels, and their treatment as responsible and interested citizens and not as mere bodies. Only in that way will their enthusiasm and interest be retained.

The fourth point is incentive. Here there are many suggestions, most of them on the material side, but we must avoid a competitive raising of wages and conditions in a scarce labour market, which raises prices. Secondly, we must avoid an increase in the general inflationary tendency, which has already been dealt with, where more money is available to purchase less and less goods. Prices, be it remembered, are an essential factor in our export programme. If we allow prices to rise because of internal costs rising, we shall lose and not gain our overseas markets, or at least not be able to gain new ones in the competition. Therefore, incentives must be strictly limited to increased production so that more earnings mean more production. We cannot in any circumstances afford to pay more for the same or less production. We must await the further raising of the levels of earnings until we can provide the goods upon which those earnings can be spent. In the same way, let me point out, that large profits drawn from industry today are just as inimical because they, too, raise the price levels and, furthermore, they offer an immediate temptation for the demand for greater salaries.

In summing up this Debate, I have attempted to give a broad sketch of the difficulties in short and long term and to show the essential interrelation between the two. I have dealt also with what is to my mind the kernel of the whole problem—how are we to produce more so as to have more to distribute amongst our people? But when we have considered broadly and in detail, as we have during the course of this Debate, the actual steps that we must take, we come back to the most important consideration of all: our failure or success will depend in the last resort upon the spirit of our people. The quality of effort that is needed in the next few years is not such that it can be evoked by mere material considerations or by the intensification of self-interest or competitive self-seeking. Employers, staffs, technicians, and workers alike must be fairly rewarded. We must do our utmost to minimise the difficulties and hardships of the housewives throughout the country. There must be no sense of injustice and no favouritism or privilege except as the reward for an honest contribution to the needs of the nation. The increase of money incentives, especially with a greater shortage of goods, cannot inspire the whole nation to the efforts that are now needed for our salvation. We must bring home to the people the seriousness of the country's present plight and the future problems that we face. We must convince them of their power to overcome all difficulties by common effort. We must draw out from people that courage and determination which have always been the hallmarks of the British character.

The time for the realisation of our aims and hopes has been set back by the inescapable economic facts of world development. We can offer no immediate prospect of relief. The struggle of production, the battle of the balance of payments, is as tough a proposition as

any that this country has ever faced, and there is no easy way out. Production, and production alone, can find us relief in our immediate situation. It is no part of the British character to resign ourselves to such difficulties or to fail to take the measures, however hard, to overcome them. It has been truly said that by our faith we can move mountains. It is by our faith in ourselves, in our country, in the free democratic traditions for which the people of this country have for centuries fought and battled, and for which they must fight again as willingly on the economic front as upon the oceans, on the land and in the air, it is by our faith in the deep spiritual values that we acknowledge in our Christian faith, that we shall be enabled and inspired to move the present mountains of our difficulties, and so emerge into that new and fertile plain of prosperity which we shall travel in happiness only as the result of our own efforts and our own vision.

Question put, "That this House do now adjourn."

The House divided: Ayes, 170; Noes, 318.

Division No. 370.] AYES. [9.57 p.m.
Agnew, Cmdr. P. G. Dodds-Parker, A. D. Kingsmill, Lt.-Col. W. H.
Allen, Lt -Col. Sir W (Armagh) Dower, Lt.-Col. A. V. G. (Penrith) Lambert, Hon. G.
Amory, D. Heathcoat Dower, E. L. G. (Caithness) Lancaster, Col. C. G
Anderson, Rt. Hn. Sir J. (Soot Univ.) Drayson, G. B. Langford-Holt, J.
Assheton, Rt. Hon. R. Drewe, C. Law, Rt. Hon. R. K.
Astor, Hon. M. Dugdale, Maj. Sir T. (Richmond) Legge-Bourke, Maj. E. A. H.
Baldwin, A. E. Duncan, Rt. Hn. Sir A. (City of Lond.) Lennox-Boyd, A. T.
Barlow, Sir J. Duthie, W. S. Linstead, H. N.
Baxter, A. B. Eden, Rt. Hon. A. Lloyd, Maj. Guy (Renfrew, E.)
Beamish, Maj. T. V. H Elliot Rt. Hon Walter Low, Brig, A. R. W
Beechman, N. A. Erroll, F. J. Lucas, Maj. Sir J,
Bennett, Sir P. Fleming, Sqn.-Ldr. E. L Lucas-Tooth, Sir H.
Birch, Nigel Foster, J. G. (Northwich) Lyttelton, Rt. Hon. O
Boles, Lt.-Col. D. C. (Wells) Fyfe, Rt Hon. Sir D. P M McCallum, Maj. D.
Boothby, R. Galbraith, Cmdr. T. D Mackeson, Brig, H. R.
Bossom, A C Gammans, L. D. McKie, J H. (Galloway)
Bowen, R. Gates, Maj E. E. Maclay, Hon. J. S.
Bower, N. George, Maj. Rt Hn. G. Lloyd (P'ke) Macmillan, Rt. Hon. Harold (Bromley)
Boyd-Carpenter, J. A. George, Lady M. Lloyd (Anglesey) Macpherson, N. (Dumfries)
Bracken, Rt. Hon. Brendan Glyn, Sir R. Maitland, Comdr. J. W.
Bromley-Davenport, Lt.-Col W Gomme-Duncan, Col. A Manningham-Buller, R. E
Butcher, H. W. Gridley, Sir A. Marlowe, A. A. H
Butler, Rt. Hon. R. A. (S'flr'n W'Id'n) Grimston, R. V. Marples, A E.
Byers, Frank Hannon, Sir P. (Moseley) Marsden, Capt. A.
Carson, E. Hare, Hon. J. H. (Woodbridge) Marshall, D (Bodmin)
Challen, C. Harvey, Air-Comdre. A. V Marshall, S. H (Sutton)
Channon, H. Haughton, S. G. Maude, J. C.
Churchill, Rt. Hon. W. S Head, Brig. A. H. Medlicott, F.
Clarke Col. R. S. Headlam, Lieut.-Col. Rt. Hon Sir C Molson, A. H. E.
Clifton-Brown, Lt.-Col. G Hinchingbrooke, Viscount Moore, Lt.-Col. Sir T
Conant, Maj. R. J. E. Hogg, Hon. Q Morris, Hopkin (Carmarthen)
Cooper-Key, E M Hudson, Rt. Hon. R. S. (Southport) Morrison, Maj. J. G. (Salisbury)
Corbett, Lieut.-Col. U. (Ludlow) Hulbert, Wing-Cdr N. J Morrison, Rt Hon. W. S. (C'nc'ster)
Crosthwaite-Eyre, Col. O. E. Hurd, A Motl-Radclyffe, Mai, C E
Cuthbert, W. N Hutchison, Col. J. R. (Glasgow, C.) Nicholson, G.
Darling, Sir W. Y. Jarvis, Sir J. Nield, B. (Chester)
Davidson, Viscountess Jeffreys, General Sir G. Noble, Comdr A. H. P.
Davies, Clement (Montgomery) Jennings, R O'Neill, Rt. Hon. Sir H
De la Bère, R Joynson-Hicks, Hon. L. W. Orr-Ewing, I. L
Digby, S. W. Kerr, Sir J. Graham Osborne, C
Peake, Rt. Hon. O Savory, Prof. D. L. Turton, R. H.
Peto, Brig. C. H. M. Scott, Lord W. Vane, W. M. F
Pickthorn, K. Shepherd, W. S. (Bucklow) Wadsworth, G.
Ponsonby, Col. C. E. Smiles, Lt.-Col. Sir W Wakefield, Sir W. W.
Poole, O. B. S. (Oswestry) Smith, E. P. (Ashford) Walker-Smith, D
Prescott, Stanley Spearman, A. C. M. Ward, Hon. G. R.
Price-White, Lt.-Col. D, Stanley, Rt. Hon. O. Webbe, Sir H. (Abbey')
Prior-Palmer, Brig, O. Stoddart-Scott, Col. M Wheatley, Colonel M. J
Raikes, H. V. Strauss, H. G. (English Universities) White, Sir D. (Fareham)
Ramsay, Major S. Sutcliffe, H. White, J. B. (Canterbury)
Rayner, Brig. R, Taylor, C. S. (Eastbourne) Williams, C. (Torquay)
Reed, Sir S. (Aylesbury) Taylor, Vice-Adm. E. A. (P'dd't'n, S.) Winterton, Rt. Hon. Earl
Reid, Rt. Hon. J. S. C. (Hillhead) Teeling, William York, C.
Roberts, H. (Handsworth) Thomas, J. P. L. (Hereford) Young, Sir A. S. L. (Partick)
Roberts, Maj. P. G. (Ecclesall) Thorneycroft, G. E. P, (Monmouth)
Roberts, W. (Cumberland, N.) Thornton-Kemsley, C. N. TELLERS FOR THE AYES:
Robertson, Sir D. (Streatham) Thorp, LI.-Col. R. A. P. Mr. James Stewart and
Sanderson, Sir F. Touche, G. C Mr. Buchan-Hepburn.
Adams, Richard (Balham) Davies, Edward (Burslem) Herbison, Miss M.
Adams, W. T. (Hammersmith, South) Davies, Ernest (Enfield) Hewitson, Captain M.
Alexander, Rt. Hon. A. V. Davies, Harold (Leek) Hobson, C. R.
Allen, A. C. (Bosworth) Davies, Haydn (St. Pancras, S. W.) Holman, p.
Allen, Scholefield (Crewe) Davies, S. O (Merthyr) House, G.
Alpass, J. H. Dear, G. Hoy, J.
Anderson, A. (Motherwell) de Freitas, Geoffrey Hubbard, T.
Anderson, F. (Whitehaven) Diamond, J. Hudson, J. H. (Ealing, W.)
Attewell, H. C. Dobbie, W Hughes, Emrys (S. Ayr)
Attlee, Rt. Hon. C. R. Dodds, N. N Hughes, Hector (Aberdeen, N.)
Awbery, S. S. Donovan, T. Hughes, H. D. (Wolverhampton, W.)
Ayles, W. H. Driberg, T. E. N. Hutchinson, H. L. (Rusholme)
Ayrton Gould, Mrs. B. Dugdale, J. (W. Bromwich) Hynd, H. (Hackney, C.)
Barnes, Rt. Hon. A. J. Dumpleton, C. W. Hynd, J. B. (Attercliffe)
Barstow, P. G. Durbin, E. F. M. Irving, W. J.
Barton, C Dye, S. Isaacs, Rt. Hon. G. A
Battley, J. R. Ede, Rt. Hon. J. C. Jay D. P. T.
Bechervaise, A. E. Edwards, N. (Caerphilly) Jeger, G. (Winchester)
Belcher, J. W. Edwards, W. J. (Whitechapel) Jeger, Dr. S. W. (St. Pancras, S. E.)
Bellenger, Rt. Hon. F J. Evans, E. (Lowestoft) Jones, Rt. Hon. A. C (Shipley)
Benson, G. Evans, John (Ogmore) Jones, D. T. (Hartlepools)
Beswick, F. Ewart, R. Jones, J H. (Bolton)
Bevan, Rt. Hon. A. (Ebbw Vale) Fairhurst, F. Jones, P. Asterley (Hitchin)
Bevin, Rt. Hon. E. (Wandsworth, C.) Farthing, W J. Keenan, W.
Bing, G. H. C. Fernyhough, E. Kenyon, C.
Binns, J. Field, Captain W. J. Key, C. W.
Blenkinsop, A. Fletcher, E. G. M. (Islington, E.) King, E. M.
Blyton, W. R. Follick, M. Kinghorn, Sqn.-Ldr. E.
Boardman, H. Foot, M. M. Kinley, J.
Bowden, Flg.-Offr. H. W. Forman, J. C. Kirby, B. V
Bowles, F. G. (Nuneaton) Foster, W. (Wigan) Kirkwood, D.
Braddock, Mrs. E. M. (L'pl, Exoh'ge) Fraser, T. (Hamilton) Lavers, S.
Braddock, T. (Mitcham) Freeman, Maj. J. (Watford) Lee, F. (Hulme)
Bramall, E. A. Freeman, Peter (Newport) Lee, Miss J. (Cannock)
Brook, D. (Halifax) Gaitskell, H T. N. Leonard, W
Brooks, T. J. (Rothwell) Ganley, Mrs. C. S Leslie, J. R.
Brown, George (Belper) Gibbins, J. Lever, N. H.
Bruce, Major D. W. T. Gibson, C. W. Levy, B. W.
Burden, T. W Gilzean, A. Lewis, A. W. J. (Upton)
Burke, W. A. Glanville, J. E, (Consett) Lewis, J. (Bolton)
Callaghan, James Goodrich, H. E. Lindgren, G. S.
Carmichael, James Gordon,-Walker, P. C. Lipton, Lt.-Col. M.
Chamberlain, R. A Greenwood, Rt. Hon. A. (Wakefield) Logan, D. G.
Champion, A. J. Greenwood, A. W. J. (Heywood) Longden, F.
Chater, D, Grenfell, D. R. Lyne, A. W.
Chetwynd, G. R. Grey, C. F. McAdam, W.
Cluse, W. S Grierson, E. McAllister, G.
Cobb, F. A. Griffiths, D. (Rother Valley) McEntee, V. La T.
Cooks, F. S. Griffiths, Rt. Hon. J. (Llanelly) McGhee, H. G.
Collick, P. Griffiths, W. D. (Moss Side) McKay, J. (Wallsend)
Collins, V. J. Guest, Dr. L. Haden Mackay, R. W. G (Hull, N. W.)
Colman, Miss G. M. Guy, W. H. Maclean, N. (Govan)
Cook, T. F Haire, John E. (Wycombe) McLeavy, F.
Cooper, Wing-Comdr. G. Hale, Leslie MacMillan, M. K. (Western Isles)
Corbet, Mrs. F. K. (Camb'well, N. W) Hall, Rt. Hon. Glenvil Macpherson, T. (Romford)
Corlett, Dr. J. Hamilton, Lt.-Col. R. Mainwaring, W H.
Corvedale, Viscounl Hannan, W. (Maryhill) Mallalieu, J. P. W.
Cove, W. G. Hardy, E. A. Mann, Mrs. J.
Crawley, A. Harrison, J. Manning, C. (Camberwell, N.)
Cripps, Rt. Hon. Sir S. Hastings, Dr. Somerville Manning, Mrs. L. (Epping)
Crossman, R. H. S. Haworth, J. Ma[...]hers G.
Daines, P. Henderson, A. (Kingswinford) Mayhew, C. P.
Dalton, Rt. Hon H. Henderson, Joseph (Ardwick) Mellish, R. J.
Messer, F. Reid, T. (Swindon) Thomas, D. E (Aberdare)
Middleton, Mrs. L. Rhodes, H. Thomas, Ivor (Keighley)
Mikardo, Ian Ridealgh, Mrs M. Thomas, I. O. (Wrekin)
Millington, Wing-Comdr. E. R Robens, A Thomas, George (Cardiff)
Mitchison, G. R Roberts, Goronwy (Caernarvonshire) Thomson, Rt. Hn. G. R (Ed'b'gh, E.)
Monslow, W. Robertson, J. J (Berwick) Thorneycroft, Harry (Clayton)
Moody, A. S Rogers, G. H. R. Thurtle, Ernest
Morgan, Dr. H. B Ross, William (Kilmarnock) Tiffany, S
Morris, P (Swansea, W.) Royle, C. Titterington, M F.
Morrison, Rt. Hon. H. (Lewisham, E.) Sargood, R. Tolley, L.
Mort, D L. Scollan, T. Tomlinson, Rt. Hon G
Moyle, A. Segal, Dr. S. Vernon, Maj. W F.
Murray, J. D Shackleton, E. A A Viant, S. P.
Naylor, T. E Sharp, Granville Wallace, G. D (Chislehurst)
Neal, H. (Claycross) Shawcross, C. N. (Widnes) Wallace, H. W. (Walthamstow, E.)
Nichol, Mrs. M E (Bradford, N.) Shawcross, Rt. Hon. Sir H. (St Helens) Webb, M. (Bradford, C.)
Nicholls, H R. (Stratford) Shinwell Rt Hon E Weitzman, D.
Noel-Baker, Rt. Hon. P. J. (Derby) Shurmer, P. Wells, P. L. (Faversham)
Noel-Buxton, Lady Silverman, J. (Erdington) Wells, W. T. (Walsall)
O'Brian, T. Simmons, C. J. West, D. G.
Oldfield, W. H Skeffington, A. M. White, H. (Derbyshire, N. E.)
Oliver, G. H Skeffington-Lodge, T. C Whiteley, Rt. Hon. W.
Orbach, M. Skinnard, F. W. Wigg, Col. G. E.
Paget, R. T. Smith, C. (Colchester) Wilcock, Group-Capt C. A. B
Paling, Rt. Hon. Wilfred (Wentworlh) Smith, H. N. (Nottingham, S.) Wilkes, L.
Paling, Will T. (Dewsbury) Smith, S. H. (Hull, S. W.) Wilkins, W. A.
Palmer, A. M. F. Solley, L. J. Willey, F. T. (Sunderland)
Pargiter, G. A. Sorensen, R. W. Willey, O. G. (Cleveland)
Parkin, B. T Soskice, Maj. Sir F Williams, D. J (Neath)
Paton, J. (Norwich) Sparks, J. A. Williams, J. L. (Kelvingrove)
Pearson, A. Steele, T. Williams, Rt Hon. T. (Don Valley)
Peart, Thomas F Stephen, C. Willis, E.
Platts-Mills, J. F. F Stokes, R. R. Wills, Mrs. E. A
Poole, Cecil (Lichfield) Strachey, J Wilmot, Rt Hon. J
Porter, E. (Warrington) Strauss, G. R. (Lambeth, N.) Wilson, J. H
Porter, G. (Leeds) Stross, Dr. B Wise, Major F. J.
Price, M. Philips Stubbs, A. E Woodburn, A
Pritt, D. N. Summerskill, Dr Edith Wyatt, W.
Proctor, W. T Swingler, S. Yates, V. F.
Pryde, D. J. Sylvester, G. O. Young, Sir R. (Newton)
Pursey, Cmdr. H Symonds, A. L Younger, Hon. Kenneth
Ranger, J. Taylor, H. B. (Mansfield)
Rees-Williams, D. R. Taylor, R. J. (Morpeth) TELLERS FOR THE NOES:
Reeves, J. Taylor, Dr S (Barnet) Mr. Snow and Mr. Popplewell.

Question put, and agreed to.