§ Motion made, and Question proposed, "That this House do now adjourn."—[Mr. William Whiteley.]
§ 3.41 p.m.
§ The Chancellor of the Exchequer (Sir Stafford Cripps)
I am sure the House will forgive me if I use this occasion for giving them a short review of our general economic situation as it appears a t the end of the year, in addition to dealing with the capital investment programme for 1948. It is of the utmost importance that all those who are working so hard in this country today to get us out of our difficulties should be given a full and frank statement of our position. Misrepresentation of facts and wild partisan statements not only do grave harm to our position abroad, threatening the stability of sterling and embarrassing us in our bilateral deals, but they act as a discouragement and a source of confusion to our own people. Criticism and constructive suggestions are welcome and helpful; but irresponsible and misleading assertions make even more difficult the already sufficiently onerous task which the people of this country have to face.
I will first deal with the investment programme for 1948, which is set out in the White Paper, and which is the primary subject matter of our Debate. Let me make clear what is the real significance of this term "investment." It does not mean, of course, the buying of stocks and shares in enterprises of various kinds. It signifies the expenditure by the country of its resources of productive 1891 capacity, materials and manpower in the construction or maintenance of its stock of capital goods, such as factories, houses, transport, roads, machinery and so on.
The essence of the problem is twofold. First, it is a matter of capacity, materials and labour, and it is in terms of these that we must consider our ability to maintain our investment programme. Secondly, it involves using resources today to make things which cannot be consumed today. It involves postponing and limiting consumption in order to make available these resources. They are the same resources that we require for the urgent purpose of our living standards, whether in the form of goods produced for home consumption or for export in exchange for essential imports. In earlier times we were accustomed to allow the forces of supply and demand to regulate the flow of our resources into capital investment, but the war has left us in an entirely new position.
Not only have we suffered the destruction of many capital goods—four million houses destroyed or damaged by enemy action, and much industrial plant as well—but, what is even more significant, we have run down the productive value of our capital equipment by deliberately deferring all but the most vital maintenance and repairs. The railways afford a good example of this. They did a magnificent job during the war, but they ended up with vast arrears of repairs and maintenance, the result of which was vividly brought home to us in the exceptional circumstances of last spring. Indeed, it is one of the common experiences of almost every industrial country in the world that the overwork of plant during the war has gone much further and deeper than most people calculated.
This greatly accentuated demand, covering the whole range of our industrial services and buildings, accompanied by the urgent and increased necessity for exports of every kind in our struggle to balance our overseas payments, made it necessary that we should attempt some allocation of our resources between the competing claims of export, investment and consumption. Our problems could not be solved by any laissez-faire method. It was vital that we should assert the 1892 priority of the national interest. We had to make certain that we were not only sending out the exports, but also maintaining the capital equipment of the country in a state of efficiency in which it could continue to provide for our needs.
To secure these ends it was necessary to have a stricter measure of control. That was the origin of the White Paper. We had to fix our programmes of investment at a level which would maintain and, where necessary, improve the capital equipment of the country, but at the same time at a level which would not make a greater claim on our resources than we were able to sustain. It is not necessary, I am sure, for me to stress the great complication of detail in this matter, but there are two most important general considerations which I would ask the House to bear in mind in reviewing the subject. First, we are dealing with a shortage of men, materials and capacity, but not of money; and secondly, we must look at the problem as a whole.
Everyone, I have no doubt, will have his own choice as to the things to which he would like to see an overriding priority given. I can assure the House that every one of those priorities has been most vigorously pressed upon us by the Department concerned. But we must so balance the use of our resources as to get the best overall result, and it is that which the plan in the White Paper has attempted. We have postponed nothing for the sake of postponement, but only in order to meet the hard and inescapable facts of the supply position. We have to work within the limits of the manpower, and the steel and timber which we have available. These limits of our resources have forced us to reduce both consumption and investment.
Consumption has already been severely squeezed by the cuts on imported food, and by the diversion of goods to export in order to balance our trade. Further cuts on consumption have been imposed both by the autumn Budget and by the measures we have taken to steer manpower away from less essential industries. In all these ways the claim of less essential consumption on our resources has been heavily cut back. Our next step was to get our investment coat cut according to the cloth available, while still maintaining as good and as sound a design as possible, 1893 bearing in mind that certain overseas investments, such as the developments within the sterling area, were an essential part of the eventual solution of our difficulties.
The real significance of the White Paper is not in the financial terms which have had to be used to sum up the results of many dissimilar programmes, but in the actual decisions as to physical assets and labour which are to be found in the appendices. The new programme will, we hope, be more realistic than the earlier ones in terms of the resources available. If all the various projects planned for 1948 had proceeded according to their schedules, the volume of investment would have mounted to a very large figure, certainly far in excess of £1,600 million.
If the manpower and other physical resources we had originally expected to be able to devote to work on investment projects in 1948 could have been made available, they would, we estimate, have produced about £1,600 million worth of physical investment; but when we had made provision for increased export, and for the needs to expand agriculture and other industries at home in order to save imports, it was clear that this quantity of resources could not be found for investment. It has, therefore, been reduced to the level of £1,320 million a year at the end of 1948, or an average over the year of £1,420 million. Moreover, we must see that the number of new projects proceeded with is limited to ensuring that the more important schemes may be completed as rapidly as possible. We cannot afford at the present time to have more of our resources locked up in work in progress than is essential to the ordinary flow of construction.
There are two main criticisms which have been made. First, that the postponements and reductions are not enough in total, and, second, that more should be spent upon re-equipping our industries, which implies, of course, still severer cuts in other investments. In this respect, the chief suggestion is that housing should have been further cut. It has been suggested that my right hon. Friend the Minister of Health has managed by his vigorous insistence to torpedo the programme. As regards the first criticism, we shall see as it develops next year how far we have enabled the export pro- 1894 gramme to be carried out by what we have done.
The present White Paper on investment is not necessarily a final document, in the sense that if the necessity supervenes we may have to reconsider it. It would be unwise, in such circumstances of world economic disruption as we are now faced with, to have any rigid or final plan. We must always be ready to adapt our economic activities to the rapidly changing world situation, and to our own internal circumstances. We believe, however, that the substantial postponements laid down are about the maximum possible within the mobility and interchangeability of labour that exists.
The cutting down of projects which merely keeps people unemployed is of no value. It is not our object to waste our labour resources. On the other hand, we desire to get a transference of labour from less essential to more essential activities. It is almost inevitable that the changeover of production necessary to meet our new national requirements will disturb the present pattern of employment. It will be impossible in the course of this changeover to avoid some incidence of temporary unemployment, but we must be careful so to adjust our plans as to minimise the waste that would be caused by any large-scale unemployment. Although there may be, therefore, a theoretical case for sudden and drastic measures and changes, there is a much stronger practical case for taking time to making the changeover smooth and as little disruptive as possible of our production efforts.
A great deal of the limitation on what we can do as regards our own industrial reconstruction depends upon the availability of steel, which strictly limits the possibilities, in view of the inescapable fact that we must export as many steel goods as we can in various forms, to balance our overseas payments. So far as housing is concerned, timber is the real limiting material, but here we must bear in mind that an essential condition of success in achieving our export and import-saving programme is a degree of mobility of labour which will allow us to move labour from one occupation to another. In securing this mobility, housing is vital, and the more houses we can get quickly finished, the better chance we 1895 shall have of achieving our production programme.
Mining and agriculture are the two most vital industries which we must man-up to help our balance of payments, and neither can be manned-up without a large access of new housing. Housing is not an added or an unnecessary luxury; it is an essential part of capital equipment necessary to carry out our plans. Quite apart from the question of comfort and convenience for our people, which are in themselves of first class importance, as a mere matter of industrial efficiency, the provision of adequate housing accommodation as quickly as possible is a primary consideration. That is a very good reason why we should not at this moment cut our housing programme more than materials compel us to do.
I do not propose to deal in detail with the arguments and facts set out in the White Paper. My right hon. Friend the Minister of Health, when he sums up, will be able to deal with any special point which may be raised. We have laid down a programme which will be manageable in physical terms, and which we hope will not materially interfere with our attempt to achieve our export task. Do not let us or anyone else overlook the fact that we have done a tremendous amount of new capital work in this country in the last two years. It is a surprisingly large amount, when we bear in mind the circumstances under which the whole country has been labouring. We intend to go forward with a considerable programme, although not so much as we had hoped. In adjusting the plan to our needs, we have tried to maintain an overall balance which will allow us to concentrate upon the most necessary, without wholly neglecting the general pattern of our capital development.
I now turn to a review of our balance of payments situation, which is, of course, closely associated with the investment programme. Many of the current facts have already been made public. We have had a fairly recent Debate in this House on the matter. I will attempt to give the House a sort of rough balance sheet, accompanied by some observations as to our future situation. It must always be borne in mind that this is not a short-term problem. It is one which 1896 will proceed, perhaps with varying emphasis, far into the future, because it arises out of long-standing and difficult tendencies which have been developing over the years in many other countries besides our own. Indeed, it is a world problem.
We cannot reach a reasonable equilibrium without more settled economic and political conditions throughout the world. All our recent plans and activities have been designed to assist in reducing the size of the problem we have to face. First, the cuts in our imports; second, the forcing up of our exports; then, the capital investment programme designed, as I have said, to free our resources; and, finally, the recent Finance Bill planned to diminish the inflationary pressure which might otherwise disturb our economy and so force up prices and costs, making it more difficult to find markets for our exports. Linked with these steps is the development of our own internal resources including, of course, agriculture, and those of the sterling area, so as to reduce our dependence upon exports from hard currency countries. The final step is the arrangement of bilateral agreements which will secure us the most valuable use of our exports in acquiring the vital imports which we need.
These are the main elements making for a reasonable hope that we can, in time, achieve an acceptable standard of living for our people, based firmly upon our own economic independence. The Marshall plan, if it is put into operation, will, we hope, help the carrying out of this programme; but it can be no substitute for it. Any assistance we derive from that plan will have to be used for the more rapid development of our own resources and those of Europe and the sterling area, and not merely to enable us to enjoy some temporary improvement in our living standards. We must always have in mind that such a plan is temporary, and can only give us the time in which the better to carry out our own long-term arrangements for securing the supplies and markets we need as a permanent and stable basis for our economy.
I now turn to a short historical review of our balance of payments position, because it is in the light of the tendencies so disclosed that we must judge our present position. Before 1914, the annual average 1897 value of retained imports into this country at the then level of prices was £610 million. Our own physical exports earned £474 million, leaving an annual deficit of £136 million, which was made up by shipping, with earnings of £95 million, and insurance, banking and other commercial services, with £35 million. This still left a deficit of £15 million which was, however, wholly covered by our investment income of more than £150 million sterling, thus enabling us to enjoy a substantial surplus for reinvestment abroad. It was out of this surplus that we developed many areas in the world upon which we could draw for imports of food and raw materials. That general pattern of our policy, however, had one unfortunate result in that it led to the neglect of our own agriculture, a mistake which we must not repeat.
The war of 1914–18, shook the whole structure of our economy. By 1928, our exports were only just over 84 per cent. of those in 1913, and our share of world exports by value had fallen from 13.9 to 11.2 per cent. Between 1922 and 1928, our annual deficit on current account on overseas payment averaged £143 million, which was closed by using the greater part of our overseas investment income, thus leaving, little or nothing for new overseas investment. Between 1928 and 1938, exports fell still further by 37 per cent., but imports were reduced by only 23 per cent. Fortunately, for us there was, however, in the 1920's a favourable turn in the terms of trade, but the agricultural communities supplying us with our food were deprived of a large part of their current income through the fall in prices of primary products.
Immediately before the last war, on a three years' average, we were spending £884 million on imports against earnings of £496 million on physical exports and re-exports, an adverse balance in visible trade of £395 million. Against this, we had our earnings from shipping, insurance, banking, commercial services, and so on, and, in particular, £203 million from overseas investments, leaving us with an overall debit balance of about £45 million. We were then living beyond our current income. I have given the House these figures because it is essential to appreciate these long existing tendencies towards the worsening of 1898 our position as regards the balance of our overseas payments.
It was upon this precariously balanced position that the war had its tremendous impact. There were three particular consequences affecting our balance of payments: the concentration of the whole of our productive effort on the war; the cutting to the bone of our exports, with all the long-term consequences of disturbance of prewar trade channels which was necessarily involved, and the destruction of half our Mercantile Marine, together with the loss of much of our income from overseas investments. We have rebuilt a large part of our shipping. Indeed, we are building at present in British yards more tonnage than the rest of the world put together. But we still have not enough ships for international trade, and, therefore, we are unable to set free enough ships to go out and pick up the lucrative trade between other countries which was the basis of our prewar shipping income.
The income from commercial services, such as banking and insurance, has stood up well, but it has not increased proportionately to the changed value of money. On our overseas investments, we have suffered most sharply. During the war we sold or facilitated the repatriation of overseas investments to the total of over £1,100 million sterling. That means that by far the largest single source available to us before the war for closing the visible trade deficit on current account has been seriously reduced. Moreover, as things turned out, we felt this loss particularly, because a substantial part of it represented the loss of dollar income from dollar securities.
Nor, indeed, did the process of the sale of investments cease with the end of the war. We have sold many public utilities in Latin-America including, of course, the Argentine railways, and we have sold other lucrative interests elsewhere. It is sometimes suggested that we ought to realise still more of our overseas assets to meet our current bills, but the man who pays his current bills out of capital while making no effort to reduce his expenditure or increase his income faces a bad end. That is equally true of nations and particularly true of our own. As it is, we can only estimate £70 million for 1948 as a return from our overseas investments. In the light of this situation, our 1899 resources take on an added importance for they alone stand between the sterling area and possible bankruptcy.
In some parts of the world a mystery still hangs around the words "sterling area." Indeed, it is by some regarded as a sinister phenomenon. In fact, it is a very old system and is the application to the financial arrangements between the members of the sterling area of the principles of a domestic clearing banking system. For many years past the countries in the sterling area have maintained practically all their reserves in London and paid into London foreign exchange earnings, calling on London in turn to provide such external resources as they required for their current trade. This has enabled the sterling area like the clearing bank to ensure that all the money in the system was made to do its work.
Through this system we have been able to finance development overseas, and we have, in our turn, received a very substantial contribution to our own foreign exchange resources. Before the war it was a completely free system. During the war we obtained the agreement of the members of the sterling area that they would continue to pay into the system their dollar earnings and they would limit their dollar expenditure to what was essential for their own contribution to the war effort. This voluntary limitation was reinforced by the difficulties of supplies of shipping, but broadly we left it to the local controls to determine in the light of the general policy their claim upon the sterling area resources for dollars. Now, of course, this system is under a great strain. The current dollar earnings of the sterling area though significant are much below their current dollar needs. This would mean, if it were to continue, a very heavy drain on our reserves.
We must remember when we speak of our reserves we are speaking of the reserves of all countries in the sterling area. As the House knows, we were compelled to spend the American loan much more rapidly than either we or the Americans had foreseen when it was negotiated in 1945. The rate of expenditure was influenced by two main factors—the increasing dependence by practically all countries for essential supplies upon the North American continent, and the very sharp rise of prices in those 1900 countries. The final reserves of the sterling area now, therefore, consist of our existing gold and dollar reserves. At the end of this year we expect our reserves to stand at about a figure of £500 million sterling that is after bringing into account the first 100 million dollars of the remaining United States credit and the remainder of the gold that we shall obtain from South Africa under the existing gold contract.
At the beginning of 1948 we shall have available to us in addition £75 million sterling representing the rest of the United States credit and £70 million, being the approximate amount of the undrawn part of the Canadian credit. We also hope to see in January £80 million in gold under the gold loan from South Africa. We have not in sight any other accruals to those reserves for the first part of 1948. We can look forward in the latter part of 1948 to some reduction in the drain on us for dollars if the Marshall Aid Scheme is by then in full operation.
On 23rd October I commented on the momentous consequences for democratic civilisation all over the world of the discussions then proceeding at Washington. Since then the United States Government have taken matters further. Interim aid for France and Italy has been voted, and we expect very shortly to see the text of the United States Government Bill giving a clear outline of the form and scope of Mr. Marshall's great project. As I have already said, we must in the first place use the help that comes to us, if it comes, to strengthen the foundations of our economic position rather than have any immediate alleviations of our consumption standards.
§ Mr. Oliver Lyttelton (Aldershot)
There is one point on which perhaps the right hon. and learned Gentleman would help us. Do I understand that there is no balance left on our drawings under the International Monetary Fund quota?
§ Sir S. Cripps
I did not mention it, but there is a balance of £25 million.
Against the reserves which I have just described, we have external liabilities of £5,300 million, of which £3,550 million represents the sterling balances accumulated by our creditors during the war and as a direct result of the war; £855 million represents the existing liability in respect of the United States credit, and £235 1901 million the liabilities on the Canadian credit. Hon. Members will be interested perhaps to have a few figures about the rate of the drain on our gold and dollar reserves since the suspension of convertability on 20th August. In the four weeks ending 20th September the weekly drain averaged more than 90 million dollars. In the following four weeks ending 18th October it fell to the figure of about 65 million dollars. Since then it has run at the rate of rather less than 55 million dollars a week.
These figures take into account all our transactions in gold. We have had to make considerable sales of gold and these will have to continue, we hope in rapidly diminishing quantities, despite the release of the 400 million dollar credit for which we are so grateful to our American friends. During October we sold £35 million of gold, of which £30 million was in the United States, and we received £12.2 million worth of gold of which a little over fro million was from South Africa, showing a net loss of gold of £22.8 million. In November we sold £47.8 million of which £40 million was in the United States, and nearly £5 million to Belgium towards clearing up the balance under the then existing payment agreement. During November we purchased £11.3 million of gold, of which £10 million was from South Africa, showing a net loss of gold of £36.5 million.
It is a matter of convenience to some extent whether on any particular occasion we draw on our gold or on the dollars which are available to us. The figures which I quoted a few moments ago to illustrate the rate of drain on our total reserves of gold and dollars show that this total drain is being reduced, but we must reduce it still further if we are to keep within the margin of reasonable safety. Mere arithmetic will show that it is impossible for us to continue at that rate. The various governments of the countries in the sterling area have now announced their policies of further restrictions in dollar imports.
§ Sir Arthur Salter (Oxford University)
Could the Chancellor say whether the real deficit—that is to say, the deficit which is either less or greater because of a change in the stocks of our imported materials—is substantially different from the cash deficit?
§ Sir S. Cripps
Yes, certainly. These figures which I have given take no account of stocks of imported materials at all. It can be seen in the monthly statistical return what those are and how they vary from time to time.
§ Sir S. Cripps
These figures do not include the food stocks at all. If the right hon. Gentleman is interested to know, there has been no material change sufficient to signify from this point of view. They vary from time to time.
These policies which have been imposed by the Governments of the countries in the sterling area mean inconvenience, and perhaps even worse, for their peoples, but they are accepted as part of the combined policy of the whole sterling area, and we are grateful to them for their generous cooperation. We ourselves will have to watch with very great care every cent of our dollar expenditure. There will have to be further sales of gold to pay for dollar imports, and we shall not be able to avoid some drawing down of the total figure of our reserves during 1948.
While the policies for the reduction of dollar imports are being brought into effect, these basic reserves of the sterling area have immediately to carry the whole shock of the present difficult world situation. We must remember all the contingencies for which these reserves must provide, not only in the immediate months ahead of us but as part of the whole stability of the sterling area system. No one is in greater danger of losing his independence of action than the man who has no reserves upon which to fall back.
The maintenance and strengthening of these reserves must, therefore, be a major preoccupation of our external economic policy, and we shall have to postpone alleviation of our own internal position until we have done our best to make this policy secure. It is because of our own action and policy that we, in our turn, are entitled to ask other members of the sterling area to help us in this primary task, even at the cost of personal sacrifice. But we cannot build a healthy economy upon restrictions on imports or a jealous care for our reserves; we must increase our foreign exchange income and retain the confidence 1903 of other countries in the stability of our own economy, not by credit from abroad but by our own efforts in production.
I therefore turn to see how we are progressing with our export-import plans. There are so many uncertainties and incalculables that it is not possible to make any accurate forecast. Who will say what the terms of trade will be, or what will be the outcome of the many bilateral negotiations upon which we are now, or shortly shall be, engaged? Here let me interpolate a word as to the progress of these various negotiations. As the House knows, we are having talks with those countries with whom we have important trade or financial arrangements. I will not give details of all of those, but perhaps I may mention a few. The special agreement as to food grains which we hope to conclude with Russia will be most helpful in spreading our area of supply. We have, I am very glad to say, reached an agreement with Canada, and an agreed announcement of its terms is to be made later this evening.
With regard to Germany, an agreement with the United States of America as to the finances of the joint zone was announced yesterday. We no longer have direct dollar liability for German imporation.
§ Mr. Lyttelton
Could the right hon. and learned Gentleman say anything about the Canadian agreement?
§ Sir S. Cripps
I cannot say anything about it at the moment because we have promised not to announce it until later on, at 8 o'clock.
We no longer have direct dollar liability for German requirements. We shall be paying in sterling for sterling imports into Germany to the extent laid down, and our only liability to pay dollars arises if the balance of the current trade with the combined zone moves substantially against us. We have undertaken to convert the joint agency's sterling balance into dollars if necessary—it now stands at £24 million sterling—but it is the expressed intention of the United States Administration that if possible we should not be called upon to convert more than million in 1948. Among other countries with whom talks are proceeding at the present time are the 1904 Argentine, Egypt, Holland and Yugoslavia. Agreement has been reached with Sweden, I am very glad to say, and an announcement will be made in the course of the next day or two.
For 1948 we shall require about £1,600 million worth of imports on the reduced scale of living but allowing for some increases in prices, and we shall have an invisible import of about another £100 million of Government expenditure overseas. For exports and re-exports, if we fulfil the export programme we should obtain £1,550 million; and from shipping, oil and services together with income from overseas investments we should get another £130 million net. This would give us substantially an overall balance, but even if we do all that, there is still within this total balance a deficit with the Western hemisphere of nearly £300 million sterling which, of course, cannot be set off against our surplus from the other areas. That can only be tackled by cutting off imports from or extending exports to the Western hemisphere.
There is absolutely no chance of our arriving anywhere near a balance of visible exports with the United States of America. We never have done so since the days when we supplied the capital goods to develop America, and our available exports are not, in the main, such as the United States of America wants or can take. We have always relied upon three-cornered trade for the balance. We must, therefore, continue to encourage that three-cornered trade, and hope that the sterling area as a whole will be able to increase its exports into the United States of America, or that Europe may do so, with whom as a result of the Marshall Plan we may be even more closely linked than before. We are, indeed, now actively studying how that closer integration of our economy with Europe may be brought about.
§ Mr. David Eccles (Chippenham)
Was the £300 million deficit in the United Kingdom or the sterling area as a whole?
§ Sir S. Cripps
The sterling area.
While these long-term policies of developing other sources of supply for ourselves, and a greater volume of exports to the Western hemisphere from this and other countries, are being put into operation, we must secure that the 1905 drain on our reserves is reduced to the lowest possible point. We must make every effort we can to maintain our reserves, for the reasons I have already given to the House. Apart from economies on imports, which we have already imposed almost to the limit of our capacity, we must rely on a greater volume of exports, and that means an overall increase in production. Here, there are some encouraging signs.
The resumption of coal exports was announced yesterday by my right hon. Friend the Minister of Fuel and Power. That is indeed an important step forward, not because of the benefit it brings to us alone, but because it will be of great help to our European friends, and decrease their dependence on the United States for dollar coal. It is only a small beginning, but even 10 million tons of coal per annum is something well worth while, and we hope that when the winter difficulties are over we shall be able to increase that figure.
The rising output so far is, of course, almost entirely the result of the efforts of the miners themselves. We have in hand, as well, a very big programme of reconstruction and mechanisation, the effects of which have scarcely begun to show. But while there are good grounds for optimism in the long run, we are by no means out of the wood, so far as coal production is concerned, and we must try to keep a balanced outlook on the results. They are bound to vary with the seasons, weather conditions and other factors, and we should not be wildly excited at every increase or inordinately cast down by every decrease. If we can maintain the present tempo, and gradually improve it, we shall be able to get a really satisfactory export programme next year. I can assure the House that nothing will help our acquisition of foodstuffs and raw materials more than our having coal with which to purchase them. We shall not waste a ton of that coal by allowing it to go for anything that is not of real and vital value to us.
In steel, too, we have been doing exceedingly well, and I have no doubt that we shall continue to do so provided we can keep up the flow of scrap and pig iron. In both of these we are running oh a very narrow margin, and I cannot emphasise too strongly the most urgent need for every factory and workshop to 1906 mobilise its scrap without delay. The whole output of our great engineering industry depends on the flow of steel, and that, in its turn, depends on the flow of scrap.
In textiles, we can report a really encouraging increase. For a long time output remained almost stationary but now, at last, we have a quickening response to our situation, both in the numbers in the industry and in output, as the figures show. The number of persons employed in our textile industries in June of this year was 756,900. By November the figure had risen to 784,800. The weekly average output of cotton yarns was 12,560,000 yards at the end of June, and had risen to 14,730,000 by November. The output of woven wool fabrics rose from 20 million yards in June to 23,870,000 by the end of November. Nonetheless, to meet our ultimate targets we have still a long way to go.
In engineering, we have had our rising output checked, unfortunately, from time to time by material shortages, but we hope that the revision of the investment programme will bring relief in that respect. Let me give the House a few figures: In June this year we turned out 56 mainline locomotives; in October, 76. The output of railway wagons, which stood at 2,962 in June, rose to 4,119 in October. The value of the June production of internal combustion engines was £1,618,000. By October that figure had risen to £2,177,000. The corresponding figures for hosiery machinery show an increase from £235,000 to £363,000.
Agricultural machinery, in which we have the foundation of a most important new export industry, is being turned out in increasing quantities. I will take tractors as one example. Production amounted in the first quarter of this year to 8,308, and, by the third quarter, had risen to 14,318. I have mentioned only some of the main industries on which our exports are largely based. Other industries, too, are contributing to our increased production, so that the overall picture shows an encouraging revival of our internal industrial activities.
When we come to examine the export position that is more difficult, and not quite so encouraging. There are two important factors: One is within our control, and the other is not within our 1907 control. The first is cost. We have either reached, or are reaching, a buyers' market condition in many lines of goods. This means that the price factor becomes more and more important. We are already losing sales overseas in some of the most desirable markets, because of our price level, and we must, therefore, do everything in our power to prevent it rising, and, indeed, to bring it down. The second factor is the import restrictions imposed on our goods by other countries, who are as short of foreign exchange as we are. Here, we can only do our best to persuade them to admit as large a range of our goods as possible, and that is the constant preoccupation of my right hon. Friend the President of the Board of Trade in all the bilateral negotiations he is carrying out.
In spite of these difficulties, we must not relax for a moment our efforts to develop the types of manufactures which have assured markets, and to switch our exports as much as possible from soft to hard currency markets. We must sell everything we can for hard currency, and we must not allow our preference for habitual methods and traditional markets to deflect us from this paramount objective. This is particularly true of textiles, where the conditions of the industry—surplus plant, a plentiful supply of raw materials, and a market, particularly in North America—are favourable to an even more intensified export drive.
I have attempted to give a rapid and rough sketch of our present position, with its prospects, because I believe that the House and the country would wish to know what those prospects are. I might perhaps sum up the position in this way: So far as our internal efforts are concerned, we can face next year with quiet confidence, based on the experience of the last few months. A few weeks ago, I said that Britain was on the move. Now we can see clearly the steps forward that our country has already taken. Our people have responded magnificently, on all sides, to the demands which have been made upon them. I see no reason, short of a catastrophic or unforeseen happening, why we should not progress steadily to an ever-increasing volume of production in all our main lines of output—coal, steel, agricultural machinery, textiles, and 1908 the rest. But we must remember that we are by no means at the end of the road. The progress I have mentioned, satisfactory as it is, is no more than an approach to the level of production that we must achieve.
When we turn to the external scene we still have great cause for anxiety. I have told the House the extent of our reserves, and that they do not allow much margin for manoeuvre. The dollar unbalance is proving most stubborn to reduce, despite the efforts of ourselves and our fellow members of the sterling group. Search as we may, there are still large quantities of foodstuffs and raw materials for which there is no other source than the Western hemisphere, where prices are still rising, thus worsening the terms of trade against us. The growing difficulties of international commerce are tending to narrow our opportunities of getting our exports into the markets where we need to sell them, though we hope that this situation will be relieved as a result of our bilateral agreements.
We are indeed fighting with all the means at our disposal including a reduction in our standard of living—most unwillingly but courageously accepted by our people—against the dollar deficit, but circumstances are still weighted against us. We need to employ every resource available and to make every economy in our own use of our own material. We shall continue our immediate struggle, which cannot be a short one, and we shall, at the same time, lay plans and put them into execution to provide a longer-term solution of our difficulties upon the lines that I indicated earlier. There is no need for pessimism so long as we each do our best, but we must realise that this is a long, uphill struggle which, with the help of our friends overseas, we can and shall win through.
§ 5.22 p.m.
§ Mr. Oliver Lyttelton (Aldershot)
The right hon. and learned Gentleman dealt with the larger question of the balance of payment at the end of his speech. Therefore, I had better begin by commenting on that part of his speech before I turn to the White Paper. The right hon. Gentleman had a rather difficult task, which he performed with his accustomed skill. During the last two or three weeks I have detected, and I think rightly, a tendency among Government 1909 speakers and spokesmen towards a note of optimism. The right hon. and learned Gentleman has been as fair as possible in concentrating his optimism largely upon two things, in order to avoid speaking with a different voice from his other colleagues. So he first of all dealt with the very heartening increase in our coal production. We all rejoice to see that increase, and we should all like—[HON. MEMBERS: "Oh!"] Yes, all of us, and we would all wish to pay a tribute to the work which the miners have put in, in that dark, dangerous and arduous calling. I mean that, with the very greatest sincerity.
At the same time, we must recognise—and the right hon. and learned Gentleman went upon the same lines—that the coal target was fixed at a very low figure. That is common knowledge. We must recognise, secondly, that the price of our coal is now very high indeed. The third point is that the quality in calorific value of our coal is between 7 per cent. and 10 per cent. below what it was before the war. That statement is confirmed by the figures, which can be studied, for the power stations. That means, in terms of the present programme, a decrease in calorific value of about 20 million tons. Those are serious figures. There was a low target and there has been a considerable fall in the quality of the coal; nevertheless, we hope to see the tendency increase which has been present during the last few weeks.
§ The Minister of Health (Mr. Aneurin Bevan)
Would the right hon. Gentleman give the source of his statement about calorific value?
§ Mr. Lyttelton
I do not think the right hon. Gentleman could have heard what I said, that I derived that estimate from the figures relating to industrial coal used by the power stations, which figures are published. I also have other means of checking them. I am not claiming infallibility on this matter. If the right hon. Gentleman wishes to contradict the statement and to give other figures, I should be very glad to hear what he has to say. That is the source upon which I am relying.
The next thing to which the right hon. and learned Gentleman referred—I shall not go into the matter industry by industry, as he did; I have not the same 1910 access to the figures—was the increased tempo of production. As far as I can judge from my limited outlook, there is a better tendency in production. We ought to remember the great skill and flexibility shown by employers and managements as well as the efforts, skill and brain power of the men on the factory floor. I have the impression very strongly that the tempo of production is better—or, in other words, that practically all the dislocation caused by the fuel crisis has now been overcome.
The right hon. and learned Gentleman gave a number of figures. Perhaps the Minister of Health will refer to this matter when he winds up. I would like to know whether, in making his comparison, the right hon. and learned Gentleman adjusted the prices, or whether they are directly comparable as to volume. Again, while it is encouraging to see the increase in production, we have to remember that industry as a whole is working fewer hours than it was. The increase in the tempo of production has probably not done more than to increase the level of productivity to that which had been reached on the higher number of hours worked per week.
I have noticed during the past week or two a great deal of optimism being put out by the Government. I had the impression that the Lord President of the Council, at least judging by the screech which he issued last weekend, thought that the Government had lost the middle class. Perhaps the word went round: "A little more stuff about being all for the best would help our dispirited supporters to enjoy their Christmas more than they would do otherwise." I do not think that the Chancellor of the Exchequer has subscribed this afternoon to that sort of statement. He confined himself to those encouraging signs—as they are—but we must read those signs in the light of low coal targets and much worse quality, and in the light of the fact that, in production, we have still to make up what we have lost in shorter hours.
It is unnecessary for me to turn from this subject to the balance of payments, because the right hon. and learned Gentleman has dealt very fully with it. I would like to put the matter in a slightly different way. I do not think that the figures I propose to give are open to very much dispute. If I put one of them wrong 1911 I hope that the right hon. and learned Gentleman will interrupt. I have made it out that we shall have about £500 million of reserve gold and hard currency at the end of the year. If to that we add about £25 million as the balance of our International Monetary Fund quota, £75 million unexpended of the American credit, £79 million from Canada and about £80 million of the gold loan from South Africa it makes, according to my rather rudimentary arithmetic, about £760 million of reserves, in gold and in hard currency.
But they are not expendable reserves. We have it on the authority of the right hon. and learned Gentleman himself that the irreducible minimum of gold and hard currency with which we can operate the banking system of the sterling area is £275 million. That is the substance of what the right hon. and learned Gentleman said in October. From our total reserves we have, therefore, to deduct the irreducible minimum of £275 million, and that will give us something like £485 million of expendable reserves, and by expendable reserves I mean reserves which can be spent to augment the supply of food and raw materials above that which we can pay for with our exports. I thank the right hon. and learned Gentleman for having given us figures of the drain on these reserves. They are still a little obscure because the sales of gold have to be added to the actual dollar drain, but it will not be far out to say that the drain——
§ Sir S. Cripps
The drain is an over-all drain and not simply a dollar drain. It is a dollar and gold drain.
§ Mr. Lyttelton
I quite understand that, but I would like to ask whether the drain from all causes is now running at about £60 million a month——
§ Mr. Lyttelton
I prefer to say £60 million a month. We are going from one currency to another and befuddling everybody. The last time the right hon. and learned Gentleman spoke he said he would give all the figures in pounds and I have stuck to that and am now on the wrong foot. However, I say £60 million a month. If we have a drain of £55 million or £60 million a month and we have £480 million 1912 of expendable reserves, it is quite obvious that by the end of June or July at the present rate of drain we shall have used up all our reserves. Does the right hon. and learned Gentletnan wish to correct that?
§ Sir S. Cripps
I would only say that according to my arithmetic six times £55 million is not £480 million.
§ Mr. Lyttelton
I said that calculating from 1st December, it will be some time in June or July, and that will be found to be correct.
§ Sir S. Cripps
I am sorry to correct the right hon. Gentleman, but the £500 million figure which I gave was to the end of the year and not to 1st December.
§ Mr. Lyttelton
The right hon. and learned Gentleman knows perfectly well that when he is calculating the drain upon our dollar and hard currency reserves he is calculating something which is extremely difficult to estimate. I believe that in some of those months the drain will go above this because of claims from the sterling areas which will be very difficult to resist.
I make the proposition that by June or July the whole of our expendable reserves will have been used up. Some time before that date His Majesty's Government will be faced with the dilemma which we all dread of whether to reduce the imports of raw materials or food or to throw overboard others of our foreign investments. If we reduce our imports of food we shall reach a standard of nutrition which will make rising production extremely difficult to achieve. We are already undernourished for the great efforts we are asked to put out industrially. It is unnecessary to stress what will happen if we reduce our imports of raw materials; cur exports will go down not in the same proportion as our raw materials but in a greater ratio, since the labour, skill and processing which is put into the raw materials is calculated in the value of the exports.
This situation of the balance of payments is grim in the extreme. Quite frankly, a cold shudder ran down my spine when, if I do not misquote him, I heard the Lord President of the Council say that we were rounding recovery corner. Those words will sound extremely ominous in American ears. They are almost precisely the words used by Mr. Hoover when the 1913 United States was about to enter the severest economic crisis it or any part of the world has ever felt. I say quite frankly that those who expect to get away with feeding the British public with that kind of pap will be mistaken. Anybody who says that sort of thing, that we are rounding recovery corner, is not worthy of a responsible position even in this Government.
§ Mr. Lyttelton
I cannot give way. I have a lot to say. I say that that is doing a disservice to our fellow citizens and it will retard and may make altogether impossible our survival.
§ Mr. Lyttelton
No doubt if the hon. and learned Member is lucky enough to catch Mr. Speaker's eye we shall have the advantage of his views later on.
It is necessary to deal at some length with this matter of the balance of payments. The whole edifice of the Government's figures is erected on certain targets for export. The right hon. and learned Gentleman was extremely candid with the House not only on the last occasion but this afternoon as well. On 23rd October he said:We are proceeding frankly on an optimistic basis so far as the saleability of our exports is concerned."—[OFFICIAL REPORT, 23rd October, 1947; Vol. 443, c. 288.]That was a very candid statement. I am very much afraid that a large part of the structure which has been erected on this foundation will topple down. Two things will happen. First of all—I am sorry if the right hon. and learned Gentleman thinks that my expressions are inelegant.
§ Mr. Lyttelton
I thought the right hon. and learned Gentleman was interrupting. We hear far too much with this new system of loudspeakers. We used to be 1914 insulated from some of the more difficult remarks owing to the bad acoustics.
§ Sir S. Cripps
The right hon. Gentleman must have misheard me. I said nothing rude or discourteous.
§ Mr. Lyttelton
Even a mild expression amplified on this scale may be disconcerting.
I am afraid that if we are asked to increase our exports by £31 million a month above the present level—that is £I million a day—it is quite certain that two economic laws will come into force. The first one is that we shall see an increase in the number of embargoes put on British goods and there will generally be more difficulty in getting export markets. The right hon. and learned Gentleman has said so. We are aware, especially in the case of textiles which we hope will make a large contribution to our exports, that a number of markets are already completely shut to us, notably for hosiery and knitwear in markets like the Argentine and France. Import licensing is now beginning to spread in a world which has only recently signed the Geneva multilateral agreement.
The other law which can also operate is that if you try to press a million pounds a day more exports on to the market, you will tend to turn the terms in trade still further against us. They are today about 256 for imports compared with 237 for exports, according to my information. These terms of trade have recently moved against us still further, and we all know that part of the reason is an increase in American prices. In passing, it is worth saying that a main factor in that rise in American prices has been the export of goods to the rest of the world and, more particularly, of foodstuffs.
§ Mr. Lyttelton
The hon. Gentleman apparently disagrees, as he is quite entitled to do, with the Harriman report, but it was a highly skilled Commission that looked into this matter, and I have 1915 been at great pains to identify my authorities. I am sorry that the hon. Member, with his knowledge of American affairs, does not agree with this report. This is what it says:According to one view"—That is his view—the persistence of high food prices since the war has been chiefly due to domestic demand, and the influence of food exports has been minor and secondary.Perhaps the hon. Gentleman will listen to the rest?The Committee believes that this opinion overlooks the importance of marginal demands, and that it is the extra food withdrawn from the domestic supply by exports which has made the real difference. Through 1946 and the first half of 1947 the continuance of large foreign shipments served to prevent the anticipated decline in agricultural prices, while the recent rise in foreign requirements, coupled with short supplies, has skyrocketed the food market.Indeed, in four days in the month of October the Commercial Credit Corporation bought 58 million bushels of wheat for export and that was the main reason why the price went to the very high figure of 3.15 dollars a bushel.
§ Mr. S. Silverman
Would the right hon. Gentleman himself, not the Harriman Commission, exclude from the consideration of this matter the enormous rise in food prices in America that followed the withdrawal of controls? The other question I would ask him is whether it is not the case that American exports to Europe, so far from having increased since the end of the war are, in fact, only a very small proportion of what they were during the war?
§ Mr. Lyttelton
The hon. Gentleman has asked two questions. I chose my words carefully. I said that a main factor in the rise in American prices was the exports to Europe. I believe that to be true, and I am confirmed in that opinion by no less an authority than the Harriman report.
§ Mr. Lyttelton
The hon. Member must not be so impatient; I am coming to the other one. If the hon. Member asks me here whether I think the rise in prices has been accelerated by the complete removal of controls, I would say that I 1916 think it probably has, and that the Americans are no doubt to be criticised—I prefer that they should do it themselves—for having removed all the controls too quickly. However, I would say that the argument goes no further than that, and that in this world it is absolutely necessary to begin by removing controls and to time it very well. The worst one can say is that some of the timing may have led to an increase in prices.
§ Mr. Silverman
But the hon. Gentleman has not answered one of my questions. I asked him whether he agreed or disagreed that the export of foodstuffs to America since the war, so far from having increased, is only a small proportion of what it was during the war?
Of course I have not the operative figures, but I would say that the hon. Gentleman is probably correct, because the United States was at that time feeding the largest army of American citizens in the field which had ever been outside their shores before. I do not think the hon. Gentleman's interjection is a very valuable contribution to our general discussion.
§ Mr. Silverman rose——
§ Mr. Lyttelton
I cannot give way again. I have given way often to the hon. Gentleman, and he must be content to contain himself a little longer. So the summary of all these matters on the broader question is very grim, and I repeat what I said before, that those who go about making optimistic statements are doing a disservice to their fellow citizens and to our chances of emerging from our present difficulties.
Now I turn to the White Paper itself. We on this side of the House have long been convinced that although our capital investment programme after two great wars requires to be expanded some day at a greater rate, at present it is far beyond our resources. We have long held that our capital programme must be trimmed, and the truth of our contentions on this subject is written large across the face of the White Paper. Reading between the lines, it is a record of a sprawling, un-co-ordinated, diffused capital expenditure and a lack of policy by His Majesty's Government. The blunders and mismanagement of our national affairs are 1917 openly confessed in the White Paper—at least, when I say "openly," they are confessed as far as Whitehall language—much of which is Cherokee—permits. Perhaps the most astonishing of all the ingenuous admissions in the White Paper is to be found in paragraph 5, which I must read to the House:Earlier in the year before the development of the acute dollar shortage and the consequent action to reduce imports and increase exports, plans had been made by private industry and by public bodies for a very large total of investment in 1948 … In the altered circumstances resources will not be available for so large an investment …Does this really mean that earlier in the year no gale warnings were observable by the economic general staff, the large planning staff? I am not, of course, including His Majesty's Ministers, we would not expect it of them, but the Civil Service and the Treasury? Did they not even see the drawings on the American loan? If they cannot read that kind of economic weather, what can we expect?
I want to touch on one other piece of background to the White Paper, the remarkable way in which His Majesty's present advisers have misunderstood the monetary theories to which they subscribed when they signed the Coalition paper on Full Employment. Did they even understand them at the time they signed? I rather doubt it. That monetary theory, which owes a great deal to the inspiration of Lord Keynes, is based on the idea that you withhold capital investment during times of rising business, and in times of declining business you expand capital investment—public, by direct action; private, by persuasion.
All this modern theory also leads to the idea that in times of slump you budget for deficits, and in time of boom for surpluses. But these theories however unassailable they may seem to us now, will be a complete waste of time if, as has happened in the last two years, the most obvious signs of economic weather pass entirely unheeded by the Government of the day. That kind of myopia will make it impossible to work any sort of capital investment scheme. Instead of budgeting for a very large surplus, and checking inflation, they have gone on expanding the monetary system in time of boom, which is exactly contrary to the monetary theory to which they themselves subscribed when they signed that White Paper. I attribute 1918 a lot of this sprawling capital expenditure to the weakening of Treasury control——
§ Mr. Lyttelton
Perhaps the right hon. Gentleman will allow me to continue with my speech, because these are the points with which I am going to deal. The Minister of Health was not committed, but his colleagues were. One of the reasons why the capital expenditure programme has got all over the place, which is confessed in the White Paper, is because an entirely unsound monetary policy has been followed, unsound in present circumstances.
In the building and engineering section, I shall be entering a field with which the Minister of Health is familiar, although he is not with other fields. Here again there is waste; far too much has been begun, and far too little is finished. Up to 1947 the Government over-stimulated the building of houses by local authorities, and suppressed the building of houses by private enterprise. In consequence, available labour and materials have been wasted. Far too little has been finished and the whole programme has, to use an industrial term, got "out of phase." That is because of administrative incompetence and drift. The same applies to the phenomenal rise in the prices of house building.
I must devote a few minutes to the background of the Government's present programme. The programme of the Coalition Government was 220,000 houses to be finished by May, 1947, and 80,000 to be in course of construction at that time. It is quite true that the right hon. Member for Wakefield (Mr. Arthur Greenwood) described that as "chicken feed for a hungary nation," and equally true that his colleague, Lord Addison, in another place, I believe, in 1946 said that the programme was, "a fairy tale." Right hon. Gentlemen can have it any way they like, but the difference between chicken feed for a hungry nation and a fairy tale, is a fair measure of the difference between "Let Us Face The 1919 Future," and the situation we have to look at in facing the present.
The present Government have succeeded in getting this programme so much out of phase that by May, 1947, they had completed 87,000 houses and had 224,000-odd under construction. If a more striking confirmation of lack of phase is required, I do not know of it. The Minister of Health, for very good Parliamentary reasons, is rather un-target-minded. He is unlike his colleague, the Chancellor of the Exchequer, who absolutely revels in targets of all kinds, whether they can be reached or not. The Minister of Health does not much like targets, and I can quite understand why, because whenever he has been forced into the open, the results have been unfortunate. I will not begin with him, I will begin with the Minister of Works—[HON. MEMBERS: "Hear, hear."]—not the present Minister of Works. On 14th July, 1946, he said that 100,000 new permanent houses were to be occupied by the end of 1946. Fifty-two thousand and ninety-three were completed, and on 21st December——
§ Mr. Lyttelton
Perhaps we shall all be in better form later on. The Minister of Health said on 21st December that they would get finished and occupied at the end of 1946 all the 20,000 local authority houses then at eaves level. By 31st December, 1946, 14,769 had been completed. Looking at Government promises on housing, if we divide the Minister's promises or estimates by two, we will generally not be far out. It is remarkable that in these two cases performance is almost exactly 50 per cent.
I wish to deal with the matter of priorities. Again, this afternoon the Chancellor of the Exchequer said something which I think we all believe; that in our present situation there must be priority in housing for mining and agricultural areas. But up to the middle of 1947 at 1920 least the Government had completely failed—indeed, I think they had hardly tried—to secure priority for these vital areas. By the end of October, 1947, just under 30,000 houses had been built in agricultural areas, of which about 14,000 were built by private enterprise and about 16,000 by local authorities. Out of that number 3,075 had been let to agricultural workers and no serious attempt has been made to put this position straight. I repeat, this concerns the principal dollar saver in the whole of our economy. Instead of any effort having been made, the usual circular, also largely in Cherokee, has been put out. This is what the Government call giving priority to agricultural housing. I cannot read the whole thing, it is really too tiresome, but it ends up by saying:It is suggested, without making any rigid rule, and consistently with the need to consider the circumstances of the individual applicants, that each rural district council might well have in mind"—we know that one—some proportion of houses to be so occupied, based upon the part at present played in their district and the need for increased production.That is what the Government call a priority.
I wish to ask the Minister of Health another question on this point, one with which I am very much concerned. It is a purely constructive question, as all my questions are. The Government's avowed policy over housing is to concentrate on the completion of partly built houses in 1948 and 1949. They have come out into the open and said that they are going to complete well over 140,000 in 1948 and 140,000 in 1949. The policy is to finish partly constructed houses, but, unfortunately for agricultural or mining priorities, the great bulk of these houses is in areas unsuitable for the priorities, not in the right places.
Will the Minister of Health tell us this evening how he proposes to deal with this serious defect? Personally, I can see only one way; either to stop completion of certain houses already begun, or to cancel contracts already placed. I know that in both instances public opinion will be very much shocked and will see a visible evidence of the incompetence with which the housing programme is being handled.
§ Mr. S. Silverman
On a point of Order. May I ask you, Sir, how far, if at all, this discussion of the housing situation will prejudice the housing Debate which, no doubt, will be asked for by the Opposition.
It is unfortunate for the intervention of the hon. Member that the last part of the White Paper which we are debating is concerned with housing, but I quite understand his desire to turn me away from too much discussion of figures which are so embarrassing to his side of the House.
I wish to bring home what is carefully concealed in the White Paper—the effects of these cuts on the housing programme. I refer to building as a whole. Again, if the Minister of Health objects to these figures, perhaps he will correct them later, but as I understand the matter, the figures are incorrect, and the Government, in an official paper they have put out, have admitted that the figures are incorrect but have not corrected them in public, so far as I know, except by a statement made at a Press conference. The figures are extremely elusive and I am trying to get down to a solid basis, which is that at 31st October there were 1,004,000 men employed in the building trade. The White Paper says that at 30th June, 1948, there will be 835,000 so employed. In other words, there will, between then and now, be 165,000 men unemployed in the building trade. Are we not entitled to know, in rather more detail than the vague terms which the right hon. and learned Gentleman used this afternoon, how the Government intend to employ them. Are they to be directed, and if so, to what industries, in what localities and at what rates of pay? The Government are anxious to avoid bringing out this large figure of unemployment which will be caused in the building trade.
I must go very rapidly over the rest of the White Paper. The right hon. and learned Gentleman himself went over it rapidly. In the building trade, other than houses, there is, first of all, a change of emphasis of some significance between agriculture and fuel and power and another group. The increase in labour for 1922 agricultural building other than houses is 10,000 and the increase in the fuel and power group is 8,500. These are almost exactly off-set by a corresponding fall in industrial building and in transport. So this is a mere change of emphasis. I must draw the attention of the House to the fact that the Education and Health Departments are to use more building labour; the increase is 14,000. I confess I am a little doubtful whether it is wise to leave the plus and minuses on the productive industries untouched while according such an increase as this to these two Departments. They will one day pay us very large dividends, if I may use a phrase unworthy of the subject, but I rather doubt whether, in our present hazards, these figures are not a little extravagant.
I have time only to discuss one other part of the White Paper, that part of Appendix B which deals with plant and machinery. We have now more jobs to do than we have men and women to do them. Everyone will also agree, I think, that there are only three ways, some alternative, some supplementary, in which this problem can be tackled. The first is by increased mechanisation of our industries; the second is by working longer hours; and the third is by the redeployment of the existing labour force on the factory floor. Hon. Members from the North-West of England will know that under that last heading I am thinking particularly of the cotton textile industry. As we are working shorter hours than we were all the more importance is to be attributed to the other alternatives. The trades unions, who alone can make a full contribution in respect of redeployment, are doing so in the cotton textile industry. It is their contribution to the breaking down of restrictive practices which in the past have been erected by employers against bankruptcy and cut-throat prices, and by trades unions against the infiltration into skilled trades of new workers and against the evils of unemployment.
These restrictive practices on both sides of industry were quite understandable at a time of declining business, but they are, or would be, unpardonable in our present economic situation. In this situation of shorter hours and the limited effect which redeployment of the labour force on the factory floor can make, it is all the more necessary to look to greater mechanisation of our industries. That 1923 being so, it is little short of a tragedy that we should be brought to such a plight that we have to ask private industry to reduce to an absolute minimum the replacement of obsolescent tools, and to look with very critical eyes on any plans for the extension or adaptation of their processes.
I conclude by saying that to make a constructive criticism of the White Paper, such as the Minister of Health a moment or two ago asked me to do, we should have to know, and we are not told, what the manpower, raw materials and dollar budgets really are, because although the right hon. and learned Gentleman did not mention the last one, capital investment goods have a significance in our external balance of payments, though it is a little further off. I thought the right hon. and learned Gentleman concentrated chiefly on manpower and raw materials. However that may be, this White Paper is designed to throw up manpower and raw materials from the lower priority industries, and ultimately to have an effect, amongst other things, upon our external balance of payments. Unless we are to know to what industries and upon what plan, if there is one, these savings of labour and material, notably steel, are to be directed, it is impossible to know whether the general cuts go far enough or go too far.
I am told, and I believe it to be correct, that there are, in the warehouses of this country, large quantities of what have now come to be called by the rather tragic name of frustrated exports. I hope we shall get some indication from the Minister about the tonnage and the amount of money locked up in these frustrated exports, if any of these are steel. We should require to know how all this is going before we could say whether the proposed savings in steel foreshadowed in the White Paper are necessary, or whether, on the other hand, they go far enough. On the subject of housing, we have to be satisfied with the mere statement in the White Paper that it is necessary to save £5 million worth of timber during 1948, and, later, the White Paper says that the housing programme is governed by the amount of timber. Those are the reasons why we are prevented—through lack of information—from making wide or constructive criticisms on the White Paper.
The most serious thing is the lack of priorities for agriculture and mining, and 1924 other matters of emphasis in the building programme. If the White Paper does nothing else it acknowledges in as grudging a manner as it can the contention which we on this side of the House have been advancing for so long, that our capital expenditure programme has been far too great for our resources, and is at least one of the contributory causes of the inflation, lack of industrial balance, and our disastrous overseas balance of payment, in short, of the very sad economic plight to which this Government have reduced us.
§ 6.10 p.m.
§ Mr. Ellis Smith (Stoke)
In his statement today the Chancellor of the Exchequer set out the great achievements of British industry. No matter what political opinions people may hold, or how critical they may be, they ought, in these days in particular, to give credit where it is due. The achievements of the British people in the past two years have been simply remarkable. Great credit is due to them. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) referred to the high cost of coal. I share his concern about that. At the same time, however, we ought immediately to place on record the fact that cheap coal in the past has been won in this country at the expense of the miners, their wives and children. Injured miners had to seek the pittance of workmen's compensation because of that. The sale of cheap coal was made possible also by the failure to undertake the cost of installing modern equipment in the mines.
The right hon. Gentleman also complained about the quality of coal. I understand his complaint. I know that he is familiar with the cost of power. He ought to know, as I have no doubt he does, that to a limited extent this results from machine-mining. We cannot use the modern methods of mining, such as we are using today, without paying a small price in regard to quality. When the new screening machinery is introduced, no doubt the position will improve. It is not the fault of the miners that the machinery is not in the mines. It is not the fault of the Government. If any indictment were to be drawn regarding the present condition of the mines, it would be agreed that it is due to the neglect of past generations.
1925 I agree with the right hon. Gentleman about the cost of coal and its quality. His remarks apply also to other things. I am very much concerned about the pre-production costs of the whole of the materials used in productive industry in this country. Almost every material that is used in productive industry is "ringed" either by the trade associations, monopolies, or some organisation of that kind. I hope that, sooner or later, my hon. Friends on this side of the House, together with the powerful trade unions and the Labour and Co-operative movements outside, will insist that the time has arrived when a Royal Commission or a Departmental Committee should be appointed with full authority to send for persons and papers so that there can be a very close investigation into the cost of all preproduction materials.
The right hon. Gentleman also pointed out that we are working shorter hours. That is true: it is time that we were. The right hon. Gentleman ought to have gone a stage further and paid tribute to the patriotic actions of the trade union movement, which has agreed, without any hesitation, to work overtime. In another quarter, he has paid a tribute to the work that has been done. When we are considering our economic position, surely we ought to place on record the credits as well as the debits.
§ Mr. Lyttelton
I thought that I had done so. In fact, I did so. The point I was making was a more limited one. I made no remark about whether it was desirable to work shorter hours. I only said that the increased tempo of production probably has not quite made up for the shorter hours that we are working.
§ Mr. Ellis Smith
I go further. I say that, as a result of the agreement reached in industry, shorter hours have stimulated the workers. There is a more dynamic atmosphere among the men and women in industry. It would not have been easy to have obtained the overtime had we not, first, agreed to shorter hours. For many years the trade unions have been trying to negotiate shorter hours. As a result of conciliation and negotiation, a fixed working week of shorter hours has now been agreed. That agreement facilitated the agreement on overtime.
The right hon. Gentleman then quoted from paragraph 5 of the White Paper. I 1926 share his concern about that. While I agree with his criticism, I think that the situation would have been far worse if we had had a Conservative Government. My concern is that the Government have not yet planned a national overall plan. That is what we will have to do. But the Conservatives do not agree with planning. Had they been in power, we would have had chaos, probably running into anarchy, instead of the report which the right hon. and learned Gentleman has been able to make this afternoon.
The Chancellor set out a number of main principles with which I am in complete agreement. For example, I like the phrase that he used when pointing out that this White Paper is not a final document. [Interrupttion.] If the right hon. Gentleman the Member for Bournemouth (Mr. Bracken) were more in touch with industrial affairs instead of financial affairs he would know that a document of this kind cannot be a final document. He would know that, in a quickly changing situation, one cannot have a final document. I hope that the Chancellor of the Exchequer will consider what is said in this Debate in order that adjustments may be made in the White Paper. At one stage he said that while it may be correct, considering the theoretical case, it cannot be practical. The right hon. and learned Gentleman should know that one cannot have correct theory unless it can be translated into correct practice. I hope that that will be remembered in future. He then said that our problems could not be solved by any laissez faire attitude. I think he will find complete agreement on this side of the House, and in the country in general, with his statement that we must look at the problem as a whole.
In return, I want to ask why we have not yet got a national overall plan. Who is holding up the preparation of such a plan? Ten months ago the Prime Minister promised the House that a four-year plan would be produced. I hope that, in reply to this Debate, the Government spokesman will gave an explanation why that plan has not yet been produced.
The issues today are: how can we pay our way, and which is the best way to economic recovery and on towards a greater Britain? It should be clearly understood that, relatively, our economy is backward when compared with that of the United States. People in the United 1927 States should remember that we strained ourselves to the maximum extent in fighting two world wars. It was left to this country, with its limited resources, to stand for 12 months alone against the mightiest military power ever built. If we had the equality of sacrifice about which so much is said, and if the amount spent on war were measured by national income, then the United States would owe this country 12,000 million dollars. During the war the United States made decades of normal progress in production research and in increased productive capacity. During the last two years they have made even further progress in industrial equipment, organisation and the introduction of designed machine tools. This has further reduced costs of production, at the same time increasing the volume of production and the output per man hour.
Here are one or two concrete examples which show the seriousness of the policy pursued in the United States. If we are to be called upon to enter into competition with products of that country in the future, we need to be very concerned about the position. The largest pottery manufacturers in the United States, for example, have recently introduced new forms of mechanisation on an increased scale. They claim that they have increased output, reduced cost, and, at the same time, improved quality. A new machine, worked and served by only three persons, can now turn out 240 dozen dessert dishes, or 180 dozen dinner plates, in one hour. By hand dipping, they produce 800 dozen plates in an hour. By a new machine all operations can be carried out—they do not need to use one machine and then another—and they can now produce 1,500 dinner plates per hour.
The Chevrolet Company recently redesigned their assembly lines. They have changed their production methods, and as a result have secured an enormous increase in output per man-hour. In the production of one part of the car, they have increased output by 33 per cent. In the production of crankshafts, they have increased output by 62 per cent., and in the production of connecting rods they have increased output by 400 per cent. As a result of a vast investigation which has been made we learn that the re-equipment of industry 1928 in America, including mining and transport, is now under way on a tremendous scale. New methods and devices, developed during the war, are being experimented with, and in the near future there will be a huge increase in production per man-hour. American industry managed to spend in 1940 between two and three times as much on re-equipment in any year——
§ Sir William Darling (Edinburgh, South)
I take it that there is no restriction on re-equipment in America?
§ Mr. Ellis Smith
What I am attempting to do is to show the seriousness of all this, and afterwards to apply it in relation to our own internal position, and to point out what a serious position we shall be in, compared with the United States, by refusing expenditure on industrial capital equipment. I should have stated that I am quoting from the "Manchester Guardian," who sent out a number of specialists to carry out this investigation. I think that shows great public spirit. It stated:The American industry managed to spend, in 1946, between two and three times as much on re-equipment as in any gear of the prewar decade.If any hon. Member thinks that that can be accounted for by increasing prices, I would say that in this section prices have increased very little. In one year this industry will spend the equivalent of two-thirds of a seven-year equipment programme of the whole British steel industry. It is not only spending more on new equipment than it used to do, but much of the new equipment will be more efficient. To those of us who represent the people employed in large-scale and productive industry, these facts are bound to give great concern.
Britain has always put as little as possible into capital equipment. We have got old mills, old works and old machines. One cannot lay that at the door of this Government. Industrialists and finance capitalists, who are represented so well by the right hon. Member for Bournemouth who has just gone out, preferred to make the workers, and not machines, slaves in this country for generations. From 1931 to 1935 expenditure on capital equipment was postponed, and again, in the main, from 1938 to 1945; but, during that period, practically the whole of expenditure on capital equipment was either on 1929 the armament industries, or supply industries which were given super-priority. Now it is suggested again that expenditure on industrial capital equipment should be forestalled further. Irrespective of our political opinions, I wish to ask this question of every hon. Member present. If we are going to pursue a policy of this kind, which this country has pursued for generations, where shall we be in between five and ten years' time, when the sellers' market has finished? The amount of energy, for example, available in 1938 in this country was 181 million tons of coal. In the United States of America it was 334 million. The hydroelectric power in this country was nil. No Labour Government was responsible for that. While no hydro-electric power was available in this country for industry, in the United States it was 31 million tons.
§ Mr. Lyttelton
I hope the hon. Gentleman is not suggesting that it is the fault of a Conservative Government that there are no waterfalls in England.
§ Mr. Ellis Smith
If the right hon. Gentleman is going to start indulging in that kind of thing, he will get back as good as he is giving. What I am suggesting is that the people responsible for no power being obtained from hydro-electrification in this country are the right hon. Gentleman's friends and the Conservative Government. He knows—or he ought to know—that in 1931 a very fine document was prepared by some of the finest authorities on hydro-electrification in the world. It has been stated by all those who know anything about hydro-electrification that one of the finest sites in the world for obtaining this kind of power is on the River Severn, near Bristol. Time after time that has been postponed, because they preferred to go on in the way they have done, rather than to put money into industry and maintain an efficient and modern industry.
Another example is Japan, where in 1938 there were 50 per cent. automatic looms. The United States had 95 per cent.; Britain had 5 per cent. This is why this country, in the main, is in the serious economic position it now is. It was appallingly evident before the war that our industrial equipment was relatively obsolete. The working class have paid very dearly for British private enterprise. It has been very private, but we 1930 have seen very little enterprise, compared with the examples I have been quoting. During the war we were told, "Give us the tools and we will finish the job." We are now told, "Work or want"—and get on with the job with the blunt, old tools.
This is a repudiation of the policy so often and so clearly stated by the Lord President of the Council. It is a policy of discouraging modern methods of production and technical progress. It means the continued increase in production by the increased exploitation of human energy, and it is of paramount importance—and here I am appealing to my hon. Friends on this side in particular—that this obsolete policy should be reversed as soon as possible. In view of the facts about American production which I have given, there is no time to lose if we are to hold our own; and we are now in urgent need of effective modernisation. Industry in this country requires a tonic injection of drive and enterprise, and in this sphere the activities of my right hon. and learned Friend will receive the wholehearted co-operation of everyone on this side, everyone in the movement outside and in the great trade union movement; and if only we would take the steps which we ought to be taking at the present time, the results which the Chancellor has been able to give to the House today would be small in comparison with the results that would be obtained from a policy of that kind.
In three years, American industry proposes to spend on capital equipment alone 14 million dollars, plus millions on research and millions more on industrial education. The United States spent on capital equipment, in 1946, 12 million dollars, and, in 1947, 15 million dollars; in 1948, they propose to spend 13 million dollars. These figures show the serious position we are in, and, if the ordinary competitive struggle for world markets is to continue, this country must face up to its very serious situation. I hope that no right hon. or hon. Gentleman thinks for a moment that I am holding up the United States as an ideal paradise. Far from it. I am only contrasting the policy of the United States, which is a policy of production by machine, with the policy of production by human energy which we have in this country, which we have had for so long, and which we are still proposing to carry out today.
1931 Therefore, I say that the battle of the gap will never be won by the present policy, which is a continuation of the old prewar struggle for markets. Ultimately, that is bound to lead to a demand for a reduction in the cost of production, and that is why I want my hon. Friends on this side, in particular, to begin now. We cannot begin too early to give our whole attention to this problem, and to the serious cost of pre-production materials, because if we do not, there will surely be a demand for a reduction in wages. As a result of the election of this Government, we have gone a long way towards bringing into operation in peace time the dynamic democracy that we had during the war, but we have still a long way to go, and, therefore, I want us to take the new road of production by power, by machine, by organisation, based upon plans. We have had the Platt Report, the Reid Report, the Bossom Report, the Steel Report, the Cotton Report—and what action has been taken? Relatively speaking, very little action has been taken on any of these Reports, and now we have before us the White Paper on Capital Investment which we are considering today.
The workers' blood is glowing with warmth and pride at the achievements of the past two years. The Government have acted fundamentally on coal, power and transport, and, as a result, we are getting every week-end the results which everyone ought to look upon with pride. What can be achieved in the turn-round of wagons can be achieved in the production of coal and in every industry in this country if only we can win the spirit of the people and if we deal with the problem in the fundamental way in which we have already dealt with coal, power and transport. Therefore, I say that the time has arrived when we should take similar fundamental action in dealing with steel and chemicals. Does anyone in this House object to that? The Chancellor and the right hon. Gentleman the Member for Aldershot both pointed out the seriousness of the situation in regard to steel supplies, but I predict that, if we adopt a similar policy in regard to the steel industry, we shall get the same results as we are now getting in mining and other industries.
The right hon. Gentleman the Leader of the Opposition has made many great speeches, and we have heard quoted 1932 recently a speech he made in Manchester. He made another speech in Manchester which completely supported the policy I am now outlining. He was being entertained to dinner, and, replying to a toast, he said that he had not been quite convinced by his experience at the Ministry of Munitions that Socialism was possible, but he had very nearly been convinced, and he was bound to say that he considered that the achievements of the Ministry of Munitions constituted the greatest argument for State Socialism ever produced. We believe that this country will have to act more and more on these lines for economic and technical reasons, and that it is urgently necessary, in the national interest, that the steel and chemical industries of this country should be nationalised before the end of this Parliament.
§ Mr. Speaker
Nationalising these industries means legislation, and this Debate is on the Motion for the Adjournment.
§ Mr. Ellis Smith
That is quite true, but I was only quoting an example in order to show that this is a contribution towards dealing with our serious economic position, and we are dealing today with capital investment. In conclusion, if we are to obtain the best results, there will have to be drawn up a national overall plan for conducting industry on the lines on which the coal, power and electricity industries are to be conducted, and in that way a greater contribution will be made to the revival of our national economy.
§ 6.43 p.m.
§ Lieut.-Colonel Corbett (Ludlo w)
We have listened to a very interesting speech from the hon. Member for Stoke (Mr. Ellis Smith), and I think that none of us would disagree with him in advocating greater mechanisation of industry. I am quite certain that we all appreciate, as he does, the improvement in production figures which has been shown recently, but I do not think I could follow him into the argument on which you, Mr. Speaker, cut him short. It is a very good thing that all of us should praise this increase in output and give encouragement to the working men in the country. We cannot do better than that and recognise their efforts, but, at the same time, those of us who are responsible for understanding the situation must recognise the facts as they are.
1933 When speaking today, the Chancellor of the Exchequer outlined his targets, and the amount of money available in our national reserve in the sterling area. He showed us how it might be possible to make the balance of payments meet, by cutting down our expenditure on imports and by increasing our exports. But we should remember that these targets, if achieved, are only sufficient to make ends meet on the present bare standard of austerity, and that, therefore, they are nothing to become very enthusiastic about. We hope that the increase in production will go on until ends meet, but we must also hope for a very considerable improvement in our balance of payments, so that we can raise the standard of living as a consequence. Certain dangers to our export programme have been touched upon today. We all recognise that we cannot be certain of holding the export market in particular goods. Therefore, it is most important that we should do all we can to increase production at home.
I want to say a few words about agriculture, in particular, and about coal-mining. I do not pose as an expert, but there is a coalmine in my constituency. There is one factor which is common to the needs of the people in my constituency which concerns both coal-mining and agriculture—housing. Both these interests are very much affected by housing. The local authorities have had their housing programmes severely curtailed in recent times, which will jeopardise increased production in these two industries. In spite of the fact that we were told that the Government would pay special attention to the housing of agricultural workers and miners, a circular letter was suit round to local authorities in November, in which it was said:(i) The Government policy aims at the completion of houses already in progress in the shortest possible space of time, and(ii) bringing the programme into balance by the restriction of new contracts and the elimination from existing contracts of those houses on which no effective progress is being made,The result of that programme, at any rate in my part of the world—and, as I know, in other places also—has been to curtail building by stopping the making of new contracts and the issuing of licences. It has had a very serious effect on the programmes of the local authorities.
1934 Both the rural district councils which I represent have got out programmes which, I must admit, were slow in taking shape. Considerable negotiation, particularly in rural districts, is necessary between the local authority and other bodies, such as the N.F.U. and the county agricultural executive committee, in order to discover just where these houses are required. Eventually, these local authorities produced their programmes. They have plans to set in motion building by various contractors who would move on from one place to another. They would, for instance, build four houses in one village, half a dozen houses in another village, and so on, and would keep a certain number of men in constant employment.
I have had a careful look at these programmes, which seem to me to be quite reasonable, but they are entirely dependent on the early issue of licences, and the early approval of tenders by the Ministry. The present state of affairs is that those builders who are actually building houses, have been stopped by the withholding of any further licences this year. I would urge the Minister to look into this matter, and to allow these contracts to be made in good tune, so that the building programmes can go along smoothly, and without first bringing men into employment, then throwing them out of employment, and then, again, perhaps, later on, bringing them back into employment, as, otherwise, we shall have an uneven situation, and no continuity.
I will now say a few words about agriculture. It is extremely important that we should have an element of price incentive in our programme of production. The hon. Member for Nelson and Colne (Mr. S. Silverman) interrupted my right hon. Friend the Member for Aldershot (Mr. Lyttelton) during his speech, and a considerable discussion took place about the high prices existing in America. It is well to bear in mind that the high food prices in America, whatever be their cause, whether it be increased exports or increased home consumption, have resulted in a total increase of agricultural produce in America. It has been higher during recent years than ever before in history.
§ Major Bruce (Portsmouth, North)
Would the hon. and gallant Gentleman be 1935 good enough to compare that fact with the unemployment figures in America, which are at the moment, I believe, 2,600,000?
§ Lieut.-Colonel Corbett
That has nothing to do with the total amount of food produced in the agricultural areas of America. The output is bigger than it has ever been before, and I have no doubt that the numbers employed are also bigger. I say that advisedly, because our policy here is one of agreed prices. I do not advocate a free market in agriculture, but I recommend the Government to recognise the necessity of relating demand to the price level. Our two most essential products in agriculture, at the present time, are wheat and potatoes, and they are about the two least profitable to grow. That also should be borne in mind by the Government. The price should be related to the demand, and, by adjusting the price, we are able to adjust production.
The Government should also bear in mind the result of higher prices on employment in the industry. The agricultural industry is still working at about the bottom wage level. Apart from the fact that there are no houses in which to put agricultural workers, it is important to remember that, while the wage offered in agriculture is at the bottom of the scale, it is unlikely there will be any willing increase in the numbers going into that industry.
I would now like to mention a sideline of agriculture, in which I am particularly interested—grass conservation. It is rather an interesting topic, and it shows only one of many sidelines of agriculture which can be increased by capital investment, and the improvement of machinery generally. I say, advisedly, that it is only one of many sidelines, but I do not propose to go into the others. However, we can increase our output very considerably by giving attention to new and better machinery. Our manufacturers need every encouragement they can receive and this of course entails increased capital expenditure, but at the moment in many lines of agricultural development we are entirely dependent on imported machines.
Turning to dried grass—rather a dull topic—I would compare its value with 1936 another crop, oats. We feed a great deal of our livestock on oats at the present time and it is rather interesting to quote some figures I heard given in a lecture at the Farmers' Club the other day by Dr. Slade. According to him, an acre of dried grass will produce 800 lb. of proteins as compared with an acre of oats which produces 180 lb. of proteins, and the same ratio holds good for starch equivalent. That means if you grow an acre of oats as opposed to an acre of ley you can produce about three to four times the feeding value. We grow in this country over three million acres of oats and if we grew leys and dried them we should increase the total production of feedingstuffs by four times, and that would be very considerable when you are considering a matter of two or three million acres.
We could of course develop some of the extremely poor pasture which exists, instead of the land now growing oats, but either would greatly increase the value of feedingstuffs. I would not advocate doing away with oats entirely because some of the Scotsmen would be hard hit if we asked them to eat grass instead of porridge. It does show, however, what a remarkable increase in output could be achieved by this form of agricultural production, but it does need a considerable amount of capital investment. I believe that for every 100 acres of dried grass one grows, one has to be prepared to invest about £1,500.
I have fully expended my time and I would like to emphasise that agriculture above all needs houses so that it can attract new workers, and it needs a policy for incentive through the price structure to encourage farmers to grow the right crop, which would make it much more profitable for them to grow wheat instead of barley. We must encourage more labour, and we need a policy for the improvement of agricultural machinery which, at the moment, is extremely backward in this country.
§ 6.54 p.m.
§ Mr. Clement Davies (Montgomery)
There have been very few speakers tonight. It was right that the Chancellor of the Exchequer should take up a considerable amount of time, and it would have been wrong for us to have adjourned until 20th January without having heard his statement. We are rising for 1937 the Christmas Recess after having heard today two statements which have not been very cheerful. There was the very sad statement which the Foreign Secretary had to make earlier in the day and there was the statement by the Chancellor of the Exchequer. While, very rightly, the right hon. and learned Gentleman has paid tribute to the great efforts we have made within the country, the position we are now in, so far as our foreign trade is concerned, is not only grim—that is the word he used—but really frightening. Let us just consider what it is.
In spite of the fact that great efforts were made by the Chancellor of the Exchequer—whom we all respect—during this year as President of the Board of Trade, nevertheless our adverse balance is running at the present moment at the rate of £600 million on the wrong side. It is now proposed to make cuts in our capital expenditure within the country of only £130 million, compared with what we have been expending in 1947. It is £180 million compared with the proposals that were in existence for 1948, but compared with what has actually been done in 1947—which was the figure one really should have taken—it is a cut of only £130 million.
Therefore, what one wants to know is how this £130 million cut in capital expenditure can be related to what we may get in increased exports to bridge this tremendous gap which still runs at £600 million. It is right that we should acknowledge the tremendous efforts that have been made in the country since the war terminated. Six million people have been returned to ordinary peace-time avocations from war production and from the Services, and there are very remarkable figures set out in the beginning of the White Paper with regard to achievements.
We knew before the war ended that we would be short of materials and labour, and we knew that after the war, as the Chancellor of the Exchequer has very rightly shown, we would have to export far and away more than we exported before the war. Very rightly, now, he has given figures showing how much we were short before the war in exports of what was necessary to pay for our imports. There has been a deterioration of the position over a number of years. This 1938 deterioration has been due to the intense nationalism which beset the world and the raising of barriers and establishing of quotas in country after country, when really what was needed was an extension of trade and an opening up of opportunities for people to get together and trade together. We knew what the position was before the war and we knew, therefore, that greater provision would have to be made by this country for our exports.
My complaint with regard to the Government is that when the war ended they had greater powers of control over materials and finance than had ever been given to any Government previously and they could, therefore, have guided the country in the use of those materials and of that finance far and away better than they did. They have recognised the position today. My regret is that they did not recognise it very much earlier. They have not been without warning. There was a warning given in a Debate as long as 12 months ago. Then, again, there were the two White Papers in February. It was emphasised that we had a limited number of people and limited resources. What was worse was the fact that there was a possibility that the resources in materials, instead of increasing, would decrease owing to the danger of our having to do what we have since done—cut down our imports. Cutting down imports will never solve anything, except the immediate problems, and what is really wanted, of course, is an extension and not a restriction, if it possibly can be managed.
We have to deal with a situation in which we have limited quantities. Therefore, one should have related our internal position to our external position, which is just what the Chancellor of the Exchequer suggested today we should do. There was a warning, again, which came suddenly and rather terrifically at the beginning of August, when our American and Canadian resources collapsed over night. I know that that is somewhat of an exaggeration, but yet that is what it really was. The Chancellor himself then began to say, "I have got to arrange for a cut in capital expenditure"; but not until December, not until we are about to adjourn for the Christmas Recess, do we get a White Paper about that. What is worse, when he originally had this in mind, the figure that he gave us was not 1939 a £130 million cut, but a cut of £200 million.
Let me deal with that shortly. I have made the point that the Government have been very dilatory in doing this. I recognise the difficulty of deciding where the cuts should fall. It is a frightfully difficult problem for anybody to settle. The Chancellor asked for constructive suggestions. It is almost impossible for somebody outside the Government without knowledge of all the facts and figures and of what is happening, not only in Government Departments and amongst public bodies, but amongst private companies and firms and individuals, to make any constructive suggestions, to say, "Cut that, but do not cut this." Quite rightly, there is bound to be a tremendous fight between Departments, as to which shall maintain its position and which shall not.
I am glad the Minister of Health will be replying. I think that one of the most difficult of all problems is the one with which he has to deal. The housing shortage here is still the greatest social sore, and the one that causes more distress than anything else—one which, of course, ought to have been put right years ago. There has been a sort of general statement that, of course, we must have houses in agricultural areas—we all agree about that—and that we must have them near the mines; but, really, the shortage of houses has a great effect upon production, and upon the mobility with which men can be moved about. So I really would not venture to offer any suggestions to the Minister, because he has all the facts and figures, and we have not.
Consider machinery. The Chancellor has said that he proposes to lessen the quantity of machinery that shall be available for internal use in this country by some £40 million or £50 million, or even more, and use that for export, for this reason, that it is more saleable than almost anything else. To deal with the immediate, short-term problem, we could not have anything better to sell, and so buy back raw materials. But there is tremendous danger in it. We may beat up our exports for the next two years, but what is to happen afterwards? We have not only to beat up our exports in the next two years, but we must have a 1940 continuous flow of those exports over a whole number of years; and if we are to sell the machinery to somebody else to use, and lower our own technical position, we shall be committing suicide, only by a long process instead of a quick one. I say this to show the difficulty of the Government in making these cuts. The Chancellor gave us a whole list of figures, and I thought he was going to put before us a national balance sheet. I ask that that should still be done. Not only would it be of benefit to the Government——
§ Major Bruce
The right hon. and learned Gentleman was referring to machine exports from this country. I should like to ask him whether he is aware that our machine exports before the war, in the last five years, averaged approximately £56 million per annum. To what figure would he wish to limit our machine exports now?
§ Mr. Davies
It is about time that the hon. and gallant Member, who has been in the House two years now, got out of the kindergarten class. He is always asking childish questions and making childish interruptions.
§ Major Bruce
If my question was so childish, why could not the right hon. and learned Gentleman answer it?
§ Mr. Davies
If people understood more, they would respond. What I should have liked the Chancellor to do—I do not know whether the Minister of Health will be able to do it—was to relate this cut of £130 million to the £600 million gap. In other words, what do the Government hope to gain in exports from the production of consumption goods, and turning materials and resources and labour from capital goods into consumption goods to be available for export? Some of them, of course, will have to be available. There must be some estimate as to the amount. We should like to know what it is. It cannot amount to £130 million. There is bound to be unemployment here and there, for we cannot get men to turn from one thing to another quickly, and we cannot get goods switched from one direction to another quickly.
1941 One would like to know what is the relation between the cut in the expenditure and the improvement that there ought to be in our export position. Whatever it is, we shall still be left with an adverse balance which is really frightening, and I gather now, from the admission made by the Chancellor, that unless something almost unexpected occurs—unless some manna from Heaven falls—by the middle of the year our resources that we can use will have gone. What is the proposal of the Government for dealing with that situation? That is what we really want to know.
This is not a party matter. It is a matter for the whole nation. The Government can do a great deal and the Government should have done more than they have done, with their guidance, with their control over finance and their control over resources. However, the result can come only from the people as a whole. It is upon that note that I should like to end—that it is our duty, no matter what our party, to gather together for this one purpose of pulling the country out of the economic mire in which it is at present.
§ 7.9 p.m.
§ Sir Richard Acland (Gravesend)
I am sure the right hon. and learned Member for Montgomery (Mr. C. Davies) will excuse me if I postpone for a moment taking him up on one point, that in which he said that the difficulty of raising our exports to prewar level was primarily due to the raising of barriers, of nationalism, all over the world. I hope later to offer him a rather different explanation; but I postpone that, because I should like to begin with one comment on the speech of the right hon. Member for Aldershot (Mr. Lyttelton). I know that the days have long since gone by when hon. Members of this House made their speeches almost entirely in quotations from the Greek and Latin classics strung together with a few words in Anglo-Saxon. Nor would I wish to pose as a classical scholar, but when I heard the right hon. Gentleman castigating various Ministers on this side of the House—and, indeed, when I have recently read speeches from other right hon. Gentlemen on the Opposition Front Bench—I am most forcibly reminded of one of the very few Latin phrases I know, which was, I think, applied by Cicero to the Emperor 1942 Nero—and if it was not Cicero and Nero, it must have been two other Romans——
§ Sir R. Acland
The phrase, by whoever it was used, and to whomsoever it was applied, runs thus: capax imperii, nisi imperasset, on which I hope the right hon. Member for Bromley (Mr. H. Macmillan) will improve when he comes to reply. It means that, listening to them, we would think they were capable of governing this country, had we not already had a dose of their kind of government. Beyond that, I would say only that one has to listen to such Opposition Front Bench speeches very carefully in order to discern that they contain no constructive suggestions at all, and do not answer the question asked by my right hon. Friend the Minister of Health as to which capital expenditure should be cut. I will not presume to anticipate the answer the Minister of Health will give to the charge that this Government did not sufficiently pay attention to the economic weather signals.
I believe I am right in saying that, when Members return to this House after being, as we put it, refreshed by peculiarly intimate contact with the electorate, it is reasonable for them to offer the House one or two observations based upon their experience; and, of course, if the observations are relevant to the subject under debate, so much the better. I should like to do so, if I may, in this sense, that I hope I speak without too much modesty in saying that perhaps the position in Gravesend is better now than it was a few weeks ago. But undoubtedly, a very few weeks ago, the ordinary people of Gravesend shared with the ordinary people of this country as a whole a very grave misunderstanding—indeed, an almost complete lack of understanding—of the real causes of what is hitting us as a country now. There is almost no appreciation of the facts which lie behind the long-term trends in import and export, to which the Chancellor of the Exchequer drew attention.
That is important, because we are here dealing with a subject on which Members of this House as individuals are peculiarly qualified to make a real contribution to 1943 the solution of the difficulties now confronting our country. For it is indeed true that, if ordinary citizens know what are the causes of their difficulties they will respond with enthusiasm to the demands made upon them; whereas, if there is some mystery, some vagueness as to the real causes of what is happening, then appeals may be made but the response is likely to be very ambiguous. In all this matter, I am sure it is important to differentiate sharply between a whole host of circumstances, which have combined to exacerbate our difficulties up to the point of crisis now, and the simple, stark, root cause of the real difficulty.
I should like to mention one or two exacerbating factors, such as the unprecedented weather which has afflicted Western Europe in 1947. That has been a very powerful exacerbating factor, but is in no sense a root cause of the present difficulties. Then there was the industrial lethargy of the 20 years which the locusts consumed between the wars. It is very tempting for hon. Members on this side of the House to look at those years, and to see the tragedy that at least one-half of the capital re-equipment now needed could have been carried through in those years if decaying private ownership had not laid its dead hand upon the free enterprise of the British people. But yet, that industrial lethargy is only an exacerbating factor and not a root cause of what we are now suffering. Then there was the war, with all its aspects—destruction here, destruction abroad, the sale of foreign investments. But even when all those are added together, the fact remains that the war itself is only an exacerbating factor and in no sense the root cause of our present difficulties.
It is of the utmost importance for this whole country to appreciate fully that the root cause of our present difficulties consists, quite simply, in the fact that we are no longer a privileged nation. Throughout the whole of the 19th century we were not only a privileged nation, but the outstandingly privileged nation of the whole world. We, before all others, had made the unique discovery of how to use and to operate great power-driven factories. The whole world was obliged to come to us, bringing us food and raw materials in abundance, because there 1944 was nowhere else in the world where from anybody could obtain manufactured goods. Upon that basis our industrial structure was built up, and upon that basis 48 million people came into being in these islands. That basis, the uniquely privileged position of our islands—has now, and inevitably, passed away. I suggest to the right hon. and learned Member for Montgomery, it is that falling away in our uniquely privileged position, more than the mere erection of trade barriers, which is the ultimate explanation of the steady drop in our exports in prewar years.
There is a simple, one-word change in the situation which, in my opinion, explains it all. A hundred years, even fifty years, ago the whole world was desperately short of the things we had to sell: today, the world is desperately, and increasingly, short of the things we have to buy. That, I believe, is the beginning middle and the end of it; and the 20 years of lethargy, the war itself, the weather of 1947, and many other factors have only served to exacerbate that great root cause up to the present point of crisis. However, it does present us with a desperately serious situation. I am by no means saying this in accusation of anybody else who has not realised this situation in the past. I am saying it much more in confession that I, myself, did not realise how powerful the operation of this fundamental cause of our difficulty would be.
I suggest to hon. Members opposite that there is at this moment no crime against this nation which is greater than the attempt to persuade the people of this country that all their sufferings are caused, by this Government. Criticism, particularly if it is constructive, is what we ask for and expect, but for a whole political party to seek political advancement in the present situation by deliberately attempting to persuade the people that the single root cause of our present difficulties lies in this Government, is a political crime. Our present situation is far too serious to allow anyone to indulge in the party political game on that scale. While appreciating and rejoicing at the internal signs of increasing tempo and the improvements in production of all kinds, let us not escape from the fact that we shall be very lucky if, in the next 12 or 18 months, we do not step over the edge of that ghastly watershed, on the other side of 1945 which lies the spiral of reduced rations, reduced vitality, reduced output, reduced exports, reduced purchasing power abroad and, again, reduced rations, reduced vitality, and so on. Let none of us forget, and let hon. Members opposite who have been making speeches that the difficulties are being solely caused by this Government not forget, that the whole of this country must face the serious risk of that situation.
Hon. Members opposite may think that this is a pretty grim thing to be said by a Member of this party. They may think that it will bring them political comfort, but I suggest just the opposite conclusions follow. The conclusions I draw from our present situation is that the position in which this country inevitably finds itself is so serious, and the risks in front of us are so great, that in the next 12 months or so we shall be obliged to take all sorts of measures which hon. Members opposite will dislike a great deal more than some of the measures which have already been taken.
The Chancellor of the Exchequer spoke of our doing the maximum possible within the "mobility and interchangeability of labour that are now available." I am sure he will agree with me that one of the things which is going to prove most necessary in the difficult months which lie ahead, in a world situation which is liable to change any moment with almost kaleidoscopic rapidity, is to increase this mobility and interchangeability of labour. That is not a mere phrase. It is something which has to be interpreted into the living experience of tens of thousands of men and women and their families. A greater interchangeability and mobility of labour calls for courage, adaptability and a willingness to face up to unorthodox situations, and to do things which at the present moment people do not contemplate doing very readily. These things are going to be demanded more and more from the ordinary people in the next 12 or 18 months.
To make these demands upon our people, and to expect that there will be a response, makes it necessary that we shall not distribute quite so much in dividends and in big salaries, and so on. It makes it necessary that we shall severely curtail, not only the income of the people at the top, but the amount of money which they are allowed to spend on their 1946 immediate personal consumption. Something must be done in regard to those who are best off in our community before we can expect a new level of mobility and adaptability from those who are at the bottom of the industrial ladder. I cannot go further without stepping into realms which obviously demand legislation.
I repeat however that the world forces which have been inevitably gathering around this country over a period of at least 50 years confront us now with difficulties which we shall not surmount, except by all sorts of little people having the courage and the faith to take unconventional, unorthodox and unusual actions, even to the point of individual sacrifice in all sorts of different ways. If that is to be done, and if that is to be asked for from the little people, I am sure that the Government will have to say that they are prepared to introduce all sorts of unconventional Measures to make sure that there is something more like equality of sacrifice at all levels in all that lies ahead of us.
In conclusion, I come back to the main point I wanted to make, namely, that there lies upon Members of this House, during these next few weeks when most of us will spend some time with our constituents, the supreme duty of trying to explain to the people of this country whence our difficulties have come. I even go to the length of appealing to hon. Members opposite that in this time of national difficulty and crisis, while they should criticise constructively, they should repudiate their steady propaganda of the last 12 months or so that it is this Government and their Measures which are the root cause of the trouble now confronting us.
§ 7.29 p.m.
§ Mr. Molson (The High Peak)
It reminds me of old days to hear the hon. Member for Gravesend (Sir R. Acland) once more addressing this House. He could have done very little to cheer up the electors of Gravesend, if that was the kind of speech he made during the time of the by-election.
§ Mr. Molson
I make no complaint about that. I welcome speeches from the other 1947 side which face the gravity of the situation. I very much regret that, since he has fallen from office, the right hon. Member for Bishop Auckland (Mr. Dalton) suggested in a speech in the country that the difficulties of the country are now perhaps nearly over. I, therefore, welcome the speech of the Chancellor of the Exchequer this afternoon and also the general tone of the speech made by the hon. Member for Gravesend. When he rebuked my party for having played what he called the party political game, I thought that here was Satan rebuking sin. I remember the time when the dangers of this country were far greater than they are now, and during an electoral truce the hon. Baronet organised a party of his own in order to break down the unity of the country.
§ Sir R. Acland
I would at some time like the opportunity of showing the hon. Member some of the letters we received from all over the world from soldiers, sailors and airmen who took part in the victories we fought and won at that time, stating that the one thing that enabled them to go on with their efforts was the realisation that there were people in this country who wanted to have the same kind of country after the war as they did.
§ Mr. Molson
I do not think that the hon. Baronet can expect me to read all the letters he receives. I will respond to one of his requests by trying to make constructive criticisms on the White Paper under discussion. On the second Finance Bill of 1946, I asked the then Chancellor of the Exchequer how he anticipated financing the large capital programme which was contemplated by the Government. I reckoned that the housing programme of 4 million houses at approximately £1,000 each, spread over 12 years, would amount to £330 million annually, and that the steel programme for reconstruction was £22½ million spread over 7½ years. The Minister of Transport told us that he anticipated an expenditure on roads amounting to £80 million in the first year.
I asked the Chancellor also how he thought it would be possible for British industry to produce the vast amount of capital goods that would be required. Capital goods are normally produced out of the savings of individuals and com- 1948 panies, and it was quite clear that the reconstruction programme to which the Government had set their hand vastly exceeded any savings which had been available in the past. The White Paper is a belated but frank admission by the Government that in this most vital and important feature of planning they have tried to get much more than a pint out of a pint pot. I hope that Members of the Government have read a number of recent articles by professional economists, and particularly a book by Mr. Roy Harrod on, "Are these hardships necessary."