HC Deb 08 July 1947 vol 439 cc2041-158

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

3.41 p.m.

Mr. Eden (Warwick and Leamington)

The main purpose of this Debate, which I now initiate, is to seek from the Government replies to essential questions in respect of their import programme and their consequent economic policy. I am quite sure the House will agree that it is indispensable that we and the nation should have full information upon these issues. In other words, we must know what the Government's policy is, and only then can this House and the nation judge as to its adequacy or otherwise.

When last Monday the Chancellor of the Exchequer made his statement, which will be fresh in the memory of the House, I told the right hon. Gentleman rather on the spur of the moment, though he was kind enough to give me a copy of his statement, that the implications of that statement were difficult to follow. After the lapse of a week and after the publication of the very sketchy figures which were made available to us last Thursday, that is still my position. I do not know what the Chancellor's purpose was in making that particular announcement last Monday. I cannot think that he had it in mind that the cuts which he proposed would have any material bearing on the problem of our balance of payments. They were much too trifling to influence that to any material extent either way. It may be that his purpose was to warn the country of the seriousness of the position. If that were so—and I could not complain of that—then the right hon. Gentleman ought to have followed up his statement by a personal conference with the Minister of Food, for any service which the Chancellor's statement may have done on Monday in warning the nation was completely undone by the contents and tone of the speech of the Minister of Food the very next day.

Mr. Gallacher (Fife, West)

It was a very good speech.

Mr. Eden

Of course, from the hon. Gentleman's point of view it was a very good speech, but the point I am making is that it bore no resemblance to the statement by the Chancellor of the Exchequer the day before. The hon. Gentleman may prefer the Minister of Food to the Chancellor of the Exchequer. It is not for me to enter upon such delicate matters. It is only for me to draw attention to the discrepancy and to ask which happens to represent the policy of His Majesty's Government. I read with great interest— and no doubt the House did—the letter of the Minister of Food to "The Times." It is always interesting when Ministers write to "The Times." It was a letter in which he explained that "the coming years" do not include "the coming year." Of course, I accept that statement—if I understand it—but, even so, that was not the passage in the right hon. Gentleman's speech which surprised me most. The right hon. Gentleman had already said, before he reached that point, There is no need whatever for the housewives or the people of this country to feel that they will find it difficult or impossible, as is sometimes suggested, to obtain, partly from at home and partly from abroad, the food which they need."—[OFFICIAL REPORT. 1st July, 1947; Vol 439, c. 1187.] Judging from the volume of one's letters, some housewives are finding it pretty difficult now. [HON. MEMBERS: "The Housewives' League."] That is not a point I wish to argue now. However that may be, can the Minister of Food or the Government possibly reconcile his statement with the known worsening of our balance of payments, and, in particular, with the more rapid expenditure of our dollar resources, since it is from the dollar countries that a great part of our foodstuffs now come? I therefore say to the House that there is a complete divergence between the Minister of Food and the Chancellor in that respect, and I shall be glad to have it cleared up. I give my vote, for what it is worth, to the Chancellor of the Exchequer.

I now turn to the figures of the Chancellor of the Exchequer. Those he has made available to us are for the 12 months from the middle of this year to the middle of 1948. They show that in this period the Government calculate that the total cost of our imports, after making allowance for the cuts the Chancellor announced on Monday, will be about £1,700 million. In the same period the Government are planning—perhaps I ought to say, are estimating—an export programme which will bring us between £1,300 million and £1,350 million, thus making a deficit of between £350 million and £400 million. Even accepting that those figures are realised, which I must say on the basis of past experience is very doubtful, this deficit is a very serious figure. I must remind the right hon. Gentleman the Lord President that in the Chancellor's own statement in which he sets forth these new figures, he has himself admitted that the Government's previous export target —a 40 per cent. increase in volume over the 1938 figures—which was timed to take place at the end of 1947, cannot now be realised until the middle of 1948. I am sure he is right in what he says.

The right hon. Gentleman must realise that this past experience shakes our con- fidence in his new figures. If the other estimate was wrong, what reason have we to suppose that the present is right, and what assurance have we that the Government's present budgeting is going to be any more accurate than their budgeting last February, when they were warned by the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) and the hon. Member for Chippenham (Mr. Eccles) that they were over-optimistic? For the sake of argument let us suppose that the Government's statement is accurate and that the overall deficit is £350 million to £400 million for the next 12 months. Even those figures still fail to give information on the most difficult aspect of the whole situation. While our total adverse balance of payments is admittedly serious enough, the problem of hard currencies, in particular of dollars, is even more grave. This will be none the less true, as far as I can see, after sterling becomes freely convertible on current account on 15th July. I now quote from the Economic White Paper issued last February, After all, it still retains a certain historic interest. It said: …our dollar position is much more difficult than would appear from our total balance of payments. Why is that? The White Paper explains. It was because in February we were drawing about 42 per cent. of our imports from hard currency countries and exporting to them only about 14 per cent. That disequilibrium in our balance of trade, especially with the American continent, has not, so far as I know, improved in any way since February. If anything, I think it has grown worse. Let me try to put it another way. The most recent figures which the Government have given seem to show that our global adverse balance of payments has been running at the rate of something like £700 million a year. On the other hand, the rate of our drawing on American and Canadian lines of credit appears to have been running recently at the rate of £900 million a year. At that rate the American and Canadian credits seem unlikely to last much beyond the end of this year.

The next item which seems to me of great significance, and which is completely ignored in the Chancellor's statistics, is the balance of payments upon invisible account. Once again I shall base myself on the historic document, the White Paper published last February. Then the Government estimated that our net income on invisible account for this year might be about £75 million as against overseas Government expenditure of £175 million. that is, a deficit of about £100 million per annum. That invisible deficit does not appear to be included in the Chancellor's figures, yet it is an important item, particularly because it includes our expenditure in Germany, a large part of which is in dollars. Moreover, since then, I ask the House to note, further debits on invisible account have arisen in the shape of releases from the accumulated sterling balances. It seems to me essential that the Chancellor's figures should be expanded to include the invisible items. I therefore ask the Government for figures to show what is the estimated invisible deficit for the year to June 1948; secondly, perhaps even more important, what will be the added drain on our dollar resources on this account?

Under that head, if we are to have a lull picture, we must also know what is the estimated effect upon our dollar resources of fulfilling the convertibility agreement on 15th July. What, for instance, does the right hon. Gentleman calculate will be the sum involved in his agreement with Egypt, and what will be the extent of the dollar liability for us under this head for the rest of the year? I have tried to work out these things as best I can for myself, and I suggest to the Chancellor that, at a minimum, the increased amount for invisible deficit that should be added to our total deficit is somewhere between £100 million and £150 million. If that is so, that additional deficit ought to have been shown in the original figures; if it is not so, I shall be glad to be corrected in due course. I cannot attempt—nobody can without the official figures—to calculate what the additional dollar strain must be of this invisible deficit, but, clearly it must be serious and no doubt the Government can give us an estimate.

I have given reasons why the Chancellor's figures fail to give us the full picture. Now I want to put some questions to the Government about the figures themselves. I ask, first, for some information as to the assumptions upon which the estimate of the volume of our imports and exports is based. I understand that the import programme allowed for the total volume of exports is not materially different from the estimate for this calendar year given in the Economic White Paper. That programme provided for expansion of imports to 80 or 85 per cent. over the 1938 level. If this is still the calculation, does it make any allowance for the rebuilding of stocks which during 1946, both in food and in raw materials, were run down at an alarming rate? Let us not forget in this connection—and I ask the House to bear this in mind—how seriously the known shortage of our stocks, because the whole world knows about it, affects our bargaining position in all these international negotiations. If that is the calculated rate of imports, what assumption have the Government made about the trend of world prices? The Chancellor in his figures blames the increase of 16 per cent. on the total cost of our import programme upon the increase in world prices, yet between December, 1946, and May, 1947, prices have advanced by only about 11 per cent. Why, then, this further margin? Are the Government calculating on a further rise in the level of world prices?

Secondly, as to our exports. The Government say" they hope to reach by the middle of next year a target of 140 per cent. volume of our 1938 exports— a target, in other words, which they set originally for the end of this year. I ask the Lord President what allowance, in making this estimate, have the Government made for any decline or for the disappearance of a sellers' market? This, surely, is of vital importance. Already there are reports from business men, in steadily growing volume, of increasing competition in practically every line of goods, and it is becoming more and more difficult to sell our goods. Some countries have recently announced their intention of placing embargos for the time being on a number of articles such as textiles and motor cars—the Parliamentary Secretary to the Board of Trade made a statement about it just now—and they are lines of goods in which we are interested. Finally, we have the high and reputed authority of the President of the Board of Trade—I have the quotation here if anybody wishes to challenge it-that the end of the sellers' market may be quite close. The President said on 25th June: So everywhere we receive the warning that the sellers' market is disappearing. It has already disappeared so far as some commodities are concerned. So I ask the Lord President, in estimating the volume of exports next year as 140 per cent. above the 1938 level, has any account been taken at all of the disappearance of the sellers' market? If no account has been taken, those figures will be of no more value than those given to us last February.

The Government ought to tell us what they expect in relation to the export drive of each industry. I must remind the Lord President that in the White Paper, now several months old, the Government announced their intention of arranging discussions on their targets with each industry. What has been done about that? Have those discussions taken place? Have new and realistic targets for each industry been drawn up in the light of the imminent decline of the sellers' market? What are the new targets to be set for industry? We ought to have this information. It will be for the benefit of industry and to those engaged in it that all should know what is expected of them, and we were told last February that this was to be done. We are now in July. What has happened? Has any progress been made? What are the targets for each industry and, in particular, what are the precise calculations in the case of the textile industry? What increase in the total volume of production do the Government expect? What steps are they taking to make available to that industry the necessary coal, and, certainly no less important, the necessary number of operatives?

Now as to coal, it is quite clear that there cannot be—I do not think anybody will dispute this—an increase in exports of the kind which the Government contemplate unless the coal production is substantially above the target of 200 million which everybody has denounced as too low. Is that anywhere disputed? If it is not disputed, then this export figure depends upon our getting an output of coal in excess of 200 million. What are the hopes of that? I shall have another word to say about coal in a moment. Equally important with coal is the question of operatives. That again raises the question of inducement. The Chancellor of the Exchequer dealt with this problem at the Margate Conference. It is, indeed, the heart of the whole matter so far as exports of textiles are concerned. I hope I shall not embarrass him by saying that I think the Chancellor's words at Margate were very wise: The executive is in favour of relative inducements and advantages for the undermanned industries. I think that is right, but it is not enough. Mr. Deakin said exactly the opposite. What I must ask the Government, because we are concerned with national policy, is where do we stand on this matter now? Is the Chancellor to have his way, or is Mr. Deakin to have his way? We do not know—we have never been told—but we shall be obliged for information on that point. Unless that matter is dealt with, it is useless verbiage for the Government to talk of increased production of textiles.

Let me sum up the facts as I see them. We have at the moment a total deficit on our overseas balance of payments running at an annual rate of £600 million to £700 million. That is our global deficit; our dollar deficit is apparently a good deal worse. Yet we are drawing nearly half our supplies from dollar countries. We cannot live beyond our means indefinitely. If we were to try now to live on the result of what we export at the present day, I calculate that we would have to make cuts in our import programme equivalent to eliminating all tobacco, all petroleum products, all newsprint, all consumer goods, and at least half of our food imports. That is what we are at present earning. The results of that in unemployment and malnutrition do not require to be described by me or by anyone else. The dollar loans seem likely to run out by the end of the year. There will be nothing left to fall back upon but our reserves of gold and free exchange, which we must at all costs keep as a banker for the sterling area. That seems to me to be the problem in all its grimness. It is for that reason that we on this side of the House have asked for this Debate. What is being done about it? What can be done about it?

First, let me say that no one, I imagine, can be happy about the way in which our dollar resources have been expended up-to-date. No one will deny that the main purpose of these dollar loans, certainly that which influenced many of us on this side of the House, was the rehabilitation of our economy They were intended to give a breathing space during which we could restore our own trade.

Mr. Stubbs (Cambridgeshire)


Mr. Eden

I am coming to that also. It is perfectly impossible to reconcile that with our dollar expenditure in the last half of last year—5 per cent. on machinery, 7 per cent. on films, 32 per cent. on tobacco. That is not what this House had in mind when it voted for that loan. I accept the intervention of the hon. Gentleman. No one in the House thought that the dollars were going to be spent exclusively on machinery; of course we did not. We knew that great sums were intended for expenditure on raw materials, and also to keep our factories going, and also on foodstuffs to Maintain the health of our people. But expenditure on nonessentials has been excessive, as indeed the Government have themselves belatedly and half-heartedly realised. Our criticism, therefore, is that their policy has been one of piecemeal expedients, rather than comprehensive and realistic planning.

In the light of this, I want to look at the cuts the Chancellor announced last Monday. Let the House compare the new import programme with the old estimate for the year 1947. Then the House will find that the effect of the increased Tobacco Duty is calculated to mean a saving of about £10 million. The saving on film remittances has not been estimated yet, but I find that the total cost of these remittances calculated for 1947 was only £18 million, and clearly there is not very much scope for substantial savings there. So far we have not been given an estimate of the saving on petroleum products at all. I hope we may be given one.

As for newsprint and paper-making materials, which appears to be the one definite new Government decision, the total value of imports in these items for the first five months was only £1.2 million and £7.9 million respectively. According to the best calculations that I can make, the total saving in respect of newsprint, even if supplies to newspapers and periodicals are cut by a quarter, cannot amount to more than £1 million. I would like to know if I am wrong in that figure. If that is so, does the House not consider that at a time like this it is of the utmost importance that the nation should be given the fullest information about the urgent and vexatious economic problems that confront it? I must say that if the Government are going to make these reductions, they are going to make their task almost impossible. Even if the saving were important, I should hesitate about cutting newsprint severely at a time like this, but, when the saving is absolutely negligible in relation to our total deficit, I cannot see how on the grounds of public interest it can possibly be justified.

What effect can the cuts so far announced, have on our problems? So far as I can see, the sum total of what the Chancellor announced last week cannot amount to more than £25 million or £30 million over the year, when our total deficit is running at the rate of £600 million or £700 million, and our dollar deficit running substantially higher. This is merely tinkering with the problem, if I may borrow a much abused word.

May I turn to the new economic theory, which appears to underlie Government actions, as explained by the Lord President of the Council at his Press conference last week? It is apparently wrong for us to make substantial cuts in our imports, for this might betray a lack of confidence and help to promote a general reduction of world trade. Does that apply to the cuts which the Chancellor now proposes? If not, some of them, such as those in-films and tobacco, might have been made a long time ago. It is all very well for the right hon. Gentleman to talk about not giving a shake to international confidence, and not reducing world trade. I, personally, applaud the right hon. Gentleman's purpose, and think it a good purpose, but the only way we can serve his purpose is by increasing our own production, and balancing our payments in that way.

There was another statement attributed to the right hon. Gentleman at his Press conference last week which caused me a great deal more concern. He is reported to have said: If I am asked, Are these import cuts leading to others, still worse, or will they really see us through?' I must reply, 'It does not rest with us to answer that'. That is a very dangerous statement for one of His Majesty's Minister's to make. To argue that any further cuts would be a bad thing for world trade as a whole, and then to fling the reins on the horse's neck, and put the blame for any resulting breakdown on the rest of the world, is not government, it is the negation of government. Our job is to analyse the facts, and make our own contribution to their solution. The first unpleasant fact is this. In the long run, if not in the relatively near future, we shall have to consume very substantially less, unless we can produce very substantially more. I would like the Lord President, not to say that it does not lie with us, but to dwell upon the steps which we can ourselves positively take in respect of our balance of payments and to get as close as possible as we can to paying our way. I have one or two points I would like to make in that connection.

First and foremost, comes the question of coal. Shortage of coal is putting a break upon industrial activity in every sphere. The Government's programme of 200 million tons this year is quite inadequate for our needs. Everybody accepts that; the trade unions have said it, the employers have said it, everybody has said it. Yet, on present showing, would I be wrong in saying that there is no certainty even that that figure will be reached? Let the House consider, in contrast, what the position was even as recently as 1941. In that year the total production of deep-mined coal was 206 million tons. If we add to that another 9 million tons, which represents current opencast production—there was no opencast production in 1941—one finds a total for 1941, comparable to our present position, of 215 million tons. What a difference it would make to our economy if we were certain that we would have that amount of coal this year. Yet in 1941 there were fewer men in the industry and less machinery to produce it. Those are facts which we ought not to shirk, and from which we cannot escape.

Here is really the most urgent problem for the Government. They have inaugurated the experiment of the five-day week. After the first burst of enthusiasm, it appears from the figures and from Minister's speeches—which have been very rough to some of the miners—that production has fallen short of what is required to meet even the 200 million tons target. I say to the Government in all seriousness that the one thing which this country will never forgive will be a repe- tition next winter of the fuel crisis from which we suffered a few months ago. Therefore, I ask the Government what is now their estimate of the coal production in the coming months, and what action they propose to take, if any, to raise the level if that level continues below our minimum national needs? That is the most important question which I have to address to the Government today, because it is really fundamental to all our economy. The Government know it as well as I do.

In the economic Debate last March the Minister of Labour—I am sorry he is not here—repeated the statement of the Minister of Fuel and Power that the Government offered no objection in principle to the five-day week, provided that arrangements could be made to see that we secured the output of coal which was necessary to meet the country's needs. I have no quarrel at all with that statement, but that output is not. so far as I can understand it, forthcoming at the present moment, so that when the Minister of Fuel and Power is reported in "The Times" as saying, on Sunday, that the five-day week had come to stay, no matter what anyone said. Here are two completely conflicting statements. On the one hand, there is one which says that we want the five-day week, that we believe that it will result in increased production and that its continuance depends in a measure upon that increased production or sufficient production for the nation. On the other hand, we have the Minister of Fuel and Power saying the other day that it has come to stay no matter what anyone says. We must know which of these two statements represents the policy of the Government.

I have another point to put about our present position with reference to the nondiscrimination undertaking in Article 9 of the American Loan Agreement, which is repeated in spirit in the commercial policy proposals. I wish to recall to the House some of the words which my right hon. Friend the Leader of the Opposition used about this in the American loan Debate. I think the House will agree that there is no one who knows more about opinion in the United States than does my right hon. Friend. He said: This is really a proposal upon which [...] earnestly trust the steady gaze of the just minded people of the United States will be attentively fixed."—[OFFICIAL REPORT, 13th December, 1945; Vol. 417, c. 714.] That was a very wise comment, for the significance of the non-discrimination undertaking has been completely altered by events. As I have said, the loan was originally intended to last until we had restored our trading position. In fact, as is only too obviously true, the dollars are running out much faster than was originally intended.

In present circumstances, the strict observance of this non-discrimination undertaking is leading to many anomalies and difficulties which could never have been foreseen at the time of the loan negotiations. I do not think that the right hon. Gentleman will dispute that. It applies particularly to a number of Empire products. There are even instances in which our inability to purchase certain commodities from America owing to our shortage of dollars has compelled us to reduce in similar proportion our purchase of these commodities from Empire countries. I am sure that that could never have been the intention of the negotiators of the loan. I am sure that if my right hon. Friend's advice had been followed, that is to say, if the "steady gaze of the just-minded people of the United States" was fastened upon those facts, they would see and understand our difficulties. I ask whoever is to reply for the Government to give the House some account of this matter, and to say what action, if any, has been taken.

I have made no mention of the Marshall offer. That is not because I wish to cast any doubt upon its validity or to detract from its importance. I know that the House will understand the significance of this historic offer, which may be the only means whereby economic catastrophe can be averted. I have made no reference to it for quite a different reason, because our concern at this moment should, above all, be with our own actions, our own responsibilities, what we can do to help ourselves. If the Marshall offer should become a pretext for continuing upon our present wholly artificial basis, for refusing to face the facts and for shirking the necessary hard decisions, then in the long run, I say to the right hon. Gentleman, the additional breathing space it gives us may prove to be more a loss than a blessing. We cannot become the permanent pensioners of the United States. We have a role of our own to play in the world, as the heart and centre of a great Empire. If we are to carry out this duty, we must, sooner or later, pay our own way, and to do this we must be able to sell British goods in adequate volume in a competitive world market, and it is our ability to do this which is the crux of the whole problem which now confronts us.

Are we doing everything in our power to produce the goods for export and to sell? I fear that we cannot pretend that we are As I have said before, an increasing number of our business men already report growing competition in price and quality in overseas markets. The problem of our level of costs, our level of prices, is of supreme importance. The index of wholesale prices in this country has been rising steadily since this Government took office. There can be no doubt that recent wage increases, which may well be justified in themselves—they may be, I do not deny that at all—[An HON. MEMBER: "Do you think that they are justified?"]—I ask the hon. Member to apply his mind to my argument. I am not saying that they may not be justified. I am asking the House to contemplate their consequence, which must be to give a further impulse to the present inflationary movement. In the economic Debate on 10th March, the President of the Board of Trade said: we cannot afford increases in wage levels or shorter hours unless they increase productivity per man year."—[OFFICIAL REPORT, 10th March, 1947; Vol. 434, c. 994.] Can this be said of all the recent agreements to increase wages and reduce hours? We should all like to see these increases, but are they correct policy at a time when we are living to an ever-increasing extent on borrowed money?

Let me sum up what I have to say. I say, first, that the cuts which the Chancellor announced the Government propose to make in our import programme are utterly inadequate to bridge the gap that at present exists in our balance of payments. Meanwhile, our dollar resources are being spent at an alarming rate. What do the Government propose? Alternative courses are open. I would even venture to tell them what, to the Opposition, they seem to be. They can propose further cuts to reduce the gap. If that is their policy they ought to declare it now. They ought to tell the nation what those cuts are and for how long they are to be endured. Alternatively, the Government can go on for a little while longer as we are now, living largely in excess of our income, in the hope that the success of the Marshall offer will save them from having to make further import cuts. If that is their policy, equally the House and the country ought to be told. The nation is entitled to know. The nation is perfectly prepared to examine any constructive plan to meet our problem, but the first condition is that the nation should be told of that plan. Up to the present I must tell the Government that that condition has not been fulfilled.

I want to conclude on a note which I fully understand will not be acceptable to Government supporters. I hope they will allow me to put this point of view because it is one which I most sincerely hold. The other day, the Paymaster-General, speaking in the country, said— I think quite accurately and I endorse his words: Economically we are in a jam. We must get through the next 18 months or smash. Speaking from these benches, I say to the Government that we are as concerned as anyone on the opposite side of the House for the future of our country. Nobody could watch recent developments of events unmoved. I believe that the Government would be wise and would be acting in the best interests of the nation if at this moment they decided to put aside for a while—perhaps for the period which the Paymaster-General regards as supremely critical—the pursuit of purely party legislation, and decided to try to unite the nation in a joint effort to rebuild our prosperity. I know that hon. Gentlemen opposite will not agree with that, but I must put it because I deeply believe in it. The present task is certainly sufficiently formidable for any Government. The right hon. Gentleman knows as well as I do how heavy is the pressure on the machine, how formidable are the tasks, how fully taken up is the time of his best civil servants. I must add that if the Government persist in pursuing party legislation now—I am not saying this as a threat: I am stating it as a fact—inevitably they are going to divide the nation into probably two almost equal halves. I conclude by saying that if they will show themselves to be something bigger than party men, they can do a service of lasting value to the State.

4.24 p.m.

The Lord President of the Council (Mr. Herbert Morrison)

I am sure that all hon. Members will entirely agree with the right hon. Gentleman that the discussion which we are having today, arising out of the statement made by my right hon. Friend the Chancellor of the Exchequer with regard to the import programme, is one of very great importance. The right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) has, quite rightly, raised a number of issues upon matters to which he attaches importance and which he thinks should be considered by the House. In the course of my wider observations giving the general economic situation in relation to the import programme as we see it, I shall cover a number of the matters to which the right hon. Gentleman has referred. If he will forgive me, I will leave some of the other matters which are more detailed and within the sphere of the Treasury, to be dealt with by my right hon. Friend the Chancellor of the Exchequer. Time is needed to look up some of the actual figures to which the right hon. Gentleman referred. I shall give some figures and others will be given by my right hon Friend.

We were asked whether the assumptions that the Government have taken in regard to the volume of imports and exports included stocks. As indicated by the Chancellor's statement, stocks were taken into account. Indeed, in the course of his statement he said: We count, however, on increased imports of animal feedingstuffs and fertilisers, and on rebuilding some of our stocks which have run down very low.".—[OFFICIAL REPORT, 30th June, 1947; Vol. 439, c. 961.] Therefore, as far as was practicable, the stock position was taken into account in the Government's deliberations on this matter. With regard to any calculation about world prices, it is exceedingly difficult to be certain what the further movement of prices will be. No doubt, some prices will show a further rise but there are signs in some cases that certain prices are tending to break. Indeed, so far as the world is moving to a buyer's market that is bound to be the effect. No Government can be in a position to be sure, with any degree of accuracy, what will be the statistical and monetary effect. J can only say that so far as it has been possible for the appropriate Departments to form an impression as to the probabilities, the element of rise and fall in prices has been taken into account, but I very much doubt whether a figure could be put upon it.

With regard to the export drive, the Board of Trade have been steadily in consultation with the export groups. They are constantly discussing this matter with a view to both industry and the Government making the best possible effort towards increasing exports. In the course of these talks, they sometimes arrive at targets, though I doubt very much whether it would be wise to give figures relating to individual targets of individual industries. However, I can assure the right hon. Gentleman that consultations on a cooperative and friendly basis between industry and the Government are taking place steadily with a view to getting to the desired purpose, namely, the maximum practicable degree of export trade—a matter to which we have attached the greatest importance ever since we have been in office and to which many Ministerial references have been made.

The right hon. Gentleman said that, as far as he could calculate the value of the imports of newsprint over a certain number of months, he could not see that the saving could be greater than £1 million at the outside. I am advised that that assumption is wrong and that the figure will be somewhere between £2 million and £3 million, or roughly about four times that number of dollars. I would like to assure the House that the Government have come to this conclusion about newspapers with the very deepest regret. We are exceedingly sorry about it. We had to seek to choose as channels of economy those which would do the least damage either, as the right hon. Gentleman said, to the physical welfare of the people or the economic welfare of British industry. If the series of subjects for economy which the Government have considered is taken into account, I think it will be seen that, as I shall show in the course of my observations, we have sought to do it on that basis.

If we are forced to economise in food consumption, which is the raw material of labour power, just as other raw materials are the raw materials of indus- try, or if we are forced to cut the supplies of raw materials needed for industry or supplies of machinery needed for industry, we begin to get into a terrible vicious circle. It is not a thing to walk into if we can possibly help it; it is not a thing to hurry about. Such a vicious circle would make it impossible for our people to put forth the physical effort to enable our industry to give us the amount of production which is undoubtedly necessary. In any case, on the production side the Government began a very strong drive to get the additional production which, I entirely agree, is a vital element in the problem of imports and exports.

In the coal industry, which, I quite agree, is the biggest single element in our industrial well-being—there are some other elements that are almost as important, but undoubtedly, this is the biggest single element—we have devoted the utmost energy to getting the maximum production. I think it would, yet awhile, be too early to say whether we shall get the 200 million tons. I know that others have said that it should be 220 million tons or even more. The Government made their estimate of 200 million tons in the best of good faith as to what they believed would be a reasonable objective, or was within the sphere of practicability. Others thought it should be higher, and nobody is more delighted than I am that others think that it should be higher. It is far better that they should think it should be higher than that they should think it should be lower, especially as they include a number of people on the labour side in this and other industries.

But I think it is too early to say whether we shall achieve the 200 million tons. Quite frankly, I cannot be sure, but it would be premature at this moment that I should make a statement as to whether we shall reach the 200 million tons or not. I only say that it will want a very great effort to get the 220 million tons, and, quite certainly, it will want a very great deal of effort even to get the 200 million tons. It is of the most vital importance that we should do that. We must not get it out of our heads that without it we will be quite unable to get through next winter without the inconveniences of last winter— [Interruption.] Well, the inconveniences and great dislocations, if the right hon. Gentleman prefers it. I quite agree, but I think we must be careful to remember that that is not the sole objective of the drive for coal. We really want more than that. We need elbow room in our own industry, and we need to supply the nation, not only for our own sake, but for the sake of Europe and the whole world economy, with an adequate amount of coal for export such as we formerly had. I entirely agree about that.

The right hon. Gentleman has referred to certain alternative courses to which he attaches importance. I shall indicate the alternatives which are inherent in the consideration of this problem. Finally, he asked that we should set aside party legislation in order that the nation might be united in those essential economic measures which he thinks do not involve party political considerations. The matter we are discussing today does not of itself involve party political considerations, and I should have thought that, over the sphere of production and our balance of payments, and all the problems arising out of it, there is really plenty of room for all good men to pull together. But, if I may say so, I think it is unreasonable of the right hon. Gentleman to carry that argument—when there is no party conflict over a good deal of the sphere of economic activity—to the point of saying that the only way in which all good men can pull together is for some good men, that is, us, to drop legislation which we do not introduce for party reasons as such. [Interruption.]Well, the right hon. Gentleman can think we are right or he can think we are wrong. Of course, the Opposition think we are wrong; that is the way of an Opposition, just as we think we are right.

But to assume that the Government are bringing in certain legislation with which the Opposition does not agree, for partisan and party political motives, is quite wrong. We are bringing in this legislation because we believe that it is in the interests of the nation. It is perfectly competent for the Opposition to say—and, whether it is so or not, they will go on doing it—that they do not agree, and that they believe that the legislation is pernicious. It really is unreasonable to say to us, as was implicit in the right hon. Gentleman's statement—and he will correct me if I am wrong, because I do not want to be unfair—that, if there is to be support day by day from the Opposition in this matter of the nation's vital economic life, which really does not involve partisan or party political considerations, then the Government ought to pay the price for that support, and that it should be a condition of that support that we should not bring in legislation with which the Opposition disagrees.

Either that line of argument leads to a Coalition, which, with all sincerity, I do not believe and never did believe would be in the interests of the nation, or— [HON. MEMBERS: "Hear, hear."] This unanimity is charming, and the universal agreement that there should be no Coalition is almost a Coalition in itself. Anyway, we are agreed about that. This line of argument either leads to that conclusion, or to the conclusion that the Government of the day, returned by a great majority and with the support of the electorate, should not bring in legislation which they believe is in the interests of the nation, unless that legislation is approved by the Opposition party opposite.

Mr. Eden

Will the right hon. Gentleman allow me? He has put a gloss, unwittingly, no doubt, upon my words which I never intended. I am not seeking to make a bargain, least of all to promote a Coalition. This business is the responsibility of the Government, and I only drew attention to the words of the Paymaster-General. All I did say was that the unity amongst all parties possibly provided a basis within which it might be wise not to pursue party legislation for the time being, but I repeat that it is entirely a matter for the Government to decide. We shall continue to play our patriotic part, whatever the Government may do.

Mr. Morrison

I am sorry if I put any gloss on what the right hon. Gentleman said. It is quite possible that it is a little habit of both of us from time to time to put a little gloss on what the other side has said, but, if I did, the right hon. Gentleman has taken the gloss off, and it is for the House to decide what is the broad conclusion between my gloss and the right hon. Gentleman's anti-gloss.

I must first impress upon the House that the import programme provisionally decided upon for the period from the middle of 1947 until the middle of 1948 is, I agree, only an interim programme. The facts about it were circulated by my right hon. Friend the Chancellor of the Exchequer last Thursday. The programme for the year mid-1947 to mid-1948 is, as the right hon. Gentleman opposite said, £1,700 million. This is an advance in money of £232 million, or about 18 per cent. on the programme for 1947 set out in the Economic Survey. The volume of imports envisaged for the year mid-1947 to mid-1948 is much the same as for the calendar year 1947. The great expansion in cost is, as the House will readily conclude, attributable to prices. The policy adopted in framing this programme has been to provide what is required for the health of the people and for the growth of industrial production, but to cut out less essentials ruthlessly. Tobacco, films, and consumer goods will represent only £85 million out of £1,700 million—a mere 5 per cent. will go in those three items, according to our estimates. Of the consumer goods, only a small proportion come from hard currency countries.

Now I turn to the criticisms of the Government's balance of payments policy. They boil down to five. The first argument against us is—this is quite often heard even now, though I agree it did not come from the right hon. Gentleman today—that the American loan was a mistake, and that we ought to have done without it. There are some people who believe that now, and did at the time. Considering the difficulty we have had in keeping going, even by drawing on the loan, it is up to those who use this extraordinary argument to show how adequate alternative supplies could have been found in the time. Some of those critics thought that the answer lay in a more extensive development of British Commonwealth and Empire resources. To them, I would say this—that if the people who have been talking so energetically about developing the Empire had taken as practical and vigorous steps to develop it in all the years that they were in power as this Government have already taken since V-J day, there might have been some shred of hope that Empire resources could have been mobilised adequately in time. But, owing to past neglect, this, unfortunately, is not the case. Others said we ought to have refused wider international commitments and relied on driving hard bargains, country by country. It must now be clear to all that even if such a policy had been justifiable, the immediate bargaining strength of this country would not have supported such a line of action.

The second line of attack has been that the credits and resources available to carry us over the transition from the war have been inadequate. That we freely admit. When our representatives went to Washington for the loan negotiations we estimated we should need 5,000 million United States dollars to see us through until our production had recovered sufficiently to enable us to pay our way. What we actually got was three-quarters of this sum—1,250 million dollars less than our estimated needs. Again, the purchasing power of this already reduced sum was further reduced by a rise which we estimate to be 40 per cent. in United States prices. The persistent boom conditions further compelled us to accept second, third and fourth choices at high prices, instead of what we most urgently wanted. Then we were compelled by events to assume a cripplingly high proportion of the common burden arising from the war. As one example, no less than 8 per cent. of our expenditure in the United States in the past year has gone to feed the Germans. The Government agree with their critics that the hard-pressed British economy has been weighed down further since the war by additional burdens and misfortunes, which we were entitled to hope we might be spared. But no Government could have avoided these evils without running into even greater ones.

The third line of criticism is that the loan has been frittered away on nonessentials—and that, I think, we have already heard some observations about. The loan was, of course, always intended to aid in financing our normal import programmes, until our exports rose sufficiently to pay for them. That was the purpose. The loan has, therefore, been spent on items in the programme. The smallness of the cuts which we have been able to make without threatening national production and health is evidence of the relatively small proportion of the loan which has been going on nonessentials. Those who say the loan should have been spent on such items as steel, mining and manufacturing machinery, entirely overlook the supply conditions in the United States, where these things are almost unobtainable.

The Government did not feel it right to impose, shortly after the war, any greater degree of austerity than actually had to be imposed on this country. Many who are now criticising us for not having cut down more drastically on what they call inessential imports are the very people who, a year ago, were carrying on campaigns against the rationing of bread —which, incidentally has saved us a tidy sum in dollars—and in favour of un-rationed petrol, which would have cost us a great many more dollars, not only directly, but indirectly, by creating extra home demand on our engineering and other industries at the expense of exports. People who took this line, who decried the need for maintaining controls through this critical period, and sought in every way to represent the Government as enforcing unnecessary austerities, really have no right to turn round now and criticise us for not having enforced even sharper austerity earlier.

Some critics take the line that we should have made faster progress in expanding production and achieving our export targets. There is room for fair difference of opinion here, and certainly the Government would not claim to have been perfect. Undoubtedly, mistakes have been made, and things have been done more slowly than we should have liked to see them done. On the other hand, if some of those who are now such fervent champions of greater production had, while they had control of the destinies of this country before the war, thought fit to bring our basic industries up to date, to make reasonable provision for research and training, and had been more active in combating the mass of restrictive practices and habits of mind so common at that time, the task of the Government in securing a greater expansion in production today would have been infinitely easier.

If production is now universally recognised as national duty No. I that is because the Government, without as much help from others as I should have liked, have placed it firmly in that position on the national agenda by a sustained campaign. Not that we have done so badly in production. Demand has been im- mense, and the difficulties of meeting it have been unparalleled. How many people even now realise, for example, that in the first five months of this year, when load shedding and electricity restrictions were in full force, we consumed 6 per cent. more electricity in Great Britain than last year, and 61 per cent. more than in the record prewar year? Without direction of labour, without ample supplies of the raw materials and foodstuffs to which we are accustomed, we have done more to restore and to outstrip prewar production than any other country which felt the impact of enemy explosives and revolutionised also its whole economy for war, as we did. Of course, we must and will intensify our production drive to meet this emergency. Every extra ton of home production of foodstuffs can save us a ton of imports. Every extra ton of coal above home needs is a vital contribution to exports.

Every increase of manufacturing output adds, directly or indirectly, to the margin which we can squeeze out for export. We have squeezed such a margin out of textiles. The raising of the export rate of textiles to £250 million a year will mean that on the present rate of production the amount of textiles available will not permit of more than four coupons a month being left to the home consumer. But the President of the Board of Trade informs me that, owing to the good recovery of the textile industries from the fuel crisis, he will be able to start the new ration period on 1st October instead of 1st November as he previously announced. But he asked me to add that, unless, however, the present slight rate of increase in textile production is not only maintained but accelerated, there can be no increase in the home clothing ration. The Government are well aware of the urgent need for comprehensive and drastic action to break bottlenecks and to get the national output moving upwards in a big way. But although that is all very relevant to the subject of our import programme, it is a matter which was debated in the House of Commons last week, and I do not propose to dwell further on it today.

The point I want to make now is, that while an immediate increase in output would do much to simplify our balance of payments problem, increased British output alone could not solve it. For one thing, it would not, in the short run, increase the capacity of most other countries either to pay for our exports to them or to supply us with the additional food and raw materials which our increasing economic activity requires. For another thing, the gap in our balance of payments is at present far too wide to be closed by any increase in production and exports that can be expected in the early future. The plain truth is this: increased production and exports are unquestionably the long-term solution; but, equally certainly, they cannot provide the entire short-term solution. They cannot enable us to pay our way in time. On a short-term basis, unless other means are found of closing the trade gap, further cuts will be inevitable. We may even have to face some cuts which will reduce our economic activity greatly, and so themselves prevent the rise in production for which we are all striving.

That brings me to the final criticism that has been made of the Government's import policy—that the cuts in our import programme are too little and too late. If one looks only at the arithmetic of dollars, that criticism is unanswerable, but, important as subtraction sums in dollars have, unfortunately, 'become, there are other important things to be considered. The first duty of this Government to our own people, and also to the world, is to keep Britain in full production, in full employment, in good health and in good heart. To starve our industries or our workers, or to take the heart out of the British people, or to throw overboard abruptly a number of our most expensive overseas commitments, would be to play into the hands of the trouble makers and the enemies of democracy, and to strike a blow against world recovery and the prospects of world peace. The Government are quite clear, having given deep and prolonged thought to this matter, that they should not impose cuts of a scale which would require a drastic adjustment of our standard of living until it is perfectly clear and certain that this is the only course open to us.

The problem which confronts us is this. The deficit for the year mid-1947 to mid-1948 is of the order of £450 million.

Mr. Oliver Stanley (Bristol, West)

Is that the total?

Mr. Morrison

That is the total. That probably accounts for the slight discrep- ancy by the right hon. Gentleman on this figure. Anyway, it may contribute to it. To balance our accounts, therefore, we should have to cut imports to about 25 per cent. below the level now contemplated. This is the gap that must be filled. But the problem is that it cannot be filled by cutting imports. If we cut imports too far, great adjustments become necessary in our production and in our whole standard of living. But we cannot indefinitely go on importing what we cannot pay for, and I must tell the House, quite frankly, that it may come to this—and a tragically bad day it would be for us, for Europe, and for the world's hopes of prosperity.

It is most important that we and the whole world should get the perspective of our problem right, because it is also the perspective of the whole world's problem. There are, in fact, many different problems mixed up with one another. Two are fundamental. The first of these is, recovery in production of all kinds all over the world. Until that is complete, shortages and famine will persist, productivity will be reduced, prices will be inflated, and all sorts of undesirable expedients will be forced on all but the economically strongest countries. The second is the establishment of world monetary and credit conditions which enable full employment, high production, and expanding and balance of trade to flourish. Until that happens, there can be no security on earth, economic, political or military, and even those who may temporarily be living in plenty will all the time be living on the edge of a volcano.

The importance of the problem of getting more commodities produced and distributed quickly cannot be over-rated. It is all very well for us to set up long-term organisations to assure the future security and welfare of. mankind, but if the producers of the world do not expand their production more quickly in the next three or four years, the whole opportunity of building a tolerable civilization may be lost. Time is all-important. Not only Britain, but the world, must produce or perish.

We, as the nation most inextricably bound up in world trade, suffer particularly from world shortages. I will take just one example—cereals. The Coalition Government planned, even before D Day, to start restoring the production of British livestock products by modest import? of animal feedingstuffs. We were defeated first by shipping difficulties, and then, after the end of the war, by the threat of world famine which forced diversion even of coarse grains to human consumption. Widespread droughts and other natural disasters were added to war devastation of the great wheat and rice growing areas of the old world, and we were forced to find dollars not only for the whole of our own great imports of wheat, but for those of India, the British zone of Germany and even our normally rice-eating Colonies. We were, therefore, hit in three ways by the cereals shortage, which set back our own plans for agricultural reconversion, added millions to the quantities of food imports for which we had to pay and the price we had to pay for them, and compelled us to buy in dollars what could otherwise have been bought for sterling. The Government responded actively to this situation.

Just over a year ago I crossed the Atlantic to concert with the United States and Canadian Governments measures for bridging the gap between world cereal requirements and supply. I was very strongly criticised from the benches opposite. I hope that some of those who made this criticism will note what has happened since. We have had bread rationing in this country, but, contrary to the prophets, we are still alive in spite of it. Famine in India has been averted by narrow margins, and the economic conditions for political settlement have just been maintained. In Europe also, famine has been held in check, although in some of the ex-enemy countries, owing to difficulties which the House has often discussed, the situation has been very bad. But the big thing is that world cereal production has expanded.

In the United States alone, under the leadership of the Secretary for Agriculture, Mr. Clinton Anderson, whom we look forward to welcoming here at the end of this week, they have planted four million more acres and they are bringing in now the biggest harvest in history—1,400 million bushels of wheat. In Canada also, on whose never-failing efforts we rely for most of our daily bread, the farmers have done great things and are reaping enough this year to secure us the promised supplies under the Anglo-Canadian Wheat Agreement. The world supply of wheat has been expanded and its use economised sufficiently to avert world famine, but the cost in foreign exchange has been enormous and it has left all the wheat importing countries impoverished. Our very success in combating the famine in food has contributed to the famine of foreign exchange in the consuming countries; for, one of the worst things about these shortages is that they are so unevenly spread. In the United States and in the Western Hemisphere generally, production as a whole is more than 50 per cent. higher than before the war. In war ravaged Europe and in Asia, on the other hand, production on the average is still well below the prewar level. This disparity in the rate of economic recovery and expansion is the fundamental reason for the balance of payments crisis which now threatens the world.

The only remedy, pending the restoration of European agriculture and industry, lies in devising some means whereby billions of dollars worth of North and South American production can be transferred across the Atlantic without the necessity for immediate payment in the form of an equal and opposite flow of European goods. Up to now it has been found possible to finance an enormous flow of excess exports from America by a variety of means, for example, by U.N.R.R.A. supplies, by special loans such as those to the United Kingdom from Canada and the United States, and by countries dipping into their remaining reserves of gold and dollars. By these means a breathing space has been won during which the countries of Europe— and let no one underestimate this—have made substantial, if gradual, progress towards the restoration of their production. But now U.N.R.R.A. is dead. The reserves are becoming exhausted, and still the process of recovery is far from complete. Some new way has to be found of maintaining supplies until the Old World can stand on its own feet. The institutions set up at Bretton Woods, the International Bank and Monetary Fund, while they may have a valuable contribution to make even in our present difficulties, cannot by themselves meet the emergency needs of the period of reconstruction.

For this, therefore, something different is required, to which our wartime experience may provide a clue. In war, after the United Kingdom had faced the enemy alone through its second winter, a new system was devised to ensure that those who could contribute to the war against the Axis should not be prevented by book-keeping considerations. The essence of this system of mutual aid was the maintenance of maximum war effort by each country contributing its full available resources whether of manpower, materials, or credits. As we all know, this system proved an important element in victory, but it also proved to be the key to a tremendous domestic prosperity, such as the countries concerned had vainly tried to attain by orthodox methods in time of peace. It is a paradox, most conspicuous in the case of the United States, that enormous apparent economic sacrifices and burdens were shouldered while standards of civil consumption were, in many cases, little reduced and often actually increased.

The world has learnt from this that the test of a modern economic policy is whether or not it keeps the economy running at somewhere near full capacity or not. The price of letting an economy be throttled down right below capacity is so vast, and the sacrifices it imposes so heavy, that anything which keeps the wheels turning pays for itself. War demanded, and brought about, a rational system of international finance. Under this system, the apparent great sacrifice through aid to other countries was much more than made good by the enormous stimulation of demand resulting in more economic production, stability of employment, and a high and steady national income.

Whether the analogy of mutual aid is applicable to the present situation, or whether some more appropriate method can be found of maintaining the life-giving flow of goods and services, I do not know. One point has, in any case, to be borne in mind. Mutual aid was accompanied by something resembling overall planning of allied military and economic resources, and would have been impossible if the countries which gave more than they received had not been confident that the others were pulling their full weight. Now, once more. it is essential that the countries of Europe should prove their will and ability to win through. They must agree on methods to help themselves and each other, in accordance with a co- ordinated economic programme designed to free them from abnormal dependence on imports and make them economically healthy. Only on this basis is it reasonable to expect the full co-operation of the United States and other countries from whom the bulk of the assistance required to restore the economy of Europe must be drawn.

From a strictly business standpoint our recent conduct as a nation may seem extremely foolish. We were foolish enough to go to war for a principle without being attacked, and to spend our accumulated wealth in holding the line against Fascism until other countries, whose values and vital interests were equally threatened, were brought in. We then mobilised more completely than any other country, and refused to compromise our effort by attending to such details as whether we were going to have enough electricity after the war, or how soon we could get back our lost markets. Having emerged victorious we then gave away vast sums to others, while we had to borrow money at interest to carry over the period until our own production and exports could be restored. A good deal of this borrowed money we proceeded to pass on to our starving ex-enemies in Germany, to our enemy Japan for cotton cloth for our Colonies, and to our suppliers in the Argentine and such sterling area countries as India and Egypt to meet their dollar needs. We behaved, in fact, as a one-man international monetary fund, helping the world to carry on until the balance of payments problem could be solved. And we did all this as an act of faith. Had we failed to do the first part of it, we would have lost the war; and had we failed to keep up the effort more recently, the peace would already be past saving.

Trade is an exchange of goods and services, and it must be two-way. We have a record as the world's best customer, and its biggest lender for development in every continent. Unfortunately, we have over-strained ourselves, and we cannot do more than we are doing. We can, however, still contribute a great deal. We can provide important manufactures which are required in every country to restore production. We can also provide vital raw materials such as rubber and wool. Although we are in no position to make an immediate contribution of coal to other countries— apart from what we send them embodied in exports of manufactures—we will redouble our efforts to resume coal exports to the Continent at the earliest possible moment. There are other ways in which we can help. Appalling as our shortage of dollars is, measured against the prospective gap in our balance of payments during the next two years, we have many valuable assets for the common pool and we will make them available in the most practicable and acceptable manner, provided—I emphasise, provided —others are willing to put in their resources according to their ability also.

Time is very short. In these matters the best is the enemy of the good. We cannot hope for a fully comprehensive agreement before the twelfth hour strikes. Therefore, we must go for the best agreement we can get before the clock strikes, as it will, this autumn. Fortunately, the crisis can be dealt with in two complementary parts. First, there is the worldwide problem of raising production: that can be tackled through the United Nations, and by direct talks. Our representatives have made great progress, even in Eastern Europe, in reaching practical arrangements for the development of exchange of commodities and manufactures, and nothing seen in the headlines about diplomatic deadlocks must be allowed to hold up this healing process. It is when we come to the balance of payments that we must, following the regrettable breakdown in the Paris talks with Russia, be content for the time being with a more limited objective.

While production is a vital interest for all countries, and world trade is a general world-wide interest, the bulk of world trade is carried on by a relatively small number of countries. It is these countries. naturally, whose economies are vitally affected by the present shortages of dollars and of other currencies, including sterling —for sterling is a hard currency to some countries, just as dollars are to us. The countries whose economies are of this pattern are the ones which have the greatest understanding of world trade and the greatest interest in putting it on a sound basis. If such countries can agree on methods of maintaining and expanding trade through the present strains and difficulties, they will, in the process, show the way to others and demonstrate the groundlessness of fears that measures, whose sole object is the expansion of production and trade, may have some sinister implications. They will thus provide a magnet of commercial attraction to which other countries will be drawn.

Do not, therefore, let us be held back from seizing quickly and surely what can be grasped now by the fear that we may be perpetuating divisions in the future. The truth is really just the opposite. If we do not create the nucleus of a sane world economy now, the lack of it will force even many who would be disposed to co-operate into hostile or suspicious groups and compel them to take crude and damaging measures in the hope of self-preservation. We, therefore, as a great commercial nation, are staking our whole future on the creation of a sane economic system. We cannot, and will not, believe, after all the sacrifices made by all the peoples for a better world, that anyone who hopes to build democracy in peace will again let loose on the world the demons of trade restriction, unemployment, and famine.

Our progress, since what was called victory, takes us from one crisis to another —[HON. MEMBERS: "Hear, hear."] yes—as the bills which we were forced to sign as the price of victory come in for payment. Perhaps we may feel, and perhaps history may judge, that the people of this country deserved something better after their single-handed stand for freedom in 1940. Certainly, for the individual citizen, and particularly for the housewife, this continuing succession of crises is a bitter and severe test. Very often there is a temptation to vent on His Majesty's Government the irritation and frustration which we all feel, and to speak as if these things were due to some extraordinary wrong-headedness or incompetence. But I think the House will recognise that any Government which had the terrible responsibility of guiding the country through these postwar days would have been up against much the same immense problems, with much the same inadequate resources. Unfortunately, the breathing space has been further curtailed, and the emergence of worldwide order has been further postponed, by events outside the control of anyone in this country. Our production and exports have lagged far behind our needs, and we must increase them vastly and rapidly if disaster is to be avoided.

Nevertheless, we need not be ashamed of what we have achieved in the last 18 months even, though it has riot been nearly enough. We have regained our prewar volume of exports, we have beaten many prewar production records, we have set up a standard of orderly industrial relations which is the envy of the world, and we have contributed a vast effort, despite great difficulties, towards the relief and reconstruction of Europe and of Asia. All of us in this country are entitled to face the, future, whatever it holds, with confidence. We are standing, as in 1940, for what we know is right and sane against prospects which to any other people would look madly discouraging. We do not know how many trials and hardships these next months will bring, but whatever they may be, we will weather them successfully, provided we do not deviate from the only track which leads in the direction of a sane and prosperous world.

5.20 p.m.

Mr. David Eccles (Chippenham)

I am sure that the House welcomes the first important speech by the Lord President of the Council since he was compelled to go away sick. We are very glad to have him make a long speech again, but the position which he reveals is appalling. The Lord President of the Council has spent three-quarters of an hour telling us that there is an unbridgeable gap between imports and exports, and that there is nothing we can do about it except wait for more help from America. This Debate was, I understood, designed to tell the British people what they had to do. We thought that we were to have from the Government at least some outline of their plans to deal with this terrific problem which is coming upon us; instead of which the Lord President of the Council says that the cuts so far made are of small importance, and that there is nothing else we can do but simply wait and see what turns up. That means, unfortunately, that there is no concrete policy of the Government for us to criticise, comment upon, or support, and that we are left exactly where we were yesterday, with nothing more whatever to bite on.

On this side of the House, it is no surprise to see that the figures given by the Chancellor of the Exchequer last Thurs- day should reveal this enormous gap, which is widening instead of closing. I hope to show to the House that it is not possible to close this gap unless the Government are willing to scrap their financial and economic muddling, and in its place to unite the nation behind a policy which is both inspiring and practical. I believe that that can be done. Months ago, we on this side said that the combination of bad luck, low output and, above all, incompetent government would drive us to the edge of this precipice. I have no heart to quote the many warnings which we gave. When one has repeatedly pointed out to someone one cares about, what will happen if he goes on keeping bad company, and then it docs happen, there is no pleasure or consolation in saying, "I told you so."

We are now in a critical position, such as we have not been in for hundreds of years in our history. How have we got where we are? We have passed two long, shabby years since peace and Socialism arrived together. How can it be that in July, 1947, we are more dependent upon the charity of another Power than we have even been before, and how can it be, unless supplies of food and raw materials are assured us by another enormous American loan, our standard of life must be cut to a starvation level, when every home in the country will feel privations which hardly 1 per cent. of the population have even imagined? The Lord President produced three alibis in order to cover up the responsibility of the Government. First of all, he blamed events over which, he said, the Government have no control. For example, he blamed the rise in prices in other parts of the world. I must tell him that many competent Americans say that the rise in their export prices is in no small part due to the buying methods of His Majesty's Government.

The Lord President of the Council then blamed events which took place before the Labour Government came into office. Presumably he was referring to the prewar management of the coal mines, when we never lacked coal. Thirdly, he produced a new kind of excuse, namely, that all other governments are as short of dollars as the British Government. It never seems to occur to His Majesty's Ministers that their own policy has been a major factor in undermining our capacity to produce, and in robbing us of the strength to lead Europe in peace as we did in war. My hon. Friends will deal faithfully with these alibis in the course of the Debate. All I should like to say is this: If the captain of any vessel, finding himself in a position of peril, said to the crew that they could be quite sure it was not the fault of their officers that they were in danger, that he hoped an American lifeboat would come and pick them up, and that anyway, they could console themselves with the thought that other ships were going on the rocks as well as theirs, a captain who used that language could never inspire his men to make the effort to save themselves. I like that word "effort." In our village in Wiltshire, when we want to raise money for some object, maybe to repair the church roof, or to pay for an outing of the Women's Institute, we do not sit around waiting for a cheque to come down from the big house. We organise an effort. We are always organising efforts for this and that, and we should be ashamed to imitate the Lord President's attitude of waiting to see whether enough dollars come in under Mr. Marshall's offer to pay for maintaining the whole of our standard of life.

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

Has not the hon. Member seen the poster entitled, "Extra effort now means better living sooner."

Mr. Eccles

I have seen the poster, and I have also noted that it has had no effect. The Government's business is not to do as the Lord President did today, go on whining about the bad old days when these crises did not occur, or blaming events over which the Government may or may not have control. Their business is to organise an effort, and it is about the kind of effort they should organise that I wish to speak.

Nobody knows whether the Government are to receive a large gift under the Marshall offer, or if they do, whether it will be given with or without conditions. Even supposing the dollars come pouring across the Atlantic with no strings attached, I do not think we ought to take them, unless at the same time an adequate effort is being made to put ourselves in a position to pay our own way within a limited period. I say that for two reasons: first, because charity without self-help deadens the character and destroys the will to recover. Right hon. Gentlemen opposite have been quick to tell us how odious to them is a hospital maintained by voluntary contributions, but they do not seem in the least disturbed at the prospect of British Socialism being maintained by contributions from a capitalist State. May I again quote the remarks made by the Lord President of the Council in his Press conference? They set the whole tone for his speech in this Debate. He was reported to have said: It does not rest with us whether any further cuts in imports are made or not. That expresses perfectly the pious resignation of a perambulating mendicant. More dollars can only put off the day of reckoning. They cannot heal our economy, bewildered, frustrated, and vivisected by this Socialist experiment. That is one reason why we have to make an effort of an altogether new kind, and in a greater degree than we have yet contemplated.

The second reason is this: Great Britain must be seen to be making an effort of this kind, if democratic Europe is to be inspired to do the same. If we sit down under our troubles and wait for a general world solution, which is, apparently, the Lord President's panacea, the ravaged Continent of Europe will not muster the faith and energy required to surmount her still more troublesome difficulties. It is up to us to give Europe a lead in peace, as we did in war. What is the situation which calls for the effort? In the old days, Governments only adjusted their actions to economic events when they occurred; it is now necessary for Governments to imagine situations, and prepare for them, before they occur. I see no reason why one cannot imagine fairly accurately what will be the situation when the American Loan runs out. My right hon. Friend the Member for Warwick and Leamington asked some searching questions about the figures which the Chancellor gave, and which purported to portray this situation. It is vital that we should have answers to those questions, so that we may know more accurately what will happen. But in anticipation of that information I think one can discern, in outline, what will happen when the Loan runs out.

Unfortunately, as my right hon. Friend pointed out, it is not possible to take, as a working basis, the Chancellor's most recent estimate. As usual, the Govern- ment make statistical comment very difficult by changing the period to which their revised figures refer. They never compare like with like, and are earning a bad reputation for statistical trickery. However, taking the figures as they were presented, the estimate for imports for the next 12 months is £1,700 million. That is a prodigious figure, but no doubt is much more accurate than the figure in the Economic Survey, and I would accept it on the basis of the present economic policy. On the other hand no one ought to accept the estimate for exports. If we are to export £1,350 million worth of goods in the next 12 months our monthly rate of exports must rise from £90 million last month to £125 million in June, 1948. That is a jump of something over 35 per cent. and nobody with any sense of reality believes that it can be done.

I want to ask the Government some questions about this export figure, which as it stands seems to destroy the value of their balance sheet. Do they expect the increase in exports to come out of home consumption? If so, our shops will be empty. If, on the other hand, they expect the increase to come out of increased production will they tell us how much more coal, let alone labour and materials, will be needed to sustain so big an expansion? Further, do they really believe that we can sell this great increase in exports against the trend of world markets? Coming from the general to the particular criticism of this figure, in what direction do the Government think that this expansion can possibly take place? In the Chancellor's statement last Thursday, nothing was said about coal, which is produced by a nationalised industry. The right hon. Gentleman singled out a privately owned and managed industry, the textile industry. What are the figures of our textile exports? The most we have ever yet done in one month is £19 million, and the Government say that they hope for a 20 per cent. increase. That is £4 million. What is £4 million against a monthly deficit of over £50 million? It is useful as an addition, but it is nothing more. That is the only concrete suggestion which the Government have made. Therefore, taking a realistic view—and I am sorry that it is a gloomy view—I do not believe that we should put our exports, over the next 12 months, higher than £1,200 million, even if coal produc- tion reaches 210 million tons, which it will have to do if we are to hit that export target.

Certain conclusions follow: When the American credit is exhausted, presumably early next year, the dollar deficiency will be running at nearly £50 million per month. It will remain at that figure so long as any of us can foresee. The effort we have to make is to close a hard currency gap, after the Loan has run out, of over £500 million per annum. The size of this gap makes unpleasant things only too plain. Little cuts in imports, little increases in exports, will be like trying to put out a blaze with a water pistol. If the Government's statement does nothing else it should clear away the last lingering hope in the minds of hon. Members opposite that we can ride this storm without a major change in our economic policy. It must now be obvious to all that if the standard of life which we have been enjoying since the end of the war—and I refer to all sections of the people—is not to be cut to ribbons the maldistribution of our resources, and low level of productivity, must be dealt with before the last instalment of American aid is expended. This consideration is, I think, the signpost to the sort of effort we must make.

I believe that we should only ask for help from America, and take it, for two purposes. First, to acquire capital goods of all kinds to expand our productive power; second, to add to our supplies of consumer goods while our normal supplies are getting back into their stride. I stress the words, "normal supplies." What we ought not to do is to ask for help from the United States to swell our supplies of consumer goods over and above the total for which we are likely to be able to pay, after a definite and planned period of reconstruction. That is what we have been doing. We have been spending, on consumer goods, far more than our current or prospective income. We have been borrowing, not only for reconstruction, but for over-consumption, and until this large inflationary element of over-consumption is faced, and got rid of, there can be no health in the British economy. In other words, the choice is between deflation and greater production. That should be the signpost to our effort. I do not believe that the United States will indefinitely send us consumer goods in such quantities that we are able to enjoy a standard of life beyond our own capacity of production to support. I hope that they will send us capital goods in order to expand our productive capacity. I hope that they will send us enough consumer goods to tide us over while the build-up is being achieved. What they are not likely to do, and what we ought not to ask them to do, is to send us a volume of consumer goods that masks from the British people a fundamental lack of balance in our economy and stifles, rather than stimulates, our will to put our own house in order.

This is a tough conclusion, because it means that more consumer goods as an incentive to greater production are ruled oat from the Government's policy. For the time being, the best we can do is to stabilise the standard of life of workers in the essential industries. Others will have to consume less, and expenditure on non-essential items, like gambling, which has thrived so on the Chancellor's inflationary policy, will have to be severely cut. We shall have to spend our money on home-grown food and not on fags, films and football. Many capital projects which are today under contemplation will have to step down in the queue, and their place be taken by an all-out drive to increase production of food and raw materials at home and in the Colonies.

This means hard going for several years, and it means also that the Lord President's new planning staff cannot make any plans which have any hope of success until there is a great revival of the spirit and will to work, first in the coalmines, and then throughout the whole country. These planners can publish whatever allocations, programmes and targets for production they like, but they will all fail, as all the Government's targets have failed up to now, unless the general policy of the Government is changed, and is charged with the power to inspire their own supporters, let alone the anti-Socialists, to work loyally and to spend their money on essential things.

Mr. Fairhurst (Oldham)

Is the hon. Gentleman suggesting to the Government that they should impose direction of labour?

Mr. Eccles

I have no such suggestion to make as that direction of labour should be imposed. What I desire is that a spirit of loyal co-operation should be created. I do not wish in this Debate to traverse the controversial aspects of Socialist economics. On these benches we do not believe that nationalised industries can ever escape the occupational diseases that flourish when large-scale organisations are infiltrated by politics. Whether these diseases are deadly or not, the fact remains that the particular administrative methods by which the Government have sought to impose their brand of Socialism have enormously slowed up production.

The House may be interested to hear what industrialists in all parts of the country told members of the Conservative Committee who were responsible for the Industrial Charter. For the purpose of finding out how production could be increased, we held a large number of provincial conferences, attended by all sections of industry at all levels. The consensus of opinion was astonishing. The consensus of opinion from Scotland, Wales and England was that business wants firm government at the centre, with maximum freedom at the circumference. Employers, technicians and wage-earners all described to us how, under the Labour Government, they were checked and bewildered by the muddled and conflicting policy at the centre, accompanied by maximum interference at the circumference. I am not asking in this particular instance, for the Government to drop all legislation, although I wish they would, but I am asking them to cut out this indecision and incompetence at the centre of administration. If they do not, there is no hope that they will ever succeed in mobilising the productive resources of the country. This indecision and incompetence cannot stop so long as the Government pursue a doctrinnaire economic policy. By its very nature Socialism is a method of controlling production in detail. One cannot be a good Socialist and allow an employer to get on with his own job without some kind of control, and it is the knowledge that that is so, and the working out of this attitude of mind in practice that is holding up our production from one end of the country to the other.

To take one example—the production of food from our own soil. When in the war we wanted aircraft and bombs to destroy lives, the Government saw that the labour and material, and houses for the labour were provided. We expanded the aircraft industry five or six times. In peacetime, when for two years it has been obvious that we need home-grown food to save imports and to preserve the health of the people, what comparable energy in administration has been put into the production of food from British farms? I could give a good many instances. Today, in my own county of Wiltshire, essential spare parts for agricultural machinery are in disgracefully short supply. Every farmer knows that when the Labour Government took office, pressure was taken off the accelerator of home food production. I hoped that we should hear from the Lord President about the drive to produce food. We heard nothing at all.

The outline of the effort which we have to make is clear enough. The Government must not be afraid to tell the nation the facts, and all Ministers must give the same interpretation of these facts. If that is done, the people will be able to imagine—that is the essential point—the situation that will face them when the loan runs out. Once they can do that clearly and unmistakably, they will be willing to follow a bold and practical lead in defeating inflation and stepping up production. But everyone knows that such a national effort cannot be married to a bitter party programme. I have one question to ask the Government: Do they believe that production and recovery can be achieved in any other way than through national unity? Do they believe that strength is achieved through unity or disunity? Last Monday, the Chancellor told me that, crisis or no crisis, he did not believe that any economic policy could be found that would unite the people. If the right hon. Gentleman is correct nothing can save us from disaster. I am sure that he is wrong, and time will show who is right.

5.49 p.m

Mr. Ronald Maekay (Hull, North-West)

I would like to take up some of the points made by the hon. Member for Chippenham (Mr. Eccles) which reflect on the Lord President of the Council, but, no doubt, my right hon. Friend is well able to look after himself. The hon. Member for Chippenham made the point that what we were getting from America was of no great value to this country because of the high prices in America, which were really our own fault, and that our method of buying from America had resulted in the loss of a certain amount in the value of the money loaned to us. If this is true why have prices of consumer goods risen as well? If we look at what has happened in America during the last 18 months, I think that it is fairly clear what is the cause of the rise in prices that have taken place. It is a very specious argument for anyone to suggest to this House, that the methods adopted by the British Government have been responsible for a rise in prices, when the rise has extended to a field in which the British Government have not been concerned.

I should like to come more to the main general political point both of the right hon. Member for Warwick and Leamington (Mr. Eden) and the hon. Member for Chippenham. They seem to put the whole problem on political grounds. They argued that because we have a Socialist Government in Great Britain, which is applying Socialism to a small part of the national economy, we are launching into the economic blizzard which is confronting this country today. I wonder how it is that in the past when Tory Governments have been in power there have been adverse balances of payments. There were such adverse balances for the three years before the war, but I am not saying that they were necessarily due to the Tory policy at that time; they were due to the change that had taken place in the part and place this country occupied in the world during the years between the two wars. That is a factor at which we have to look this afternoon.

I was amazed at the right hon. Member for Warwick and Leamington devoting the whole of his time to saying that we must get back to what Britain has done before. The hon. Member for Chippenham said that we had to lead Europe as we did in the war. We did it then because we had Lend-Lease behind us to the total of 30 billion dollars for the five years, or £5,000 million during each year of the war to enable us to tide over our balances which we have not at the present time. The whole of the argument this afternoon was that we should be blamed for the present situation without any regard to the situation which went before. I want to examine this problem of the economic position, because we have to look at the facts, if we are going to make any useful contribution to this Debate.

We are, rightly, pressing for increased international trade. The right hon. Member for Warwick and Leamington says that we must try and sell our goods in world markets at competitive prices as we did before. Let us look at that, see what can be done and see what it means. First, let us in international trade separate raw materials and foodstuffs from manufactured goods, because they are entirely different. Since 1913 the production of raw materials and food has gone up by about 50 per cent. but the trade has gone up by only about 25 per cent. Since the turn of the century there has been a fair increase in the amount of international trade in foodstuffs and raw materials, but when we look at manufactures the position is entirely different. The production of manufactured goods has gone up from 1913 by 100 per cent., but trade in them has gone down. It is pretty well a straight line for the world as a whole, but if we look at the main industrial countries like Britain, America, Germany, Belgium, Switzerland and Sweden—the eight or nine main industrial countries of the world—we find that the amount of trade in manufactures has gone down. The only logical conclusion to be drawn from this position, if we look at the position for 30 years, is to ask ourselves whether the trade in manufactures is going to be bigger and bigger from year to year. We have to realise that with the development of mass production, even though manufactured goods have multiplied by double as against foodstuffs and raw materials, the trade in them has gone down.

We are asked to manufacture for exports and to increase our target by 140 per cent. over the target in 1938. We know, however, that in 1938 we were exporting raw materials and other things like coal and some foods that we are not exporting now, so the target of 140 per cent. is much larger than it seems at first sight. It is 170 per cent. or 180 per cent. above the prewar figure, and when we look at that figure, we should remember that we are trying to secure it in a world in which trade for manufacturers is declining, not because of a Socialist Gov- ernment in Great Britain, because it was declining in the days of Tory Governments before the war, but because of the change in our industrial position in the world. Let us remember that at the end of the 18th century we were producing one-third of the manufactured goods of the world; now it is 10 per cent. When people say that we must lead Europe, they should realise that we are only producing manufactured goods to the extent of one-third of what we did at the beginning of the century and the suggestion becomes an absurdity.

There are one or two things which I should like to ask the Chancellor of the Exchequer, and with which I hope he will deal when he replies. In the first place, I should like to ask what is the justification for thinking that in the next 25 years —and I am looking at the problem from a long-term point of view because the short-term problem can be tided over if we know that we are going to be all right in the long run—we can naturally increase our share of world trade when the things on which we have concentrated for our export trade in the past, in the field of international trade, have been going down from year to year.

Mr. Boothby (Aberdeen and Kincardine, Eastern)

The hon. Member seems to have some confidence that the short-term position can be overcome, and I should like to ask him how he thinks that that will be accomplished.

Mr. Mackay

In reply to the hon. Member for East Aberdeen (Mr. Boothby) may I put this point—if we cannot solve the long-term problem we cannot solve the short-term problem, and that must be perfectly obvious. In the second place, our deficit of last year was about £400 million—I am now speaking from memory —of which £300 million came from Government expenditure overseas. Another £50 million came from the fact that we bought foodstuffs from Canada and America which we would normally have got in such years as 1938 from Denmark, because Denmark was supplying Europe which was poor as a result of the war. In the same way we had to buy wheat from America and from Canada, which, normally, we would have got from Australia, because Australia's wheat went to India on account of last year's famine. These are but short-term problems. We do not expect to spend anything like £300 million on Government expenditure abroad this year. We shall be able to buy more dairy produce from Denmark and less from America, and we are buying more wheat from Australia this year. In consequence we will have to buy less from Canada and America.

Mr. Stanley

Does the hon. Gentleman say that everything is very much better this year?

Mr. Mackay

No, I do not say that everything is very much better this year, but Denmark is sending dairy produce here this year. She did not send it last year.

Mr. Stanley

We have to pay tor it.

Mr. Maekay

But it is not in the hard currency area, and, therefore, it is much easier to deal with the problem in that way. In other words, we are getting back to the normal channels of trade in which this country was before the war.

Mr. Stanley

If all that is so, how is it that our expenditure of dollar credits is continually rising?

Mr. Mackay

The right hon Gentleman knows perfectly well why it is continually rising. In the first place, it is because we are importing more things from America, and consequently the price is greater than we intended. Secondly, the price has risen 40 per cent. as against what it was nine months ago

If I may, I should like to get back to the point I was making when I was interrupted by hon. Members opposite. I was saying that we have to bear in mind that the whole problem of our position in the world is very different from what it was, and it is completely nonsensical for hon. Members to stand there and talk about the political policy that this country has adopted, when they are failing to recognise the changed position in which this country finds itself. There are good reasons for thinking that we will not get beyond the 1929 figures in international trade, and that being so, it must affect the whole position of this country in regard to manufacturers.

That brings me to the second point which I wish to make. If we recognise the changes that are taking place with regard to international trade, we shall find that we have to think out our economic problems entirely afresh. We have not only to achieve a very big reorganisation of our own industry here, but must look around for areas where we shall be able to obtain the raw materials we require, while at the same time supplying them, with the complementary goods in a way we have not been doing. The reason we are up against the problem of manufactures is that We have not a big market in this country. The United States, with 120 million people, has a market for mass-produced goods of a kind which we do not possess in this country, and we have to take steps to extend the area of our trade, so that we shall obtain a market big enough to mass-produce the goods with which we are dealing.

Hon. Gentlemen opposite have been carrying on this Debate on the basis of chiding the Lord President of the Council for having said that it does not matter what we are doing here since it is the rest of the world which will settle the question. If hon. Gentlemen opposite would give a little more thought to this problem they would realise that matters are indeed very largely out of our hands, and very much in the hands of the United States and dependent upon the way in which they are going to trade. It. is obvious that we have never been a very big exporter to the United States, and it is not very necessary now that we should be—provided that America is going to buy raw materials from other countries with whom we trade. After all, before the war, in times of a different economic position in the world as a whole, the U.S.A. used to buy raw materials from Malaya and places like that to which we could sell, and until that process is restored we cannot look hopefully at the problem of international trade.

As I say, it is a problem which is not in our own hands. I do not wish to go into a lot of figures, but I think they should be looked at in this connection. Recently the Department of Commerce has been giving figures of American trade for the first three months of this year. They show exports of about 4.5 or 4.6 billion dollars with imports of 1.6 billion dollars, and the suggestion is that over the year the exports will total 20 million million dollars with imports at about seven or eight million million, leaving a difference of some 12 billion dollars, of which about five can be dealt with by gold and other things, leaving a gap of some 7 billion dollars.

This is the fact which is to return prosperity to this country. It those exports get into circulation and if the dollars are provided by America in some way— not necessarily to this country by direct exports from here, but by trade with the other 50-odd nations of the world-then there is a possibility that we shall be able to increase our exports to a certain extent. But the problem is in their hands much more than in ours. When we look back over the last 20 years—as we must, because since 1929 the world has never recovered the production achieved before then—we find the drop in world production between 1929 and 1931 was about 40 or 45 per cent. In previous world crises it was only 6 or 7 per cent., and afterwards, when things became better again, the previous peaks were passed. Never since 1929, however, did any one country get back its employment, production or trade to the standard of 1929. World trade never returned to the same levels all through the decades of the Tory Governments up to 1939

Mr. Osborne (Louth)

And the Socialist one too.

Mr. Mackay

At least the Socialist Government at that time attempted to handle the problem in a way in which it was never handled by Tory Governments. If we look at these figures in this way, and realise that it was only the production of the war that brought about a recovery in employment—full employment if you like —and in production, it will be seen that a recovery in trade was secured only because billions of dollars were given away. When we look at this problem in this way, I want to know what has been done in the world and in this country to provide the purchasing power or the demand which was lacking in 1929, which brought about the crisis of purchasing power which was never present up to 1939 and returned only as the result of the production of the war, and the handling of the finances of the world based on lend-lease. Short of that there is no other way of doing it today. It is a world problem and it is no use hon. Members opposite chiding the Government for not taking steps to put it right.

In conclusion, I should like to make two or three suggestions which seem to me to be important at this stage. I think that all hon. Members must reconsider the whole economic position with which this country is faced and which is not only due to two wars, because they have merely accentuated an economic development which was going on and which has made our position completely different from what it was in 1913. When we consider that change we realise that there are a large number of export industries which will no longer be export industries. When I was a boy in Australia, for example we used to import steel from Britain, but now Australia can export steel to us more cheaply than she can import it from Britain. This is part of the industrialisation which is taking place in all the younger countries. such as Brazil and Canada, and because of that exports which used to come from this country are not doing so today. Perhaps we ought to give up trying to export motor cars and export instead prefabricated steel houses in which other countries do not compete with us.

We have to look to those industries which can provide mass production and cut down the imports of raw materials needed for other industries that cannot go in for mass production. Here is a large field in which a great deal of rationalisation has to be done. It is the problem of the Socialist Government to see that finance, plant and equipment are available to reconstruct British industry in such a way that it can enter other fields. That is not the only problem. The real need is to obtain a big market. We talk about the three countries in the world—

Mr. Osborne

Can the hon. Gentleman explain how the remarks that he has just made fit in with his statement that Australia could export more steel cheaper than we can?

Mr. Mackay

I did not say that Australia could export more in quantity, but more cheaply. She does not, of course, produce 12 million tons of steel as this country does. She produces a much smaller amount more efficiently, for the reason that she has the iron ore which we have not in this country, and because her equipment is more up to date.

The matter of equipment will be put right here when we take over the steel industry. I might add, as an hon. Friend reminds me, that Australia has had a Socialist Government for a very long time.

My final point is that we must extend our markets so that we can have an area for trade which is large enough to permit of mass production. The secret of American success, I suggest, is not so much that the Americans are more intelligent than Europeans or that they have more raw materials. In fact, if one looks at the figures one finds that there is actually a greater quantity of raw- material in Europe than in America. The secret is in America's free trade market of 120 million people. So far as the world is concerned, Russia is looking to herself to develop her production and her standard of living in her own way and will not be a big factor in world trade. However, we now have the Marshall offer which is leading to a meeting of European States, and the only way in which this problem can be solved ultimately is not by a bargaining between the States of Europe but by a real economic union of the States with which this country trades so that we may have a market in mass produced commodities not of 48 million people, but of 250 million or 300 million, so that we can get mass production going in the right way. With Europe tied up with Britain in that way, we should have a complementary market and should not then be so dependent on America as we are now.

6.9 p.m.

Mr. Turton (Thirsk and Malton)

I think that the last two speeches were the most gloomy to which I have listened in this House since Philip Snowden spoke in 1931. The hon. Member for North-West Hull (Mr. Mackay) spoke as if we were bound to decline, however competent or incompetent the present Government might be. I do not think that that is quite the same policy which he and others put to the electorate at the last Election. That is a very great change which I have noticed in this House in the two months I have been away. If hon. Members would go to the country— [Interruption.]—if I went away for another two months, I would gladly go. What is the position? The hon. Member for North-West Hull (Mr. Mackay) talked as though British goods were not wanted throughout the world.

Mr. Mackay

All I did was to point to the fact that whereas we used to have two-fifths of the world's trade, now we have hardly one-fifth of it.

Mr. Turton

At one stage the hon. Member was talking about production going down and at another about British goods not being required, and he cited Australia and Brazil. The fact is that British goods are required urgently in many parts of the world. We must somehow do our best to get greater incentives to production. I cannot think that the gloomy speeches from him and from the Lord President of the Council will be the best way to get Britain to meet the crisis with which we are faced today.

What is the hope? We are to have cuts in imports, and even greater cuts in the autumn unless something else turns up. The Government's policy is one of a vicious spiral of self-mutilation. It began with the American Loan Agreement. Under that Agreement, the Government really made this policy inescapable, unless they had taken greater steps to turn over from manufacture to agriculture. What happened under that Loan Agreement? We were borrowing large sums in the hope of borrowing time It was thought to repay in dollars in 1951. I presume that the Government hoped and expected that they would be no longer in power. [Laughter.] What other hope have they, in regard to repaying? Hon. Members laugh, but what hope have the Government of repaying in 1951, the dollars they borrowed, by starting to make interest payments?

Under Article 9 of that Agreement we have sealed all hope of Britain's export trade getting under way and of our having greater incentives to production. It is not merely a question of capital goods and of raw materials. The great need today is to have more incentives to production and more goods in the shops. Until we get those goods in the shops, we shall not get greater production or the balance of payments levelled out. The first point put to me is, "How can you get greater incentives to production with-not impairing the dollar position?" Is the House aware that many countries, especially in South America, cannot take our exports because they are short of sterling balances? I recently visited Chile and Peru, where that is the position. The people said to me, "It's all very well to try to sell us British goods, but we cannot buy from you, because you will not take our goods."

His Majesty's Government have had applications before them for many months for importations from those countries, and have either turned them down or have not replied to them. As a result of that policy, export orders cannot be taken from those countries in South America. A fortnight ago, when I was coming back, I stopped at Jamaica. What is happening in Jamaica? Why is there so much unemployment there at present? Are the Government adopting towards Jamaica the same policy of denying to this country what they call luxury fruit, because of the dollar position? Is it because we cannot get pineapples from the Portuguese, that we cannot get fruit from Jamaica? I hope that when the Government reply is given, we shall be told something about our policy of getting luxury imports from South America and from Colonial territories.

So far as I can see, we are using the same yardstick for both America and the Colonial territories and South American countries. That is a great mistake for the people of England. The Government could give us more goods in the shops by bringing in those imports of wines, glass, barley and beans from South America, which those countries are trying to sell to us, but we cannot do it under Article 9 of the Loan Agreement, by which we said that we would not discriminate against America through any other country, either inside or outside the Empire. I want to turn to another way in which we could help to balance our imports and exports. The Economic Survey White Paper lays down in paragraph 107 that the Government's policy, both to save foreign exchange and for good farming was: to switch our production, as rapidly as the cereals position permits, from the production of crops for direct human consumption to the production of livestock and livestock products, especially pigs and poultry. The import of £1000 worth of feeding stuffs will save nearly £2,000 worth of imports of livestock products. I could not agree more emphatically than I do with that paragraph, over any other paragraph in that White Paper. What have the Government done in pursuit of that policy? How far have they changed over from finished food products to the raw material of feedingstuffs? Let me give one example, of which the House may be well aware—our friend the dried egg. In the last live months we have imported some 40,000 more cwts. of dried eggs than were imported last year. Comparing 1947, with 1946—

Mr. Leslie Hale (Oldham)

Will the hon. Member forgive me for interrupting him? Surely, it was the hon. Members on the benches opposite from which we heard such a row about the shortage of dried eggs, which were described as great need of the people? If the hon. Member had been here during the last two months, he would have heard the full details of the shortage of refrigerator space which makes the transport of fruit a matter of extreme difficulty because the utmost economy has to be exercised in shipping.

Mr. Turton

Those seem to be two quite disconnected interruptions. We complained that the British housewife was being deprived of eggs. For many months we heard my hon. Friends on this side of the House demanding more feeding-stuffs so that more eggs could be produced. I have heard no such claim from those benches at all in that connection. Why is it that in these five months we increased our imports of dried eggs from 130,000 cwts. to 170,000 cwts.?

Mr. Hale

If the hon. Gentleman wants the figures—

Mr. Turton

The hon. Gentleman is interrupting again. I have an idea that he may get an opportunity to make his own contribution to the Debate, when he may demonstrate, if he can, the holes in my argument. We have spent £6 million already this year on dried eggs. That is hardly carrying out the Government's engagement to change over from finished products to feedingstuffs. Let us look at the other position—the maize that could have produced those eggs. In order to produce 170,000 cwt. of dried eggs—I am subject to correction—one would require 100,000 tons of maize. I believe that is fairly accurate. That would cost £2,200,000 instead of £6 million. Was that maize available? What is the position? The crop of maize in the United States last year was six million tons more than the. year before. Out of the mammoth crop of 86 million tons, how much maize have the British Ministry of Food got from the United States for this country? The answer is 45,000 tons.

Mr. James Callaghan (Cardiff, South)


Mr. Turton

I heard an hon. Member shout "Shame." It is shameful. I am very glad that it is admitted. When I went to the Argentine to find out what we were doing about getting maize from there the first thing they said to me was, "Why are you not getting it from the United States? Out of that huge crop of 86 million tons, surely you can get maize for the British farmer?" What it the position in the Argentine? In the Argentine this year the crop of maize is five million tons more than last year. The estimated crop is 8,600,000 tons instead of three million tons. The buyers this year are much fewer. When I was in the Argentine in March, Mr. Zoutendyk, representing the South African Government, declared that he did not want a single cwt. of maize. Last year his Government got 367,000 tons.

What have we done in our buying policy? We have bought 127,000 tons of maize. That is all the maize that has been landed from the Argentine to this country. When I was there, there was a report in the Press that the maize exports to England had been cut from five million tons to 700,000 tons. Thinking that was an inaccurate report, I asked the Chairman of the Purchasing Commission to contradict it, as it would have a wrong effect in this country. What the Press really meant was that out of the export surplus of five million tons, we were only asking for 700,000 tons of maize. Surely, we ought to get more than that. I believe one of the reasons the Argentine Government are not going to take our textiles is that we are not buying maize from them as we should.

Mr. Hale

Surely the hon. Gentleman—

Mr. Turton

I have already had one interruption from the hon. Member for Oldham (Mr. Hale) and shall be delighted if he will make a contribution when I have finished my argument. I will allow him to interrupt if he still wishes to do so. Surely we should encourage the buying of maize from the Argentine for British poultry? What is stopping the imports coming? [HON. MEMBERS: "Nothing."] There is the fact. Two months ago they thought we could take one or two million tons. We have taken only 127,000 tons. I believe that in a Debate last week the Minister of Food said that he was satisfied with the system of buying feedingstuffs from overseas. lf so, he is very easily satisfied. The poultry farmers of Britain will not be easily satisfied. There was a golden opportunity to buy maize from both the United States and the Argentine. From both countries there has been a most dismal failure. Let me make this suggestion to the Government.

The Minister of Agriculture (Mr. T. Williams)

Before the hon. Member leaves the point about all these millions of tons of maize available in South America, is he able to answer the question he submitted to the House: why have the purchases already made not been despatched to this country? The hon. Member has been in that area and perhaps he can tell us that. The House ought to know that of the 700,000 tons already purchased, under 50,000 tons have yet been shipped.

Mr. Turton

That is a perfectly fair point. There is certainly a slow turn-round in shipping in the Argentine. What the right hon. Gentleman must realise is that other countries are facing that and are getting the maize and having it shipped away. We were slow in putting our demands forward. We have asked for less than the Argentine Government thought we would ask. The Argentine Government believed we would ask for far more of the five million tons than we did, and there have been in the Argentine these statements about Britain cutting her demands for maize which have certainly done this country a great deal of harm in South America. If the Government had announced early in March that they would take one million tons or 1½ million tons of maize, it would have had a tremendous effect on the Argentine Government and on our poultry farmers. [HON. MEMBERS: "Not on the price."] The price is another matter. I entirely agree. I have no approval of the blackmailing methods adopted for raising the price. Apart from that, realise this. It is three times as cheap to buy the raw material. maize, as to buy the finished products in the form of dried eggs. Certainly protest at the way in which we are having to pay in the Argentine for the sacrifices we made in war, but do buy. Buy the maize. It is there. The Minister says that there are hold-ups. Other countries have got over them. Surely the British Government equally can do so?

As the Minister of Agriculture interrupted me, I will make this point. It is no good merely chipping on £10 million, £15 million or £30 million from our import programme. We have to make some really great switch-over. I believe the only way to do that is in relation to this question of food. Grow more food at home instead of importing it from abroad. Three things are required to do that. They are the incentives of better prices, better wages and more feeding-stuffs. We have a wage increase coming into operation some time next month. That must be levelled up by better prices for the producers.

Finally, we must give the farmer the wherewithal to produce—the feedingstuffs. I know that in the Argentine the Government are buying through a State Purchasing Commission. Mr. Miranda believes that he can make more profit out of foreign countries when they buy through government bulk purchase. I know that. I am not suggesting that at the present time in the Argentine we can buy other than by bulk purchase, but I believe that if we let private individuals buy more generally in other countries, we would get more feedingstuffs for the farmers. I believe that on the West Coast of America, if there were not Government buying, we could buy barley and oats as we used to do from Chile, but somehow we have failed to do that these last few years. As far as we can get a cure for our ills without a change of Government, the cure is to get greater incentive to production in the shape of more goods in the shops and, on the agricultural side, to change over from cereal production to beef, pigs and poultry. It is practicable because there are abundant cereal harvests in North and South America.

I ask the Government not to despair, not to give these dismal speeches such as we have heard from the Lord President of the Council, which contain no answer to any question, no hint of a policy for the country, but are just a grovel to America for more loans, more money, and to Britain the prognostication of cuts and further cuts. I believe there is a great future for this country. British goods are in tremendous demand all over the world. British goods are preferred to American goods. If this country were allowed to be free and to go forward under a free Government, I believe we could still lead the world.

Mr. Leslie Hale

Before the hon. Member sits down, will he deal with the point I have been trying to put to him? Surely, he is aware that the distinguished chairman of the West Midlands Coal Board when Minister of Food, made the earliest contact with the Argentine for the purchase of maize and that first they explained they were short of fuel and then of transport; that arrangements were being made and that then a one-man Conservative Government was formed in the Argentine which repudiated all these arrangements and instituted a system of local bulk selling in the sense of not selling abroad, and that arrangements for selling were repudiated. Does he not think an alteration, not of this Government, but of the Government in the Argentine, would be desirable?

Mr. Turton

I did not catch the whole of the hon. Member's remarks.

6.33 p.m.

Mr. Benson (Chesterfield)

I have listened with great care to the speeches of hon. and right hon. Members opposite, and apparently they are agreed upon three things: first, that the Government are responsible for the position in which we find ourselves; second, that the nation will not co-operate unless we accept a Conservative policy; third, that there must be an increase in agricultural production. [An HON. MEMBER: "And prices."] No, they are not agreed upon that, The hon. Member for Chippenham (Mr. Eccles) wanted a cut in prices. I do not think, if we treat this matter realistically, that there is any serious hope of balancing our import-export gap by any attempt to increase agricultural production. It would help, but our food bill alone, according to the Government estimates, is £840 million. Any possible help that agriculture can give us in the next 12 months will be negligible and our major problem—or what ought to be our major problem—in this Debate, is to see if we can find some way out of the extraordinarily difficult position in which the country finds itself.

I do not think it will be helpful to attempt to make a quantitative assessment of the adverse balance that is likely to occur during the next 12 months. All sorts of possible variations may arise— a fall in prices, the possible development of a buyers' market—so to make any attempt to assess accurately the future is quite hopeless. All we know is that, however well things go for us, that adverse balance is sufficiently large to be desperately serious. We have dollars and gold resources and possible help from the Colonies and the Dominions which might enable us to pay our way for the next 12 months. After that, unless we can get a new dollar loan or the Marshal plan matures, we are faced with the fact that we have to close that gap in one way or another.

Now to gamble upon our getting another dollar loan, or to gamble that the Marshall plan will mature is far too great a risk. The only safe assumption that we can make is that within a maximum of 12 months we shall have to deal with our import-export balance ourselves. If we get help from America, so much the better, but we cannot risk the gamble. We have about 12 months' breathing-space in which to close the gap ourselves, and not much more. There are two methods only by which we can do that. They are not mutually exclusive. We can reduce imports or increase exports, or do both. I do not believe we can balance, unless we are utterly compelled to do so, by cutting imports. Do not forget that our imports at the moment are only 70 per cent. of prewar. So far as actual material imports are concerned, we are pretty well cut to the bone now, and to impose a further £400 million or £500 million cuts on the import of food and raw materials—because the fripperies will not go anywhere near it—would be to reproduce the hungry 1840's in the 1940's.

We have to export more. That is the only practical solution we can contemplate. This is essentially a short-term problem. We cannot possibly hope that some great upward surge of production will take place in the next 12 months. Coal output is the limiting factor there. It is impossible to re-equip our industries with modern machinery within the next 12 months. There is, then, only one alternative, that we must not, as the hon. Member for Thirsk and Malton (Mr. Turton) suggested, put more goods in the shops, but we shall have to export British production which at present is going into the home market. That is what I offer as a fairly simple, logical proposal.

Mr. Piratin (Mile End)

What kind of things?

Mr. Benson

I have not overlooked that point. We have to send British manufactures into the export market. In 1940 we organised for war effectively; in 1947 we have to organise for export. If we put the same energy into it, we can do it, but the Alpha and Omega of export is that we must get our present hopeless unbalance of our labour forces right. At the present moment everybody knows that our labour force is hopelessly out of balance. We have this extraordinary situation, this fantastic situation, that while our textile industries, both woollen and cotton, have an unlimited supply of raw materials and are desperately short of labour, in light engineering, where there is a grave shortage of raw materials, there is a vast inflated amount of labour. It is so great that there is more labour than raw materials for it, and the result is that our light engineering industries are really working at half pressure.

I do not think anyone will suggest direction of labour. I have never suggested it, nor have I heard it suggested from the other side of the House, but in our present situation, although we do not wish to accept direction of labour, we are not therefore compelled to allow industries to waste labour, material, or fuel. I see no reason why we should not get a kind of negative direction of labour by preventing the production of goods which we cannot afford and cannot sell abroad. There is only one method of dealing with this. I am told that the possibility of regulating production from the raw material presents very grave administrative difficulties. That comes from the Board of Trade, and I am prepared to accept it. I suggest we should make a much more direct approach to the matter. We can approach it from the retail side, and make a whole schedule of articles which should be forbidden to sell in the British market. If they can export them, well and good, but if they cannot export them, let them close down that industry.

The amount of junk and unnecessary articles in our shops today is astonishing. I took the trouble to walk through one of the largest general stores in London, and on the ground floor I found acres of floorspace, and heaven knows how many assistants, selling all kinds of expensive knick-knacks, and all sorts of odds and ends—cigarette lighters at a guinea a time, ladies' compacts, beautifully made, every possible and conceivable shape of ashtray and every kind of house ornament, and personal ornament. We cannot afford at the present time to waste the labour going into these articles, and the materials and fuel that go to the making of them. If they can be sold abroad, well and good, but if they cannot, let those particular branches of industry close down, and let labour find its way into the industries which are absolutely essential for our very existence. I know such suggestions are going to be unpopular. They are going to cause friction, but they are not going to be so unpopular as an attempt we might have to make, if we do not use this breathing space to bridge the gap by cuts in food and raw materials. We are in the position at present from which we cannot extricate ourselves without someone feeling the draught. The question is how can we extricate ourselves with the minimum hardship' and the maximum advantage to the standard of living of our country? We cannot afford at present the labour needed for making, handling, and selling these unnecessary knick-knacks and fripperies, which involve a large amount of labour.

There is an assumption that this country is very badly off for clothing. That may be true so far as underclothes are concerned, and certainly so far as cotton goods are concerned, but I have never in my life seen this country better clad than at the present time. We have a large market abroad for British woollen goods. I go so far as to say that if we made allowance for juveniles, and for suits worn out by hard manual work, we could put an end to the selling of men's cloths for the next two years, and create no hardship whatever to the consumer— [HON. MEMBERS: "Oh."] We should be shabby, possibly we are shabby now, but, quite frankly, I would rather go about with my elbows out than go hungry. Some hon. Members do not seem to realise that what we are now discussing is—are we, or are we not, going hungry in 18 months time? [An HON. MEMBER: "Or less than that."] Or less than that. There is a vast reservoir of goods which we can deflect from the home market, or a reservoir of labour to make saleable exports without reducing the basic standard of health in the country.

Dr. Morgan (Rochdale)


Mr. Benson

My hon. Friend the Member for Rochdale (Dr. Morgan) might think that cigarette lighters are necessary—

Dr. Morgan

My hon. Friend said "health."

Mr. Benson

Are they necessary for health?

Dr. Morgan

What is the use of quoting a particular item in answer to a general statement? My hon. Friend is arguing that certain things can be done without detriment to public health. I say we have reached the limit of sacrifice.

Mr. Benson

Nonsense. A shortage of food is more disastrous than shabby clothes.

There is another reservoir which can be tackled. That is in the motor trade. There, engineering labour can be of great value, because our heavy engineering is desperately short of labour. Now, as always, our motor industry is a chaos of disorganisation. There is no standardisation, and there never was standardisation. The result is that our motor cars, in contrast to those of America, although we pay half the rate of wages, are double the price weight for weight, not because of the cost of raw materials, but of the excessive labour involved in making them. The industry employs hundreds of thousands, and after two years it is in just as much chaos as it was before. It may be producing more cars, but it is not rationalised. We cannot afford the thousands of men wasted in the motor industry because of lack of standardisation. If we are to re-balance our labour force, we have to impose ruthless rationalisation, ruthless standardisation, upon this great and important industry. Why it has not been done already I have not the foggiest idea. I admit that these suggestions are likely to be unpopular. Once again, I say that they will not be so unpopular as the alternative if we do not balance our import-export trade and do not get dollars. It is the lesser of two evils.

It seems to me that it would be far wiser, rather than gamble on getting dollars, that we should attempt to put ourselves into a position to export adequately while our dollar resources exist, that is during the next 12 months. We have 12 months in which to face up to this problem. I have put forward an unpleasant and unpopular suggestion, but I claim it is the only suggestion of a large enough character to meet the problem we have to face.

I hope that the Financial Secretary to the Treasury will convey to the Chancellor the point that no matter how we balance our trade, no matter how we succeed in filling the gap, the effect of filling that gap is bound to be inflationary. The fact that we have been able to import some £400 or £500 million worth of goods per year without paying for them, has been equivalent, so far as the problem of inflation is concerned, to taxation of £400 or £500 million, and no matter what steps we take about the problem we are discussing, whether it be cutting imports or increasing exports at the expense of the home market, the balancing of our trade will produce a great exacerbation of the problem of inflation The problem of balancing belongs to the Board of Trade. The financial problem that will arise from it belongs to the Chancellor. I hope we shall realise that we cannot achieve the first aim without taking the appropriate financial steps to see that it does not throw our price structure completely out of balance.

6.53 p.m.

Mr. Clement Davies (Montgomery)

the speech of the hon. Member for Chesterfield (Mr. Benson) was the most realistic and certainly the most constructive speech which I have heard in this Debate. It was a real constructive effort to' understand the problem and to put forward suggestions for solving it. The Lord President of the Council began his speech by saying that this was a most important Debate. The occasion for it was the statement made by the Chancellor of the Exchequer on 30th June, that not only had we to regulate our imports, but that our position had now become so critical and serious that certain imports would have to be cut. One would have expected that the Government would today have directed the attention of this House and of the country to the problems that face them, to the reasons for them and to the way in which the Government propose to tackle them. One would have expected that all the more because as recently as yesterday, the Lord President of the Council announced to the House the names of a Planning Board, which it had long been suggested was one of the essential things to deal with the situation.

Not one word about the problem which has caused the situation, or the steps which are necessary to meet it, came from the Lord President of the Council this afternoon. It was an incredible speech. He divided it into three parts. The first part was what I might call the usual cut-and-thrust of Debate across the Table with the right hon. Member for Warwick and Leamington (Mr. Eden). Then came a very serious statement, probably the most serious that has been made at that Box since the termination of the war, that we may be face to face, in a very short but unnamed time, with a serious cut, both in food and in raw materials Then came the third part, an accurate summary and analysis of the world situation from 1939, ending, to my great joy, with a restatement of the best Cobdenite principles. But of what was to happen in regard to the immediate situation which is confronting us, which had led to the Government, through the Chancellor, making that announcement about the cutting of imports immediately—not a word.

There is not the slightest doubt that we are passing through a great economic crisis. It is obvious that the crisis is increasing in its seriousness. The hon. Member for Chesterfield was quite right in the warning he gave as to what might be the eventual crisis. We have been going on in this way, of being given, in successive periods of about three to six months, some kind of warning that a new crisis is facing us; there is some new factor or figure which gives a sudden jerk to the people of this country. We all know that this is due originally to the world war, its length and the upset it has caused, but this sort of jerky crisis, springing up every now and then, really condemns the Government for their failure to carry out a proper system of administration throughout the period they have been in office.

The first duty of a Government is to administer. They should then introduce such legislation as is necessary to make that administration more effective and more economical. It seems to me that what they have done is to clutter up themselves and the Government machine with a whole host of Measures. With a number of these I certainly agree in principle; I have said so and have voted for them, but I feel that it would have been better to postpone some of them to a more appropriate time. The Government themselves have had a tremendous burden put upon them individually, but they have also placed an even greater burden upon the Civil Service, which inevitably means that we shall not be able to have that effective administration which we should have with a fresh, active body of men.

Let us consider what is the position today. It is difficult to steer between the Scylla and Charybdis of optimism and pessimism. The "Economist" rightly pointed out the other day that while "pessimism overwhelms one's judgment, optimism stupefies it. It is right that we should first consider the position at home before we consider the position of this country face to face with other countries; its trade and what is the balance of its import and export trade. The first significant point is that in 1946 there was a drop in national income of something like £400 million. I have not the figures for the first six months of 1947, though I imagine that they are much more serious than those for 1946. In 1946 there was a drop of almost 5 per cent., in spite of the fact that something like 3½ million men and women were demobilised and the major part of them put back into industry. There they received higher wages than in the Armed Forces where we regard them not as adding to the wealth of the country but as taking it away.

Though there was a steep rise in wages of somewhere between 65 and 70 per cent., the total net investments in 1946 amounted to only £700 million. The gross investments were £1,300 million. The inevitable conclusion is that there has been a fall in productivity of something between 20 and 30 per cent. Despite the fall in national output, consumption increased during 1946 by nearly 10 per cent. and now it is nearly equal to what it was in 1938. That means that there has been a far greater increase in consumption than is compatible with effective industrial reconstruction. There has been a failure not only to carry out the proper reconstruction but to make known what is needed for reconstruction.

One turns next to the most important matter of coal. The least amount to see us through the winter is 200 million tons. I think that everyone feels that that in itself is not really enough to meet every situation. Now it appears that we shall not achieve even the 200 million tons this year. I agree that the recruiting for the mines has been quite remarkable, but that is not enough. There must be a real concentration upon coal production. The Government might with advantage pay attention to the remarkable report produced by the Parliamentary and Scientific Committee upon the proper utilisation of coal and not rely so much upon production. Steel is also in short supply. One does not really know which of the two commodities is the most important except that one realises that the supply of steel must depend upon the amount of coal available.

One or two hon. Members have already mentioned the shortage of labour in essential industries and the maldistribution of that which is available. The hon. Member for Chesterfield called attention to that point today and Mr. Will Lawther spoke about it yesterday. Something must be done about that. We are short not only of labour for the export trade but of labour for the manufacture of the necessary goods required for consumption in this country. Hon. Members must remember the possibilities of inflation. There are roughly £1,000 million available over and above the value of the goods and services which can be purchased, and the urge is tremendous. All these are major factors in relation to the position at home.

Let us turn to the position as it is affected by other countries. In 1946 we thought that what was necessary, in order that we might get back to normal and restore parity between exports and imports, was that we should boost our exports up to 175 per cent. of the 1939 volume. Some people thought that that was not enough for the good reason that, almost inevitably, prices were bound to rise. At any rate, that was the target figure set by the Government. We failed, and failed completely, to achieve that target in 1946. The best that was achieved was in the fourth quarter when we reached only 111 per cent.—64 per cent. below what we wanted. In the third quarter we reached only 104 per cent. That left us with an adverse balance of over £300 million. The only way in which we could get over that difficulty was by drawing upon the American loan.

Towards the end of 1946 the Government must have made their calculations for 1947. We got those figures from the Government in February and March. What they then said was that they hoped that in the coming year we would reach a. target of 140 per cent. by the last quarter. That would mean that there would be an adverse balance—because we could not reach the 175 per cent.—of somewhere between £350 million and £400 million. I am certain that the programme was drawn up before the fuel crisis and the blizzard. Those are probably the main reasons why we cannot possibly achieve the figure of 140 per cent. by the end of the year.

What have we achieved so far? In the first quarter we only got parity with 1938. In April we dropped to 98 per cent. and now in May we have gone up to 104 per cent. The Government are unduly optimistic if they think we can reach 140 per cent. by this time next year. What is the position? As has been pointed out, prices abroad are rising. One need only refer to the figures given by the Chancellor of the Exchequer. The value of the £ is decreasing. There is less faith in it in other countries. What has been the position since the Government made their estimate about what was required? In the White Paper, they estimated that what would be required this year to provide the same volume of imports as they proposed to buy was £1,380 million, but, owing to the increased prices, as the Lord President pointed out, that has now to be raised to £1,700 million, a difference of £320 million. Although there has been a slight drop in certain prices, and the Lord President is quite right that the sellers market is going, nevertheless, we cannot gamble. There has been too much gambling on hoping that all will go well in the future.

What does that mean? It means that, during the last two months, the adverse balance has been, not at the rate of £400 million, but at the rate of something like £700 million—£300 million worse than was estimated—and the overall adverse balance at the end of this year is expected to be £650 million. These figures are so appalling and so astronomical as to be almost meaningless. The drawings have been at the appalling rate of £900 million, so that, in one 12 months, we should have exhausted the whole of the original amount that we thought we were borrowing from America. The original amount we thought to get was £1,000 million, but, in truth, it has turned out to be something in the neighbourhood of £700 million. The position will be further aggravated beyond 15th July. The sellers' market is already disappearing, and it will be difficult then to find a ready market.

May I also add a word on export trade? It will be still more difficult to get markets in future unless the quality of our exports is maintained at the high standard which made our goods famous before the war. These are the factors and this is the position which faces us, and it is a formidable challenge which we have to face. What has been lacking, and what ought not to have been lacking, is the bold courage to say, as the hon. Member for Chesterfield (Mr. Benson) was saying a short time ago, and to do, if necessary, the unpopular thing now, to look forward and say that these things have to be done, however unpopular they may be, so as to save the situation from becoming worse month by month. What there has been, instead of that, is timidity and a great deal of contradiction. Very rightly, the right hon. Gentleman above the Gangway referred just now to the two voices —the voice of the Chancellor one day. almost contradicted by the speech of the Minister of Food the next day. One of the members of the Government, for example, the President of the Board of Trade, called attention to these very matters and was warning the country about the dangers and difficulties, only to be contradicted by somebody or other, speaking a day or two later, and saying: "Really, everything in the garden is lovely; we have never been as well off as we are today." Both cannot possibly be right, and I wish they would speak with one voice.

In March, when we had a Debate on this subject, the President of the Board of Trade announced—and this was the one concrete announcement which he made then—the appointment and strengthening of the Economic Planning Board. Incidentally, I blame the Government in allowing some of the finest planning material, if I can call them that, to be dispersed immediately after the war. We had the greatest difficulty in persuading the then Government of the need for a Ministry of Supply, and then we had the greatest difficulty again in persuading the Coalition Government to appoint a Ministry of Production. These experts did extraordinarily good work, and the Government got the finest men together, yet, when the war ended and they knew that the problems ahead were going to be far greater, they allowed them to disperse. Now, the President of the Board of Trade says, "We are really going to reconstruct this Economic Planning Board. What is really needed is an overall plan, and we are setting to work straight away with the appointment of this Board." Two weeks later, the right hon. and learned Gentleman announced the appointment of Sir Edwin Plowden, and said that the Board would be working by the end of that month. We heard no more about it until the Lord President mentioned it again later, and until yesterday, when he told us the names of those who have been appointed to the Board. It was perfectly obvious that they have not begun their work, and yet, on rath March, the President of the Board of Trade said that this was going to be done at once.

Why has there been this delay, when we were faced with the fuel crisis and the blizzard in February and March, and nothing seems to have been done until yesterday? The Lord President of the Council used one phrase which I remember; it was a most striking phrase: "Time is against us." Yet, who has been wasting all this time until the appointment of this Board? If the members of the Government, and those who support them, claim to be super-planners, here was their opportunity to give a lead to the country, but we have yet to know what the plan is. All we know is that a Board, which has not yet met, has been appointed.

The Chancellor has now announced these cuts, which one paper summed up like this: Less tobacco, less news, less petrol, fewer clothes, more exports, more work, no plan and no policy and no promise. I think that is a fair summary of it. We really want to know what the Government are proposing to do. What we are blaming them for is because, so far as we can see, there has been no planning, no direc- tion and no guidance of any kind whatsoever. The cuts proposed by the Chancellor were also described, and perhaps best described, in a paper very friendly to the Government—a very lively weekly, "The Tribune"—as "fiddling palliatives. "If we stop the whole of tobacco and luxury imports, if we add the cost of all these things together as they appear in the statement made by the Chancellor of the Exchequer—petroleum products, £55 million; tobacco, £50 million; consumer goods, £35 million.— they do not come, all told, to £150 million, but the gap is £650 million. All that we are proposing to do is to cut out possibly something between £20 million and £25 million. This reminds me of a case where a great expert doctor is called in to a case of illness. He says, "Well, the patient is in a very bad state indeed. Something really radical has got to be done. The first thing I propose to do is to have his toe nails or finger nails cut. That is all. What I am going to do after that, I cannot tell you. But I will appoint a few more doctors, and, some day, they will say -what else should be done."

Far more than that is needed. We have no right to throw all our responsibilities on to America. Let us also remember that the great and generous offer—it is only a suggestion at the moment—which has come from Mr. Marshall depends, in the first place, upon our ability to draw up a real balance sheet of our assets and liabilities, and for every one of the countries of Europe to do the same, and not merely to leave it there. We should then put forward a new balance sheer on the footing that we will help one another, in so far as we possibly can. After that, we should then see what is needed from across the Atlantic to help us once more to get on to our feet and to get on with our work. But, even then, it is not Mr. Marshall who decides; it is Congress that decides, and, as the hon. Member for Chesterfield so rightly said, we have no right to gamble on the American offer. We must pull ourselves together, and see what we can do to help ourselves

We cannot cut down food and we cannot cut down our raw materials. If we cut down the food, and thus lower the standard and capability of men to produce the things we need, and if we cut down the raw materials needed for the manufacture of goods for export, then we are cutting our own throats. What, of course, we have to do, is to increase our production. But, in the meantime, we must put our own house in order. As the hon. Member for Chesterfield said, we are, at the present time, misusing a great deal of our labour and materials. Let us cut out the luxury articles, although they will not amount to much in any case. What has really happened is that we have undertaken to do more in this country than we can possibly carry out.

What I want the Planning Board to do, in the first place, is to consider whether the proposed capital outlay throughout the country cannot be very considerably reduced, and a good deal of it postponed. Secondly, I want them to consider whether it is possible to reduce our commitments abroad. There is not the slightest doubt that our commitments with regard to the Armed Forces are far more than this country can sustain. It is also necessary for the Planning Board to overhaul the many subsidies which are now being paid. I think that if they can be cut down without undue hardship—of course, there is bound to be a certain amount of hardship involved—it will help to balance our budget, which is not really balanced, and will reduce our inflationary position. We must bring down the demand until supplies are sufficient to meet it.

Because we have overplanned, and have undertaken to do more than we can carry out, we are having bottlenecks. In his address to the Economic Society, Sir Hubert Henderson, who has given a great deal of help to His Majesty's Government, said that the excess of demand over supply is, through consequent bottlenecks, lessening the output of the nation to an extent greater than that which was lost before the war through having more than a million people out of work. That is a serious matter. What has happened is that more has been planned than can be carried out, and there has been a consequent scattering both of labour and material. The result has been bottlenecks here and there, which, in turn, means that we have not been getting the amount of production we could have got. That eminent economist, who has given invaluable help to the Government both during and since the war, said: The loss in the national output amount? to a million men. We know that the Planning Board have been formed, and that they will get to work, and will work full time. I was surprised to learn yesterday that, apparently, the members of this Board will only charge their expenses. If they are doing national work, the nation should pay them; it should not be left to some individual private firm to do that. They should be full-time appointments. The first thing necessary for the raising of individual output is for everyone to know that such a raising of output will solve the problem. It was the deep consciousness of everyone of us of the perils that we were facing during the war, and, therefore, of what was required from us, which carried us through that war. We have got to instil into the people the deep consciousness of what this situation is going to mean. Give them the facts and the figures, and let them see what are the trends and what is happening.

We want closer co-operation between the management and the employees, and a better understanding. Where we find that obsolete systems of work or pay are stopping production, we should abolish them. Finally, we should consider again what incentives are needed in order to increase production. Above all, the Government should give us the overall plan. I do not mean that they should go into details on a low basis, but on an overall basis. We want the leadership and the guidance. If that is done, I have not the slightest doubt that it will be possible for us, to overcome our great difficulties and perils, as this country has always done in the past. Given proper guidance, proper direction, proper leadership and proper inspiration this country will pull through triumphantly.

7.27 p.m.

Mrs. Castle (Blackburn)

The right hon. and learned Member for Montgomery (Mr. C. Davies) has, during the course of a rather far-flung speech, repeated the accusation with which the right hon. Member for Warwick and Leamington (Mr. Eden) opened his attack on the Government—the accusation that confusion and timidity had been shown. If he wants to see confusion and timidity face to face, he should come over here, and listen to the speeches of right hon. and hon. Members opposite. In the course of the last hour or two we have heard such a con- fusion of counsel and of attack as must have created in the minds of those who, having been told that this Government have no policy, were looking to the Opposition for one, a feeling of doubt and despair.

At one point, we had the hon. Member for Thirsk and Malton (Mr. Turton) telling us that the Government have been far too gloomy, and that what was needed was more incentive for production. Only a little while earlier, the hon. Member for Chippenham (Mr. Eccles) shook a finger at us, and, in tones which I hope the '' Daily Express "was noting, said that incentives are now ruled out; we have been buying too much; we must have more austerity. Yet those of us on this side of the House who, for the past two or three years, have been trying to instil in the country a proper appreciation of the situation which faces us, and have had to go into our constituencies and say to the men and women there," You must do without this; you must wait for that, because you cannot have all the pleasant things at once that we would like to give you, "have had our work bedevilled by an attempt from hon. Gentlemen opposite to organise discontent on a scale which would disrupt the whole effort of this country.

Clearly, the main job which we should be doing today, whatever our various remedies for this situation may be, is to attempt to create within the country that background and that atmosphere against which the greater efforts for production will be forthcoming. But the Opposition have a responsibility in this which, up to now, they have totally failed to discharge. That is obvious from the way in which during this Debate they have used any stick with which to beat the Government, regardless of whether the sticks cancelled each other out in the long run.

Mr. Martin Lindsay (Solihull)

Labour Members did not do that when they were in Opposition, did they?

Mrs. Castle

I am ready to give way to any interruption, but I prefer not to be called at across the Chamber.

Mr. Callaghan

Hon. Gentlemen opposite are ill-mannered.

Mrs. Castle

Now we once again have evidence that there is totally lacking in hon. Gentlemen opposite realisation of just what the problems are with which our country finds itself faced at the moment, and of the obligations which lie upon all of us.

Mr. Walter Fletcher (Bury)

At the invitation of the hon. Lady, may I ask her if that really is the conclusion which she draws from the speech of the right hon. Member for Warwick and Leamington (Mr. Eden)?

Mrs. Castle

I fully agree that the right hon. Member for Warwick and Leamington is a most charming inquisitor, but, as far as I could follow it, his speech was a very amiable summary of questions rather than a positive statement of an alternative policy. Never once, in all the major Debates we have had on food, on shortages, on all the other problems that have faced us—not for the first time today, but cumulatively over the past two years—never once have we had from hon. Gentlemen opposite a statement of policy. I want to suggest to them that, whereas they come along and catechise the Government, and accuse the Government of want of moral courage, saying, "You dare not do unpopular things," that is just what this Government have done. They have done one unpopular thing after another, and they have done it knowing the political risk that that involves. We have all done that in our constituencies, explaining one difficulty after another. And yet hon. Gentlemen who make that accusation have not the moral courage to go into the country to tell the people that these truths are economic truths which any Government would have to face.

I want to suggest to hon. Gentlemen that, if they think that, by doing this, they are going to get some kind of political hush money in the form of a Coalition, they have another think coming, and that all they are preparing for themselves, should they succeed in their policy of disruption, is a situation which they are going to find totally unmanageable from their political point of view. Therefore, I want to get across tonight, if I can, a fact that it is vital the people of this country should know. These are inescapable economic facts, and the problem is a world problem. In their lack of knowledge of this, hon. Gentlemen opposite stand almost alone in the world: they alone, not only in Europe, but in America, too, have failed to realise—even in the discussion today they have failed to admit it—that the problem that faces us economically is a world problem. Europe knows it. Even America knows it.

The failure to recognise that fact bedevils attempts at reaching a conclusion as to what should be done to enable us to go forward to national salvation. We all of us know—although some have not the political courage to admit it—that the problem we face immediately is a problem of the fundamental unbalance of world trade which has been left us by the war. During the war years, as we know—these are objective facts—we had a situation in which the United States of America went forward from strength to strength; but she has not only gone forward to that strength internally: she has gone forward to a situation in which her external trade with other countries has become completely out of balance, and this tendency which was exacerbated during the war period, is still getting worse. In 1946, America's total receipts from exports were three and a half times the prewar figure, while her expenditure on imports had less than doubled, which means that in the current year three is a gap between the import expenditure of America and her export receipts of from seven billion to eight billion dollars.

Now that is the problem which faces the world, and it is not only this country that is feeling the effects of it. We are now seeing the evidences in all sorts of quarters to which hon. Gentlemen opposite have pointed as lands of plenty that the poor Britisher should envy for their security and for their comfort. We are now finding that many countries, held up to us as examples of stability during the past two years, are now having to draw in their horns. Sweden, Argentina, Brazil—one country after another is clapping on import restrictions. One country after another is finding that the dollar disbalance in the world is catching up with it, too. And all the time, concurrently with this, we have the situation in whch the world competition for dollar goods is forcing up the prices. So we have been falling back, regardless of the internal productive situation of this country, in the attempt to break even on our balance of trade.

What are we to do in this situation, which is world-wide in its scope? Because as a country we have obviously to face our own immediate problem for ourselves. It has been made perfectly clear by previous speakers—but hon. Gentlemen opposite have dodged facing up to it—that we cannot balance our immediate trade account by any cutting of the luxury imports which have been talked about so widely and rather wildly, without any proper analysis of the real effect on the situation. Our exports are running at the moment at only £1,100 million, and our import bill this coming year has risen to £1,700 million. Even if we drastically reduced our luxury items—if petrol were cut by half and all tobacco and all the consumer goods and all the films were cut—we should still find the problem practically untouched. It is also clear that, with food and raw materials bulking so largely in our trade account, there, and there only could substantial economies be made so far as imports are concerned. I believe—this is something I have said frequently in this House—that we are working on a very narrow margin of safety so far as food is concerned. I have always said it. But I am not pretending that this is a criticism of the Government. It has been unavoidable. Hon. Members on the opposite side of the House have known that all along yet we have been badgered by their irresponsible talk, not only in the House but in the country. We have always known the margin to be a narrow one.

Anyone who has tried to balance the budget for weekly food for a family must know that it is a business of working in fractions, and that there is no margin which we can cut with any safety. But it is also true that the Government's alternatives in this situation have been very limited. What we have also tried to point out, against the propaganda of hon. Gentlemen opposite, is that this situation obtains side by side with one in which we have a food import Bill which is mounting to astronomical figures. Our difficulty has arisen over the fact that basic foods have been in short supply and have been the subject of international allocation. We could not just raise our own share by waving a hand. But the Food Minister has fulfilled his promise faithfully to the country that he would do the utmost to supplement the deficiencies in basic foods by bringing in a wider variety of foods not subject to international allocation.

In this new import budget which faces us today we see the complete folly of the Conservative Party's attitude to food in the past. Although they have said that the quantity available was inadequate, the quantities of food which have been coming into the country have been remarkable. Certain basic foods have been below the pre-war level but, nonetheless, enormous quantities of wheat, flour, meat and fish, including canned fish, have been coming in. We have had three times the prewar quantity of condensed milk, in addition to which we have had large quantities of dried fruit, fresh fruit, vegetables and all the other things that we, could find to supplement the diet of the people. We now know that the total has reached a height that we cannot at present exceed. Yet hon. Members opposite have been telling Britain that she is starving. What will be the psychological consequence of such a statement at a moment when we are. trying to organise a production drive, and when we are trying to get people to put their backs into their jobs? We are now finding some of the propaganda of hon. Members opposite coming home to roost.

Every pronouncement of the Opposition on every crisis that has faced this country has been a contradiction of a previous pronouncement. When we face the need to meet a national emergency, what do we get? When the suggestion is to cut newsprint, we are told, "That is dictatorship and the Gestapo, and is keeping the public uninformed of what is happening." We then decide to cut tobacco. Yet hon. Members opposite voted against the Tobacco Duty when the moment came for doing an unpopular thing which required' a little moral courage. Then a cut in the petrol allowance is suggested; but time after time, hon. Members opposite have tried to cadge easy popularity in their constituencies by clamouring for the withdrawal of petrol rationing altogether. If anybody suggests touching raw materials the industrialists howl in a body, and as for cutting food, we are told that Britain is already starving and that we shall all just collapse if we get less. So we must have no cuts at all? Oh, no; that is failing to give a necessary warning to the nation.

It is obvious that, if we want to solve, the nation's problem we shall have to go ahead without the help of hon. Members opposite. I believe that the Chancellor's programme is the only possible programme in the immediate situation. If we have to cut imports to an extent which will be effective to deal with this crisis, we shall face a very serious situation indeed. It will not be the fault of the Government but, nonetheless, it will be a tragic situation, because if we cut raw materials we shall be faced with unemployment among men who are eager and anxious to work, and if we cut food I believe we shall cut to the bone and endanger health. Therefore, I think my right hon. Friend is right, and I am waiting for hon. Members opposite to come off the fence, on one side or the other, before this Debate is concluded. We must face these restrictions, realising that this is nothing more than a breathing space and that we must use this breathing space to expand production and build up our exports to the maximum, although it is extremely unlikely that anything sufficiently effective can be done in the time left to us. I beg the Government to use this breathing space to tell the people just how short time is, and how urgent is our need. I ask the Government once again not to listen to hon. Members opposite and to ignore the suggestion that it is not the Government's job to build good publicity services It is the Government's duty to build publicity services This is a world problem and a national crisis, and the Government should have an effective publicity machine for stating the facts. Facts are not propaganda but are the driving force which alone will give us the productive effort and return which we need.

It is also to be hoped that during this period, America will realise that it is in her own interest that the world disbalance of trade should be corrected. I wish to make it clear that, in my view, any aid which we get from the United States must come from the United States' assessment of her own self-interest. We do not need any charitable gesture from America because if we suffer as a result of this dollar disbalance, the effects will be felt as crucially in America as they will be here. There must come to us from America aid that carries no tags with it. I have no time to deal with the justification of the attitude of those of us who voted against the first American loan. Personally, I think we showed a wisdom beyond our years. We foresaw the rising of prices in an uncontrolled American economy, the drain of convertibility, and the dangers of non-discrimination, and if any further help comes to us from America with any tags of that kind it will carry the seeds of its own defeat. We were right when we said that the terms of the American loan were unnecessarily harsh, and that if they had been resisted those terms would have had to be improved. I believe we can take our stand on the viewpoint that, just as this is not only a British but a European problem, it is also an American problem. I believe that view is gaining ground in America. The "Washington Post" the other day pointed out that: American prosperity at this moment cannot afford a break in our 15 billion dollars a year_ export market. The "Washington Star" said: Unless something like a peace-time version of Lend-Lease is adopted, the chances are that there will be no way of advancing our exports to foreign countries desperately in need of them—a state of affairs which would be dangerous for Europeans and for us alike. There are some signs at the moment that what the economists call a "readjustment" of American trade is having to take place internally, that a recession from boom conditions is beginning to take place, and that American industrialists appreciate that the Marshall plan may be a useful means of maintaining their sales by seeing that the markets of Europe including this country, are not allowed to dry up for lack of dollars.

Therefore, I welcome the Chancellor's statement. I believe it is the only stand we can adopt, that what we need is a recognition that, as we cannot afford to cut our imports of food and raw materials at the moment, we must use the breathing space to strive towards independence. I ask hon. Members opposite to reconsider their role in the situation of national urgency and to make quite sure that they are not trying to rock the boat over into national disaster.

7.50 p.m.

Mr. Spearman (Scarborough and Whitby)

I think my hon. Friends must have made a considerable impression upon the hon. Lady the Member for Blackburn (Mrs. Castle). She complained of differences of opinion expressed on this side of the House, but if she reads HANSARD tomorrow she will find a good deal of difference between the constructive speech of the hon. Member for Chesterfield (Mr. Benson)—who made a considerable contribution towards showing that if we continue in the present direction we are facing disaster and starvation, to which the hon. Lady referred —and her speech, which seemed to me to be more noted for its loyalty to the Government Front Bench, in whose present infallibility she seemed to have complete confidence, in spite of her admission of their mistakes in the past.

I do not think hon. Members opposite will agree very much with what I want to say tonight, but I do not think there can be much disagreement on the first two points I wish to make. The first point is, that the cuts announced by the Chancellor, whether they are well planned or badly planned, are trivial compared with the ghastly gap in our trade balance. After listening to the Chancellor making that statement last week I thought he had the appearance of a man very alarmed at the prospect of being attacked by a tiger, and making every preparation to destroy a mouse. My second point, to use the words of the Paymaster-General, is: "We are in a jam." It is my fear—and I think the fear of all of us in this House, although perhaps not of the public as a whole—that at the present time about one-third of the vital imports we are getting are coming on tick, and that our available resources will be exhausted within about a year.

The disturbing thing about the jam we are in is that it has not been foreseen. I am referring not only to the exuberant optimism so often expressed by the Chancellor of the Exchequer—who, until the beginning of this year appeared to be full of easy enthusiasm—but I should like to quote the right hon. and learned Gentleman the President of the Board of Trade, with whom exuberance is not generally associated. Last February the right hon. and learned Gentleman said: I certainly am an unrepentant optimist, subject to the one proviso that we frankly face our difficulties and take the necessary steps to overcome them. Later on, he went on to say: What we must guard against, and guard against at all costs, is a foreign indebtedness that we cannot discharge or an inability to import essential foodstuffs and commodities from abroad, without which we can neither live nor work."—[OFFICIAL REPORT, 28th February, 1946; Vol. 419, c. 2213.] It seems very clear to me that when the right hon. and learned Gentleman made that speech on 28th February, 1946, he foresaw what might come if steps were not taken, and he never anticipated the failure of his colleagues to take the necessary steps.

The Lord President of the Council complained of criticisms of Government incompetence which has brought us to the position in which we are today. I think we would get much further forward if we could make a correct diagnosis of why we are in this position, and it is for that reason that I feel that any of us who speak—although we have no resources of information other than those available to the public—serve a useful purpose if we try to suggest reasons why we are in this position today, because that may perhaps elicit from the Government, who have at their disposal all the available information, some authoritative confirmation or denial of our suggestions. I would not suggest that it is due entirely to the incompetence of the Government; but I do maintain that it is very largely due to their incompetence that we are in this position today. Quite obviously, a very substantial reason is the enormous rise in American prices. However, I have made an examination of the variation in prices between March, 1945, and March, 1947, of the major commodities which we import from America and Canada, and I suggest to the right hon. Gentleman who is to reply tonight that if we bought everything during the last year at 1945 prices, we should not have saved more than about £100 million. I put that forward as a suggestion. If that is so, then it is certainly an important contribution towards our present situation, but not a dominating one.

The second reason why we are in this position today, as I suggest, is because of our expenditure abroad. And for that the Government must take some responsibility. The Bank of International Settlements said in its last publication that the United Kingdom, since the end of the war until March, 1947, in postwar grants and credits, has spent £740 million. That is a colossal figure: about three-quarters of the whole of the American loan. I have no doubt at all but that they were most worthy causes to which the money was contributed. But has not the day arrived when we have to forget our rich past, when we were able to be a Lady Bountiful and dispose of our resources throughout the world? I think that at the present time that £740 million is an extravagantly large sum to have spent in that way. They have not included in that sum the very large amount spent in unrequited exports, the amount of exports we have sent abroad, for which we have only had a cancellation of debts. For example, in the first quarter of this year we have sent more exports to India, for which we received no return at all as far as I am aware, than we have to the United States and to Canada put together. The third expenditure abroad to which I want to refer briefly is that enormous expenditure in our administration of Germany. I believe that is due very largely to bad administration. I understand that this very week we are blowing up the great Krupp's works, which might otherwise have been used for constructive purposes. There are millions of semi-starving Germans doing nothing but spending their time in enforced idleness, who, given a better administration, could be employed in producing coal and steel, and other necessities, which would not only keep them, but would enable us to be relieved of an immense financial burden, and perhaps make some contribution towards the great cost which they have inflicted on the rest of the world.

The third and final point to which I wish to refer, and by far the most important, is the question of exports. The Lord President seemed to think it very unlikely that our exports could, in a measurable time, match our imports. I remind him of what the Chancellor of the Exchequer said, or was reported to have said, as lately as 27th September We hope before very long to pay for all out imports from our earnings from exports. Indeed, the Chancellor may turn out to be very right, but, not quite in the sense he wishes. If we have never done this before for 40 years, it looks to me as if we may have to do it in future, at the price of importing only a fraction of what we need. Why is it that our exports have disappointed the Chancellor of the Exchequer? I suggest for a variety of reasons. First—and in this I am very largely in agreement with the hon. Member for Chesterfield—a wrong allocation of labour. I refer the House to the excellent table at the back of the Economic Survey, which shows the present allocation of the labour force of the country. The number of men employed in the export trade is 1,476,000. There is general agreement that we have got to raise that figure somehow or other, to about two million, if we are to get our exports up to the required level. The Services are not taking materially more people than before the war, and I do not think we can make any cuts there. Distribution has a smaller number compared with before the war, and textiles and clothing and other consumer services are in the same position. If we turn to the investment side, we find a huge increase of over half a million. These people are engaged in the investment industries, engineering, building. It is an admirable thing to rebuild our houses and re-equip ourselves, but I suggest we are living beyond our present resources. It seems quite clear that we cannot afford at the present time to have 3,600,000 people engaged in these occupations.

The main reason for the production failure, which was referred to by my right hon. Friend the Member for Warwick and Leamington (Mr. Eden), is the lamentable shortage of coal. I suggest that there are many Members opposite who now consider that the fuel crisis which occurred last year was not inevitable, that if the recruiting campaign had been made earlier, and if proper allocation had been made we should not have had the crisis. There is general agreement throughout the country that the coal situation has been mishandled, and if that had not been so, we should have been very much better off today. Another major factor in the production failure is that we are trying to do more than we can afford. We have run down our stocks too much, and the result has been a series of bottle-necks, causing an enormous amount of concealed unemployment. We have tried to increase our exports by 75 per cent. raise consumption, and spend vast sums on capital equipment. All this adds up to more than our resources can manage, and nothing is more wasteful than to try to do more than we are capable of doing, because in that way we merely achieve less than we should.

Our national spendable income is vastly greater than the country can afford. That, I think, is the great responsibility of the Chancellor of the Exchequer. We would criticise any Government which did not maintain the purchasing power of the people up to the rate of the resources available, and, therefore, we must criticise this Government for allowing an excess of purchasing power over our available resoources. I would refer the Chancellor of the Exchequer to some very wise words of a former colleague of his in prewar days. In an interesting article in the "Sunday Times" this week, he stated: The main instrument of control at our disposal, and the instrument which so far has been most surprisingly neglected. is the financial instrument. The Government has direct control over a vast field of capital investment. It has powerful indirect control over consumption expenditure via taxation and price policy. It is a surprising thing that the first Socialist Chancellor of the Exchequer should so neglect taxation as an instrument of planning. He has asserted it in one respect, and that is in regard to tobacco.

Mr. Deputy-Speaker (Major Milner)

The hon. Member is not entitled, on the Motion for the Adjournment, to refer to matters of taxation which involve legislation.

Mr. Spearman

I was trying to illustrate the failure of the Chancellor of the Exchequer to plan the financial policy of the Government in a way which would enable the maximum production of the country to be achieved. The Government are guilty of a gigantic and immensely costly error. When they came into power, in 1945, they are calculated the resources of the country. They believed that the immense technical improvements following the war would lead to a great increase in production, and to be fair many outside the party thought the same, they have been proved wrong. They also took the view that Socialism was some sort of magic wand which would inevitably lead to far better planning and control of our resources. They believed that the combination of these things would lead to this country being a far richer nation than we actually are. We have got to cut our coat according to the cloth, and the size of the cloth is very different from that which was anticipated in 1945. The Government are in a dilemma. There are perhaps two voices in the Government. One is saying" Let us be honest. Let us realise our mistakes, and let us cut our losses. It may be unpopular, but let us do it, whatever may be the cost at the next election. "The other voice, which is perhaps rather smaller, is saying," Let us hang on. We might as well be hung for a sheep as a lamb. Providence will not let down the first Labour Government. We have a vast quantity of gold, we can use it up to carry us over two years, during which time something may happen, and American prices may come down." American prices may come down, but that will not put us right. If American prices come down, we are likely to face a change-over from a sellers' to a buyers' market.

Then there is the question of another American loan. What my right hon. Friend the Member for Warwick and Leamington said will be echoed all round this House. We do not want to be old age pensioners of the United States. I am not sure that they are prepared to take us on as pensioners. The hon. Lady the Member for Blackburn (Mrs. Castle) was quite wrong when she suggested that the Americans were willing to pour money into this country to save their own economic situation. That seems to me to be very old fashioned economics, and it is particularly surprising coming from the Socialist Benches. Is she suggesting that in that capitalist country conditions are so perfect that there is no call for a higher standard of living?

Mrs. Castle

On the contrary, I said the direct opposite. I pointed out that the failure of capitalist economies to raise the purchasing power of their people forces them to find export markets for their surplus products.

Mr. Spearman

Perhaps the hon. Lady is thinking of the economic situation before we realised how these things could be done. Certainly, no Power, whether totalitarian, Communist or Socialist, realised effectively before the war how to raise the purchasing power of its people up to the standard of existing resources. That was discovered by Lord Keynes, but I have not time to go further into that matter now. That position is entirely changed today. As an ex-President of America said, a short time ago. America is now either exporting or consuming too much, or producing too little. They have a wealth which we do not know, perhaps due to their wiser administration, but there is no great abundance in the United States today, and I do not think we should rely on their pouring money and goods into this country. They will only help in order to create political stability in Europe, and only help us if we ourselves are moving towards solvency.

As the Lord President said, I agree that there is no prospect immediately of meeting the gap between exports and imports, but if we can move rapidly in that direction we shall be justified in asking for, and accepting, a loan from America, as we would be showing prospects of solvency in the future. I do not believe that the public are yet sufficiently aware of the very gloomy prospect ahead of us. If we have to wait until public opinion can exert itself—as it will eventually then the disease of poverty that we can see ahead may make great strides. We may reach a degree of impoverishment from which recovery will be very difficult, and as a result of which the suffering of our people will be very great. I appeal to right hon. Gentlemen opposite to come down to earth, to admit their mistakes, to scrap their 1945 plans and put forward entirely realistic plans for the future.

8.13 p.m.

Mr. Hobson (Wembley, North)

The hon. Member for Scarborough and Whitby (Mr. Spearman) has followed the lines of most speakers today in that he has not been unduly critical of the Government; indeed, the only speech condemnatory of the policy of His Majesty's Government has been that made by the hon. Member for Chippenham (Mr. Eccles), who advocated deflation, and the cutting down of imports, with a consequent rise in unemployment and a reduction in the wages and standard of living of our people. We experienced some of that in 1931, and it did not solve the crisis then and will not solve our present difficulties.

I agree entirely with what the hon. Member for Scarborough and Whitby said about the Ruhr. It is absolutely insane folly to destroy what remains of the Krupp's works and His Majesty's Government, despite the Potsdam Agreement, ought to stop the destruction of the remaining steel works in Germany immediately. Not only Britain, but Europe and the world, are crying out for steel. There is labour and coal and the iron of Lorraine available there, and I hope that even at this late hour there will be a reversal of policy by the Government which will give employment to the German people and enable us to get the raw material we need. After all, steel is no more a material of war than cement.

It has been interesting to note that during this Debate Members have not blamed the Government for the present situation, which is not new. Before the war, our imports and exports never balanced. It was only because of our invisible exports that we balanced our Budget, and those invisible exports were due to shipping, insurance, and investments. What is the position of those three items today? Over half our merchant fleet was sunk in the war but, despite that, we have already recovered to two-thirds of our prewar tonnage—a commendable achievement of the Government and particularly of the engineers on the Clyde, the Tyne. Tees-side, etc.

So far as investments and insurance are concerned it is very difficulty to remedy that situation. That has been because we forfeited our investments and insurance in order to meet the cost of the war. In other words, we mobilised financially in the same way as we mobilised our manpower as part of our common sacrifices to the winning of the war. In 1942, our dollar resources were down to 74 million, but by 1944 they had risen to 421 million, and at the present moment they are considerably in excess of that figure. It is apparent that we cannot continue to live on loans. Something has to be done. The Chancellor of the Exchequer put forward a scheme whereby there would be certain cuts. We are glad to see that there are not to be any drastic cuts of food. We cannot afford to cut food any more. We have gone as far as we possibly can in that direction, and the people of this country have the right to expect their present food standards to be maintained. I think that they appreciate the difficulty. That has been proved, for, despite the philandering of hon. Members opposite with the Housewives' League, there is still no effect electorally, so far as Parliamentary elections are concerned.

I am also glad to see that there is to be no drastic cut in raw materials. We cannot do that. If we were to cut cotton, we should cause unemployment and prevent the development of the export of textiles. I think that there should be an examination more particularly by the Board of Trade of the imports of certain minerals from the hard currency areas, especially in connection with lead, chrome and manganese. I think that they could be obtained on more advantageous terms from soft currency areas. I have particularly in mind Spain and Australia. [HON. MEMBERS: "Oh."] Oh, yes, Spain. So far as machinery is concerned, I think that we could cut down imports of machine tools and agricultural machinery. We have the resources here to make them. We are urgently in need of the importation of steel. I am very concerned about the allocation.

For instance, there seems to me something wrong if we have to buy ships from abroad. If our shipyards are not yet on short time, they are not working full blast as a result of the shortage of steel. I hope that something will be done to ensure that our ships are a permanent export. If there is one thing that Britain can do, it is to build ships and sell them. It has proved that to the world. I would rather see steel allocated to the heavy engineering industries than to the light engineering industries—because I am not so sure that cars are going to be a permanent export like ships. I think that the same applies to turbines, generators, switch gear and locomotives. British heavy engineering is unsurpassed and our only rival in the field, Germany, is down and out. There we have a source of permanent export trade. We could export these heavy engineering goods to hard currency areas. They are far better than the Americans ever made, and I hope that some consideration will be given to that.

With regard to textiles, I do not think we are taking sufficient care to import certain textiles, particularly raw materials. I refer particularly to flax. The imports of flax were less than half they were in 1937. I think that it should be possible to get flax from Belgium and Northern France, and to increase our flax sowing in Northern Ireland, because linen is a very fine paying export to hard currency areas. I hope that consideration will be given to that. The same applies to jute. I think that the imports of jute are less than half what they were in 1937.

I know that there are difficulties with regard to exporting from India, but I hope that with the improved political situation there representations will be made by the Government to secure increased imports of that commodity for Britain. A great deal has been said about labour. We reject direction of labour. The hon. Member for Chesterfield (Mr. Benson) suggests closing down certain luxury industries, and he referred to cigarette lighters and ash trays, but the number of people employed on things of that kind is not very large. I suggest to His Majesty's Government that they should freeze the supply of raw materials to non-essential industries. This could be done through the Ministry of Labour, and further, with regard to the textile industry, I should import—although I do not like using the word—many displaced persons. I believe that the Slovenes, in particular, would make admirable workers in our cotton and woollen mills, and I hope, therefore, that the attention of the Minister of Labour will be directed to that subject.

There is a tremendous waste of labour in certain industries. Great play of every sort is made with regard to the over-staffing of the Civil Service, but I reject it entirely. Where we can have a very close examination is in the field of local government. What is the position? In 1939 there were 846,000 persons employed; today the figure is 1,028,000, excluding trading services, which seems to me a colossal increase, particularly in view of the fact that many of the extra services placed on local government as a result of the war are now discontinued. I suggest to the Chancellor of the Exchequer that when this question of the block grant is being discussed with his right hon. Friend the Minister of Health some condition should be made with a view to securing efficiency in local government and economy in labour; make it a weighting factor. Further, they are working a 37-hour week, which is less than anyone except school teachers, and I think that hon. Members of this House who are on local authorities should do something with a view to restoring the working week to 40 hours.

Mr. Carmichael (Glasgow, Bridgeton)

A statement of that kind about local government employees is quite wrong.

Mr. Hobson

That is the position at the moment. I am referring to the London area, and my statement excludes the numbers who are engaged in transport, gas and electricity, but it does include nurses and teachers, and I am particularly concerned with regard to clerical workers who at present are enjoying a 37-hour week in the London area as against those in the Civil Service, who work 40 hours. I think attention ought to be drawn very sharply to this waste of labour. Finally, I want to suggest that when the planners are in session they should give our vital industries a target to which to work. I am convinced that, as the result not so much of Government propaganda as of the reasoning of the workers themselves and the talks which they are given in their trade union branches, they will respond and we shall be able to close the gap which we all deplore so much at the present time, and which is a source of paramount concern to His Majesty's Government.

8.24 p.m.

Mr. Molson (The High Peak)

The Lord President of the Council certainly painted an extremely gloomy picture this afternoon. He did not attempt to suggest that this country would emerge from the present crisis in an easy way, yet his long speech ended without any constructive proposal as to what the Government intend to do. Two important periodicals which are supposed to represent the point of view of the Government have recently written on this subject. First, there is the "Tribune." I believe that the Chancellor of the Exchequer is one of the comparatively few intellectual Members of the party opposite who do not own shares in that paper.

Mr. Stanley

Perhaps he has nominees.

Mr. Molson

My right hon. Friend suggests that possibly the Chancellor has some nominees who hold shares on his behalf. The Chancellor looked indignant this afternoon when someone suggested that his cheap money policy was encouraging gambling in this country, but when it comes to the Government we find the "Tribune" saying, in an interesting paragraph entitled "Gambling on Marshall": It the crisis hits us with a bang and no real help is coming from outside, the country will be able to take it and accept a regime of the sternest austerity with a backs-to-the-wall defiance more easily than a drawn out period and carefully dosed with staggered misery. Clearly the Government gambles on the success of the Marshall offer to come to our rescue. The hon. Member for Devonport (Mr. Foot), in his interesting article today in the "Daily Herald"—which I hope the Chancellor also reads—

The Chancellor of the Exchequer (Mr. Dalton)

I do.

Mr. Molson

—indicates that in his view the Government should continue to spend the American loan until it runs out and not adopt a policy of austerity before then. I hope that when he replies tonight the Chancellor will make it quite plain whether we are right in understanding the Lord President of the Council's speech as meaning that the Government do intend to go on as long as the loan lasts, relying upon the Marshall loan if it is forthcoming to save this country from the disaster which would overtake it if we were suddenly confronted with the inability to pay for the food and raw materials which we required.

Why are the Government taking that line? If they took the kind of line which we on this side of the House would recommend, it would be placing too great a strain on the solidarity of the Labour movement. It is quite obvious that the economic survey of last March was written by what one might call the Socialist planners on that side of the House. When they referred, for example, to the impossibility of increased wages and shorter hours unless there was a corresponding increase in production, that was obviously the point of view of the Chancellor of the Exchequer and, certainly, of the President of the Board of Trade. The hon. Member for Dundee (Mr. Cook), in a very remarkable speech last December urging a great increase of production in Dundee, said: To keep costs down you must give a little bit extra to cover the five-day week. These are hard facts, a complete reversal of the things we were told over the years. One of the troubles of the Government is that now they have taken office they find it necessary to preach a gospel opposite to that which they preached when they were in Opposition. What has been the record of the Government, and in particular of the Ministry of Labour, presided over not by a theoretical Socialist, but by a practical trade union official? There has been, for example, the five-day week for miners. We were told at the beginning that it was conditional upon there not being a reduction in the output of coal. In the Economic Survey, the Government emphasised that the whole of their programme was dependent upon there being a great increase in the production of coal. Now, the country and the miners are told that the five-day week is to stay, whether there is a decreased or an increased output. It would be interesting to hear from the Chancellor of the Exchequer tonight whether the Government now take the view that it will be possible to maintain the five-day week even if the zoo million tons target is not reached.

We have the same trouble about railways. Last December, again, there was an account in a Scottish newspaper of the way in which a particular colliery and its shops had to close down for lack of wagons. In the adjoining column of the same newspaper it was reported that the wagon repairers 44-hour and five-day week was to start in the summer. During the last week we have heard of an increase in the wages of railway workers. We sometimes hear it said that shorter working time means an increased output, but there are some occupations, of which transport is a notable example, in which obviously there cannot be an increase in the speed, in this instance of trains or lorries, or their loading, in order to make up for the reduction in the working time.

At a time when we are told by the Government that we are coming into increasing difficulty over exports, it is naturally serious that there is a great increase in the cost of transport upon our railways. When we consider the matter of exports and imports, surely we must see that the real cause of the trouble is the wage inflationary policy that has been followed by this Government. If they want increased production, a reduction in the working time is not necessarily the best way of obtaining it. If, as was made plain again in the Economic Survey, a larger proportion of the con-sumption goods of the country will have to be exported if the target is to be reached, to go on increasing wages and, therefore the potential consuming capacity of the home market, is not the best way to make additional consumption' goods available for export.

I believe that the failure on the part of the Government during the last four months to put into effect the principles laid down in the Economic White Paper is responsible for the increasing gap between payment for imports and the volume of exports. Some of my hon. Friends, including my right hon. Friend the Member for Aldershot (Mr. Lyttelton) emphasised the other day that it was largely the lack of consumption goods that had done away with much of the incentive of the workers to increase production. Anything which tends to increase the minimum wages without at the same time increasing the amount of goods available in the shops naturally has the effect of reducing incentive. Wages are still not to any noticeably greater extent based upon output than they were before the White Paper was issued.

Mr. Gallacher

There is too much babbling about the workers.

Mr. Molson

Whenever the hon. Member for West Fife (Mr. Gallacher) gets up to speak he says a great deal about the capitalists. He might be prepared to listen to an argument put forward from the other point of view. What we want in this country is unity and everybody making his contributon. The hon. Member himself might be prepared to support his own Government and to respond to their appeal to go about urging increased production.

Mr. Follick (Loughborough)

His Government is in Moscow.

Mr. Molson

Quite right. I forgot. The hon. Member for West Fife sometimes conceals himself among the Social Democrats opposite. The effect of rationing consumption as evenly as possible over everybody, does not give any increased share to those who are skilled or who increase production by their additional efforts. I could not help noticing a certain tendency in a number of the applications recently made for increased wages. The last example I saw was in the case of the building industry. There was an application for a ninepenny increase in the rate of pay for the unskilled workers, compared with an increase of 6d for the skilled workers. Anything which tends to even out earnings without regard either to skill or to production must necessarily tend to reduce incentive.

There was a remarkable article published in the "Economist" about a year ago called "The Carrot and the Stick." It suggested that the way in which production in this country in the past had been stimulated and increased was that there were both economic and other sticks against those who were not skilled and did not labour and did not exert themselves, and there was a carrot for those who did exert themselves and there was reward for thrift. The general effect of the policy of the Government over the last two years has been to take away the stick, about which I make no complaint, but it has not had the wisdom to provide for the people of this country the carrot which might take its place.

8.38 p.m.

Mr. Dryden Brook (Halifax)

Most hon. Members who have taken part in the Debate have covered a very wide canvas. I want to confine myself to a more limited object. All the speakers have been unanimous in putting forward the idea that it would be difficult, if not impossible, to make any major cuts in our imports. Therefore, concentration has been on the notion that we must proceed by increasing exports. Several hon. Members have referred to the textile industries as being the likeliest industries to which to lock: for that increase. I shall, therefore, confine myself to the severely practical problem of trying to indicate to the Government some measures by which production can be increased in that textile industry in which I have spent the whole of my working life—the wool textile industry.

The first problem I want to deal with is that of the fuel supply. Based as it is at present upon the 1946 consumption, it appears that it should be adequate to cover the needs of the industry, but that does not take into consideration its incidence in respect of individual firms or groups of firms. It cannot take into consideration, for example, the fact that in the spinning section of the industry during the war there was a considerable amount of concentration, and spinning is at present the bottleneck in the industry. Now those firms who were concentrated only began work in 1946, and, owing to labour difficulties, they were not able in that year to get within measurable distance of their productive capacity; as a matter of fact, some of them have not yet got back to a normal labour force. Therefore, the Government will have to look at the fuel supply problem with a good deal more flexibility than can be obtained by the 1946 proposal. The consumption needs of these firms will have to be treated on an individual or group basis.

To take another example, I was discussing this problem only yesterday with a spinner in my own constituency whose firm has begun recently a night shift from 5.30 to 9.30 which is made up of married women who go into the factory, after the children have come home from school, to work for four hours. Fortunately for that firm, it has turned over to oil consumption, but supposing other firms in the district which are on coal consumption are to be successful in operating a similar scheme, they will be unable to do so on the present allocation of coal. Secondly, there is the labour problem over the whole field of textiles. The immediate problem in respect of the wool industry is that we want something like 17,000 additional hands, and suggestions have been made that displaced persons, and other people from abroad, shall be brought in. The difficulty is that of accommodation. In my own constituency the military authorities have two establishments-—the Halifax Barracks, and another which was used during the war as a convalescent camp. Each of those could be made capable of accommodating 1,000 displaced persons who, brought to the town, would help to solve the labour problem. The Government will have to make up their minds to deal ruthlessly with the Service Departments over this problem of demand for space. They will have to decide, in accordance with the Debate which has taken place today, that priority No. 1 in this country in the near future will be the increase in production, and that can only be done by increasing the number of workers inside the textile industry

Another problem is that of carpets, which are one of the best export propositions we have in this country today. There we have the problem of interlocking industries. The problem of jute has been mentioned by a previous speaker. Jute is one of the great necessities in the carpet industry for backing, and there was not found during the war period a really successful substitute, particularly from the export point of view. Yet the jute industry of Dundee is only working some 50 per cent. of its capacity. The success of the carpet export industry is bound up with being able to resuscitate the jute industry in Dundee to somewhere near its prewar capacity.

Again, there is the problem of the bottleneck of spinning, both in the woollen and worsted sections of the industry. A man with whom I was discussing this problem yesterday told me that in the carpet industry, at their works, they could put more looms to work today, that it was possible for them to get weavers on to work immediately, but that they could not get the yarn. Yet at the same time that this firm could not get yarn, there was a woollen yarn spinner who could supply them with the yarn but who wanted a small quantity of card clothing for one of his carding machines. He applied to the Board of Trade a little time ago to spend £38 in value, and was told to apply again in six months' time. That sort of thing will not do, because I am informed by people in my own constituency who are manufacturing card clothing that at the present time they are manufacturing 80 per cent. of their goods for export. These are interlocking problems in one particular industry. The Government will have to look into these problems industry by industry. They must make up their minds whether it is best to export a comparatively small amount of card clothing, or to increase the supply of manufactured goods to a far greater amount. There are many problems like that which need going into, and I beg the Government to take into consultation people inside and outside the House who are connected with the industries concerned, and who have knowledge of their problems, in order that they may make a better job than they have done up to now.

8.47 p.m.

Mr. Douglas Jay (Battersea, North)

I agree with my hon. Friend the Member for Chesterfield (Mr. Benson) that what we are discussing today is whether we will have to make severe cuts in food or raw material imports in 12 or 18 months' time. I believe the policy the Government have announced so tar is in all the circumstances an inadequate contribution to that problem. Nothing that the Lord President of the Council said today has weakened me in that opinion. We have also had almost no constructive suggestions from the party opposite. The only positive suggestion I have been able to notice from that side of the House is the proposal that the Government should abandon the main elements of their Election programme. I cannot agree with hon. Members opposite, who apparently think, as the hon. Member for Chippenham (Mr Eccles) did, that that would have an inspiring and uniting effect on the workers of this country. If the Opposition really think that that would unite the workers, their sense of political realism must have declined even since the General Election. I also fail to see what effect it would have on our balance of payments if nationalisation schemes were dropped. You cannot sell your Election programme for dollars; and nobody would respect you if you tried.

Nevertheless, faced with a deficit running to about £50 million a month, I think we have to make further cuts, and, unlike the party opposite, I would like to make some concrete and unpopular suggestions to that end. I have no time to go into the background of the problem, but we should remember that in 1946 a balance of overseas payments was more nearly achieved than the official estimates we had suggested. The situation only took a turn for the worse in the first five or six months of this year. If I understand it aright—and the Chancellor can tell us whether it is correct—the trouble has not mainly arisen in the last three or four months from a deterioration in the balance of trade. Expenditure on dollars in the first few months of this year has very greatly exceeded the visible import surplus, or even the import surplus if we take into account the invisible items. The truth is that dollar scarcity has developed all over the world, and this country has been forced in these last few months to supply dollars to all sorts of other countries, partly in order to buy goods for them, and partly to meet other commitments. That is a process which cannot be allowed to go on The only basic solution is, of course. some large-scale collective proposals for dollar loans from the United States on the basis of the Marshall plan. No one will dispute that. But I wish also to suggest to the Chancellor that this really is not the moment to take the Marshall proposals as an excuse or pretext for not making any further cuts in our imports.

I would, therefore, suggest that we should have more drastic action along the following lines. First, I believe that we could prune our Government expenditure abroad rather more severely than we have yet done, not merely military expenditure, but other expenditure. I believe, in particular, we ought to tell the Government of the United States now that our dollar expenditure on Germany particularly cannot continue beyond the end of this year if the Marshall proposals fail. Secondly, we have got to be much more tough in moving towards the actual freezing of the sterling balances. So far as one can judge from the figures, we have allowed a considerable amount of dollars to leak away in the last six months by rather tender treatment of some of our ex-Allies or some of those countries on whose territory we fought the war. The Chancellor has moved in that direction with the Egyptian Agreement, but I think he should go further and faster. Thirdly, I hope we shall be a little more intelligent in our interpretation of the non-discrimination Clause in the Anglo-American Agreement. These things are always a matter of interpretation. Surely, it is no more good ethics than good politics or good business to begin by interpreting an agreement against oneself. Fourthly, I would grasp the nettle now, and make a series of economies in our expenditure of foreign exchange.

In two minutes I can only mention briefly some of the things which I believe should be done. I believe we could reduce the figure of £75 per head which we allow tourists going out of this country to £40 or even £30 a head. I know it can be said that all these suggestions do not save much and will hurt someone; but if we are to follow that shallow line of argument, we shall certainly move, sooner or later, into a crisis. Secondly, I believe that the time has come when we could also put back the petrol ration for the ordinary motorist to the point at which it stood last year. Again, I do not see why we should not require the motor industry, if it can sell in export markets, to raise its proportion of output exported from the present 60 per cent. to something like 90 per cent., and to make the allocation of steel for motor cars on that basis.

Finally, I would not shrink at this stage, seeing that the prospect is one of really severe food cuts 12 months hence if all does not go well, from making further cuts, even in food, with the exception, of course, of the staple foodstuffs and the inessential foodstuffs which derive from what are called war-shattered countries. I am not satisfied that we cannot make some further cuts in less essential foodstuffs from the dollar area.

That is a list of the things which I think we could do. I do not put this policy forward as an alternative to the most energetic possible prosecution of the negotiations for the Marshall plan. As I see it, we are now in a difficult spot, which is likely to get more difficult. I believe that we should move forward on both these fronts simultaneously, to protect ourselves, on the one hand, by an energetic effort to bring the Marshall plan to fruition, and meanwhile, by some defensive economies along these lines, to save foreign exchange while we can still do so.

8.55 p.m.

Mr. Oliver Stanley (Bristol, West)

The hon. Member for North Battersea (Mr. Jay) in the brief period available to him has made some interesting suggestions for future economies. No doubt the Chancellor will deal with them during his speech, and will tell us why he has not included them in the list he has presented to us. I want to turn to the more general points which have been raised in the course of this Debate. I think everybody in the House, on whatever side he sits, has shown himself to have been impressed by the seriousness of the situation which we are discussing. It was for that reason that all of us waited with great anxiety for the speech of the Lord President of the Council. I should like to associate myself with those who have congratulated the right hon. Gentleman on his return and on his being able, after such a long interval, to address this House again. We are indeed pleased to see him back.

Having said that, I must add frankly that it is all I can say about the speech he made. I had not intended, and I do not intend, to talk about the past. I am far more interested, and I think the House and the country are far more in- terested, in the present and, above all, in the future. Yet the right hon. Gentleman's speech was devoted almost entirely to the past. I think that the only excursion into the future was when he told us that there would be no Coalition. That is a statement rather reminiscent of the not-so-young lady who refuses a proposal which has not been and is never likely to be made to her. Certainly his speech was most interesting. I hope that a more appropriate time will come when we can deal with the past, because we too have a great deal to say about it. Many hon. Members on this side of the House will welcome the opportunity, which certainly will come, to deal with the curious view that the right hon. Gentleman took of some historical events.

I would say only one thing about the past. The right hon. Gentleman laid great stress, as indeed did many other speakers from the opposite side of the House, upon the impotence of this country in these circumstances to act alone. We have been told from all quarters how much depends upon America, how much depends upon the freedom of world trade, and how much depends upon the decision that this or that country takes about this or that aspect of their economic affairs. How different is the attitude to the present of hon. Members opposite from their attitude to the past. No such alibis were allowed in the 1930's. No arguments that a Conservative Government in those years were not able single-handed to stem a world depression have ever been allowed for one moment. Everything that went wrong has been put down by right hon. and hon. Gentlemen opposite to the action of His Majesty's Government and to them alone, it is indeed a curious change in the attitude they adopt to the 1940's, and they will not complain in future if they are judged by the standards that they have applied to other Governments in the past.

I turn to the first of the two main questions which the Government have to answer today. What exactly is the position of the country now? Too often in the past the Government have spoken with conflicting voices. The sombre utterances of one day are offset by the sunshine perorations of the next. Grim facts are overlaid by easy hopes. The example to which many speakers have called attention already is that which took place last week. Many other examples could be chosen, but that is not only the most recent, but, to many of us, the most dramatic. I remember the atmosphere in this House on Monday of last week when the Chancellor of the Exchequer made his statement. It was an atmosphere of grave anxiety, and that, presumably, was the very atmosphere which the Chancellor wished to create, first in this House and then in the country. The next day, I happened to be absent during part of the speech of the Minister of Food. I returned only for the peroration, and I found, instead of that anxiety, the House, or, at any rate, one-half of the House, laughing, cheering, optimistic and smiling. Really, that peroration was the most extraordinary performance. Attention has already been called to one of its phrases. I want to call attention to another, because it seems to me that, for a Minister in the position of the Minister of Food to have made that statement, shows an irresponsibility almost amounting to dishonesty. Here is the phrase which he used in his concluding passage: Nothing has been more encouraging and heartening to me in the negotiations which have been conducted on my behalf with these various countries than to find that, keen as we are, and we do not deny it, to buy their foodstuffs, they are at least as keen to buy our manufactured exports."—[OFFICIAL REPORT, 1st July, 1947; Vol. 439, c. 1188.] At the time he made that statement, he must have known that Argentina, a country with which we have, perhaps not the biggest, but among the biggest, trade in foodstuffs, had put a complete embargo both upon our motorcars and upon our textiles, the two main sources of our export credits. Let us consider the people in Lancashire, who know that this has been done, who know the difficulties that it has created for them, and who read in the papers the next morning the speech of the Minister of Food. How can we blame them for wondering whether the Government really know what is going on in the world today? It is that kind of divergence between the views which are expressed which does lead to confusion and frustration throughout the country.

We have had some argument today about the actual rate of deficit which is now running, and I should be very glad if the Chancellor, in his reply, could, once and for all, give a definite figure which will stand challenge or argument. I am not myself so much concerned with the figure for the physical deficit which appears in the statement which he circulated last week. The difficulty about that is that it depends upon one certain set of figures and one conjectural. It depends upon a more or less ascertained rate of imports, but also on a rate of exports which is only the prognosis of the Government, and, having had, within the last few months, a conjecture prophesied as to exports which has proved entirely wrong, we can hardly be expected to accept as stated and accurate fact a new conjecture which, so far as we can make out, is based upon the same assumptions and the same rough and ready methods which led to the gravely mistaken prophecy of only three or four months ago.

Nor, I think, is it necessary now to go into the complications of the difference between our deficit with hard currencies and our overall deficit with the world. The fact is that when convertibility comes about, our overall deficit is going to become, to all intents and purposes, our dollar deficit, because countries today are making, and will make, to the limit of their power, use of that convertibility to exchange sterling into dollars. Therefore, the main question we want answered is, what is the rate today at which we are drawing upon our dollar credits? That is the all-important figure, and the one which determines at what date our dollar credits will run out. Thereafter, we shall be face to face with the stark necessity of the situation. It is difficult for us to come to any accurate calculation, but the sort of figure that most people have in mind is that of £900 million a year; that is to say, that at the present time, we are drawing on our dollar credits at the rate of £900 million a year. I would ask the Chancellor of the Exchequer, when he winds up this Debate, either to confirm that figure, or to give in its place the correct and accurate calculation. So much for the actual position of our dollar deficit today.

But I am even more concerned about the relative position. The worrying thing to me is not only the magnitude of the sum now, but the fact that it is worse than it was a year ago. As the hon. Member for North Battersea said, the gap last autumn was less, and the deficit was running at a lower rate than had been budgeted for at the beginning of the year. That meant that if the credit of, say, last autumn was continued, and if only we were able to maintain the exertions which had brought us to that position, then, eventually, the whole dollar position would right itself, and the gap would be closed. In other words, all we needed was time. But, since last autumn, there has been a complete reversal of that trend, and we are now running, not only at a greater rate than last year, but at a rate which has been increasing over the last few months. Indeed, the gravity of that change is, as I think the right hon. Gentleman himself said, that time is no longer on our side, and to buy time in which to continue the trend which we see today is only to buy some slight delay from disaster. In those circumstances, I think it is impossible to over-estimate the gravity of the present position.

I remember that at Question Time in the House the other day one of my hon. Friends behind me used the word "desperate" to describe our present position. One right hon. Gentleman opposite—I think it was the Prime Minister—took exception to that term. I agree that if it was meant in the literal sense and its strict derivation from Latin—-that there was no hope—then it is not a term I should use, because I will not admit, and certainly do not believe, that there is no hope for this country. I am confident that, even yet, we can get out of our difficulties. But if it is used in its ordinary meaning, the meaning of the old saying, "Desperate situations require desperate remedies," then I regard it as only too apt, because I believe we have reached the position where there is no longer any room for easy optimism and for the sort of belief, "Oh, it cannot happen here." Only by making something happen here, can we hope to escape from the disaster which faces us.

I read in a speech only this morning, one of the best descriptions of the present situation I have come across. It was as follows: We cannot afford to meander through our difficulties and to hope for the best. That was the description given to the action of the Government today, not by one of us on these benches, but by a gentleman who, I believe, is an ardent supporter of theirs, Mr. Lawther, of the Mineworkers' Union, when speaking to the miners yesterday. I agree entirely with him. We cannot afford to meander through our difficulties. The time has come when we have to take some definite decision as to what we are going to do.

So we come to the second question which I want the right hon. Gentleman to answer. In a situation so grave as this, what does the Government mean to do about it? Certainly, if they mean to do anything, nobody has yet told us what it is they mean to do. We have heard no suggestions at all of any-policy which measures up in any degree to the needs of the existing situation. What have we heard suggested at all? First of all, the cut in imports, which was the immediate cause of the Debate which we are now having. But if that is meant as an effective immediate cure for our position, then, on the face of it, it stands condemned for its inadequacy. It is not only a pill to cure an earthquake; it is a very small pill to cure a large earthquake. What does it amount to?

I have no doubt the right hon. Gentleman will give us figures—which we certainly cannot assess for ourselves, so indefinite have been the statements made so far—of what will be its effect. What does £25 million amount to? At the present rate of our deficit it means that we postpone the exhaustion of our dollar credit for something between 10 and 14 days. Who can pretend for one moment that that is a proposal that is really significant? I quite understand that as complementary to other measures, as part of a general scheme whereby parts of the deficit are to be dealt with in other ways, it might be a useful addition; but, standing by itself, it clearly could have been no effective remedy. I, personally, feel it very difficult to realise why the Chancellor of the Exchequer made his statement at this time at all. Was it psychological? Was it in order to give the country a shock? If so, it has failed for two reasons.

In the first place, the subsequent statements made by other Ministers have destroyed much of the effect; and, secondly, it is so calculated that, in fact, the ordinary man in the street feels— and will continue for some time, at any rate, to feel—no immediate effect from it at all. Films: they are not to be cut until a subsequent order at some indefinite date. The Press: well, no doubt that will cause great inconvenience, and. I think, a good deal of national injury, but. no doubt, the Press will arrange that the features that the majority of the people like will continue. The cut in petrol: well, that is chiefly to fall on the Services. Textiles: hopes are held out that increased production will make a reduction unnecessary; and indeed, we are told today that there is to be some advancement of the rationing period. All that remains is tobacco, and the tobacco austerity was imposed, not when the statement was made last week, but when the Budget was introduced some three weeks ago.

The second new feature of which we have been told is the planning machinery, and the new council of which we were told yesterday. But it is becoming a usual concomitant of any economic Debate that we are told of some new bit of planning machinery which is set up. In March we had the chief planning officer of the Government; in July we have the chief planning council to advise the Government; and, no doubt, the right hon. Gentleman's ingenuity will find for subsequent economic Debates some further extension of the system which is only paralleled by that entomological parallel which, as hon. Members know, can go on ad infinitum.

Finally, there is the hope that everybody will work harder and that we shall produce more—a hope expressed today by the right hon. Gentleman the Lord President of the Council in almost exactly the same terms in which it was expressed by other of his colleagues in the economic Debate last spring. The fact is that, so far as we and the country can judge at the moment, the Government have only one policy with which to meet this crisis, and that is to have no policy at all, but to go on causing as little inconvenience and hardship and creating as little unpopularity as possible, and to see if anything will turn up which will make a policy unnecessary. It is a gamble and, if it is to be taken at all, it must have some reasonable chance of- success.

What are the two things for which the Government are waiting? The first is American help. I will say very little about that, because it is a delicate matter, and no one wants to make it more difficult. I doubt very much, however, if some of the speeches made from the benches opposite today, threatening America with what will happen to her if she does not give us help, are likely to be of very great service. But while I agree that, in any case, American help is essential for a solution, I am also convinced that American help is not a solution in itself. In the situation in which we are now, with the trend against us, with our position deteriorating and with the gap increasing, it is no good buying time, because to do so is merely to create a decision which sooner or later must be taken. The other thing for which the Government are waiting is the fall in commodity prices. It may come. It is true to say that so far it has come, largely not in the commodities we buy but in the commodities we sell. We must remember that when it does come it will not be entirely on the asset side, but that with the fall in commodity prices will also come a fall in our export value, and that the dislocation which any major fall will cause in our markets will have an extremely bad effect.

I have every sympathy with the Government in their position. If they take a decision at all, it has got to be a major decision, and any major decision in the unpleasant circumstances of today must be an unpleasant decision. It is not worth dealing with the matter at all unless the Government deal with the major questions which have been raised in all quarters of the House today. I can see any Government hesitating to do so, but I do not believe that the decisions, unpleasant as they are, will become any less unpleasant by putting them off. That has never been our experience. We are now faced with the same sort of decisions as faced the Government in the early days of the war, and our experience was that decisions which we did not take at the time, and which we postponed, only became more difficult and more unpleasant when finally we had to take them.

I appeal to the Chancellor to give us a full answer to the question which everybody in the country is asking today, namely, what are the plans of the Government for dealing with the situation in which we are? The Chancellor is a very adept Parliamentarian. No one is more successful than he is at evading awkward questions. I know to my cost, because in the last two years it has often been my fate to wind up just before the right hon. Gentleman. I have asked him a great many questions, and I cannot remember one to which I have had an answer. He has all the Parliamentary gifts. He has banter and blarney, with the aid of a certain amount of bias, and with them he evades the questions of his opponents and excites the plaudits of his friends. I do beg him sincerely tonight not to do that. This is a serious occasion, and we want to hear from him.

I can assure the Chancellor of this, I think on behalf of all my hon. Friends behind me, that no one will be more pleased than we are if he is able to tell us tonight of a policy which we believe and conceive to be adequate to meet the situation in which we find ourselves. It does not matter if that policy is hard, as long as it is realistic. It does not matter if that policy promises little, as long as it evades nothing, as long as it is a policy really designed to meet the needs of the times and, above all, a policy designed to unite and not to divide the nation. I can assure him that if he does produce a policy of that kind, he will find support in all quarters of this House, and in all quarters of this country. On the other hand, if, after he has spoken tonight, we are left in the same position as we are at this moment, if we are given no indication of any plan to meet a situation whose gravity must be apparent to all of us, then I can only say to him that all the censures which are open to an Opposition will precede by only a very short time all the anger which is felt by a nation realising too late, that it has been bedevilled and betrayed.

9.21 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

We have had a Debate in which, during the time that I was in the Chamber —and I have been here for the major part of it; and I hope that this will not be thought to be a patronising form of words, because I say this quite sincerely—there has been an exceptionally high level of thoughtful contribution to the matter which we all regard as most serious, important and urgent There have been speeches made from both sides of the House, which are certainly worthy of further thought and study; many suggestions have been made and many points raised. I would mention in particular my hon. Friend the Member for North Wembley (Mr. Hobson), who made an exceptionally interesting speech. Other hon. Members, including the hon. Member for The High Peak (Mr. Molson) and the hon. Member for Scarborough and Whitby (Mr. Spearman) also made speeches which will certainly be studied closely for their suggestions by the Ministers concerned. I propose, first of all, to pick up the Debate, so to speak, where we began it, and I shall not avoid answering the questions which have been put to me by the right hon. Member for West Bristol (Mr. Stanley), the conclusion of whose speech was curiously mingled emotionally between appeasement and menace. I will answer his questions, and he must take his own decisions on my answers, whether he likes them or not. I will also answer the points put at an earlier stage of the Debate by the right hon. Member for Warwick and Leamington (Mr. Eden).

I was asked: Why did I make a statement last week at all? The answer is very short and simple. It is, that each year—I think this was so under the Coalition also; it has certainly been so since the Election—we make an import programme to the best of our power and foresight to run from the middle of one year to the middle of the next; that is the import programme year. Last year a similar statement was made at about this time of the year. And if my memory serves me aright—though I have not checked this—similar statements were made from time to time in preceding years. Certainly, it was done last year. The Government judged that the House was entitled to be told this year, as last year, when the moment came for fixing the import programme for the next 12 months, what the Government intended. In that sense, therefore, my statement was a routine statement, made at the accustomed time; and I think I would have been wrong not to have given that information to the House and the country.

It so happens that this statement also coincides not only with the middle of the calendar year, when it was appropriate to make it, but with a time of great anxiety for all—in both this and many other countries—at the prospects for world trade in the next few months. It is, therefore, not unnatural—and we naturally make no complaint; indeed, for my part I welcome the fact—that this matter has been further debated today. The right hon. Gentleman asked me. following that statement, for further particulars. I gave them in a circulated answer which appeared in the OFFICIAL REPORT. I gather today that he thought I ought to have given fuller and more detailed figures. I could, of course, have given more, and I will give some more figures in a moment. I thought I was giving what he asked for, after carefully studying what he said. However, I am glad to supplement it tonight, by giving information, much of which may have been published before, but which, at any rate, it will be convenient for me to bring together.

Let us begin with the import programme. The import programme is about the same volume, as we have planned it now for mid-1947 to mid-1948, as that which was contemplated for the calendar year 1947 when the Economic Survey was prepared. We have not proposed any substantial variations in the total volume of imports, although we propose certain changes in the composition of the total; it is the same total volume, as near as may be, as was proposed in the Economic Survey. As I have said, there are certain changes in composition; prices have gone up further, which is why it costs more foreign exchange. We must be clear whether that decision by the Government is criticised or not. Either the volume should be the same, as we are making it, or it should be greater than we contemplated before, or it should be less. No one, I think, will argue that it should have been increased. No one has argued that tonight. The question is whether at this stage we should plan for substantially the same volume, or propose at once— and I emphasise "at once"—to reduce the total volume of our imports. My hon. Friend the Member for North Battersea (Mr. Jay), in a very brief, compact and compressed speech, put a large number of positive suggestions for reductions. The argument he has put has not commended itself entirely to the Government when taking this decision, but I admit at once that all the proposals he made are the type of proposals which we should keep constantly before us, as and when we may need, in accordance with the changing situations, to revise our import programme from time to time. Although we have made that import programme for the year ahead, which is the convenient and customary unit, changes in the conditions which we are dealing with may arise before 12 months have passed, which will require some modification of it.

One or two hon. Members have argued that we should at once have cut the total volume of imports. It is very difficult for the Opposition as a whole to argue that we should at this stage cut the total import volume. There has been talk about many voices, and attempts are made —it is part of our game here, and we have all done it—to distinguish between the emphasis of one Minister speaking on a subject, and another Minister speaking on some other aspect of the subject. The Opposition have been challenging the President of the Board of Trade for not putting more consumer goods into the shops. They have been carrying on a campaign against excessive austerity, and some of the criticisms they have made of my right hon. Friend the Minister of Food were to the effect that there was not enough food. Lord Woolton is twittering away outside.

Therefore, it does not lie with them, unless there is a serious discrepancy between speeches of the leaders of the Conservative Party and the oracle of the central office, to say that we should now be cutting down the volume of food imports. I think it is reasonable for thoughtful Socialists to say that perhaps we should cut our volume of imports, but it is not reasonable for Conservatives to say the same thing. I maintain that at this moment it was the right thing not to cut into our import programme. I would like to say a word or two about prices. The terms of trade have been steadily moving against us for some time, and that is one of the handicaps from which we are suffering. That is not the fault of this Government; it would not have been the fault of a Conservative Government if we had been blessed with one; it is nobody's fault except what is vaguely called world conditions, and so on.

Now I would like to supplement the information which was circulated in the OFFICIAL REPORT in reply to a request by the right hon. Member for Warwick and Leamington. The Board of Trade index of import prices, taking 1938 as 100, had by June, 1946, steadily risen to 203—just over double prewar—and has risen further to 241 in May this year. The export index shows a rise from 196 to 225. Therefore. imports are forging ahead. Import prices are rising, and so are export prices. But import prices are always a little further ahead, and that means that the terms of trade are constantly moving against us. One of the things which we do not count upon, but which we are hoping for, is a change in the terms of trade so that if the relative relation was reversed our import prices might move down faster than our export prices.

I would like to touch upon the world aspect of this matter. There is a world aspect as well as a United Kingdom and British aspect. I will deal faithfully with both. But the world aspect is that two years ago the people who were calculating the future miscalculated. They assumed—we all did it; many people from other countries, meeting in international conference and for discussions, did it—that the rate of recovery of the world as a whole, from the effects of the war, would be more rapid than it has been. World recovery has been exceptionally slow. In parts of Continental Europe we under-estimated the damage done by the enemy, and the necessary damage done by ourselves and our Allies by way of counter measures to put the enemy down. We also underestimated the damage done in many parts of Asia, and I am thinking now of Burma, the whole of the S.E.A.C. area in the war, and so on. That has thrown out the time table to which many people were working.

We are now gradually getting into the situation in which there is a spreading shortage of dollars throughout the world. That is why we are finding some of the disagreeable events such as that mentioned several times today, namely, that certain markets, to which we looked forward for an increase of our exports—the Argentine is one example, and there are others—are finding themselves so short of dollars that in view of their own national interests, as they think, they are compelled to restrict imports from this and other countries. It is no special bar against this country; it is a general bar which affects other exporters as well. As someone said to me, wishing to put it in a very simple fashion, and, I think, putting it very well: The nations are gradually getting more and more like a lot of children playing marbles, except that one of the children is getting all the marbles, and if one child is getting all the marbles, the game cannot go on unless something is done to distribute the marbles among the other children. That is the way it affects us—and I have tried to put it in a simple way

I have been asked about convertibility. The "Financial Times" has lately published in pamphlet form some very excellent articles showing in some detail why the extra weight falling upon our dollar reserves consequent on convertibility on 15th July is likely to be much less than many people might suppose. This is largely because it has to some extent been provided already by a number of bilateral agreements with various countries with which arrangements have been made in advance of 15th July. I think that, in a large measure, 15th July has already been discounted, and the additional burden of assuming these new obligations under the Anglo-American Loan Agreement will be noticeably less than many people may suppose. In another direction, before 15th July, and having no reference to the Anglo-American agreement, the pressure on our dollars has enormously increased.

That leads me to the answer as to the rate by which these dollar stocks are now falling. Before I give the answer, I would like to lead up to it by explaining why, in the last few months, this position has noticeably worsened. The hon. Member for North Battersea hinted at it, and he was quite correct. In the last six months—to resume what I said just now—a great number of countries all over the world have been suffering more and more from dollar starvation, and they have to seek to get United States dollars from wherever they can gather them, for the purpose of balancing their inequality of trade, in so far as they are attempting to buy more United States products than they can pay for. We have been purchasing large quantities of wheat in this country from Canada and meat from the Argentine. We have seen signs increasingly as the months have gone on that Canada and the Argentine—to mention two only among a large number of countries—are suffering from this dollar starvation. Both Canada and the Argentine now expect to be paid for much of what they send to us in United States dollars, and this is one of the heaviest pressures we have been sustaining in the past months.

Mr. Eccles rose

Mr. Dalton

I would rather continue. To answer the series of points raised by the hon. Gentlemen opposite—I was asked a question by the right hon. Gentleman who has just spoken and I want to give the answer. He said, "What is the rate at which the dollars are now being used?" In fact, it is, of course, the lines of credit which are being drawn upon and not any reserves lying behind the lines, on which I prefer to say not too much now. It is the lines of credit being drawn upon, and it is in relation to that that the question was put. The right hon. Gentleman thought that he had worked it out to something in the order of £900 million a year. I have also worked it out and it is not quite as bad, but not very much better, than the right hon. Gentleman said. As near as may be, in the first two quarters of this year, the rate of drawing down on the United States plus the Canadian dollar lines of credit, taking the two together, has been some £400 million worth of dollars. Multiplying this by two we find an annual rate. which may or may not be continued, of some £800 million. That is the answer, and the right hon. Gentleman will never again say that I have evaded him. Indeed, he could not have a straighter answer than that.

This is, of course, a very serious figure, greatly in excess of anything which any of us contemplated would occur or would be tolerable. As my final statement of this part of the case, I want to repeat that this would not have occurred if we had not been getting—instead of the increased multilateral trade, to which many people looked forward—increasing multilateral paralysis, which is what the world is suffering from today; increasing multilateral paralysis of trade due to the fact that in the Western Hemisphere—to put it simply—those competent producers in North and South America, who stood aside from the ravages of the war, happy lands where no invader marched and where no bombs fell, although brave men sailed away from them to fight in Europe, these countries, unscorched by bombs and devastation, have been in a relatively most favoured position.

What is deterring many of our efforts is that the scorched areas on the Continent of Europe and in parts of Asia have been so badly scorched that they are not yet making that contribution we had hoped for to the pool of wealth of the world. Therefore, since the supplies are coming forward so slowly and inadequately from these other parts of the world, the great bulk comes forward in conditions of world scarcity from the two Americas, and the prices of their products remain high and drive up the cost to us and to the other countries, which are unable to make their contribution to the pool or to benefit as they would be able to benefit in a real multilateral trade system because they have so little to put in and must, to sustain themselves and to survive, draw so much at such high prices from the favoured Continents across the Atlantic.

Mr. Eccles

The Chancellor said that the Canadians now insist on being paid in free dollars for some of the wheat which we buy. If that is so, does it mean that they are unwilling that the credit should be drawn on at a rate determined by His Majesty's Government, and that therefore the actual drawings on the dollar credits are greater than the £800 million he has mentioned?

Mr. Dalton

No, Sir, it does not mean that at all. It means exactly what I have said, but I am prepared to supplement the information I have given by telling the hon. Gentleman that I aggregated together in my answer to the right hon. Gentleman the drawings on the United States and Canadian lines of credit. It is also possible to state them separately, and I am quite prepared to give the corresponding figure. There is nothing to conceal here and no one is scoring by obtaining answers to questions. I am, perhaps, the only person who knows the answer to some of these particular points. I will give the hon. Member for Chippenham an answer to his question. In this same period, the first two quarters of this year, the drawings on the Canadian line of credit totalled 160 million dollars or, roughly, £40 million.

I am not going to say anything which would suggest or could bear the interpretation that as between His Majesty's Governments in the United Kingdom and Canada there is anything less than the most helpful, harmonious and constant cooperation. The Canadian Government have done tremendous things to assist us and it would ill befit anybody here to suggest anything else, but they have their difficulties. They, too, are suffering like a great many other states—although much less strongly—from dollar starvation. So, to take another example, are the Swedes, another strong nation who kept out of two wars and have not been ravaged and scorched, but who have had to place very severe restrictions on imports against our goods and American goods just because they are running short of dollars.

I have emphasised this aspect because it is part of the world problem, and it is no evasion of the Government's responsibility to point out that fact and to elaborate it a little. What follows, I think, is that if this increasing paralysis, as I have called it, is to be dispersed, it can only be by some international cooperative effort. No one country alone can do it by itself; we must all seek to join in arrangements to do it. I will not go into great detail on the question of cuts because in reply to the questions which have been put to me I am able to say at once that nobody, not even I myself, would suggest that the various cuts in tobacco, newsprint and the like, which I announced to the House recently, are more than a quite small contribution to a very great problem. None the less, if we are to keep the total volume of our imports about steady there is also a case, in the view of the Government, for doing a shift over within the bounds of the total volume from the less essential to the more essential. We would rather have more food in the total volume and less fags, and, possibly, less flicks—as the right hon Gentleman put it the other night.

On tobacco it is possible to under-esti-mate what has already been done, and I should like to give the House these figures. Our purchases of tobacco in the calendar year 1946 amounted to £70 million. I am sorry to have to make the comparison in this manner but it is inevitable from the framework of the discussion. The amount we are budgeting for in the import programme from mid-1947 to mid-1948—I think the contrast is a reasonable one—is only £40 million. We are making a reduction of £30 million on £70 million, which is cutting it by nearly half, and I will explain to the House how we are doing that. On the basis of a cut in smoking in this country of 25 per cent. we get a reduction in purchases of 40 per cent. because we shall deliberately run down stocks. If there is less smoking going on a given stock will last longer. There is need for less in the pipeline—[Laughter]—the pipeline that leads to the pipe—and at the same moment we can live on the stocks and not need to replenish them. Therefore, it is noticeable, I think, that among a number of other items, we are able to save in respect of tobacco alone £30 million a year. I pass on from that point because I claim that it is better to have £30 million worth of credit than of tobacco and to be able to build up stocks of food that have run down very low.

I pass on from that to consider what it is that we should do. The right hon. Gentleman asked what we were going to do. [HON. MEMBERS: "Hear, hear."] I notice that there is an air of expectancy. Would it be the first time that it has been declared that our purpose is by all means open to us, and in co-operation with all who are concerned in these matters, to stimulate and to press for a reduction of non-essentials to the utmost? It would not be the first time. That has constantly been said, and I say again that we are taking steps in that direction in our economic life. Is it really thought that if we had not nationalised the mines we should be getting more coal produced? We must have more coal, and certainly we should not have had a ghost of a chance of getting even the present output. Certainly, there is no chance of building up our output to the level that we desire unless we re-equip on a sub stantial scale those out-of-date and long neglected collieries. I am not seeking to go through the list, but, what is the complaint we get from every manager and every practical man in the industry? Their mining gear is old and they are short of up-to-date machinery. The only way that that can be dealt with is through the efforts that we are making now. We shall certainly bend all our efforts to stimulate, by all means that we can, the production of coal.

I will not go through the list, but the same is true of all our more essential requirements in our national economy. Having spoken of the international aspect, I say with equal emphasis that no one nation alone can cure the paralysis from which every nation is tending to suffer, but that every individual nation must make its individual effort with its own powers to build up its own production. We shall do that here, and we hope that all good citizens will help us, regardless of their politics. We do not put it higher than that.

A lot of these matters can be perfectly well conducted without reference to political controversy at all. There are technical matters of how industry can be stepped up and brought up to date. Indeed, this Government, and I myself as Chancellor of the Exchequer, have done our best in various directions to make easy the re-equipment of industry. I mention cotton in particular. Large sums have been set aside, of which the House as a whole has approved, for the more rapid re-equipment of the spinning section in particular, in the cotton industry and of bringing about new amalgamations or more effective union and the like. All that is well in hand.

In regard to farming, I do not want to pitch this case too high, but I doubt whether the farming community as a whole has ever felt that a more effective and useful Bill has been passed though this House, to give them security in regard to prices, and to create the conditions in which the best production can take place, than the Bill which was recently conducted through this House by my right hon. Friend the Minister of Agriculture.

As the Lord President of the Council said, What about the Empire? We are doing our utmost there.

Sir Waldron Smithers (Orpington)

To throw it away.

Mr. Dalton

If the hon. Gentleman, or any of his Friends, had dug and delved in the Empire in their day as we are going to do, the Empire would be a more productive place than it is. A shameful thing about some parts of the Empire, particularly in Africa, is that there are such great natural riches that have lain neglected for so long. We are setting out to cure and to deal with that. I insist on making that point here.

Mr. W. Fletcher rose

Mr. Dalton

May I just finish this point, and I will give way? It used to be suggested that this party was not interested in the Empire and that the party opposite had a monopoly of interest in the Empire. That was never true. It certainly is the case that until my right hon. Friend the Minister of Food the other day propounded his scheme for the growing of groundnuts in East Africa, there were never the wits nor the enterprise opposite to do it. It is the Labour Government which have in the last weeks and months brought forward more far-reaching schemes for the development of our Empire than ever before in its history.

Mr. Stanley

As the right hon. Gentleman appears to want to make a party matter of this, may I ask whether he has entirely forgotten the £120 million which was given to the Colonies as a free gift during the Coalition Government and which, I think, ranks higher than the £100 million, which is a repayable loan?

Mr. Dalton

We will see, but this is a wicked animal which when attacked defends itself. I will make a non-party speech as long as we do not have partisan reaction—only just so long. I must get on. I have other things to say. This Government is determined to stimulate production in this country and in the Imperial territories for which we are responsible, particularly Africa, and that will be pursued with all the energy and the vigour at our command. I hope we shall not entirely lack support among good citizens—I will put it broadly—in what we seek to do.

With regard to the other action which we are taking, my right hon. Friend the Foreign Secretary is taking an extremely prominent and vigorous part in bringing the nations of Europe together, in order to make a coherent economic plan for stepping up their own production and the efficiency of agriculture and industry in each of the European countries. I have high hopes, and I think all good citizens will have high hopes, that the right hon. Gentleman will succeed. There are tremendous possibilities here also of bringing together countries shattered by the war and countries which in the past have pursued narrow nationalist policies behind high tariff walls shut away from their neighbours. There is at least a chance, under this new scheme now being developed in Europe, that we shall be able to get a higher production and a greater efficiency in the continent of Europe. If I may summarise what we propose to do, it is that we propose to do everything within our own power to stimulate our own industry and agriculture and our own Colonial territories; and also we propose to have the maximum co-operative effort which we can achieve with other nations equally bent upon that increased production which alone can be the basis of higher standard of life for all of us.

This is the final point which I think it well to make, because it has been said that the Government are to blame for some of the difficulties arising from its financial policy. If we were planning for a mere return to the situation we had between the wars, if we had made our plans for two million unemployed in this country, and if we had made our plans for a state of affairs in which we had none of the recent improvements in the social services, then indeed our task would not seem so difficult—it would be just as difficult, but it would not seem to be so difficult—because, our people not having the money to buy, as they have now, we should not have been conscious of the shortages in the shops. [HON. MEMBERS: "Oh."] The shortages of money in people's pockets would have concealed, as they did years ago, the realities of the situation. The policy which we have pursued has brought clearly into the light and consciousness of men the difficulties from which we are suffering. They are the shortages of goods and services required in order that men shall live a happy, prosperous and decent life, and it is towards the conquering of those shortages that we shall direct all our efforts.

In conclusion I say this. This import programme is a provisional programme. It will indeed be necessary from time to time to re-examine it, to consider on the one hand how far our targets for exports and the like are being achieved, and on the other hand to reconsider the volume of imports we are proposing to bring in. We shall conceal nothing in the study of those things. We shall conceal nothing from the people of this country, and shall continue to tell them the facts, as we have in the past. I have made only too many speeches on this subject, along with a number of other hon. Members. We believe that these people of ours will in peace as in war go forward and face with a determination and courage whatever dangers and difficulties lie in front of them. The purpose that we must achieve within a measurable time—a short and measurable time—is that we must fight our way through to a position in which, whatever we need to purchase from across the seas, we pay for by exports from this country, whether visible or invisible. That is the aim. We shall try to achieve it as quickly as we possibly can and, meanwhile, I hope the right hon. Gentleman will admit that I have answered his questions, whether he likes it or not.

It being Ten o'Clock, the Motion for the Adjournment lapsed without Question put.