DEBATE ON THE ADDRESS

HC Deb 24 October 1947 vol 443 cc384-469

[FOURTH DAY]

Order read for resuming Adjourned Debate on Question [21st October]: That an humble Address be presented to His Majesty as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament."—[Mr. Blyton.]

Question again proposed.

11.9 a.m.

Mr. Clement Davies (Montgomery)

Yesterday we heard from the Minister for Economic Affairs one of the greatest speeches that I have ever heard. It was, as we would have expected it to be from him, a realistic marshalling of the facts, and it brought to the mind of the House, and through the House to the minds of the people of the country, the grim situation in which we are today, a situation which was summed up, in a very remarkable article written by Professor Robbins of the London School of Economics, as being the biggest disaster that has yet occurred in the long economic history of this country. We were also deeply moved by the lofty words which the right hon. and learned Gentleman used at the end of his speech; it was a most moving and eloquent peroration. But as he proceeded with his speech I felt that it was the most devastating and complete denunciation of the policy pursued hitherto by His Majesty's Government. It differed completely from so many of the speeches made in the past by his colleagues sitting with him in the Cabinet and on the Front Bench; it differed very considerably, too—if I may refer to this now—from the words which were used in the Gracious Speech from the Throne. One would not have gathered from the two opening paragraphs of that Speech that our situation was as grim, as threatening and as dangerous as we all now know it to be from the speech of the right hon. and learned Gentleman the Minister for Economic Affairs. The two opening paragraphs of the Gracious Speech read: In the Session which opens today the nation is laced with grave economic difficulties affecting almost the entire world. From that one might imagine that the position here was no graver than anywhere else; that the whole world was involved; and that, in truth and in fact, our position here was not due to any fault in ourselves, but due to a world situation for which we were not responsible; that we were merely the victims of some outside difficulties for which we could be in no way responsible. The Gracious Speech goes on to emphasise the suggestion underlying that first paragraph by saying that the people of this country will demonstrate once again their qualities of resolution and energy. Of course, they will There can be no doubt about that. With sustained effort this nation will continue to play its full part in leading the world back to prosperity and freedom. Again, the suggestion is that the fault lay not at all with His Majesty's Government, but with some outside influences, and that with the full help and active co-operation of the people of this country we will take the leading part in leading the world back to prosperity and freedom. I find those words "leading the world back to prosperity and freedom" rather pharisaical, coming from His Majesty's Government. It is, indeed, rather hypocritical to suggest that this Government is the one to lead us back to freedom when it has done more than any other Government of this country in time of peace to limit the freedom of the individual, and is now actually threatening their spiritual liberty.

The condition of the world, politically, morally and economically a indeed chaotic. It looks as if, two years after six years of the greatest and most devastating war in the history of man the whole world were bankrupt of true statesmanship, for instead of having an atmosphere of peace and an abolition of rankling suspicion, the world today seems to me to be in an even worse condition than it was before that war started. The figures themselves, quite apart from everything else, are appalling. At this time there are roughly 19,000,000 men in the world under arms. Forty nations are spending, in this time of economic crisis, something like £7,000 million per annum on the preparation for war, which is £2,500 million more than was being spent in 1938, before that terrible war started. Today, there are more men in uniform throughout the world than there were in 1938 and 1939, although the armed forces of Germany, Italy and Japan are now non-existent.

I emphasise that at a time when the world is in real need of food and consumer articles, it is tragic indeed that a very high percentage of the budgets of very nearly every country is being devoted to war purposes. Even the little countries which, if they were fully armed, could not hope to offer more than a momenary defence against attack by superior arms, are devoting a very large part of their annual budgets to their armed forces. In this coming year the United States are devoting 34 per cent. of their enormous budget to military purposes; Russia, so far as we know, even on the published figures, is devoting 40 per cent.; and we in this country are devoting something like 26 per cent. of our budget to those purposes.

One of the main causes of our troubles today is our shortage of labour. Yet at this time we have still over 1,000,000 men in our Armed Forces, and according to official figures something like 450,000 men whose whole time is occupied in providing food, clothing, munitions, and so on, for the Armed Forces. I think that figure of 450,000 is a very low estimate; I would put it at very nearly double; but taking it at 450,000, and taking our Armed Forces today at 1,200,000, it amounts; to 1,650,000 men: a figure even today, in excess of the 1,500,000 people devoted to the most important matter of all, our export trade; a figure which is very nearly twice the number in the coal mines; a figure far in excess of that for agriculture, even including the German prisoners of war. In fact, two years after the end of that devastating war, we can say that today our greatest industry in this country—which is face to face with the situation described yesterday so eloquently by the right hon. and learned Gentleman—is still the military industry.

The hardship of it is that ordinary men and women in every part of the world—I am sure without exception—have only one desire, and that is to be allowed peacefully to pursue their ordinary daily lives, to devote themselves to their families, and to assist their families and those around them to raise their standard of life. I only wish that the Governments of those peoples in every part of the world could show some realistic understanding of the desire of ordinary people, and could devote themselves with far greater purpose and determination than they seem to have exercised hitherto to the cause of peaceful pursuits.

The one ray of hope has been the meeting of the 16 nations in Paris, as a result of the very generous proposal made from America by what is known as the Marshall plan. We sincerely trust that this is only the beginning of a real desire for co-operation among these States of Europe, so that they may assist one another to attain a better mode of life and peace amongst themselves. I only wish the policy we are pursuing in Germany were more in alliance with what has taken place at Paris. I fear that if that policy is pursued to its bitter end, it will go a long way towards upsetting what is obviously desired by the sixteen nations. I will say no more than that, because I hope that this matter will be discussed more fully on Monday. We all want to see these nations returning to normal and being able to stand upon their own feet.

Coming back home again, our primary duty, as the Prime Minister very rightly said, is to put our own house in order. If there is need to put our own house in order, it means that the Prime Minister acknowledges that at the present moment our house is in disorder. A later phrase he used, when he said that someone would probably call attention to the fact that what the Government are now proposing to do they should have done earlier, also shows that the disorder is due, not to outside events, but to mismanagement in the past, and in the immediate past, by His Majesty's Government. There has been a misuse of resources in men and material, and a mistaken policy, which was reaching its climax during the early part of this year, and which has been steadily pursued for two years. For that, His Majesty's Government are responsible, and that, in the main, is the first reason why we are in our sad position today. The fault lies not in the amount or nature of the goods we are importing, but in the misuse of those goods, which has led to insufficient exports and to a reduction of our standard of life.

No Government ever started on their career with greater good will than His Majesty's Government. They had the support of all the workers, and the full support of the trade unions. They had the realisation among the people that the tasks confronting them were enormous. I wished them well on behalf of my colleagues in my speech on the Address in reply to the first Gracious Speech from the Throne in this Parliament. We wished them well, not so much for their success, but because we realised that upon them would depend the fate of the country, and the responsibility to bring it through its difficulties back to normal. They had greater powers over finance and materials, together with controls of all kinds, than any Government has ever had; and what has obviously happened, from the words used this week by the Prime Minister, and emphasised by the Minister for Economic Affairs, is that there has been a lack of vision, foresight and realisation of the effect of many of their actions—a real lack of vision as to what might happen as a result of the failure to exercise the control over finance which was in the hands of the Chancellor of the Exchequer. Obviously, they did not realise the immensity of the problems, still less the danger. Still less did they give that proper guidance which the country was entitled to expect.

The Government are right in saying that the people will go all out to restore prosperity. We have always done so, and we shall do so again, but we shall want to know what is required, and that guidance must come from His Majesty's Government. Unfortunately, in spite of the speech delivered by the Minister for Economic Affairs, we have not today that confidence we might have had originally in His Majesty's Government because of the situation in which we have now been placed. What is more, it is obvious that there has been a complete division of opinion in the Government with regard to policy. The Minister for Economic Affairs, when he was President of the Board of Trade, was all the time warning the country, as explicitly as he did yesterday, but what has been happening? The speech he delivered yesterday was followed almost immediately by a speech from one of his colleagues flatly contradicting him. How can we possibly have confidence in His Majesty's Government when there is obviously a division of opinion on policy in the Government?

Moreover, one's confidence is not restored when, turning to the Gracious Speech, we find that, having called attention in the first few paragraphs to our economic position in the mildest possible language, it then goes on to deal with legislation, and the first thing suggested is that the position of the House of Peers should be dealt with. I hold no brief for the House of Peers. [HON. MEMBERS: "Hear, hear."] I probably have a longer memory than hon. Members opposite. I have the bitterest recollections of the action of that House between 1906 and 1911, when my party had a far greater majority than the present Government, and what is more a complete majority in the country. The country has had to wait for practically 20 years for the social reforms which we would have carried out then, and which we proposed, debated and discussed on the Floor of this House, day after day and night after night, and which went to another place only to be mutilated, torn and ultimately thrown out. One major Bill which had taken the greater part of a Session was thrown out. A meeting of Peers was held the night before in private, and after the Second Reading of the Bill had been moved by a Member of the Government, a Member of the Opposition got up and moved that they take the vote upon it. Without discussion, the Bill was thrown out. I have bitter memories of that period which culminated finally in the throwing out of what became known, because of the name of the then Chancellor of the Exchequer, as the Lloyd George Budget.

Then we had to go to the country, and we came back. In the course of 12 months, we had to go again and we came back. As a result of those two Elections the Act of 1911 was passed. At that time there was reality in the cry of "People versus the Peers." They were standing in the way of the will of the people. But what has happened since? Since then we have been practically a single Chamber. For 36 years the Peers have not ventured or dared to interfere with a major Bill—certainly not with its principle or policy. [Interruption.] They did not interfere with the principle or with the real major doctrines underlying any one of them They have contented themselves with amending smaller principles within Bills. They have indeed performed a very useful function for the Government of the day, and especially have they performed a very useful function for this Government, because so many of these major Bills were so ill-prepared that not only had we to have scores of Government Amendments during Committee and Report stages, but further Government Amendments had to be introduced in another place. It is a sort of clearing up place of the mess that has been left. When they have suggested any important Amendment with which the Government have disagreed, in every instance they have given way. That is the position today. Why raise this matter now?

May I put this to hon. Gentlemen opposite: This Constitution, we are glad to think, is an unwritten Constitution. It keeps on growing by custom. There was a time when the Throne had a right of veto. It was last exercised by Queen Anne, who, as everyone knows, is dead. I do not know what might have happened if her successors had exercised that right, but no one ever dared to exercise it, and every constitutional lawyer today recognises that the right of veto has disappeared—gone completely. What has happened under the Act of 1911? Since 1911, for 36 years, the Members of another place have not dared to throw out a single major Bill proposed by this House and sent up to them. [An HON. MEMBER: "There has been no need to."] I agree. There have been ten years of war. In the rest of the period, in the main, it was a Conservative Government. They are expected to be complacent when there is a Conservative Government. But hon. Gentlemen forget that there have been two years of this Government.

Mr. Beswick (Uxbridge)

Not until next year will they really have the power to interfere.

Mr. Davies

They had the power to interfere in the first year. They could have chucked out every one of the Bills that had been introduced. What the hon. Gentleman means, I expect, is that in spite of what they could do, a Bill would become law in two years. Does he realise that there is a "carry over" even with a General Election intervening. Does he realise that, if another place throws out a Bill next year, even under the present Act, and a General Election takes place, assuming his party comes back and passes that Bill again, it will become law, although there has been a General Election. That was provided for in the Act of 1911. Of what, therefore, is the hon. Gentleman afraid? [An HON. MEMBER: "That they will not come back."] Since the Act of 1911 nothing has been done, and it may be that the right of veto under that Act has lapsed. Now what will the Government do? Do they propose under the new Measure more or less to invite the other House to throw out a Bill? In fact these new proposals might very well, instead of strengthening this House, weaken this House. They will be giving a right to another place which has been dormant for so long that might, in a few years time, have been regarded as dead. Therefore, I can neither be exhilarated with what has been proposed nor can I ask myself to be indignant with regard to it. What appals me is that at a time like this, with the grim situation as described by, the right hon. and learned Gentleman yesterday [Interruption.] I wish the hon. Gentleman had listened more carefully.

Mr. Bowles (Nuneaton)

I listened to every word of the speech.

Mr. Davies

Had listened then, with understanding. A little Measure of this kind is not worth fighting for one way or another. It looks as if there is a feeling in the Cabinet that they are not very popular at the present moment, and a very good popular cry would be "Lords versus the People." That was a popular cry when it was a reality. I do not know whether it would be a popular cry today when rations are being cut down and we are face to face with a grim situation. We are at the beginning of winter, and the right hon. and learned Gentleman has warned us that there is to be a cut in our food and in our amenities, such as they are. We are also facing this enormous adverse balance of £600 million.

May I deal very shortly with one or two other points? First, to mention agriculture, the greater part of our imports is composed of food and the more we grow in this country the better. A scheme has been put forward by the Minister of Agriculture for raising prices, but, believe me, that is not enough. It is not a question of raising prices but a question of help to the farmers to produce the goods we need. The right hon. and learned Gentleman the Minister for Economic Affairs very rightly referred to the fact that 130,000 German prisoners will be going home, as they should have gone home long ago. They have to be replaced by men who are really capable of turning out agricultural work. We do not want "nuisances" on our farms.

Might I also draw the attention of the Government to the fact that not only do we want men who will work on our farms, but we are short of skilled labour to carry out essential repairs. All we get today on our farms is breakdowns. There is a terrible shortage of blacksmiths and wheelwrights and a farmer can lose a whole day waiting in the smithy in order to get his horse shod. Then there is, in spite of the-figures which the right hon. and learned Gentleman gave, a shortage of machinery, and also a shortage of spare parts. The other thing that the farmer needs is capital on easy terms which will enable him to produce more than he is producing at the present time.

Two other matters and I am finished with agriculture. In the first place, why should the Government take up land for forestry when that land can produce food? We want every inch in this country which can produce food to be utilised for the production of food. Moreover forestry can wait, for it will not bring back any wealth to us for another 30 or 40 years. The need is now, and in the next three, four or five years. Forestry can wait until we get back to normal. A large number of skilled men are engaged in forestry and we badly need them in agriculture itself. The Government are still taking vast tracts of agricultural land for military purposes. In Wales we have had to protest time and again with regard to the threats held over our land. A far higher percentage of Welsh land has been taken than of English or Scottish land. Again, land ought to be used for the purposes of the production of food.

A few words about petrol—I merely raise the question because of the difficulties in our rural areas I am not referring only to the difficulties of farmers and so on but also to the difficulties of our public men. Take, for example, my own county which is an agricultural county. The railway is not of much assistance to us, because it runs more or less along the eastern border. The people in the rest of the county have to travel by road. I have the honour of being the chairman of quarter sessions in my county. When we met on the last occasion justices of the peace of all political opinion—Labour, Conservative and Liberal—were unanimous in passing a resolution saying that we could not possibly carry out our public duties if the basic ration were done away with, nor could we really assist in production in the way we would like. I am afraid that the cut, instead of saving the country anything, will really cost the country something.

May I come back to the economic situation which is our main concern? Of course, our difficulty primarily is the difficulty of every country in the world, for it has been caused by the war. We cannot fight six years' of war with millions facing one another under arms and with the terrible devastation caused by modern weapons without facing subsequently an economic situation such as we are experiencing today. Every country, whether actually involved or not in the war, is involved in this economic chaos. In this country in 1946 we were making a remarkable recovery. Millions had been demobilised from the Armed Forces and from the making of munitions and had found their way into peacetime occupation without direction. Exports had trebled in the course of two years. By the last quarter of 1946 the exports were nearly four times the level they were in 1944. Our adverse balance in 1946 was £400 million. If we deduct from that our commitments abroad, which were £300 million, our adverse balance in 1946 was £100 million. In fact, allowing for the change in prices, our position was better than in 1938, when our adverse balance was £70 million. During that year we did what, in my opinion, was absolutely necessary; we negotiated the loans with America and Canada. The idea was to tide us over the period when we could not sell manufacturing consumer goods to pay for our imports of food and raw materials.

Mr. Walter Fletcher (Bury)

The right hon. and learned Gentleman is, surely, a little confused when he talks about negotiating the American Loan in 1946. He must mean 1945.

Mr. Davies

Yes, during 1945. If I said 1946, I was wrong. That loan, it was felt, would enable us to tide over that period which we required to get back into peacetime production. It was meant to last us until we got back to normal, which was estimated to be somewhere about 1950 or 1951. What happened? There has been a misuse of the loan and an abuse of our resources which is the main cause of our position today. Instead of devoting our attention to the making of consumption goods, the Government themselves started to embark upon a vast capital expenditure, and, what is more, they encouraged everybody else to do so, not only the local authorities, but firms, companies and so on. Instead of devoting ourselves to the making of articles for sale, we were devoting ourselves too much to the building of great machinery and matters of that kind. That is perfectly all right in its own time, and we shall have to do it some day, but at the moment we should have devoted all our attention to consumption goods.

The second cause was the failure to balance the Budget. The Chancellor of the Exchequer allowed an inflationary position to be created with an abnormal inflationary pressure which last April amounted to something like £1,000 million. I am not going into the details with regard to that, because I understand we will have an opportunity of debating it more fully when we come to the supplementary Budget. What is happening? Let ms go back to 1946. Our capital outlay for 1946 was £714 million. There was a Budget deficit of £407 million making a total of £1,121 million. We met that by savings amounting to £721 million and drawing on some foreign credits to the extent of £400 million. Thus we were travelling fairly well. Granted that in this year of 1947 the Budget deficit had been removed, and granted that we kept our capital outlay at £700 million, we might have been travelling more or less on a fairly even keel. All that the Chancellor had borrowed up to 1st January of this year out of these millions was £150 mil ion, but what happened? In the Economic White Paper issued in February the Government stated that the capital outlay which had been £700 million in 1946, which was far too much, was to be increased in the coming year by another £400 million, making a total of £1,100 million. Even if the Budget had been balanced, we should have been £400 million worse off than we were in the previous year.

Meantime, what was happening? Stocks were being used up. The pipeline was getting empty. There were shortages of stocks as well as shortages of materials and of labour. Then what happened? As I have said, down to 1st January all that the Chancellor had drawn was £150 million. By 20th August he had drawn on that fund £825 million. As far as I can see, during the first six months the adverse balance came to only £265 million. Assume that by the end of August £350 million was the adverse balance. Take that £350 million from the £825 million which he had drawn, and there remains £475 million unaccounted for. We want to know where that sum is. What has happened to it? The Chancellor makes a statement one day and then has to broadcast within a few days a statement which appears to say completely the reverse. Where has that £475 million gone?

Has it gone to pay for past debts? The Loan was meant only to meet current accounts and was not meant to be used to pay for past debts. If it was used to pay for past debts indirectly, that was a breach of the agreement made with the United. States. I have taken so much time already that I must cut these remarks very short, but I do want to know what has happened to that £475 million. I gathered from the speech of the right hon. and learned Gentleman yesterday that this was his position: he could have managed wonderfully at the head of Economic Affairs if he were not short of dollars to pay for the goods we ought to have from America, food and raw materials. If he could get over that difficulty in some way, all would be well. He hopes by the end of 1948 to get all right locally, but he will still be short in. America by £270 million. If that £475 million were here, and had not been dissipated in some way by the Bank of England and the Chancellor of the Exchequer, he would be in a better position today. Let us remember that the Bank of England has been nationalised and that the complete control of it is now in the hands of the Treasury.

I want to end upon another note. We are waiting for the answer to the questions I have put, but there is something far worse. We shall come through this economic crisis. This country has always come through. The material position does not worry me anything like so much as the spiritual. This Government instead of tackling the real causes which were over-expenditure upon capital and inflation began by cutting imports. That was wrong As was stated yesterday we ought not to restrict; we ought to expand if we possibly can. The more we can import either food or raw materials, the better is our position not only to raise our own standard of life, but for our exports. Because of the position the Government have got into, they have had to cut imports.

What is far more serious than that is that they are taking power to deal with human beings. First of all, in spite of shortage of labour, they are bringing in conscription in time of peace for the first time in the history of this country. The second thing I warned the House about when the Government made their first step towards the direction of labour. Now the Government have brought in the direction of labour. The Government are dependent for their position upon the trade unions; the whole basis of trade unionism is the right of any individual to withhold his labour. Prior to the Trade Union Act, the individual could be prosecuted, and was prosecuted, for withholding his labour. Now it has remained for hon. and right hon. Gentlemen opposite to say, "No, you shall not withhold your labour," and, what is more, to bring in conscription of labour.

Many Members on that side of the House say that unless they direct labour we shall get unemployment and starvation, but that is the wrong way. We have all condemned it. There will be no unemployment in this country so long as we get proper materials, not only for next year but for a whole generation. The Government have the right of controlling materials. Millions of men found their way back into employment after the war. They would still find their way there if the Government would release materials. This Government call themselves a progressive Government. There are two ways of compulsion; one is by starvation and the other is by legislation. The legislative way was the one which was used on the Continent, in Germany and in Italy. The governments who used it started by being Socialist, under Hitler and Mussolini and ended by being totalitarian. There is also direction of labour in Russia.

We once had direction of labour here, under an Act of Parliament which is a disgrace to our Statute Book, but we have to go back 600 years to find it. There is not a history book which any Member of this House has read which does not condemn it as a black spot. It was the Statute of Labourers in 1349. There was economic difficulty at that time. The Black Death had devastated the country Wages were rising. A House of Commons of landowners said, "Peg them in their jobs and keep them at their wages." There is not one of us who has not condemned it since. It has been left to a so-called Labour Government to come forward and reintroduce that Statute of Labourers. I wonder what would have happened if that had been introduced by hon. and right hon. Gentlemen of the Opposition above the Gangway. If they had dared to bring in conscription in time of peace every hon. and right hon. Gentleman opposite would have taken the same attitude as they took in May, 1939. If the Opposition had dared to introduce direction of labour the party now in power would have called a general strike.

It is extraordinary, at a time like this when the spiritual rights of human beings are being threatened as they have never been before and when we have been through a six years' war fighting against dictatorship and the threat to freedom, that in this country we are taking the first steps down the road to totalitarianism. We shall, as I have said, come through this economic crisis, but let us beware of giving up any one of our spiritual rights, because when we lose those, we not only lose them, but we lose the right and the very means of getting them back. I started out with every good will towards the Government, but they have so misled us up to the present that we have no longer any confidence in them.

11.59 a.m.

The Chancellor of the Exchequer (Mr. Dalton)

The right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) has raised, as is natural and proper in the Debate on the Address, a large number of different topics. I am sure he will not expect me to pick up all those today. I am tempted to say something about the House of Lords, but it can wait a bit. I am tempted also by some of the observations towards the end of his speech in which, it seemed to me, he was making a gross confusion between what we British people, with the full light of democracy shining upon us—[Interruption]—yes, with the full light of democracy shining upon us at elections from time to time and in many other respects—are doing, and the events which occurred in the days of Mussolini and Hitler, in the countries which they ruled.

I would like to leave all that aside today because I am very anxious, and have been awaiting an opportunity, to answer Questions which were put again by the right hon. and learned Gentleman with regard to what I may call the collar events of recent months. They have been asked before, and I am anxious to give the House as clear a statement as possible on these matters. It is right that it should go on the record, and I shall welcome any comments that may be made from any quarter on what I shall say. I hope I shall be able to dispose of some of the old wives' tales which have been circulating, sometimes above the signatures of academic persons who are not completely well informed on these matters.—[An HON. MEMBER: "Such as Professor Robbins?"]—Including my old pupil, Professor Robbins, a very talented economist but not fully informed—that is natural, as he is now no longer in Government service—on some of the subjects on which he writes. I will pass to a statement of fact.

On 20th August, we temporarily suspended the general convertibility of sterling. Why was this done? It was done because of the very rapid exhaustion, at that time, of our gold and dollars, including both American and Canadian dollars. The figures regarding the drain on reserves are these. In the second quarter of the year the drain had run at the rate of about 75 million dollars a week. I am using dollar figures throughout, except where I specifically indicate sterling. That rate rose sharply during July and August. In July, it averaged 115 million dollars a week, in the first four weeks of August it averaged 150 million dollars a week, and in the last full week before the suspension of convertibility we lost no less than 237 million dollars. Against those facts no one denies that suspension of convertibility, at that time, was necessary. The Opposition did not ask that Parliament should be summoned to discuss the question, and no one has said that we could have done otherwise than we did at that date. The figures I have quoted are plain evidence to the contrary.

But there are two things that are said in comment on this period and I wish to deal with them both. Some say that this shows that we should never have undertaken the convertibility obligation of the Loan Agreement, and others say that we should have suspended convertibility earlier than we did. As to the first of those observations, the convertibility clause was, of course, a fundamental condition of the Loan Agreement, which we disliked, as I made clear when I proposed the Agreement to the House, and on which we nearly broke the negotiations with the United States Government at the time. I said in this House on 12th December, 1945, in the Loan Agreement Debate: This Agreement …. is the result of three months of very intricate discussions and of some very hard bargaining; and I frankly tell the House that more than once we have been very near to breaking point in these discussions. As regards the convertibility clause in particular, I said: As part of the Loan Agreement with the United States, we have now agreed to restore, within a year— this was the point— from the effective date of entry into operation of that Agreement, the free convertibility of sterling for current trade. I went on: We— that is, His Majesty's Government— were most anxious to keep a somewhat longer period; and it looked at one stage as though, on this point, the negotiations might break down. Finally, though with very great reluctance and after very great prolongation of discussion, we felt that we must meet them on this point sooner than break the whole negotiation."—[OFFICIAL REPORT, 12th December, 1945: Vol. 417, c. 427–439.] I made it abundantly clear that we viewed this condition with misgiving and dislike, but, balancing it all up, I advised the House, and the House accepted the advice I gave, to accept the Agreement, even though it contained this, as we thought, dangerous and objectionable clause, and the House approved the Agreement with a majority of 247 votes. More than 80 per cent. of the Liberal Party voted for the Agreement. A certain number of hon. and right hon. Gentlemen opposite voted for the Agreement, and a number of others abstained from voting. The Communist Party voted 100 per cent.—all the two of them. That, therefore, was the judgment of the House at that time. It was right, on the balance of consideration, to take the Agreement, even though it contained this clause. We all had misgivings such as I voiced, and I do not think that anyone, certainly not I, following the course of events in the months that ensued, at any time lost the misgivings we had when the Loan Agreement was first entered into. We always had a fear—but it would not have been wise constantly to give utterance to it—that it might prove in the end to be unworkable in the economic conditions of the world; but having undertaken the obligation we were clearly bound in honour to go all out to observe it, and, furthermore, having once undertaken it, it would have been great folly to have given any appearance of hanging back from it.

References are made to the Bank of England and the Treasury. Of course, I get lots of advice, some from the officials of the Treasury and the officials of the Bank of England, and some from many other quarters; but in the last resort it is my responsibility what advice I take and what I reject. I do not like criticisms which I sometimes see and hear upon the persons who advise me. I would rather that I myself were criticised. That is the right principle—I am not concerned except to set it out in general terms and in relation to my own action in this case.

Mr. Oliver Stanley (Bristol, West)

Circulate it to the Cabinet.

Mr. Dalton

I take all the blame and all the credit. In public, my advisers should take neither the one nor the other. I therefore ask that there shall be no criticism of officials of the Treasury or officials of the Bank of England; but if it is thought that, on their advice, anything wrong has been done, it is I who should be blamed, not they, and when, occasionally, what may have been advised by them comes out all right, the convention is that, publicly, I take the credit and not they.

Having cleared the ground on that point, let me say that, quite rightly, we started, following the acceptance of the Loan Agreement, gradually to ease and minimise the strain on sterling which we knew it would cause in due course by entering into a series of separate agreements, by easy and gradual stages, with a series of foreign countries. The first of these was the Argentine Agreement in October, 1946. Had we not entered into that agreement, we should not, at that time, have been able to secure the supplies from the Argentine we urgently needed—meat, linseed, hides and many other necessary commodities. This was followed by agreements with Portugal and the Low Countries in February of this year, and later by agreements with Italy, Brazil, Norway and many other countries, until, when the date of 15th July was reached, it had no overwhelming significance at all. There were only a few countries left in respect of which we had, for exceptional reasons, to ask the American Government to agree to a temporary postponement of convertibility.

The exchange of letters on that subject has been published. Mr. Snyder wrote to me on 14th July stating that at the request of the British Government the American Government had agreed to extend, for a period of two months, the time within which the British Government might complete arrangements with—and then followed a list of countries which I will not read to the House; but the most important of them, in terms of size, were France and the Soviet Union. Very well. I think, therefore, that it was right—and I emphasise this in view of the criticism that has been made—having accepted the obligation under the Loan, that we should go forward under this series of arrangements. So much for the first argument which I have mentioned.

The second ground of criticism was that, having accepted the obligation and gone forward towards its fulfilment, we should have chosen an earlier date at which to do what we did on 20th August. That argument has been advanced. I would reply that there never was any date until we reached the middle of August when it could have been said that it was clear beyond dispute—there may have been opinions and disputes—that it was impossible to sustain convertibility in the form laid down in the Agreement. Here, I draw attention to the wording of the Agreement, because many people have not read the Agreement with the care that should have been given to it. Many people have assumed—and have criticised us in this respect—that it was open to us to apply for postponement "in exceptional circumstances." That is not so. What the Agreement actually says is "unless in exceptional cases"—not circumstances—"a later date is agreed upon after consultation." That was illustrated by the facts of which I have just reminded the House—the list of "exceptional cases," that is, countries, with which we sought postponement. There were only a few of these exceptional cases, and the United States agreed readily to that postponement, but it was never possible before 20th August, either for us or for the United States Government, to plead exceptional circumstances as an excuse for a general postponement of convertibility.

Stories have been running around, which are not true, that representatives of the United States Government made us an offer. That is not true, and anybody who knows the constitutional position in the United States knows that it is not true, because no general postponement could have happened without a long debate in Congress. Under the terms of the Agreement, it was not within the power of any spokesman of the United States Administration to make such an offer. It is expressly provided in the Loan Agreement that its terms should not be revised without Congressional approval. Therefore, until the point was reached on 19th August, the day before the actual suspension took place, when it had become clear beyond any shadow of doubt that the obligation of convertibility was no longer supportable by us, it was not possible to act. But, I wish to pay my tribute to the way in which, when that moment came, the United States Government met us, and met us swiftly, in the most friendly fashion and in a spirit of great understanding. The Secretary of the United States Treasury, Mr. Snyder, in a letter to me which has been published, said that the drains to which the dollar resources of the United Kingdom Government were being subjected had run—and I quote his own words— at a rate greatly in excess of the normal flow of current transactions, with consequent peril to the re-creation of the multilateral payments system, which is the major objective of the Anglo-American Financial Agreement. I pass now to consider the criticism, which has been suggested, that the Loan was wasted. Here I wish to give the House some figures showing just how, in fact, these dollars were spent; this will be good also for the dons and may improve the accuracy of the lectures they give to the young. On 7th August, I gave some details up to that time. I will now bring them up to date and try to give a complete picture of our total United States dollar expenditure from the middle of 1946, when we first began to draw upon the Loan, until the end of the week in which convertibility was suspended—a period in which we drew 3,350 million dollars of the United States Loan.

The total net dollar expenditure of this country and of the rest of the sterling area—I will separate them later—during that period was 3,115 million dollars. There is a difference here of 235 million dollars, but this is a sum which was drawn before, and spent after 20th August. Therefore, the figure that we are going to consider is this 3,115 million dollars and how it was spent. It falls under four heads. There were, first of all, United Kingdom purchases in the United States—purchases of United States products. In the second place, there were United Kingdom purchases in the rest of the Western Hemisphere, including Canada and Latin America. In the third place, there were the expenses of the other members of the sterling area in the Western Hemisphere; and, in the fourth place, there were expenses by ourselves and the rest of the sterling area, which I group here together, in our dealings with the rest of the world outside the Western Hemisphere and the sterling area itself—that means mainly Europe and the colonies of European Powers.

First of all, let me take direct United Kingdom purchases from the United States. In this period up to convertibility being suspended, these amounted to 1,350 million dollars net. I will add for the sake of completeness, that the gross expenditure on United Kingdom purchases from the United States was 1,800 million dollars, which was offset by 450 million dollars of earnings from visible and invisible exports. That gives a net figure of United Kingdom purchases of 1,350 million dollars.

In the second place, the direct United Kingdom purchases in the rest of the Western Hemisphere amounted to 960 million dollars. Therefore, adding these two together, we get 2,310 million dollars spent by the United Kingdom alone in the Western Hemisphere. That, of course, is the major part of the loan. The sums spent by other members of the sterling area in the Western Hemisphere amounted to 620 million dollars, and the spendings of the whole family party, ourselves and the rest of the sterling area, in the rest of the world outside the sterling area itself and the Western Hemisphere, amounted to 150 million dollars—a relatively small figure, of which much has been made by imperfectly informed commentators.

Mr. Ivor Owen Thomas (The Wrekin)

Are these net figures?

Mr. Dalton

These are all net figures. They add up to 3,080 million dollars. Finally, we paid, on behalf of ourselves and other sterling area countries, our subscription to the International Bank, amounting to 35 million dollars. This makes up the balance—3,080 million dollars under the four heads I have indicated, plus 35 million dollars, the subscription to the International Bank, make 3,115 million dollars.

Mr. Sydney Silverman (Nelson and Colne)

Has any calculation been made as to what these figures would have amounted to if the price levels had remained stable?

Mr. Dalton

I will come to that in a moment, if my hon. Friend will allow me to develop the argument. All these figures were continuously inflated in the sense that a given dollar expenditure brought in a lesser quantity of goods and services as the American price levels rose.

Mr. Stanley

Before the right hon. Gentleman comes to figures, does he propose only to give figures of net expenditure in the United States? I think we should have the gross expenditure, because it might well be that the portion covered by our exports to America might be reserved for luxury consumption goods, while the more essential items might have been treated under the net expenditure. Could we have the gross figures as well?

Mr. Dalton

I did in fact give the right hon. Gentleman the gross figures—

Mr. Stanley

Could we have the details in gross figures?

Mr. Dalton

I do not want to take too long, but I will try to give all the essential figures, and if questions are asked me I shall be happy to answer them. I did give the gross figure regarding the major item, namely, the gross expenditure of the United Kingdom in the United States—

Mr. Stanley

We would like details of that.

Mr. Dalton

Within limits, certainly. I am anxious to give the broad picture, which can be filled in with details if desired. I am going to consider, first, how these sums were spent, and what we got in return for these dollars. Take first the United Kingdom's direct expenditure in the United States—1,800 million dollars gross. Of this gross figure some 23 per cent. was spend on food, 28 per cent. on raw materials, including oil, 15 per cent. on machinery, 7 per cent. on ships, 10 per cent. upon tobacco, 4 per cent on films, and 13 per cent. on keeping the Germans alive. Under the second head, United Kingdom expenditure of dollars in the Western Hemisphere of 960 million, 360 million of these were spent in Canada, 360 million in Central America, and 240 million in South America, particularly the Argentine. Practically the whole of this expenditure represents imports of food, oil and raw materials. To illustrate, the commodities were mainly wheat and timber from Canada, oil and sugar from Central America, meat, maize, hides and linseed from South America. Where is the waste and dissipation in any of those figures? I submit that those figures show no waste at all. There is, indeed, an argument, on which our critics are divided, as to whether we spent too much or too little on capital equipment. The right hon. Gentleman the Member for Woodford (Mr. Churchill) who leads the Opposition, has sometimes developed the argument that we could have spent much more on capital goods.

Mr. C. Davies

indicated dissent.

Mr. Dalton

The right hon. and learned Member for Montgomery (Mr. C. Davies) shakes his head. He may disagree, but the right hon. Member for Woodford took that view. The right hon. and learned Gentleman, on the other hand, thinks we spent too much on capital goods. It may be that, as between these critics on either flank, what we spent was about a reasonable proportion, having regard to all the circumstances. Anyhow, it was not waste to buy a machine, any more than it was waste to buy food or linseed; and since these dollars were spent on the goods I have quoted, I maintain, without fear of contradiction, that the statements I have made dispose of the argument that: here was any waste, or dissipation.

On capital equipment let me give this figure. During the last two years the value of our net investment at home has been in the region of £1,400 million—not dollars, but pounds. That is a larger figure than the total of our drawings, in this period, from the American and Canadian lines of credit. We should not have been able to make that net investment unless we had had those dollars coming in. We could not have gone so far in the building of houses and factories, and the re-equipment of factories with more modern machinery, had we not had those dollars coming in. Therefore, I maintain, against those who say that the loan was squandered, that it was of incalculable value in helping us through the first difficult chapter of post-war reconstruction, and enabling us to make a good start in repairing the inevitable run-down of our capital equipment and overtaking the arrears in housing and other forms of building after six years of war. It was undoubtedly of great value to us, and it is wrong that it should be alleged to the contrary. Did the dollars "leak away" or "go down the drain," as suggested in the phrases which have been bandied about? Such statements have no foundation in fact at all.

I have already dealt with the United Kingdom purchases in the Western Hemisphere, and now I turn to the third category to which I referred, the dollar expenditure of the rest of the sterling area. That is expenditure for supplies which had to be purchased from dollar sources—because supplies from other- sources were not available—such as American and Argentine cereals for India, fertilisers for Egypt, cotton textiles for the Colonies, and so on. They were supplies which could not be obtained, except from dollar sources. Expenditure on these was, of course, a drain against our own dollar resources, since we should bank for the rest of the sterling area. The total of this dollar expenditure from the rest of the sterling area, to be set against our central reserve during the period from the effective beginning of the Loan up to the suspension of convertibility, was 620 million dollars net, after allowing for dollar income earned by them; and of course a considerable amount of dollar income is earned by the sale of rubber, jute, wool and so on. The net dollar requirements of the rest of the sterling area in this period, were 620 million dollars.

But there is another very important consideration to be brought into the same balance sheet. During the same period, the sterling area countries, although they drew 620 million dollars net from the reserves, handed over to our reserves rather more than 400 million dollars of gold. That was chiefly from South Africa. There were 350 million dollars from South Africa, and 50 million dollars from the rest of the sterling area. That was a very important contribution from the gold production of the sterling area, in support of the central system, which is a fact that has also been missed by some of the critics.

But there is another criticism which we hear in this connection. We hear that sterling area dollar expenditure was largely financed by the running down of the wartime sterling balances. I wish to give the facts of this. Between 1st July, 1946, and 31st August, 1947, the sterling balances in the sterling area countries were drawn down by about £230 million, four countries being responsible for almost the whole of this. They were: India, £135 million; Egypt and the Sudan, £40 million; Ceylon, £25 million, and Australia, £25 million. That makes a total of £225 million for those four countries, out of the total draw-down of the sterling balances of the whole sterling area of £230 million. But only a small part of this total in pounds was turned into dollars.

As regards Australia, the decrease in her sterling balances is almost wholly accounted for by the most generous gift of £20 million which she made to us, and which was acknowledged by this House with great warmth and with a feeling of comradeship at the time. With regard to Ceylon, although she drew down our sterling balance, as I have indicated, she showed a net surplus of dollars over the period. She sold her products to the United States at good prices. There remain India and Egypt. At the most—and the House will see in a moment why I say at the most—there were about £40 million in respect of India, and £10 million in respect of Egypt. That makes £50 million. In all, at the most 200 million dollars were drawn from the loan in repayment of the wartime sterling debt.

Indeed, it may well be that the figures are much less, for a reason which I will try to explain as clearly as I can. Much of the dollar expenditure may be chargeable against current sterling receipts of these countries, as distinct from the wartime accumulated balances. When two streams join and they flow on, it is very difficult to say down which contributory stream any drop of water flowing beyond the point of junction came. And so it is with this. If, in fact, they were purchasing goods for their own necessities, and if, during this period, they were earning a current income from their trade, and also drawing upon the sterling wartime accumulation, it is very difficult to say which dollars entered through which stream. But giving it at the most pessimistic, from this point of view, at the very outside, not more than £40 million for India and £10 million for Egypt were drawn from dollar expenditure of wartime sterling balances. The maximum, therefore—and I believe it to be a maximum with a reasonable margin,—was 200 million dollars, or some six per cent. of the total number of dollars we are talking about.

Finally, I come to the expenditure under the fourth head, and here I take together the expenditure of the United Kingdom and the rest of the sterling area outside both the sterling area itself and the Western Hemisphere, that is, mainly on products from Europe and the French and Belgian Colonies. These figures aggregate 150 million dollars net, and it is interesting to observe that, during the period from the middle of 1946 to the suspension of convertibility, the total sterling balances of all these countries in Europe and elsewhere increased by about £70 million. So there was no running down there.

There is an important point in this connection in respect of the time factor. Practically the whole of the dollar drain attributable to the country concerned was concentrated in the last six weeks of convertibility. During the second half of 1946, we actually acquired from these countries 40 million dollars. We had a favourable balance during the second half of 1946. In the first half of 1947 they drew only 35 million dollars; but in the period from 1st July to 31st August, they drew 150 million dollars.

In this last period there was a rapid reduction of working sterling balances—not wartime sterling acquisitions, but working balances, arising from current receipts. These balances were rapidly drawn down in the last weeks, whereas, in the preceding months, some of the countries, including some with whom we had reached separate bilateral convertibility agreements, had actually increased their sterling holdings. But, in the last six weeks of convertibility, there was a very sudden acceleration of the conversion of such sterling as they held, acquired, as I say, from current trade. This was due to two factors. It was due, first of all, to the ever-growing dollar famine throughout the world, the fact that they wanted dollars badly; and, in the second place, it was due, very naturally, to the doubt as to how much longer we could sustain the convertibility obligation.

Therefore, if I may try to bring the threads of the argument together, the Loan was all spent on dollar goods and services; it was not wasted, cither by the United Kingdom itself, or by other members of the sterling area, or by other countries, such as those in Europe, which had acquired, through trade with us, sterling which was convertible into dollars. That is the broad statement; I make only one qualification, which I have already mentioned to the House, that in respect of the sum, certainly not exceeding 200 million dollars—and for reasons I have given possibly less—not more than six per cent. of the total was drawn by India and Egypt from their wartime sterling balances.

As to the rate at which the Loan was drawn it was, of course, drawn much faster than cither we or the United States Government anticipated when it was first arranged. For this there were three reasons. First of all, as my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) indicated in an intervention earlier, because of the rapid and continuing rise in American prices all through this period, we were continually finding that we had to give up more dollars for a given quantity of goods. It was a continuing process. In the second place, there was the continued and abnormal dependence, far beyond what we had hoped to see achieved, of the whole non-dollar world upon the American continent. This meant, of course, that all those concerned, because they needed dollars so badly, would turn anything they could, into dollars, including our sterling. In the third place, there was, as I have said in view of the admittedly increased drawing upon the Loan, an increasing doubt as to how long convertibility could be sustained. These were the reasons why the Loan went so much faster. I repeat that there is no evidence whatever to substantiate the loosely formulated charges that have been made by highly educated men that large quantities of this sum of dollars were wasted, and dissipated, and have leaked away or disappeared through some miracle or failure of control by those who work for me, whether at the Bank of England or the Treasury. I repulse these allegations.

Mr. Stanley

Perhaps the Chancellor would now give the gross figures which are, of course, important.

Mr. Dalton

No, Sir. I am not going to give any more figures in this field. Certainly not. Of course, the Opposition are often in conflict with the rules of arithmetic, as we know, even at by-elections. Let me pass on to consider what has happened since 20th August. Let me here pay tribute to the splendid contribution made by the Minister for Economic Affairs to our discussion yesterday, and I think that even the ranks of Tuscany were not unmoved both by his arguments and by the passion which lay behind them. As has been announced by my right hon. Friend—and indeed it had been announced in an official communication a day or two before he spoke—already, since 15th September, we have had to sell £50 million of our gold reserves, that is to say, about 200 million dollars. That is a very serious matter, as I pointed out when I was referring to the first £20 million of it, just after the meeting in London of the International Monetary Fund. It is a danger signal, which everyone must be disturbed to see. Indeed, we must take necessary action, along the lines my right hon. Friend indicated so clearly yesterday, to check this sale of our final reserves, which we hold as trustees not only for ourselves but for Australia, New Zealand, India and all the other members of the sterling area.

We have had to sell, since 15th September, £50 million of our gold reserves. This is a new experience since the days before Lend-Lease. Before Lend-Lease, we were selling gold on a considerable scale. Since then, until 15th September, no gold sales took place. In addition, we have had to purchase from the International Monetary Fund 180 million dollars. I would like to emphasise the conditions of this arrangement. Strictly speaking, it is not a loan; it is an exchange transaction. We buy dollars for sterling, and we are entitled to buy in any one year 325 million dollars. Of this purchase, 217 million dollars, which represent our quota, are free of any interest charges except an intial service charge of three-quarters of, one per cent. There is no interest payable on the first 217 million dollars, and we are not yet at that point. We have drawn only 180 million dollars. On the remaining portion of our quota if we go beyond 217 million up to 325 million—108 million dollars—we should pay no interest for the first three months and then only half of one per cent. for the next nine months. Provided we can replace the money in reasonably good time, this is not an onerous transaction. Of course, if we were not able to replace these dollars in a reasonable time, the interest charge would gradually go up.

On the other side of the account, as the House knows, the South African Government have agreed, subject to Parliamentary approval, to lend us, in gold, £80 million, for three years, at one half of one per cent. interest. I, personally, on behalf of the Government, have already expressed our deep appreciation of this most timely measure of assistance from our South African friends. I should like to emphasise that an equally valuable provision of the agreement is the additional offer which South Africa has made to pay us in gold for any net (drawings which she makes on the central sterling area reserves of foreign exchange during the period of the agreement. Therefore, she will make no net demand at all on those reserves during the three years of the agreement.

Only this morning I read a statement by Field Marshal Smuts, in a speech reported from Capetown on 23rd October, in which he emphasised another element in the agreement, namely, that neither this Government nor the South African Government looks in a friendly way upon refugee capital seeking to move from this country to South Africa. As the House knows, the Exchange Control Act prevents, I believe effectively, the flight of capital from this country, except in very negligible quantities, to territories outside the sterling area. There is no exchange control as regards movement within the sterling area; but there is evidence that there has been a bit of "funk" capital, as some people call it, or refugee capital, which has been seeking to find another home and to He idle in a South African bank. Therefore, I welcome very much the statement of Field Marshal Smuts, and I hope that everybody else will welcome it equally. He said that capital was flowing into the Union of South Africa, which might easily become a place or refuge for such capital. He also said: It is part of our arrangement with the British Government to see that this funk capital is not coming to lie idle here. I thank the Field Marshal both for what he said and for the words in which he said it.

Earl Winterton (Horsham)

I think the right hon. Gentleman will sympathise with a point I would like to make. It is that those of us who have for 30 years had important interests in South Africa are not to be prevented from continuing those interests or from reinvesting. What he is referring to is refugee capital in the true sense of the word. I hope that he will make that clear.

Mr. Dalton

I am very glad to make it clear to the noble Lord. There was a pretty full statement made when the South African Agreement was announced. It was made clear there that we were very anxious to do nothing to interfere with what I think was called the legitimate and productive use of capital funds for the development of the South African gold industry or their fruit-growing industry, or any of the other industrial or agricultural developments in the Union. That is one thing. We welcome that. On the other hand, we do not think very highly of some of these gentlemen who put some of their money over there, who may think they can dodge tax over here, and who are only too willing to forget they are British citizens when temptation comes. I think we are in complete agreement.

Mr. Drayson (Skipton)

They do not think much of you.

Mr. Dalton

The gallant Field-Marshal thinks well enough to enter into an agreement with His Majesty's Government in this country. I think it is better to try to keep party gibes out of the Imperial sphere. I was quoting an eminent soldier. I have spoken of South Africa's contribution. The other members of the Commonwealth within the sterling area are also considering most co-operatively how they can best help us to solve a problem which is as grave for them as it is for us, because they will equally suffer if these reserves run down too far. A few weeks ago, a conference was held in London, at which I had the honour to preside, and at the conclusion of which they all agreed to do everything possible to increase their dollar income and to diminish their dollar expenditure. Those who were present at the conference are all reporting to their respective governments, and we hope that, before long, a more exact balance will be worked out relating to the sterling area drawings.

May I say a word about the rate of the present drain of our gold and dollars? The right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden), on the opening day of this Debate, said that he was afraid that the rate of the present drain was as bad as in the period just before we suspended convertibility. I will give him the figures, from which I think he will be gratified to find that the position, although serious, is not so serious as that. In the second quarter of this year the drain of gold and dollars was running at about 75 million dollars a week. In the four weeks of July, as the tension mounted, this weekly figure rose to 115 million dollars, and in the four weeks to 23rd August it rose to 150 million dollars.

Since the suspension of convertibility it has been coming down. I wish it had come down faster, but it has been steadily coming down, and, in recent weeks, it has averaged about 70 million dollars a week; that is to say, it is now running slightly below the figure for the second quarter of this year before the sharp upward movement in July and August. That is not good news in an absolute sense; but, at any rate, the position is better than the right hon. Gentleman feared might be the case, and I am glad to give him that reassurance. But the figure is still about 70 million dollars a week, and that is a ruinous rate, which cannot be continued. As my right hon. and learned Friend explained yesterday, with such force and clarity, it can only be checked by exporting more and importing less, in respect of the dollar area. We must earn more dollars and spend less. There is no other way round the arithmetic at all. It has got to be a combination of those two operations.

The additional measures which the Government propose were announced yesterday by my right hon. and learned Friend the Minister for Economic Affairs, but I wish here to repeat one figure which he gave in his exposition; it is a very grave one, and needs to be underlined. Even if we succeeded in achieving all that my right hon. and learned Friend indicated yesterday in the programme which he set forth, we shall still at the beginning of the year 1949 be facing a dollar deficit running at the rate of 1,000 million dollars a year; that is to say, a dollar deficit of over 20 million dollars a week. Even if we succeed in all that we are planning to do, and even if the luck goes well, we shall still, at the beginning of 1949, be running a dollar deficit at the rate of 20 million dollars a week as against 70 million dollars now. That is the measure of the task which lie; in front of us.

But this reduction of imports and this increase of exports which we plan will, of course, intensify the present inflationary pressure, which has sometimes been slightly exaggerated by some persons up to now. Therefore, since this pressure will be increased, it will be necessary to counteract it, and that is why as has already been announced, supplementary financial measures will be introduced at an early stage of the Session. In other words, there will be an autumn Budget. I shall be speaking on this subject, in some detail, within a few weeks, and I think I should not be expected to give a preview now. But I will say this. If we are going to counter the new inflationary pressure which will arise from this double operation—the exporting of more of our home production and the importing of less from abroad—then the total revenue must be increased and the total expenditure must be diminished. I speak of totals. Both these things must happen. But in seeking out items, whether of revenue to be increased or expenditure to be diminished, there is obviously a range of difference of view and emphasis, and much debate may ensue.

I will not anticipate anything, except to say that it must not be assumed that some of the suggestions on either side of the House for raising more revenue or spending less—some of the suggestions which have been widely canvassed in the Press—will necessarily be adopted. That is a warning against assuming that the Press are fully acquainted with the minds of Ministers. They are not. It is part of the freedom of the Press that they should not know everything. If they knew everything, they would find difficulty in being completely free.

I wish to say one word to link this up with the national credit. I hope that all those, in all sections of the community, who are united at any rate in the desire that we shall come through these difficulties as well and as quickly as we can, will agree when I say that it is desirable to do everything we can to maintain the national credit, by which I mean a perfectly concrete and simple thing. We should give encouragement to the purchase and holding, as a firm investment of British Government securities of all kinds, including Savings Certificates. The Savings Movement lately has been lagging somewhat. Reasons can be given for that, but I hope we shall almost all agree—I look at the noble Lord the Member for Horsham (Earl Winterton) when I say "almost"—that it is a good thing for the nation if Savings Certificates are bought in larger quantities and encashed in smaller quantities. The same applies, as a general argument, to all purchases of British Government securities. I am glad to say that, during the past fortnight, there has been some improvement in savings. The latest savings figures are a little better. I hope that is the sign of an upward turn. I have also noticed some improvement in the gilt-edged market, and I hope that these improvements will continue.

Just as my right hon. and learned Friend made an appeal yesterday, so today I make an appeal to those who have got money to invest, whether in large or small amounts, that they should put it in British Government securities, including Savings Certificates, and keep it there. If they do so, I believe they will be acting as good citizens at this time. But I cannot say the same about those who, by speech or writing, try to discourage such investments in British Government securities or the purchase of Savings Certificates, and thus seek to undermine public confidence in a period of emergency. They, in my judgment, are bad citizens.

Lieut.-Commander Gurney Braithwaite (Holderness)

Does the right hon. Gentleman realise that the recent run-down in the purchase of Savings Certificates is due in no small measure to rumours of some kind of a forced loan, and, just as voluntary recruitment to the Services is hampered by conscription, so savings are affected by these rumours, and will he dispose of them?

Mr. Dalton

That would be going back on what I said to the House a few moments ago. If I begin by disposing of rumours, I shall be led on from point to point. I know that these rumours have been circulating in the Press; but I would remind the hon. and gallant Gentleman that, only a few minutes ago, I said that it must not be taken for granted that ideas most widely canvassed are in the minds of Ministers at all.

Lieut.-Colonel Braithwaite

That is a fact.

Mr. Dalton

That may be so; but if we deal with all the stories which appear in the Press we shall have a busy time.

I want now to say one word on economic and financial policy. It has become common among critics of the Government, particularly on the Opposition benches, to say that our economic and financial policies are not working in accord one with another. Very often, I understand, these are criticisms of things for which I am responsible. I say at once that, of course, the economic and financial policies should work together and supplement one another, as indeed they do under His Majesty's present Government.

I will give one illustration of how they do. We have now in this country less than 2 per cent. of unemployment. More than 98 per cent. of the insured population are now working. As an illustration of how the economic and financial policies are working together under this Government, I may say that even in the Development Areas—the old "distressed areas"—unemployment is now down to records below any which have been touched for a generation. It is down to just under 6 per cent. in South Wales, and we hope it will soon fall further as certain factories now in course of construction are completed. It is down to 4 per cent. in Scotland, and 3 per cent. on the North-East Coast. This is surely a most remarkable tribute to the combined economic and financial policies which have been pursued by this Government. It has never been known before—never in the days of Tory rule. This has been a most successful combined operation of our economic and financial policy.

Sir Waldron Smithers (Orpington)

Can the right hon. Gentleman give the proportions of the numbers in productive and non-productive employment?

Mr. Dalton

I could not give the figures on the spur of the moment. I should like, however, to give this perfectly serious answer to the question. The new developments, for which we are responsible, in the form of new factory building in those areas, are, of course, going to add very greatly to the productive, as distinct from the purely commercial or middleman activities of those areas, and it will certainly be found—the figures will be obtainable from the Board of Trade—that there will be a very substantial increase in the number of persons engaged in productive industry in those areas. That is what we take pride in. Between the wars, with a Conservative Government, we were very far indeed away from this state of affairs. We had mass unemployment. We had a means test. In those days, it was not dollars, it was human lives that were going down the drain. We have made things better since then, and the Government, and those who support it, are entitled to take full credit for that. That is the first instalment of my answer to the critics of what is called the disastrous financial policy of the Government.

Mr. Butcher (Holland with Boston)

The right hon. Gentleman will recollect that we had on the average more than one ounce each of bacon in those days.

Mr. Dalton

I think that is a red herring across this particular argument. The hon. Gentleman said that between the wars we had more than one ounce of bacon. Hundreds of thousands of people in the areas we are talking about could not afford to buy half an ounce of bacon. If this particular battle is to be joined, we are confident who is going to win. I say finally on this point—in view of the criticisms made of the Government's financial policy, aimed at me in particular—that I am very proud of any part I have had in bringing about the state of affairs I have been describing to the House.

I see, on the other hand, that the chairman of the Conservative Central Office, Lord Woolton, made a speech at Stoke-on-Trent on Monday night in which he said that these are—I quote him— Days of over-full employment. That is what he said. I do not like that expression, and I hope it will be explained later on, because, after all, he is a man holding a responsible position in relation, to the party opposite. If these are "days of over-full employment," that seems to suggest that, in the view of the Conservative Central Office, they would like a little less employment, or, in other words, that they would like a little more unemployment.

Viscount Hinchingbrooke (Dorset, Southern)

Less misemployment.

Mr. Dalton

I do not think the noble Lord is particularly qualified to answer. If it does not mean that, I should like to know what is meant by those words.

Viscount Hinchingbrooke

Was not the right hon. Gentleman one of the authors of the Coalition White Paper on employment policy, which defined full employment in a free society as 8 per cent. unemployed out of the total of those in work?

Mr. Dalton

No, Sir. I shall not go into that; but by full employment I mean that everybody is fully employed, or very nearly so; and I certainly should not think that a state of affairs in which 8 per cent. of the people were still unemployed was a state of affairs that could not be improved upon.

Viscount Hinchingbrooke

That is what was said in the White Paper.

Mr. Dalton

No, Sir, it was not said in the White Paper. I wish to touch on two other measures which have a financial as well as a social bearing, and are mentioned in the Gracious Speech. We shall complete the break up of the old Poor Law, as has been announced. This has been one of the declared policies of the Labour Party for many years.

Mr. C. Davies

And of the Liberals.

Mr. Dalton

Yes, and the Liberals have co-operated. The primary praise for this belongs to two who have passed away. Sidney and Beatrice Webb, and they would, indeed, have been - very happy had they lived to see this day. We will carry this through; and it will complete the new social security programme we have been passing into law. The National Insurance Act and the National Health Act, both passed last Session, will come into operation in July, and will not be delayed, as some people have suggested. They will come into operation in July, with all their social and financial implications; and, in spite of all the difficulties confronting us, we are not going to swerve aside from carrying through this most essential feature of the programme on which the last Election was fought.

Finally, we are going to readjust, this Session, the relations of national and of local finance. Taking account of the transfer of the hospitals from local to national funds under the National Health Act, and of the ending of the old Poor Law, with its financial consequences, and of the new block grant, adjusted on a different formula, there will be a substantial reduction in the rates in many parts of the country, particularly—and I emphasise this—particularly in the poorer industrial areas, on the one hand, and in many rural areas, on the other. The poorer industrial areas and the rural areas generally will gain very greatly under this new rearrangement. It will mean a much more equitable sharing of burdens, both as between the national Exchequer and the local authorities, and as between the different local authorities in proportion to their wealth and re- sources. That will be, I believe, a valuable measure in laying the foundation for the recovery of industry and agriculture, because there is no doubt that the burden of rates has pressed with terrible severity on many areas where resources have been scanty and where the margins of finance have been very narrow.

Neither my right hon. and learned Friend who spoke yesterday nor I can promise this House or the country any smooth or easy way out of our present difficulties. We have not promised it, and we do not promise it now. The burdens to be borne will be heavy. Everybody will have to take some share of them, and the best that we can do is to seek to ensure that they are fairly distributed amongst the various sections of the community. We must go forward with courage and clear vision; and if we do, I believe that we shall bring Britain through, victorious over all the forces arrayed against her, in peace no less than in war.

Lieut.-Commander Braithwaite

With songs in our hearts.

1.7 p.m.

Mr. A. R. W. Low (Blackpool, North)

The Chancellor of the Exchequer in his speech did not make the mistake that he made when he spoke to us the last time on the state of the nation before we went into Recess, of trying to spread more fog in front of our eyes to hide the serious situation in which we were. But his speech did not satisfy me in any way. He gave advice to his hon. Friends; he gave advice to some of his right hon. colleagues, about their responsibility for advice which they take. I hope they will heed that advice. He gave a long explanation, and he went into considerable detail—but not, I think, full detail—on the failure of convertibility from the point of view of the finances of this country. Though he said that he was trying to contradict the arguments put forward from the Liberal benches and from the Conservative benches on this side of the House, he did not attempt to explain the figure of £475 million which has been mentioned.

Mr. Dalton

There is no reality in that. I gave the actual figure of £476 million as a figment of some academic brain, and it has no meaning at all.

Mr. Low

When we have had time to study the net figures which the Chancellor of the Exchequer gave us, and have seen the gross figures for which my right hon. Friend the Member for West Bristol (Mr. Stanley) asked, and which were refused, then we shall be able to judge of whether the £476 million or £475 million is a figment of imagination on this side, or whether some of the figures given today are figments of imagination on that side. Then, too, he referred, as he has every duty to do, to the great inflationary pressure which faces the country at the present time. The House and the country must await the measures which the Chancellor may take in the Budget which we hope he will put forward in the near future, but when he tackles this serious problem—which he tries to make us believe has been over-exaggerated in the past by hon. Members on this side of the House—we hope he will not tackle it in such a way as to destroy the monetary incentives to which our people have been accustomed.

The importance of dealing with inflation, in the interests of the future of the country, was emphasised by the Minister for Economic Affairs. It is particularly important because it affects the prices of the goods we are trying to export. The Chancellor, like all hon. Members and the people in the country, must view with alarm and horror the rise in the price of coal and the rise in the cost of transport; that is, if he is trying to back up the efforts of his right hon. and learned Friend who spoke to us yesterday so clearly and, if I may say so, so bravely. But inflation affects us in other ways, too. It affects particularly the confidence which the would-be saver has in the result of his savings. The most important factor which the would-be saver has to consider is the value of the £. Will the value of the £ fall? It will fall, and considerably, if, we do not halt this inflationary tendency, which the Chancellor tries to make us believe has been over-exaggerated in the past. If it has been over-exaggerated in the past, then at the moment the tendency must be tremendous.

I now wish to address a few remarks to the Chancellor on the subject I mentioned a moment ago, monetary incentives. When he considers how he can increase the total revenue which he must have—and we all recognise that—I hope he will take into account the effect that his taxation measures will have on the individual man and woman working in the factories—and also those working in the offices for their work is very often just as important as that of those who are working in the factories, because if they work badly it throws a heavier burden on others. I hope he will bear in mind the effect which his direct taxation and indirect taxation measures will have. I know he must collect the revenue; there is no argument about that. But surely he can go too far in increasing the burden of direct fixation so that the man who earns the money has taken away from him any freedom of choice as to how he shall spend his money on those things he wants? I am certain that one indirect monetary incentive to which people look in these days is the ability to choose the way in which they spend that extra money which they have, over and above the essentials which they must buy.

The Chancellor gave no indication of any steps which he advocates or will take in cutting down Government expenditure. He said that expenditure has to be decreased. Of course, it has; it has to be greatly decreased. The only indication we have had up to the present of steps to be taken is a report in the Press that an order has been given to cut the expenditure on the Defence Services by £200 million, to which I will refer in a minute. I have to believe many of the statements I read in the Press because no statements are made on these subjects by official Government spokesmen. I imagine something is happening, and if I see such a statement in the Press which is not contradicted, then I assume that report is correct.

Before turning to the cuts in the Defence Services I want to say a little about other cuts in Government expenditure. Is it true, as my hon. Friend the Member for Mid-Bedford (Mr. Lennox-Boyd) said last night, that there are 3½ million governmental forms today? Are there 3½ million forms issued by, and worked upon in Government offices? If that is true it is a fantastic waste of time, paper, printing and money. Is it not time that the Chancellor and the Treasury examined closely the administrative methods of Government Departments, and the administrative rules, orders, and legislation which are put forward here, with a view to combing out any new rules, regulations or laws which will require more forms and more civil servants? A small risk might have to be run that a few men would get away with a breach of the law. But even at the moment, we find men getting away with breaches of the law in black marketing, and so on; yet we are wasting an enormous number of men and a large amount of money in trying to introduce new rules and regulations.

I now come to the proposed cuts in the Defence Services. Quite clearly, it is the responsibility of any Government to keep a proper balance between the amount of money and men allotted for our security and the amount of money and men allotted for producing domestic and export trade goods, and other economic purposes. However, I was astonished to see—again from reports in the Press, which I have not heard contradicted—the way in which these cuts were proposed. A decision was made by the Prime Minister on his return from holiday, that a cut would be made in the three Services amounting to a round figure of £200 million, which the Minister of Defence would divide out amongst them. How was that figure arrived at? All through last Session we were told frequently by the Minister of Defence that he had already cut the Services to the bone, but that he was looking round in order to be able to suggest any new cuts which might be made. That put the responsibility for making cuts quite squarely on his shoulders. Surely, he should have been the man to originate the new cut, unless we accept that the Services are not only to be cut down to the bone, but are to have part of the bone cut away as well.

The country and the House have been alarmed chiefly by the recent disclosure of the position of the Home Fleet. I was astonished when I first read about it, but I then began to see it might be argued that if these drastic measures have to be taken at some time, then the sooner the better. That may be; I am not qualified to say; if the Admiralty find that that is right, it is difficult to disagree. What I deplore is that the Government did not think fit to make the announcement to the country, and to take the people fairly and squarely into their confidence. If they had done so all this alarm and despondency—not only among ourselves, but among our friends elsewhere in the world—could have been prevented. That is the major mistake which the Minister of Defence has made in that regard.

There is another aspect of the small-ness of the Home Fleet, which I hope the Chancellor will pass on to the Minister of Defence, because I believe it to be a point of great importance. Throughout our Services there is a sort of disease. We have an enormous number of men, but a great operational weakness. We have, I think it can be calculated from figures given, 120,000 men in the Navy at home, yet we can man only a few ships. One of the reasons—and it is usually the reason given by the Government—is that the men have to be trained, and a large number of men have to be withdrawn from the sea to the shore in order to perform that training; this involves a tremendous effort. I put this question to the Minister, of Defence: Are we not now in the position that too few experts are trying to train too many inexperts with too little equipment and in too short a time? I believe we may have come to that position very largely through causes over which the Government had absolutely no control; very largely because of the run down of the Regular members of the Forces during the war. The Government have to take the initiative, if that is the position, and put it right. They should be prepared, if it is proved that there is a serious waste of time in calling up men, and that the whole military machine of the Army, Navy and Air Force is being completely [...], to take such action as, for example, to defer the next call-up. They should take the initiative to put right the balance, the Services can get unbalanced just as much as our economic and financial affairs. We are all agreed that we want to get our Services efficient, and that we do not want too many men and too much equipment but the right expenditure and the right balance.

There is one other way in which we can help to surmount our present serious position, and that is by closer consultations with the self-governing countries of the Commonwealth. I was delighted to hear the Minister for Economic Affairs, in his long-term programme for the future, placing so high the importance of Colonial development, but he did not mention the importance of Dominion co-operation in Colonial development and in other matters. Cannot we get together and pool our resources of men, ideas and materials, and co-ordinate our plans? Is it not time that there was much closer consultation with the other self-governing countries in the Empire, so that we can get a real "Design for Empire"? If we do that, we may find, much sooner than the Minister for Economic Affairs expects, the Commonwealth contributing not only to our recovery and to their recovery, but to the recovery of the world. This is a matter where we can get complete national unity. There is little talk now about blood-sucking Imperialism, because we all know what we mean by British Empire and Commonwealth, and the contribution which we can make to each other and to the world.

Let me close by saying one word on national unity. I was delighted that the Minister for Economic Affairs made no reference in his speech to nationalisation, or to reform of the House of Lords, as part of any short-term or long-term plans with which he was concerned for the restoration of our economic position, and for increasing our prosperity in the future. He has clearly in mind what are the essentials. Cannot we concentrate on these essentials, and forget for a while these nationalisation Measures? Can we perhaps forget partisan policies, such as reform of the House of Lords, tinkers' cusses and even the past misdoings and misstatements of right hon. Gentlemen on the Government Front Bench? The Minister for Economic Affairs gave us something which, after we have closely studied it and the implementation of it by other Ministers, might bring about closer unity than there is today. We should concentrate on all these things which will produce national unity.

1.25 p.m.

Mr. Ellis Smith (Stoke)

During the past 35 years, it has been my privilege to enjoy the friendship of all the great working-class characters of this country. I say today, let the British working-class movement be on its guard. Neville Cardus, who was born in one of the poorest homes in Manchester, described "Fame is the Spur," by Howard Spring, as the greatest novel of our time. It has now been filmed, and I describe that film as the greatest film of our time. Events today, with the aid of that film, are going to have a great effect upon the British people, and upon the working classes in particular. Those of us who can stand here with not a mark against our working-class integrity, can look forward to the effect of that film on the people of our country.

This is the third Gracious Speech of this Parliament which has enabled us to look back and to the future. May I congratulate the Prime Minister on the way he received Mr. de Valera, and I express the hope, on the part of the people of our country, that that interview will lead to close economic co-operation. I want to appeal to the Prime Minister also to bring about in some way a similar meeting with Joseph Stalin. The international situation is growing worse and worse, and we are in a serious economic position. Although I am still relatively young, I have already passed through two world wars, and as far as I am concerned, it is time that the people of the world declared war on war. The Prime Minister of the first majority Labour Government in this country can make a great contribution towards easing the international situation and our economic position by meeting the representative of that mighty country, just as he has met the representatives of other countries. Let me be brutally frank. No real Labour man can agree to any cuts in our housing programme. The most hard-working, harassed people of our country will now be going home with their baskets half-filled. The most hard-working frustrated people are the working-class women, who stand in queues for hours each week with their shopping baskets waiting for their food. Why have we not worked out a time-table in order to give some satisfaction and some hope to these noble women who are playing their part? Why have we not worked out a programme to give them more food, shoes, clothes and household goods?

We are being called upon to produce more. The morale of the workers is all right. They do not need to be talked down to about morale. They have proved in the past that they are the people 10 save our country, and they will again rally to our needs in these difficult economic times. If they are called upon again to save the country by working harder and faster, then those who produce the commodities should have the first call on those commodities. In Kensington, Oxford Street, Park Lane, Bournemouth and Torquay the shops are full. These commodities should be directed into the shops in the industrial areas.

On 15th August, 1945–and this gives me great hope and gives me some satisfaction, for, as far as I am concerned after what I have passed through, it is like living over again—I suggested, and if anyone doubts it I will produce the document, that we should prepare a national plan. Based upon that plan we should build machinery that would provide us with technical and market research; a plan for modernisation in order to produce by machines and not by slave labour—a plan which would enable us to bring about maximum standards of efficiency, increased output per man-hour and, at the same time, provide those in industry with more horse-power per man-hour. On 12th September, 1945, I suggested the formation of a National Resources Planning Commission. Any one who is a student of world affairs knows that every country in the world that is making any progress at all is working upon a planned basis in that way. On 24th September, 1945, I spent hours and hours, well into the night and morning, working this out in detail; providing charts, in order to show what could be done. On 28th September, 1945, I telephoned George Woodcock, who was then the research officer of the T.U.C., and I said to him "George, we are going to consider the future of the trade of our country." That man worked for hours and hours in the preparation of a document of which no notice was taken.

I suggested on the same day that the United Kingdom Trading Corporation should be kept in being and improved upon. What a strong position this country would have been in had we continued with the United Kigndom Trading Corporation. I followed that up by suggesting trade with the Soviet Union and with all the countries that would be prepared to co-operate with us. On 30th September, 1945, I suggested the appointment of a Royal Commission or a Departmental Committee to investigate and report on all forms of restraint, rings, monopolies and cartels. On 20th November, 18th December, and 3rd January, I made proposals in order to bring about a great increase in the production of goods that were urgently needed by our people, particularly in textiles, clothing, boots and shoes. On 20th December, 1945, I made an analysis of our manpower, and suggested that before the war our economy had become top heavy, that far too many people were employed in unproductive industry and far too few in productive industry. All this was of no avail. The country and the people will pay dearly for lack of planning in this respect, and the people will be able to realise who has been responsible.

On 3rd February, 1947, nearly 100 Members of this House signed a Motion suggesting that the time had arrived when a National Planning Commission should be set up. This is democracy at work. The Prime Minister, speaking in the Debate, said that a four-year plan was to be prepared. I want to ask, "Where is that four-year plan?" It should have been obvious two years ago that there were only two roads for our country today. One is the road backward. That is the Federation of British Industries road which, at the end of a sellers' market, would lead to pre-war chaos, to a world trade war and to further slumps. The other road is the road forward—building upon a planned economy. It is true that each road will mean a period of shortages and hardships, but the forward road will give our people some hope—something to work for and to five for.

Therefore, I appeal to the Government to reconsider their approach to our economic problems. We should begin to plan in order to take the forward road. In a few years' time, the United States will be involved in a gigantic slump or they will dominate the world's markets. Therefore, we need to be concerned about prospects, because if we tie our economy too closely to an uncertain economy it is bound to have its reflection upon our own country. I appeal to the Prime Minister in particular and to the hundreds of hon. Members who have come home fresh from saving this country after playing their part in the war. Surely, the time has arrived when the Government should take the initiative in order to try again to get world economic co-operation.

I heartily endorse the new idea of some people in regard to the British Commonwealth. My right hon. Friend the Foreign Secretary, speaking upon this subject time after time during the past 15 years in small rooms in this House, has put this proposal forward, particularly during the past ten years. Surely, the time has arrived when the British Commonwealth should be brought together to work out a plan for the maximum economic cooperation between the whole of the countries making up the Commonwealth. This does not mean that it should be confined to the Commonwealth. They would provide the basis for co-operation with all the countries in Europe, with the Eastern countries and with great Soviet Russia. We should say to them that the Commonwealth wants the co-operation of the whole of the peoples living in those countries.

We are in for a grave economic crisis. We are compelled to make a basic choice, and every man and woman in this country will be called upon during the next 12 months to say quite clearly where they stand in relation to the historic situation we have now reached. In the world, we are drifting and drifting. The effect of the economy of the United States on world trade is bound to lead to a world competitive war for trade. Therefore, this country should take the initiative in order that we can take the planned road. We are being asked to work harder and produce more. I want to ask: For what are we to work harder; of what are we to produce more? I have in my hand a brochure. A number of brochures were distributed amongst a selected few in London and some other areas but I understand that prices are not given. In this one the prices are given. A new Canadian squirrel fur coat costs £175; a Canadian squirrel jacket £240; a mink coat £2,200; a blue fox coat £185; a Bystander coat £420; a Canadian mink coat £1,950; and a Platina mink coat £3,800. Then they talk about national unity. I want national unity but for far too long in this country have the people to whom I belong been exploited, persecuted and victimised while, on the other hand, we get a state of affairs like this. Therefore I want to know—

Mr. Low

Does the hon. Member believe that there should not be any mink or fur coats?

Mr. Ellis Smith

I want to reply to the hon. Member for North Blackpool (Mr. Low). I want to be friends with the overwhelming number of people who visit that great seaside resort, Blackpool. I understand that we are in a serious economic crisis. If we are, who allowed these furs to be imported? Why have we allowed valuable labour and manpower to be spent in making coats of this kind? Who has allowed it? Why should we allow such beautiful photographs as are used in this publication to be devoted to this purpose? It must have taken weeks and weeks for skilled craftsmen to make the blocks for these photographs. Why allow this beautiful art paper to be used in this way, and who has allowed it? Well might the Press this morning be overwhelming in their support of what they realise it is going to mean to this country.

We were told yesterday that more machinery will have to be exported. Is there a plan for engineering production? Have the Engineering Advisory Council been consulted? Have the engineering trade unions been consulted? We were told that it was proposed to postpone all less essential things. I want to ask today whether housing is considered to be less essential? If so, it is going to mean a first-class scandal. The late Arthur Henderson, whose friendship I treasure and whose memory is going to remain evergreen, would never have stood for this. He proved that in 1931, and no one knows that better than does the Foreign Secretary.

These proposals were worked out by the officials of the Planning Board who have nothing in common with the Labour movement of this country. If anyone doubts that, let him read the Conservative publications that can be bought in Victoria Street. Ten months ago the Prime Minister said we were going to prepare a four-year plan. The export programme will create waves of disillusionment within twelve months. It is a wrong approach. Instead of an approach to secure maximum production, we have an approach to secure maximum exports. Thus will start again a mad scramble for markets which will develop economic rivalry that will give rise to political tension, with the result that in no time we shall be back again where we were between the two wars. Anyone who has any doubts about this should read of the struggle which is taking place at the present time for exports in the motor industry. Let them consider where we have got to in regard to price. We should have had a national over-all plan and from this we could have built up world co-operation.

Concern was expressed yesterday about the saleability of what we produce. I share that concern. Unless action is taken now along the lines I have suggested, the outcome will have a terrible effect on many of us, and particularly on the wages of the working people of this country. I want to draw attention to the difference between British 1939 prices and United States prices. We find what those prices were by a comparison of the prices for raw materials in the States as compared with Britain. The differences are—benzine, 272; calcium carbide, 144; caustic soda, 121; sulphur, 206; and there are similar figures for other chemical productions. Therefore, I am pleading for an immediate, minute investigation into the cost of all raw materials in this country. Unless steps are taken upon a grand basis and unless we take the constructive scientific way forward, which is what I am advocating, then the crisis in which we are now involved will be ever recurring and will become a perpetual crisis. We must plan and take adequate steps to deal with it. Twenty-eight years ago a Departmental Committee reported on trusts. This is what they recommended: We are unanimously of the opinion that it would be desirable to institute in the United Kingdom machinery for the investigation of the operation of monopolies, trusts and combines. After two years has any action been taken with regard to that? If not, the time has arrived when the Government ought to regard this as a most urgent problem. If they are asking us to work harder, they ought to take steps to reduce the costs of production in every possible way. Therefore, I am pleading today for a full investigation into monopolies, cartels and trade associations. I should like to know what the prices were which prevailed in a business prior to the formation of a trade association and the prices prevailing after the formation of a trade association. Those who investigate should have the full authority of this House to send for persons and papers.

What were the arrangements made before the war, and are those arrangements still in operation, for instance, between I.G. Farbenindustrie, I.C.I. and the Trafford Chemical Company? What Was the German connection with the Magnesium Electron Company, Manchester? In the building industry I understand there are 600 trade associations and everything that goes into a house is "ringed" in some way. If it was right to press this matter as we did before the war, then it is more urgently necessary that we should press it at the present time. The Trade Union Congress asked for full investigation into this on 14th November, 1944.

I would like to ask whether there is one hon. or right hon. Gentleman present who attaches to the Government of the day the whole responsibility for this serious economic crisis. If there is, I would direct his attention to the publication of the Tory Reform Committee, called "Tools for the Next Job." What do we find in this publication? It says: The task is not simply to repair the ravages of war, but to make good arrears of re-equipment which have accumulated during the past 45 years and to replace obsolete by up-to-the-minute ideas, techniques and equipment. This aim can only be achieved if the whole productive power of the nation is employed efficiently. The resulting loss of output can only be met by constantly increasing business efficiency by means of greater output per man-hour. All students of industrial affairs will agree with those words. Then the committee goes on, in another publication, to show the output per man-hour in our country and output per man-hour in the United States.

We have arrived at a very serious historical period in our country. We have to produce more. I want to be as generous as I possibly can with those who have the serious responsibility of dealing with these matters. We need modernisation of our industry. For too long have we obtained production by taking the maximum energy out of our people and too little energy out of the machines. I am not going to make too much of this matter at this stage, because I hope that those who are responsible will have regard to the urgent need for a planned capital expenditure in order to increase production by modernising our equipment and not by exploiting human labour to the extent that has taken place during the past 50 years.

I ask that a planned capital expenditure programme shall be worked out as soon as possible. The pre-war Russian reinvestment figure was 40 per cent. whereas our own was 7 per cent. Between 1938 and 1943, the United States' capital expenditure in industry was £4,000 millions, whereas in our own country it was £650 millions. These figures should give us something to think about. The textile industry is in a serious situation. Our own needs are so urgent that the industry must play a great part, as it always did in the past, in contributing to our export trade. I would remind this House that between 1920 and 1932, capital on which our people were having to earn a return had been watered by bonus shares to the extent of five or six times its value. In 1932 the wages of our people were £2 16s., £1 13s. and £1 3s. Cotton operatives have never worked harder than they are working at the present time, but the average earnings in 1946 were £5 10s. for men and just over £3 for women. Many women are working harder and faster than they ever did, and yet they are getting only £2 15s. per week. There are girls from Ireland who have been recently brought over, and who are now sick of the whole business. After six months' working and training, they are working hard in the mills of Lancashire for £2 15s. a week.

I close on the note upon which I started. The working class of this country have built up a powerful working-class movement. During the whole of that time, our people have been exploited, persecuted and victimised. Millions of people have given their lives in order to build up this party, which is a section of our movement. The working class will rally to overcome our urgent economic needs, and I want to prove worthy of the groat men and women who have helped to build up this movement. I remember when that noble character, George Lansbury, stood in his place in this House. His ideas were not accepted at that time, but now that we have passed through two world wars some of us are beginning to reconsider those ideas. Those of us who have enjoyed the friendship of working-class leaders like Robert Smillie and Peter Lee must keep those names and the principles for which they stood ever green in our minds. In this difficult period of our history we must determine to be worthy of them. We encourage all people from all walks of life into this party, but at the same time we must remember that the party has been built up for the purpose of emancipating the common people of this country. That is the clear call that we must all keep in our minds and of which we must prove ourselves worthy.

1.58 p.m.

Sir Waldron Smithers (Orpington)

I am sure that the hon. Member for Stoke (Mr. Ellis Smith) will forgive me if I do not follow him. I say with all sincerity that I have always admired his great independence of mind.

The Gracious Speech, and many of the speeches that have been made since, emphasised merely our industrial and economic problems, but there is something bigger and more profound which must be hewn from the rock of principle, with which we should build, if Britain is to be snatched back from the very brink of disaster. The Gracious Speech is on all fours with, and is a continuance of the insane Socialist policy put forward at the General Election in 1945. The Election programme has proved a delusion. The proposals in the Gracious Speech will also prove a delusion. Let us compare the acknowledgments that the Government have been compelled to make in the Gracious Speech, and in the speeches made by the Minister for Economic Affairs and the Chancellor of the Exchequer today, with the Election programme of 1945. This Government will go down in history as the Government of disillusionment. The proposals in the Gracious Speech are further evidence that ideologists and theorists, obsessed with vanity and drank with power, are determined to enact their ideologies and their theories, and damn the consequences.

The Government have two alternatives, to resign and own that they have made a mess of things, or to go on and on with the inevitable result of a dictatorship. I would ask hon. Members whether they have read the book "The Road to Serfdom" by Professor Hayek. It is one of the most remarkable books ever written. In that book he said: It is now necessary to state the unpalatable truth that it is Germany whose fate we are in danger of repeating. He goes on to his next warning, which is quite clear and incontrovertible. He says: Some of the forces which have destroyed freedom in Germany are also at work here. The supreme tragedy is still not seen, that in Germany it was largely the people of good will who paved the way, if they did not actually create, the forces' which now stand for everything we detest. In that connection I would ask the Government to note the words of the paragraph in the Gracious Speech which deals with forced labour.

The catastrophe with which we are faced was inevitable because evil principles of Government, as the outcome of 40 years of fallacious propaganda, have been and are being continuously applied. We have been warned about the right hon. Gentlemen in power now in clear terms: False prophets shall rise and shall shew signs and wonders to seduce, if it were possible, even the elect. Also: Beware of false prophets which come to you in sheep's clothing, but inwardly they are ravening wolves … Wherefore by their fruits ye shall know them. There is hardly any need for more arguments because, as the result of two years of Socialist Government, by results the Government stand completely condemned. We are in danger of repeating the 1931 crisis. I had the honour to be closely associated with Mr. Neville Chamberlain and the Opposition of that day, and I well remember a speech made by Mr. Ramsay Mac-Donald. He used a sentence which I will quote. It was true then and it is true today: It is not the distribution of wealth which is in danger; it is the very existence of wealth itself. Professor Lionel Robbins of the London School of Economics has been mentioned in the Debate on two or three occasions today. I would ask hon. Members to read his article called, "Inquest on the Crisis," in the October number of "Lloyds Bank Review." As he has been attacked, may I in his defence—he does not really want a defence—quote a short sentence from his article in which he says: In any review of the present economic crisis, the first thing that must be stated is that we are victims of a dreadful catastrophe … The average citizen has tended to regard the breakdown of the experiment in convertibility and the virtual exhaustion of our dollar resources as a matter of comparative indifference. But this state of opinion cannot persist. As the winter comes on, as our rations are cut and our amenities (such as they are) abolished, we shall all realise only too vividly that, for the urban inhabitants of a tightly-packed island, such as our own, to be caught with an annual adverse balance of payments of some £600 million sterling, and inadequate reserves to cover it, is no minor incident. It is the biggest disaster in our long economic history. How has this come about? We cannot undo the past … but we can learn from experience. It is still perhaps possible to rehabilitate our affairs and restore our fallen prestige. But only on one condition—that we understand aright the events of the last two years. I am glad that the London School of Economics has produced one professor who did not come under the influence of the Chancellor of the Exchequer.

In the first paragraph of the Gracious Speech the word "power" is mentioned. This Government is like the Governments of Hitler and of Russia. They are obsessed with the lust for power. All power corrupts, and absolute power corrupts absolutely. Yesterday, in the "Evening Standard" the hon. Member for Rugby (Mr. W. J. Brown) wrote a very telling article. He said this: The Government is doubly prisoner. It is the prisoner of the trade unions and it is the prisoner of its own left wing. I will sum up with a few lines written by Mr. Rudyard Kipling in a poem entitled "A Servant when he Reigneth", which applies to the Government today: His ears are deaf to reason, His lips are loud in broil, He knows no use for power Except to show his might. He gives no heed to judgment, Unless it prove him right, So when his Folly opens The unnecessary hells A Servant when he Reigneth Throws the blame on someone else His vows are lightly spoken His faith is hard to bind His trust is easy broken He fears his fellow kind. Here I am going to alter one word— The T.U.C. will move him To break the pledge he gave, Oh! a Servant when he Reigneth, Is more than ever slave. The stress in the Gracious Speech is laid on our economic difficulties, but this catastrophe is neither a financial, economic nor "dollar" crisis; it is a spiritual and moral crisis. We have spent many lives and much treasure and we have sold a great proportion of our overseas investments in the cause of freedom. Without a doubt that has weakened us, but we still have two great assets left, stability and confidence in the integrity, experience and knowledge of our people who conduct international trade. In a balance sheet one cannot assess the value, in money, of confidence or stability, but they are vital to economic and financial recovery. By their policy during the last two years, the Government have, to a great measure, destroyed at home and abroad the credit of and confidence in Great Britain and her people. For two years Britain has not been allowed to recover half as much as she would otherwise have done. Every obstacle has been put in her path to recovery and initiative, and incentive has been killed and, therefore, ability to recover has been taken away. Britain is in danger of losing her soul, and if she loses her soul, she loses her power to recover financially and economically.

The Government's policy has been to weaken the powers of resistance of the people of this country so that they could more easily enact their disastrous policy on a gullible people. I will give just one example of gullible people. It is typical of millions throughout the country. The other day a woman was told that the railways were to be nationalised. She replied, "Isn't that splendid? Then we shall all travel free." The Government have capitalised the financial and economic ignorance of our people in order to enact the disastrous Bills they have brought in. The reason for the catastrophe is the application of evil principles. If good principles are applied; good results will inevitably follow, and the opposite is also true. Without emotion, without any warm feeling of any kind, I say quite coldly to the House and to the country that we have to get back to the principles contained in the Ten Commandments, as fulfilled in the Four Gospels, and make them practical politics, or we shall perish. In 1945 the Election was won by the mass bribery, by the promise of material things to this gullible electorate.

The Command is: Seek ye first the Kingdom of God … and all these things shall be added unto you. So long as the Government keep putting the cart before the horse, there is no hope of material recovery.

Why should America, or anyone else, lend us money or give us dollars or credit, when they have no confidence in the present Government of Britain? America looks across the Atlantic and sees 47 million of customers, but what she wants are 47 million of prosperous customers, who can foot their bills and pay their debts. The first step to restore confidence in Britain abroad and in her ability to recover is to get rid of this present Government, and to return a Government which is pledged to free enterprise within the four walls of the Ten Commandments. The only solution is complete and uncompromising freedom in industry for men and for companies, freedom to trade at home and abroad without Government interference.

The Commandments say: "Thou shalt not steal" and "Thou shalt not covet," but this Government is threatening to steal and is coveting all the time. Where the carcase is, there will the jackals be gathered together. But they can only eat the carcase once! The Government should remove all controls inside three months, and allow the law of supply and demand to operate. That would create—[An HON. MEMBER: "Unemployment."]—a tremendous upheaval, but it would be as nothing compared with the complete disaster that will ensue if it is not done. The responsibility for recovery must be placed in the only place where it can properly be placed, and that is on the shoulders of each individual. If any Government or any person breaks the law of supply and demand, that law will break them, and Dean Inge has put this very concisely. He wrote: The right to life and liberty and the enjoyment of property lawfully come by and conscientiously used have, for 2,000 years, been regarded as the natural rights secured by the Law of Nature, which is older and more sacred than any human enactments. A Government which transgresses these natural rights has no moral claim on the obedience of its citizens. If these controls and all this rationing continue, the black market will increase, and there is nothing that the Government can do to stop it. The strongest instinct in every human breast is self-preservation, and hungry men will go to great lengths to get food for themselves and their families.

Great stress is laid in another section of the Gracious Speech on the adverse balance of payments and expanding exports. I have asked several Ministers personally when they appeal for expanding exports, to add this vital sentence, "We must export at world competitive prices or starve." Hon. Members talk about competition. Thank heaven, the mandate of this Government does not run beyond the shores of Britain. If we want to trade in the world, we have got to send out goods and services at world competitive prices. Ca'canny, Communist infiltration, the 40-hour five-day week, the continual demanding and granting of higher wages, all increase our cost of production, and must impede or destroy our ability to compete in the markets of the world. The Government cannot compel a man or woman to work. A man is free because he is a man, and God in His wisdom gave man the right of free will to use or to abuse. Experience abroad has shown that Governments can put men in concentration camps, torture them or shoot them, but they cannot make a man work, and the responsibility for recovery must come from a change of heart in the men and -women of this country, who, of their own free will, will do their duty first and put their rights a bad third.

The Chancellor referred today to the continuance and increase of the social services. In 1900, the Civil Estimates amounted to £23 million; they are £1,800 million today. The principle behind the budget of my home and the homes of other hon. Members is exactly the same as the budget of the country, except in the size and amount of money involved, and the Government must somehow cut down expenditure and must have the courage to cut down the social services, because just as the Germans were told, "Guns before butter", it is now a case of cutting down the social services or starvation. If hon. Members think I am over-stating this case, let me remind them of what was said by Commissioner Lamb, of the Salvation Army, and he is not a politician but he does know something about the poor. He said: The country has during the last decade spent over £1,000 million on the relief of able-bodied men and women, and has got nothing for it but a heritage of misery and demoralisation.

An Hon. Member

It was the hon. Member's Government.

Sir W. Smithers

I do not mind which Government it was. I attacked my own Government, and all Governments are responsible for increasing these social services. If we increase them and we issue paper money, and there is no adequate production at the right price behind it, what is the good of £1,000 a week—paper pounds—in wages or benefits if the money is worthless and there is nothing to buy in the shops? That is the position we are fast approaching.

Another section of the Gracious Speech deals with the direction of labour. That means another step down the totalitarian road. The dictator Bill that was passed in August and the proposals in the Gracious Speech, especially those in this section about the direction of labour, are all further steps down the road to serfdom, and, as the hon. Member who spoke last has said, we have fought in a generation two wars for freedom. In another part of the Gracious Speech there is a paragraph which begins: The present obstacles to co-operation and understanding between the peoples of the world. Why have not the Government got the courage to put in, instead of "the present obstacles," "the Russian Soviet Government"? Atheistic Communism directed from the Kremlin is the root cause of trouble all over the world today. Anyone who is a Communist or a pseudo-Communist and who is allowed to live in this or any other country outside Russia is a traitor to his country and should be treated as such. The Government know it, but they have not the courage to tackle it. The Scottish coal strike which started in the last few days is typical of Communist technique in demanding higher and uneconomic wages and then calling a strike, and I ask the Government, if they are anti-Communist, to proscribe the Communist Party in this country and impound all its funds.

Mr. Emrys Hughes (South Ayrshire)

Is the hon. Member aware that in the Scottish coalfield the Communists are against the strike?

Sir W. Smithers

I am told they are against the strike. They will do anything, they will take any line that will add to the confusion.

Another section of the Gracious Speech refers to the Conference of Foreign Ministers. That conference will end in confusion just as the Tower of Babel because they do not understand one another's language, and Russia does not mean that they should understand. Russia does not want war, but wants the fruits of war. In case hon. Members do not know, I had better give them some information. Russia had two plans, plans "A" and "B." Plan "A" was to go down through Greece and Turkey to the Mediterranean. The Americans said "The trouble with Hitler was that we did not nip him in the bud, and although Greece and Turkey are thousands of miles away we will support the independence of Greece and stop Communist activities there." Plan "B" is to come westward and, thank God, we have had a reaction in the recent elections in France against Communist activity. Plan "B" was for the Russians to come through France on to the Channel ports.

I am glad the Minister for Economic Warfare is in his place. [Laughter.] Hon. Members may laugh, I said "economic warfare" on purpose. I want to tell the House what is the real intention behind the policy of this Government. The Minister for Economic Affairs, when he was a freelance, said this: The Socialist Government's first step will be to call Parliament together at the earliest moment, and place before it an Emergency Powers Bill to be passed through all stages on the first day. This Bill will be wide enough in its terms to allow all that will be immediately necessary to be done by Ministerial orders. These orders must be incapable of challenge in the courts. At present it is left to the courts to decide whether these Ministerial orders are within the power given by Parliament. … That power must be taken from the courts. If that is not Hitlerism, I do not know what is. Here we have quietly sat down and allowed the dictatorship Bill to be passed at the end of August-, and now the President of the Board of Trade, as he was, has become the economic dictator of Great Britain.

The Chancellor of the Exchequer, in his speech, referred to the meteoric rise in the prices of commodities in the United States. Hon. Members will have seen this morning that President Truman has recalled Congress, and one of the reasons given is the extraordinary rise in the prices of commodities in the United States. The reason for that extraordinary rise, not only in America but in the Argentine and elsewhere, is that the ordinary traders and produce brokers have been put out of business and the Governments of the world have gone in for bulk purchase. Bulk purchase inevitably means bulk selling. We all know what happened when we bought 500,000 tons of wheat from the Argentine. They saw the Minister of Food coming and passed a law that the only buyer of wheat in the Argentine was to be the Argentine Government. They gave their growers £12 a ton, and charged us £34 a ton. That is bad enough, but it goes deeper and is typical of what is happening all over the world. The Argentine farmer says, "I am only getting £12 a ton for my wheat, why grow wheat?" In wartime production is stifled and held back because of circumstances over which we have little or no control, but in peacetime production is stifled because consumption is restricted. Do hon. Members not think that the clever dealers in the Chicago Wheat Pit and elsewhere do not know roughly by the ration books how much Britain will require next year? They know perfectly well, and restriction of consumption restricts production.

I ask hon. Members to allow me to say this without interruption. I say it with reverence. The last sentence of the Gracious Speech is: I pray that Almighty God may give His blessings to your counsels. How can we expect Almighty God to give blessings to proposals in a Gracious Speech which are contrary to the Divine Law? Our Lord said: I am come that they might have life, and that they might have it more abundantly. His slogan was freedom, yet here we have more and more control, and more and more direction of labour, and I say it is almost blasphemy to ask the blessings of the Almighty God on such proposals. The Gracious Speech proposes more materialistic measures, but omits the call to the nation to righteousness and to duty. The proposals, like those of 1945, will lead to more disasters. I appeal to the people of England to oppose this Government by every means in their power, and not to forget the Chinese proverb: Act now, it is later than you think.

2.28 p.m.

Mr. Ronald Chamberlain (Norwood)

The hon. Member for Orpington (Sir Waldron Smithers) prefaced his speech by asking to be excused from following the remarks of the previous hon. Member who had spoken. I must claim a similar indulgence by asking the House not to expect me to follow the flights of poetry, queer moralising or strange extravagances of the hon. Member for Orpington. Instead I want to bring the House back to realities and to certain aspects of the situation now before us and modestly to put one or two suggestions which I think are of great importance to the Government. I will put them particularly to the Chancellor of the Exchequer.

I wish to start by congratulating the Chancellor of the Exchequer on the great clarity of his speech this morning in dealing with a very involved subject and also very modestly to congratulate the Minister for Economic Affairs on having faced up so courageously to a very difficult situation and having put before us not only a clear but also a workable plan. We face the situation with this strong resolution. That does not mean that there are not certain aspects of the plan which I feel I must criticise. We have often been charged with either planning too much or not planning enough, but certainly here is a strong plan and a clear way of dealing with the difficulties and dangers that beset us, and I congratulate the Minister for Economic Affairs on making such an able exposition.

There is one aspect of the general situation with which I feel a good deal of dissatisfaction. I have voiced it on previous occasions, and it is one which, I think, must be taken very urgently into consideration. There is, quite rightly, a strong appeal being made to the workers of the country to work harder and longer, but not to ask for higher wages. We do not quarrel with that, but I think it ought to be matched by certain definite measures of which we have seen nothing so far, namely, measures to limit the present high rate of profits. Anyone who turns over the pages of the "Financial Times" any day will see that the profits being made by industries of all kinds, whether essential or otherwise, are fantastic; indeed, it reads very much like a fairy tale.

I really cannot understand why the Government have not yet brought forward a Measure to increase the Profits Tax, or to deal in some way with that golden harvest which is being reaped, and which, in my opinion, should, at this time of difficulty and of appeals to the workers, not be reaped. I appeal to my right hon. Friend the Chancellor of the Exchequer to bear that very important aspect in mind, from the point of view both of the morale of the country and of the general situation, when he is preparing the Budget which he will shortly present to us. I hope very sincerely that there will be a clear Measure for dealing with that distorted situation.

It is important that, in our planning, we should remember the human element. After all, it is very easy to draw up a plan on paper and to work out these cuts and shortages, and I know it is very difficult to bring into them the human element. But I felt yesterday, when listening to the speech of my right hon. and learned Friend the Minister for Economic Affairs, that, even in his very able peroration there was not that strong feeling of the difficulties and the emotions of the people themselves.

We must not cut in such a way as to destroy incentives; we must not destroy encouragement and the strong spirit of the people. Therefore, I say to the Government that it is not enough just to plan, and I think that the "Work or Want" attitude is a very wrong one to take. As an illustration of the point I am trying to make, I suggest that we might find it wiser, in some ways, to cut deeper in certain directions, so as to give a certain measure of let-up in other ways, and some kind of encouragement and incentive to the people. We should not let the picture be entirely gloomy. I know it is quite easy to say that, and that it is very difficult, in practice, to do it, but I feel that in the Government's attitude there is too much of the cold planning, and not enough consideration as to what the people are feeling, and how they will react in all these matters.

I wish, very briefly, to deal with two subjects which I think are of great importance at the present time. The first is the very controversial one of the basic petrol ration. I am well aware that if I were speaking of motoring 30 years ago—and I was already beginning to speak on Labour platforms at that time—I should be speaking of something which was entirely a matter of pleasure. Motoring in those days, as far as the public generally were concerned, was exclusively pleasure motoring. But a very different state of affairs exists today, and, in asking the Government to look at this matter again, I want them to bear that fact in mind.

Tens of thousands of returned ex-Servicemen put their gratuities into old cars and motor cycles, and, as I shall say in a moment, tens of thousands of others put their gratuities and their savings into small motor businesses. Though I realise that it is easy to suggest that all cuts which are made are wrong and should be restored, or partially restored, we must remember that while we are cutting down in some directions, we are trying to build up in others. While cutting imports, we are trying to build up exports. It is no good cutting wildly in a way which will destroy the other side, and react unfavourably on our export trade. It is no good cutting one end off the cloth if we have to sew it on at the other—it is no good cutting off some difficulties if we have to take on others.

The Government should realise where the great bulk of the petrol is disappearing. I shall explain that in a moment. What is the petrol cut actually doing? I know that it is not always desirable to talk of small figures and small cuts as being unimportant. Actually, we hope to save £9 million out of a £475 million gap. I know it is not a strong argument to say that it is only a small amount, because that can be said about so many things. But there are certain things which have to be said about the saving and one is that a good deal of this suffers a rebate or back fall by way of the special allowances which must be granted. If it were merely pleasure motoring, I would say cut it right out, even though, at the same time, we have not entirely cut out tobacco or films. But that is not my argument. My argument is that by this almost infinitesimally small cut we are making very great difficulties for tens of thousands of workers, and for people living in rural areas, and those out of touch with the towns. We are making it extremely difficult for people to get to work in factories producing essential exports.

When applications for additional petrol are made, they are not allowed if there is any kind of public transport available. We know perfectly well that in a great many cases, as has already been stated in this House, transport is very heavily overcrowded, and that in London and other cities, and still more in rural areas, it is causing the greatest possible congestion and difficulty. In that way, I submit that this infinitesimally small saving is lowering morale and having a very serious effect on the production of essential output.

Another point which has also to be borne in mind is that in my own constituency there is a considerable number of men in a small way of business who, as I said just now, have put their savings or their gratuities into small motor businesses. They are now facing ruin. This is true of men not only in my constituency; in all large cities and rural areas there are people of that kind. If they could be given some prospect of a partial restoration of the basic petrol ration they might still be able to keep their heads above water. We must remember that element in the community. It is a considerable one which is facing very great difficulty; indeed, it is facing disaster.

I want to say something about the place where petrol really is disappearing. I do not want to seem ungracious in making these remarks. Recently I was in Germany, where I was very courteously and kindly treated by the Control Commission. But it was quite evident—and I think it is necessary that I should say this—that in Germany under the Control Commission petrol is running like water. It is being used with the greatest possible extravagance. I regret having to say this, but it is the case. In my estimation the saving that could be made in Germany alone, from my observations on this and other visits, would greatly exceed the saving which would be effected by the cut in basic petrol. If we restored half the basic petrol allowance we would greatly assist the small businesses, the public generally and the morale of the people, and we would only have a gap of £4 million to cover. I suggest that the great wastage in Germany, and probably in other parts of the world where our petrol is being used, if stopped, would easily cover the margin of £4 million. The savings which ought to be made in these places could cover that margin twice over. I ask the Government to think again about this matter and to consider the great benefits which would accrue from a restoration of half the basic petrol ration. I put it to the Government that they would find that small amount of £4 million would be simply and easily saved in other directions, particularly in those to which I have referred.

Another aspect of great importance to which I wish to refer briefly is one which is greatly exercising the minds of our people. I refer to housing and the stoppage of the general programme. Here, again, it is affecting important building which had been started in my own constituency, but I am speaking now on behalf of many hon. Members in all parts of the House, representing all parts of the country, when I say that an important matter of public confidence and morale is involved.

Mr. Beswick

The hon. Gentleman is talking about building that has been started in his constituency. Is he suggesting that building which has been started has now been stopped?

Mr. Chamberlain

Yes. Unfortunately, a block of fiats which was being built in my constituency is a case in point. Work has been stopped. It may proceed. After what I heard yesterday, I hope that it may proceed but, in the meantime, it has been stopped. I gathered from the speech of the Minister for Economic Affairs yesterday that building now in progress and contracts already undertaken, are to proceed. Even if it does proceed, we are told that there is still to be a very grave cut in the number of houses to be put under construction in 1948–49. To me that is a very ominous matter. Before the speech yesterday, I did not know what was really the basic and fundamental reason for this stoppage. I did not know whether a matter of capital and capital investments was involved, though that did not seem to be a really valid difficulty. I did not know whether steel was a difficulty, but I thought that that could not be the case, since the amount of steel used for housing is comparatively small. We find, however, that it is essentially a matter of timber. It rather surprised me that we should cut down by nearly half our great programme for housing people in urgent need of that basic want, and that we should take the step of cutting down the prospect of tens of thousands of people, young married couples and others, of getting houses, just because of a little timber.

It seemed to me that what the Minister for Economic Affairs said on this subject was not really accurate, and I want to put the matter to the Chancellor of the Exchequer. The Minister for Economic Affairs said that timber comes largely from the dollar areas. That is not actually borne out by the facts of the situation. For instance, if the right hon. Gentleman will look in the Housing Return for the month of August, he will see certain figures in regard to timber imports, not only for housing but generally. From the United States and Canada, that is from the dollar areas, 70,000 standards were imported; from Finland and Sweden, 73,000 standards; and from Germany, with an ever-increasing amount over the last few months, 43,000 standards, were imported. Therefore, it is incorrect to say that it comes largely from the dollar areas if the word "largely" is meant to imply mainly. I know that Finland and Sweden are not in the sterling area, but they are not in the dollar area and that seems to me to be a considerable difference.

Mr. John R. Thomas (Dover)

I think the hon. Gentleman will admit that both the countries he has mentioned may require dollars in payment for timber and may not be willing to accept the £ sterling?

Mr. Chamberlain

I appreciate that point but, as the Chancellor of the Exchequer has pointed out, the attitude we must adopt is that we must balance our accounts with the dollar countries. We cannot interweave and interchange the various accounts between this country and a number of other countries. Our immediate difficulty is the gap with the dollar countries. I am sure that the Chancellor would agree that it is a different problem to tackle the financial difficulties as far as Finland and Sweden are concerned. I suggest that it is not quite accurate—if that is what is implied—to say that the great bulk of the timber comes from dollar countries. Certainly, we must increase our exports and improve our trading arrangements with these Baltic countries, but that is rather a different problem from catching up with the dollar gap in the case of the United States and Canada. I suggest that it is possible to improve and increase our imports of timber from elsewhere. For instance, I am glad to see that our imports from Russia have recommenced. I hope that not only will they continue, but that they will greatly increase. What I suggest is that this matter of timber is not a sufficiently onerous, heavy and difficult problem to hold up the future building programme.

The only other point I wish to make is in reference to the great danger involved if we divert workers from the building industry. The Minister of Health has been chasing these workers, trying to find them, trying to persuade them to return from other industries, for the last year or 18 months. He has experienced great difficulty but has achieved some success. If the building industry is faced with the prospect of a cut down—and I would remind the House that it is not only in houses but in the programme for factories—I think the Government will be dealing a further blow at the industry from which it will be extremely difficult to recover. It will be an extremely dangerous thing to deal this further serious blow by cutting down not only the housing programme but also that of factories. I appreciate that it is difficult to balance all these things, but this is an aspect not touched upon by the Minister for Economic Affairs yesterday, and I think it should be borne in mind. The building industry has caused great difficulty in the past. It is an industry with a very bad past, a very bad tradition. It is difficult to get people into it. We should attempt to avoid at any cost the mistake of making the industry feel great uncertainty about the future. Therefore, I ask the Government to watch these points and, indeed, to reconsider these two aspects of the matter. No doubt, they must economise, but I think it is wrong to make cuts which may cost the country a terrible price.

2.50 p.m.

Major Sir David Maxwell Fyfe (Liverpool, West Derby)

I think everyone in the House will agree with the hon. Member for Norwood (Mr. Chamberlain) that His Majesty's Government should try to find a sound and imaginative psychological approach to the people at the present time. But I think the hon. Gentleman would agree that if one thing is certain, it is that we have got beyond the stage of mere exhortation and appeal. The people want to see a clearly defined path on which their efforts to advance can be made, and in order to base the hope for a clearly defined path they are looking much more critically at the steps that have been taken during the last few months. Therefore, I am sure the Chancellor of the Exchequer will not object to my taking as the test of his speech, the question of whether it has explained two things; namely, why a loan which was expected to last five years ran out in a little more than one year; and, secondly, why in the second year of our reconstruction the external position was so much worse than in the first year. Unless he has answered those questions, his speech has failed to explain his portion of the responsibility for what has happened today.

We on this side of the House make allowance for certain difficulties, and always shall do so. We make allowance for the difficulty that the price of imports has risen by 21 per cent. and the price of exports has risen by only 15 per cent. That is a clear point which every fair minded disputant should take into account. We also make allowance for the responsibilities which His Majesty's Government have had—although we do not agree that they need have been as large—in the expenditure abroad. But when we have made reasonable allowance for that, we are left with four points which go far beyond bad luck and go well into the sphere of bad management. First of all, it was never the case for the Government that the Loan was merely a matter of maintaining consumption of consumer goods. It was always part of the argument that the Loan should be used, and used widely, for re-equipment and bettering our position to meet our economic difficulties. Secondly, even if one were to accept—which I certainly do not—the figures and the supposed consequence of the figures which the Chancellor of the Exchequer has put before us today, there has been a wastage in the unnecessary purchase of expensive foodstuffs for the comfort of our people. Thirdly, when it was clear that the mess caused by the fuel crisis last winter had resulted in a loss of exportable production of £200 million worth of goods, action should have been taken at once.

The Chancellor of the Exchequer is only secondarily answerable for the obvious mistakes of the then Minister of Fuel and Power, but he is as answerable as anyone for the failure to have any plan to deal with the results of the mistakes, and the failure to take action in some way to bridge the gap which the fuel crisis caused. But lastly, the right hon. Gentleman and his colleagues were blessed with the perfection of a sellers' market. At a time when the world was clamouring for our goods they delayed, hesitated and put off until it was too late to urge and ask for more production, when under-production was clearly our difficulty and trouble. In all the Debates which I have initiated I have always begun—and I do not apologise to the House for doing so again—by saying that coal has been, is and will be the most important matter at this time. I am not going to say more than that on that point; I think I have made my view perfectly clear on the fuel crisis. But we must remember that if it was simply a matter of £ s. d., which it is not, our prewar coal exports would be worth £100 million today, and the lack of our ability to export coal has been a matter which, until yesterday almost, only one notable speech—that of the Foreign Secretary—has regarded as being of vital importance. It is a matter to which we dare never refer as something which was a happy accident of the past and an unhappy concomitant of the present. It is something for which all our people must work if our economic health is to recover.

Therefore, there are these two aspects: first, the increase of output per head. That is still below 1939, although mechanisation, wages and working conditions have all improved. The other is recruitment. I ask hon. Members opposite to consider that question again. With the enormous wastage in the industry there cannot be any question of over-recruitment today. Already the initial spurt in the early part of this year is lagging, and unless we deal with the situation, this priceless product—what I described on the last occasion when I spoke on a similar subject as a currency harder than dollars—is not within our power. I have mentioned that because I think every hon. Member agrees with me broadly on the importance of that aspect.

When I come to the question of the maldistribution of our resources, I say with all the sincerity I can command that the speech of the Minister for Economic Affairs was the most damning indictment of the policy of the Chancellor of the Exchequer that could have been laid before this or any other bar. We began with a perfectly clear and obvious problem, that of resources and labour being liberated from their war tasks to be used in the right place. It was not until 18 months after this Government took office that they put before the country even the statement of the problem, that our basic industries were undermanned and our export position was becoming serious. In addition to that—and this is the position with which I tax the right hon. Gentleman, because I believe the responsibility is his—we went in for an immense and unprecedented programme of capital development. It was not merely immense and unprecedented: it was unco-ordinated. It was suggested, put forward, carried into partial operation by different Departments and agencies of Government, by different vehicles outside the Government, and there was no co-ordinating power; and, as the right hon. Gentleman has repeated today, and repeated with pride and self satisfaction, it was at the cost of the use of our dollar Loans that that programme was put into operation. We have seen now, too late and at long last, the right hon. and learned Gentleman the Minister for Economic Affairs come before this House and say that that programme has to be cut. Two approaches that were poles apart cannot be harmonised even by the would-be logic and affability of the right hon. Gentleman the Chancellor of the Exchequer.

Mr. Dalton

Is it not the case that in the Industrial Charter just published by the Conservative Party it is stated that the programme of capital construction which the present Government were undertaking was grossly inadequate?

Sir D. Maxwell Fyfe

I think the right hon. Gentleman the Chancellor knows better than anyone else, as I hope to demonstrate in a moment, that one sentence out of its context does not give a true picture of the position; nor does it affect the point I am putting. The position that I am indicating now, which is the position that the right hon. and learned Gentleman put yesterday, and which has certainly been maintained by myself and my colleagues for a long time now, is that it was essential that there should have been a selection in the schemes of capital expenditure on the clear basis of a short-term dollar saving test. Certainly—and the right hon. Gentleman will find nothing in the publication he named to justify him—the last thing which ought to obtain is his attitude towards these matters, which is, that internal expenditure should go on entirely unchecked and unguided, without any consideration for external equilibrium whatever. That is what has gone on. That is what has been done, up to the words of his right hon. and learned colleague yesterday. My point is that even today the right hon. Gentleman has nothing but self-satisfaction for his responsibility in this matter.

It is a serious additional difficulty in our present troubles that the right hon. Gentleman is regarded, not only in this country but all over the world, as the personification of complacency in a time of difficulty. I want to take up with him a point he sought to make today as to the waste of dollars during the last four months. One starts, of course, from his clear approbation of the hon. Gentleman who is sitting behind him, the Member for North Batter-sea (Mr. Jay), in March, when the right hon. Gentleman added his imprimatur to the statement that the two Loans were likely to last for about two years. That was his view in March. I am quoting the words of the hon. Member in the "Daily Herald," when he said: The truth is, I repeat, that the two Loans are likely to last for about two years from now. In the House on the same day, 10th March, the right hon. Gentleman the Chancellor referred all earnest inquirers to his hon. Friend's remarks in the "Daily Herald."

Mr. Douglas Jay (Battersea, North)

I do not want to waste the time of the House discussing what I said and what I did not say. But, as the right hon. and learned Gentleman himself said just now, if one sentence is taken out of its context, the meaning of an argument is destroyed. I really must make it clear that I did not make that statement. What I said in that article was that at the rate at which the Loan had been spent up to date it would last a certain period. The qualifying words "at that rate" occurred several times in the article, and the right hon. and learned Gentleman, by omitting those words, has grossly misrepresented what I said.

Sir D. Maxwell Fyfe

If I am misrepresenting it, as the hon. Member says, I think it is only fair—and I am sure the House would desire it—that I should read the words which lead up to the passage I have quoted. The last thing I want to do is to misrepresent the hon. Member. I am sure neither of us wants to attribute that failing to the other, unless there is very good ground for doing so. The article said: I have heard talk about the alleged rapid rate at which the American Loan is being used up. That talk is grossly exaggerated. The Loan is, in fact, being used more slowly than we expected it would. Therefore, do not be misled by the alarmists who argue from nightmares rather than from facts and figures. They say that the American Loan—they usually forget the Canadian Loan—will be used up by next winter. The truth is, I repeat, that the two Loans are likely to last for about two years from now. I ask the House to judge whether my original quotation was an unfair extraction from the rest of the statement?

Mr. Jay

I do not want to press this point, but the right hon. and learned Gentleman is completely misrepresenting what I said. He has not read from my article but from some extract from it published somewhere else, and that extract omits the qualifying words. If he read the whole article, he would see that the words "at that rate" were inserted quite clearly.

Sir D. Maxwell Fyfe

There must be a certain limit to the amount of quotation which this House allows. I began by quoting one and a half lines; I have now quoted 10 lines; and I think, Mr. Speaker, your patience might become exhausted if I were to read the whole article from the "Daily Herald."

Mr. Follick (Loughborough)

The right hon. and learned Gentleman has not quoted the article.

Mr. Beswick

rose—

Sir D. Maxwell Fyfe

I am not going to give way again. I was about to deal with the figures of the right hon. Gentleman, which, he will agree, is an important matter because he stood up this morning, with the greatest assurance, to deliver a measured rebuke to Professor Robbins and the conclusions he had drawn. Therefore, let us examine for a moment what was the situation and what are the figures on which the right hon. Gentleman bases that rebuke. In the first place, it is, I think, common ground—and the right hon. Gentleman has not sought to controvert it—that the Loan and convertibility were on the basis of current account and not convertibility on capital sums. The right hon. Gentleman has tried to ride away from the provision in clause 12 that, Each Government shall be entitled to approach the others for a consideration of any of the provisions of this Agreement if in its opinion the prevailing conditions of international exchange justify such reconsideration. As I understood the Chancellor, he said that there was no American suggestion that he should make any approach under that clause. I do not think he told us—and I am sure we should all be very interested to know—whether there was any discussion of any kind on that point, as to the making of an approach or not.

Let us come to the next point. In July, my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) asked the Chancellor of the Exchequer whether he was not concerned with the running out of the Loan. The effect of the right hon. Gentleman's answer was that he was not concerned, and that he thought it was going to be much better than most people thought. We then had the position that the rate of drawings was 75 million dollars a week in June, 115 million dollars a week in July, and 150 million dollars a week in August. I ask the right hon. Gentleman to observe that 300 million dollars were taken away in June, 460 million dollars, in July, and 600 million dollars in August, and he still comes to this House and says that that money was used in the purchases of goods in various places, and that there was no drain due to any absence of safeguards on his part. Frankly, I cannot see how he can explain—he certainly did not explain it—that enormous acceleration, the fact that there was a 50 per cent. increase in the first month and a 100 per cent. increase in the next, except by a wastage and leakage such as he has repudiated. I do not see how he can square the explanation he gave to the House that there was no leakage or drain, or, to quote from Mr. Snyder's letter, that there had been a drain greatly in excess of current expenditure.

If the right hon. Gentleman, like some of his predecessors, leaves his present position for the City, I would give him a very grave warning on trying to explain accounts by net figures, such as the 620 million he gave for the dollar expenditure for the rest of the sterling area. He told us that that was a net figure, after allowing for any payments that might have been made in the accounts. A net figure cannot have any relevance, and cannot in any way explain whether one side of the account is made up by contributions of exceptional leakages, or whether it is simply a succession of ordinary payments, as the right hon. Gentleman suggested to us. These three grounds—Mr. Snyder's statement, the acceleration in the drain and the composition of the right hon. Gentleman's figures—the Chancellor of the Exchequer has not answered. He has made no attempt to answer Professor Robbins three fundamental questions, on which he bases his concern. The first was the terms of the agreements which the right hon. Gentleman had made with other countries, and whether he permitted withdrawals to be too large and too quick, the second was the failure to prevent transmission of the sterling balances to quarters where he did not want them converted, and the third was whether permission was given to gross or to net withdrawals.

These are the three points on which Professor Robbins quite clearly said, "I have not the exact information." The right hon. Gentleman made a great point of that this morning. Professor Robbins says that, having made a careful study of the figures, these are the only methods that seem to him to explain what is otherwise an incredible performance and an incredible lack of foresight and knowledge on the part of the Treasury. The right hon. Gentleman has not seen fit to deal, during the hour in which he addressed this House this morning, with one of the three questions which Professor Robbins proposed.

I say that when one is making appeals, and rightly making appeals, to all sections of the people to work, one must give a better account of one's stewardship, and must be prepared to show why those resources on which the Government were depending so clearly and so definitely as they themselves made out were allowed to go with such rapidity and in complete contradiction of the repeated statements of the right hon. Gentleman. Without that explanation, it is not fair to make demands on other people when, without explanation, the only answer is gross incompetence and neglect. That is the position which is apparent to anyone who has had the opportunity of listening carefully and noting what the Chancellor has said.

Fortunately, when we turn from these dead days to the future, we are left with the suggestion in which the right hon. and learned Gentleman the Minister for Economic Affairs takes part of the load, and which we on this side of the House have been urging for at least the last 12 months. I have indicated with regard to increased coal production, and I think there has been general assent. I have indicated with regard to the selection of capital projects and, again, although we have not had the details, we have seen that there is a step being taken in that direction. Again I ask, as a prima facie case, that it should be dollar saving on a short term. That is the test to apply, and then consider your hard cases outside that test, making that your general line.

I make no complaint—and I want to make clear to the right hon. Gentleman that when I do complain I make it clear that I am complaining—that he has not attempted today to deal with the question of inflation, because he desires to leave that for his Budget. Therefore, it would be wrong for me to enter into that thorny and difficult path, on which I have tried in other places, at any rate, to make a beginning, so I shall definitely cut that out, except to make clear that some mopping up of the inflationary trend at the moment is, in our view, essential, and we shall await with interest the suggestions which come in due course. I hope that no one will hold it against me that I do not go into my own suggestions, because I have tried to make this clear in other places, and I shall have a further opportunity later on.

I want in the short time which I shall venture to detain the House to deal with certain wider aspects. In the Gracious Speech it is fair to say there was no clear emphasis on matters which will make the difference between recovery and disaster. There are three aspects. One is a series of proposals for social legislation, hardly any of which to my mind will cause a ripple of controversy. They are all matters which are following out a course that has been taken in the past. Indeed, in many cases they are merely repeating legislation or proposed legislation put forward before. Their purpose is clear—it is to reassure the serious-minded section of the community. Then we have the proposal with regard to the Parliament Act. It really is difficult to dignify that proposal by the name of a red herring. The Chancellor of the Exchequer, I think, would prefer me to say that it is like one of those non-existent Portuguese sardines which we are going to miss so much. It is an attempt to draw us away from the difficulties of the economic situation. The third part consists of the very tentative and mildly expressed suggestions in re- gard to the economic situation which I admit at once must be read with the speech of the Minister for Economic Affairs.

These were the broad divisions of the speech. "The Times" referred to it as a mixture of "Iolanthe" and "Hard Times." It seems to me it was almost unnecessary to introduce "Iolanthe," because the one consistent feature in the Government's fluctuations in policy has been the repeated declaration that they, as a Government, are the true embodiment of everything that is excellent and that everything they do has no possible flaw or fault. Apart from that there is a further and more important point. The Prime Minister put it to us a day or two ago that when we asked from this side of the House for an absence of controversial legislation, we were really asking hon. Gentlemen opposite to be Conservatives and that we were only offering our co-operation on that basis. I wish most emphatically to repudiate that suggestion. What we feel is that the test of legislation is: does it fulfil its purpose and what probable effect will it have on the improvement of the economic situation of the country? We will consider all legislation with the greatest sympathy and be prepared to examine it in that attitude of mind. [Interruption.] If the hon. Member for Nelson and Colne (Mr. S. Silverman) will wait I shall be obliged. He might allow me to develop my point. When we get legislation such as the Transport Act and the Electricity Act, which admittedly are not going to do anything to assist or benefit us in dealing with the short-term problem then—[Interruption.] I repeat "admittedly," because we have put every one of those short-term problems to hon. and right hon. Gentlemen who have been in charge of such Bills, and they have admitted that those Bills had no relevance or effectiveness upon those problems at all.

That is one aspect of the matter. When legislation is introduced which has no effect in assisting us in our present difficulties we say that the purpose of that legislation has no general benefit, but is the indulgence of a party point of view. Equally, when there is an attempt, as is being made at the moment, to introduce controversial constitutional legislation, simply to deflect attention from the difficulties of the situation and from the incompetence of the party opposite in dealing with that situation, and an attempt to stoke up an artificial quarrel which has no relevance to the situation, we say that in all those regards that is not an appeal for national unity. It is not an approach to that vast common ground of common effort which can be found in this country.

Therefore I say, and I think the Chancellor of the Exchequer knows that I do not pull my political punches any more than he does, that we must state our views with clarity and firmness. That does not mean that we cannot respond fairly and with all the power we have to an appeal for common effort. Give us a clear indication, reasonable grounds, for believing that the Measures are introduced with the intention to benefit the country, and the common effort will be forthcoming. Give us a clear indication that the path which we are asked to tread is a path of freedom and reasonable liberty, and not the indications we have seen such as the cutting of the Press either by suspending the weeklies or by cutting newsprint whenever the Government gets into rough water, or the extraordinary suggestion that it is only by the magnanimity of the Government that criticism is permitted from the Opposition; eliminate these matters which appear to us to be clear infringements of liberty. Then there will be no difficulty.

If those two things are done there will be no difficulty in getting the common effort. If they are not done, we shall fight and we must fight, against the imposition of purely party Measures which are not expected to have any result on the economic situation, and against infringements of what we think are the vital liberties of the people. These things we shall fight while we have any strength left with which to do so.

3.30 p.m.

Mr. Parker (Dagenham)

I approach the subject of the Debate today from a rather different point of view from that of the right hon. and learned Gentleman the Member for West Derby (Sir. D. Maxwell Fyfe). I represent a considerable section of opinion in the Labour Party when I say that before the Gracious Speech was published and before we heard the speeches of the two Ministers yesterday and today, there was in the party considerable disquiet at what appeared to be the approach of the Government to dealing with the crisis. There was a feeling, and it still exists among substantial sections of opinion in the Labour Party, that the Government are more anxious to appease the Opposition than to tackle the problems of the day from the point of view of a Socialist philosophy and of the policy the Government were elected to carry through. The Gracious Speech and the speeches we have heard from the Minister for Economic Affairs and the Chancellor of the Exchequer to a certain extent remove some of those fears, but there are still in the party many fears about some of the proposals that have been put forward in those speeches for dealing with the crisis and some of the proposals put forward in the Gracious Speech.

I would like to start by supporting the hon. Member for Norwood (Mr. Chamberlain) in what he said about the housing cuts. I feel very strongly that whatever may need to be cut—I agree cuts are necessary—housing is a matter about which we have to be very careful when considering cuts. In putting forward their programme for housing cuts, the Government are playing with political dynamite. I am certain that if houses are not built when the next Election comes along, the newly-married couples, especially those returning from the war expecting houses and the mothers-in-law and fathers-in-law with whom they have to live, will remember that, whatever the reason may be, the Government have removed their hope of a house in the very near future. That will be the point of view of a very substantial section of the people when the next Election comes.

Take my constituency of Dagenham. There we have a very long housing list and cannot possibly build for more than half the people on that list within Dagenham's boundaries. When our housing programme is completed, many of those people will have to get houses elsewhere, such as in the new towns. Yet we were told yesterday that the new towns programme has completely gone for the time being. I plead with the Government to reconsider the housing cuts. This question of the welfare and comfort of people living in their own homes is a really big social question. I believe housing is even more important than food and the other things people may be asked to go without. I, therefore, hope that we shall have a reconsideration of the housing cuts. I ask the Government to consider whether some other use of labour and housing materials cannot be cut. A great many repairs and a great deal of reconditioning work are taking place which I am certain are unnecessary or could be postponed rather than postponing the programme for building new houses.

I would like to say something about food subsidies. I hope that when the Chancellor brings forward his autumn Budget we shall see the lie definitely given to the various newspaper reports about the proposed cuts in the food subsidies. I am certain that is not the way to deal with inflation. We are asking the people for equality of sacrifice, and I hope that the Chancellor will ensure that the idea of equality of sacrifice is really carried out. In "equality of sacrifice" we have to consider whether in taking up spare cash one takes it from the people who can most easily do without it.

I would like to make the suggestion that now is the right time for some kind of capital levy. We are having a great deal of money spent at the present time by people who have large fortunes, who are quite prepared to spend their capital and who do not mind whether it passes on to their children or not if they can keep up their present standard of living, and so they are spending money. I think that some kind of capital levy ought to be introduced to deal with that situation.

I would like to make some other suggestions. Let us take the question of the good old betting tax. We have been told that it is impossible fully to collect it. I do not know if that matters a very great deal, but I think a lot of money is now spent in betting, and that the Government, if they brought in a betting tax, could collect quite a big revenue without hurting anybody very seriously. Again, concerning football pool coupons, why should there not be a 3d. or 6d. tax on each coupon? People would not mind paying the extra, I am sure. I have heard a number of complaints about the way in which some of the football pools are run, but, if the Government taxed the pools, no money would be paid out unless the tax had been paid on that particular pool coupon, and we should be assuring the people that the pools were run rather more fairly than is the case at the present time. This seems to me to be a very good thing for the Government to bring in at the present time in order to combat this problem of inflation. [Interruption.] My hon. Friend says, "Nationalise the pools." I am quite in favour of that myself, and I really do not see why we should be frightened of the so-called Nonconformist conscience on this issue. I do not believe that the people attending the Free Churches would mind very much if the pools were taken over, because we should save an enormous amount of labour and very much revenue would also come to the Exchequer. If, however, that is not practical politics, I would ask the Government to consider the question of taxing the pool coupons, which would, I am sure, bring in very much revenue and hurt nobody at all.

Further, I ask the Government again to consider the question of taxing advertisements, particularly the advertisements of those goods which are wanted for export and for which there is now a sufficient supply for the home market. An enormous space is now taken in newspapers and on the hoardings in advertising goods of a kind the demand for which cannot be met on the home market. I know that the Press would not like it very much, but does that matter at the present time? There is another question I would like to ask the Government to look into. I am told by people in my constituency that the Petroleum Board and the Soft Drinks Board are going to be broken up. Why break them up at this time? By breaking up the Petroleum Board when there is less petrol than ever to be sold, we shall only be creating a large number of unnecessary jobs, because every company will then need to have a number of people to do different jobs which are all being done by the same people now. Surely this is not the right time to break up these organisations? It cannot be the right thing to do at this time of shortage of labour when everybody is wanted for useful jobs.

In regard to the proposed legislation, I do not feel very excited myself about the proposals for dealing with the Second Chamber. Why alter the period of the Lords veto from two years to one? What is the advantage of doing that? If we are going to tackle this question of a Second Chamber—and it will have to be tackled sooner or later—I think it is time to sweep away the veto altogether, which would be a much better way of tackling it, and I think that there is much substance in the point which was advanced" from the other side of the House that, by reducing the veto from two years to one, we are merely tempting the Lords to use the one-year veto in future. I, therefore, ask the Government to reconsider these proposals. While on this matter, if we are going to pass a Bill dealing with the question, I think that now is the time to end the hereditary principle. I would be glad to see life peerages, or people nominated purely on a basis of their being useful people for the job, and not to have the hereditary principle. I am certain I shall have strong support from the hon. Member for Oxford City (Mr. Quintin Hogg) and the hon. Member for South Dorset (Viscount Hinching-brooke) in the suggestion that we should end the hereditary principle, and allow Members elected to this House to continue in this House. I ask the Government seriously to consider on this question of the proposed Bill for dealing with the Second Chamber, that if we are going to cut the veto it is not worth while doing so unless we cut it altogether. We ought also to consider the question of having a useful revising Chamber, rather than the Chamber we have at present.

I wish to say a word or two regarding iron and steel. I think I speak for a large section of the party in saying that we are perturbed that that question is being left on one side. This is not just a matter of doctrinaire policy. In the view of many hon. Members, the industry cannot be effectively run until the ownership is changed. At present who is to decide what kind of steel is to be produced? Are the people in the industry to be told their duties by the Minister for Economic Affairs? I cannot see the industry working effectively until it is under national ownership. I think it no accident that we have seen two Conservative Prime Ministers, Lord Baldwin and the late Mr. Neville Chamberlain, in very recent years connected with that industry. This is not merely a question of effectively running the industry, but of real political power and economic power in the country, and we on this side of the House, without being ashamed of it, do stand for a social revolution. Sometimes I think the Government forget that carrying out their programme means a social revolution and a transfer of economic power. That is what the Opposition do not like. One of our strongest reasons for nationalising the iron and steel industry is not merely that it should be run effectively and efficiently, but that it should be taken out of the hands of the people who now run it and worked into the national general economic plan, and that can only be done under national ownership. I ask the Government to bear that in mind in drawing up their programme, if not for this Session, at least for the remaining Sessions of this Parliament.

I am sorry to see that the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) is not in his place. I read the speech he made at the Conservative Conference with considerable interest. He first attacked the Government because when they nationalised industry they "found jobs for the boys" as he called it. Then he attacked the "traitors in the capitalist class," the big industrialists, who took jobs in nationalised industries. That seems a rather partisan point of view. He does not want either people who believe in nationalisation to take jobs nor people already in the industry to take jobs in order to run the industry effectively. That point of view seems surprising and very partisan. If the Conservative Party are true to the line they take that they are not a partisan party but a patriotic party, supporting the Government and so on, even if they do not like nationalisation, they should be prepared to see that the best people take the jobs when industries are nationalised and that they are run most effectively from the point of view of the national interest. The point of view of the hon. Member for Kingston-upon-Thames caused me much surprise, even though he was speaking in the rather exciting circumstances, no doubt, of the Conservative Party Conference.

I hope when we have the Bill for franchise reform before the House that it will deal fully and effectively, once and for all, with the question of giving us a proper democratic franchise—in other words, it will really wipe away the double vote in every form, and the University seats and City of London special representation, and so on. We have no details yet, but I hope that when the Government bring in the Bill we shall see that it is as comprehensive as I have suggested.

Lastly, I hope that the Government will find time in this Session to prepare Measures for cheapening the operation of the law, and for cutting out unnecessary legal expenses. We have had a great deal of talk about legal reform, but it never gets very far. If there are odd periods during the Session to be filled in, I trust that that will be the kind of Bill which the Government will think of. In conclusion, I wish to stress once more the point on which I started. It is that there is considerable disquiet in the party because of the feeling that the Government are more anxious to appease the Opposition than to tackle our present problems in a truly Socialist way. I hope that the Government will bear in mind the point of view of their supporters, as well as that of the Opposition.

3.47 p.m.

Lieutenant Mullan (Down)

I ask for your indulgence, Mr. Speaker, and that of the House for a very short period in which to add my contribution to an already wide and instructive Debate. I do so, not by way of criticism, but with the genuine desire to help in the solution of the present crisis.

The Gracious Speech has dealt with many matters of the utmost importance. I will touch on only one, which has already been touched on today—the abolition of the basic petrol ration in relation to the present production drive. It is a point which is exercising the minds of many hon. Members, but we, in Ulster, feel that there are particular circumstances in Northern Ireland which justify a further discussion, so much so, in fact, that an Amendment stands on the Order Paper in the names of myself and the other Ulster Unionist Members of this House to that effect.

I may say that I speak on behalf of the other nine Ulster Unionist Members, and with their authority. We ask no special favours for Northern Ireland. The crisis affects people there in exactly the same way as it affects people here. We are fully prepared to carry out our part in the reconstruction of the finances of the country, and to shoulder the burdens in exactly the same way as the people of this country. But those whom I represent, and those represented by the other Ulster Unionist Members are not satisfied that the total abolition of the basic petrol ration is in the best interests of the country as a whole. That doubt may have arisen owing to the difficulty of ascertaining what the esti- mated saving in dollars will be. Numerous figures have been put forward, varying from £5 million upwards, but it has never been stated, so far as I am aware, whether this saving is based on the old ration of 1½ gallons per coupon, or on the new one of I gallon per coupon. Nor has it been stated whether the saving is based upon the retail price in this country, or on the price free on board in the country or area in which it is shipped. If the latter, obviously the saving in dollars will be very much less. Nor has any information been given on the number of extra "S" and "E" coupons which it will be necessary to issue for such persons as invalids, who previously relied on their basic ration. This, again, must be taken off the total saving.

We are, however, opposed to this measure on more concrete grounds than merely that the total saving to the country will be a small one, a saving which, for Northern Ireland, has been estimated as in the vicinity of only some £47,000. We are opposed to it on the grounds that it will cause very considerable hardship to elderly people and to those suffering from temporary illnesses, that it will end much voluntary work of a very commendable character and that it will cause the utmost hardship to many ex-Servicemen, numbers of them with wives and families to support, who have in many cases invested their savings and their war gratuities in the opening of small garages, repair stations, petrol pumps, and the like. These men were volunteers for service to the country and now they are to be deprived of their living by the Government of the country. There is a hardship, too, on the persons who, on the strength of the announcement and in the belief that the ration would be merely cut and not abolished, purchased new cars. Even on the cheapest models they paid into the Exchequer in Purchase Tax sums of over £100. Surely, money obtained in such circumstances would do no credit to a private individual nor to a commercial concern, and it is equally hard to justify the action when it is imposed by Government authority.

I have dealt so far only with hardships common to the United Kingdom as a whole. There are, however, special considerations which we feel apply in particular to Northern Ireland. We are a rural community without the same grouping of houses into villages which prevails over here. Long distances must be travelled and bus services are already overcrowded. Both in the city of Belfast and in the country districts we are suffering from a shortage of actual vehicles. With the present housing shortage, many workers have moved to country areas and purchased small cars in order to get to and from their work. To put a further strain on the already crowded system will cause added difficulties not only for the bus personnel and for the workers going to and from their work, but to the travelling public as a whole. At present in Northern Ireland there is very much more than sufficient manpower to deal with the available supplies of raw materials, whether it be in the building industry, in agriculture, or in the export trade. Many hundreds of garage employees will lose their jobs as a result of the loss of basic petrol. They will have no alternative but to wait for the time when either increased supplies of raw material become available or the basic ration is restored in order to bring them back into productive work.

Increased, output is the great cry at the moment, a cry which was only too fully emphasised in this House yesterday. Every citizen of Ulster takes pride in the fact that throughout the war, and since, the industrial machine has run smoothly. Today our exports are valued at the high figure of some £9 per head of the population, a figure which is three times the value of the corresponding figure of £3 over here. After the speech of the right hon. Gentleman the Chancellor of the Exchequer today, hon. Members will well appreciate the significance of this large contribution. Added to that, Northern Ireland is a great food producing area. There is a drive in progress to increase our production even more than was the case during the war period. Under these circumstances, we feel that the export machinery of the country must be kept-running smoothly and the food producing community working to capacity. There are few car owners in Northern Ireland who are not engaged directly or indirectly, in productive work, and for the reasons I have outlined we ask that favourable consideration might be given to two points.

We ask, first, that the restoration of the basic allowance, even on a further reduced scale, might be made at an early date; and, secondly, that Northern Ire- land may be allocated her appropriate share of petrol in bulk and that distribution of the supplies may be carried out by the appropriate Ministry in Northern Ireland, the Ministry of Commerce. The regulations governing supplies are the same over there as they are here—the Supplies and Services (Transitional Provisions) Acts, 1945–1947 and the subsequent Statutory Rules and Orders. No Ministry in Northern Ireland has power to vary those rules, in spite of the difference in local conditions which I have already mentioned. We ask for no more and no less petrol than that to which we would be entitled under the present arrangements, but we ask, with great respect, that favourable consideration should be given to this bulk allocation being made, so that distribution may be made through the Ministry of Commerce in Northern Ireland, and full account taken of our local requirements and the best possible use made of it towards the production effort.

3.57 p.m.

Mr. Keeling (Twickenham)

I want to deal in the briefest possible way with the last speech on Wednesday night—the speech of the hon. Member for Neweastle-under-Lyme. (Mr. Mack). I am sorry that, apparently, he is unable to be present, although I told him that I intended to raise this matter this afternoon. His speech dealt mainly with the execution of Petkov, the Bulgarian peasant leader. The hon. Member pronounced him guilty; guilty, that is to say, of conspiring to overthrow the State by force of arms.

I would like to have asked the hon. Member on what evidence he based his conclusion that Petkov was guilty—a conclusion which was entirely contrary to that reached by His Majesty's Government. The hon. Member did not attend the trial. Did he read the evidence, and if so in what language? I am quite sure that he has not sufficient knowledge of Bulgarian to enable him to read it in that language. Did he see the translation of the evidence at the British Legation in Sofia, and is he aware that although the hon. and learned Member for Llandaff and Barry (Mr. Ungoed-Thomas) was refused permission to enter Bulgaria to attend the trial, His Majesty's Government were represented at the trial by one of the secretaries of the British Legation and by the legal adviser to the Legation, a Bulgarian lawyer? Is the hon. Member for Neweastle-under-Lyme aware that, in the opinion of the British Legation, there was no evidence at all against Petkov of having conspired to overthrow the State by force of arms? Is the hon. Member also aware that the circumstances of the trial make it impossible to believe that the trial was a fair one? Every member of the court was a Communist, and every member of the Court of Cassation, which upheld the conviction, was a Communist.

I think it is very regrettable that, in the face of these facts, or in reckless ignorance of the facts, the hon. Member pronounced Petkov guilty. I deplore his speech and I applaud the speech which his colleague, the hon. Member for King's Norton (Mr. Blackburn), made at the memorial service in London. He said: Over and over again Petkov denounced the Communist terror which strikes into every home. He had denounced the Fascists no less fearlessly, and had suffered in their concentration camps. It was left to the Communists to do what even the Fascists would not do. So now Petkov takes his place among the heroes whose legend is written not in tablets or bronze, but in the hearts of men. The hon. Member for Neweastle-under- Lyme, in paying his tribute to Bulgaria, declared himself a loyal supporter of the British Government. I do not under stand how that can be, when the Foreign Office, in its pronouncement on the execution of Petkov, said that—

It being Four o'clock, the Debate stood adjourned.

Debate to be resumed upon Monday next.