PERSONAL INCOMES, COSTS AND PRICES

HC Deb 12 February 1948 vol 447 cc579-691

3.40 p.m.

Mr. Eden (Warwick and Leamington)

I beg to move, to leave out from "That," to the end of the Question, and to add instead thereof: This House views with grave concern the present state of the Nation and would welcome any well-chosen measures designed to check inflation and to restore the economic prosperity of the country I need not detain the House with any explanation of the motives which have led the Opposition to ask for this Debate and to express themselves willing to sacrifice one of their Allotted Days for the purpose. The gravity of the situation now is such that I think it is not only the desire of Members in all parts of the House to examine its causes, but it is also our responsibility to put forward criticisms and to suggest any remedies that we can devise. There is no doubt that the White Paper, combined with the speeches of the Chancellor of the Exchequer at the week-end and his Press conference this week, have, taken together, caused a profound shock to certain sections of the population. For the extent of that shock the statements of the right hon. Gentleman himself are not to blame, but those of some of his colleagues are, because during the last year we have listened to an alternating succession of warnings and optimistic forecasts from the Government Front Bench.

They began, curiously enough, almost exactly a year ago, though it will seem to many longer than that on the Friday morning when the then Minister of Fuel and Power came down to the House and announced the electricity cuts, and at the same time upbraided me for suggesting that the situation was very grave. Now that Mr. Horner has said that Britain's economic position is more desperate than ever before in living memory, I suppose that I may regard my own rebuke as cancelled out. Then in the summer, the House will recall, we had the extraordinarily optimistic statement of the Minister of Food, winding up with the assurance, which deeply impressed me and encouraged me at the time, that he was perfectly sure that the country need have no doubt whatever of its ability to obtain an ample—note the word "ample"—food supply in the coming year. I ask the House to contrast that with the statement of the Chancellor of the Exchequer to the Press last Tuesday. When asked whether he was confident that there would be no substantial diminution in the standard of living in the next 12 months, he replied: "Certainly not." Finally, we had the broadcast before Christmas by the Lord President of the Council. I make every allowance for the festive season, but the right hon. Gentleman concluded that broadcast with a statement referring to the nation as the kind of people whose effort is, now taking them round 'Recovery Corner' to a better and brighter and even more free Britain. I contrast that with the statement of the Chancellor of the Exchequer on 7th February, after the festive season was over, that all that now stands between us and disaster is the gold reserves of the sterling area. I put it to right hon. Gentlemen that if they consider these speeches dispassionately, would they not say that there is a marked contrast in their tone and context? I do not understand how it is possible for members of the same Cabinet to make such completely contradictory statements. Surely they must be in daily touch with the figures of our gold reserves and what is left of our dollar loan. Surely they watch this just as in the war we used to watch the daily course of military events.

It is not my main purpose to delve into the past contradictory statements, although others may have something to say on that subject later. I wish to concentrate upon the White Paper and upon the position which the figures of the Chancellor of the Exchequer reveal. The main issue of this White Paper is that of inflation in this country, but that issue, I submit, is intimately bound up with the problem of our balance of payments. It has always been, as the House will remember, one of our criticisms of some members of the Government, and not least of the former Chancellor of the Exchequer, that they appear to regard our external and our internal financial problems as largely independent of one another. The fact is—and I do not think anyone will dispute this now—that the continuing inflation has greatly contributed to our balance of payment difficulties. It has distorted our economy, hampered the efficient distribution of our labour forces, and thereby throttled back our industrial recovery. I say that we were right when more than a year ago, in my speech at Newcastle, I urged the Government to relate their capital expenditure programme to the resources which they had available. The Prime Minister has admitted that the criticism can be made that the Government are trying to do too much all at once. Now an attempt has been made, but how late it is!

I listened to the remarks of the Chancellor of the Exchequer the other day. He seemed to think that he had made a new discovery when talking about the danger of rising prices of British exports. Yet, we had been warning the Government for many months past of just this very danger. Therefore, my first comment on the White Paper is that it appears to attribute the progress of inflation, which is now troubling every one in the House and in this country, almost entirely to the pressure of rising incomes, and it seems to suggest that the Government's contribution has merely been to try and damp down that pressure. We maintain that the facts are quite different. The pressure for increased personal incomes, whether they be wages, salaries or profits, is certainly a potent contributory factor in the inflationary process, but the Government's own contributions have, in our submission, been no less serious. I will give two examples of that. The first is the failure to relate the capital expenditure programme to the resources which were available—much too much was attempted, and much waste has resulted, and the second is the continuing high level of Government expenditure.

Therefore, I say to the Government that if they call upon the people, as they are doing in this White Paper—all sections of them—to exercise self-restraint and to accept sacrifices, they must at the same time show their own determination to take what steps lie in their own power to check inflation. It must be clear, beyond all measure of doubt, that the proposals are not aimed at one particular section of the national income, be it wages, salaries or profits, because no partial solution can measure up to the grim facts of the national emergency, nor can any policy that fails to hold the scales of justice evenly between different sections of the community claim the united support of this House and the nation. If that is the purpose which is underlying the White Paper, then it has our support.

Our aim in this Debate is to try to make clear whether this is in fact the Government's purpose, and how they propose to give effect to it. Therefore, I must now ask the Government to give us some further information as to their real intentions, because while many of the sentiments in this White Paper are quite impeccable, they are, in practice, capable of many different interpretations. Indeed, the net effect of the White Paper may be very far reaching, or it may be virtually negligible, depending entirely on the construction which the Government put upon it and the action they propose to take to give effect to the policy which it contains.

There are several questions I want to put to the Government. I will first refer to the question of profits. I hope that it is clear that we on this side of the House agree whole-heartedly with the principle that there must be an equal distribution of burdens. We accept that. The problem of rising incomes must, therefore, be treated as a whole. If that is to be the policy, it is, I think, right that it should be applied to incomes from profits and similar sources. I must point out, however, that incomes are not solely the incomes which the wealthy capitalists enjoy from investments; they also include the incomes of many people of modest means—pensioners and retired people dependent on savings, who have already suffered very seriously indeed from the decline in value of the pound. The White Paper states: if at some future time there should be a marked rise in the cost of living, the level of those personal incomes, which as a result become inadequate, would need reconsideration. Therefore, my first question to the Government is this: Whether that principle applies to the type of people I have described—the lower income groups living on pensions and small savings? It should be remembered, in fairness, that action has already been taken to reduce incomes derived from dividends. The right hon. Gentleman will remember that over and above the normal direct taxation, company profits have to bear a special discriminatory tax, and this was, as the House will recollect, doubled as recently as last November. The rate was doubled not merely on distributed profits, which are admittedly likely to add to the inflationary pressure, if released, but also on profits ploughed back into industry. I trust that whatever steps may be considered necessary in future in respect of distributed profits, the Government will take no action that will discourage ploughing back profits into industry, because this is really indispensable, if not for our immediate existence, certainly for our long-term survival as an industrial nation.

My only other point on the subject of profits is this: What does the item "profits" in the White Paper really include? In the annual White Paper on the National Budget that was issued last year, the item described as "rent, interest and profits" includes, for example, farm profits, earnings of small shopkeepers who own their own shops and the earnings of all professional men; in fact, all the incomes of the self-employed are treated under this head.

I would ask the Chancellor what principle is to be applied to those categories of persons in this White Paper? Is there to be, for instance, a ceiling on farm profits and on one-man businesses, or are they to be allowed to increase their incomes if it can be shown that those increases are tied up with increased output? Suppose a cobbler takes on more work, and, as a result, makes more profit, will he be subject to a ceiling, or will he be allowed to make use of that profit? A more far-reaching example concerns farm profits. No one disputes that the future of the agricultural industry is particularly important. We want every possible incentive for food production. So I repeat my question to the right hon. Gentleman: Are the principles in the White Paper to apply to farm profits or are they not?

I turn now to the question of wages and salaries. Here, again, I have some questions to put to the Government. I hope that they will let us have answers, because, without this information, it is not possible for the House and the country to arrive at any real estimate of the value of the White Paper or the strength of the Government's determination. Before I put the questions, I will make one reference to the position of salary earners. This section of the community has in many ways suffered more than any other from the growing inflation. That, I think, is true. Salaries certainly have not risen as fast as either profits or wages, and the share of our national income taken by salaries has, in fact, fallen since 1938. I should like to know what the Government intend to do about incomes in the Civil Service and in the nationalised industries.

Paragraph 9 of the White Paper states: The Government will themselves observe these principles in any negotiations in which they are directly concerned. That obviously must affect the Civil Service. What is the position about the nationalised industries? Am I not right in thinking that the powers that Ministers have to issue directions of a general character to the nationalised industries in matters of policy certainly embrace the fulfilment of the principles of the White Paper? What is the position, for instance, of the Transport Commission? Are they or are they not to apply the principles of the White Paper to wage negotiations? I am not asking whether they should or whether they should not; I am asking what the position is, so that the House may be clear on the subject. Surely, this is a matter of principle and, indeed, of very high policy for which the Government must take responsibility, and which cannot be passed off as a matter of day-to-day administration.

In paragraph 10 of the White Paper, the Government state that they are going to use their extensive powers of price control. This raises some important questions. It is a very serious statement and needs a great deal of amplification. The House ought to be given full information as to how the Government propose to use this weapon. We know, of course, that rationed goods and certain other groups of products are controlled. Therefore, does it not appear likely that under this White Paper policy, the prices of the more essential groups may be held steady; while, on the other hand, the prices of the less essential groups, which, generally, the Government do not control, will be allowed to rise, and may even rise still faster? If that is so, the result may be to attract still more labour into the unessential industries. I have no doubt that the Chancellor of the Exchequer is fully a ware of this problem, but I hope that he will tell us how he proposes to meet it.

The Government say that they do not intend to intervene directly in wage negotiations. I think that they are wise in that decision, but if they are leaving so much to private negotiations, they must make clear their intentions. Here, I will give two examples of what I mean: What is meant, first of all, by a substantial increase in production? How is it proposed to apply this criterion. How, for instance, will it be applied between those working on time rates and those working on piece rates? Of course, increased production will result in larger bonuses to those working on piece rates. We certainly welcome that. But what about those who cannot, from the nature of their jobs, work on piece rates? What is to be done about them? What can be done about those engaged in such services as transport, who cannot directly achieve a substantial increase of production? Must they be denied any chance of earning an increased increment?

Here I should like to utter a word of warning. In the last resort, as I know the Government and the House will agree, the only way in which we will get out of this position is by increased output. It is, therefore, essential that in the Government's very proper desire now to combat inflation they should not take any action which may kill incentive. It is incentive which maintains our output and which alone makes a rising export trade at competitive prices possible at all. So my plea, therefore, to the Chancellor of the Exchequer will be from a rather different angle, that, if possible, the Government should increase incentive in order to increase output. Ought they not to look at P.A.Y.E. again? It is essential not to penalise a man who does an extra bit of work in the reasonable hope of getting some extra reward? The objective to my mind should be to try to increase further the earned income allowances, and I would ask the Government to try to reduce their own expenditure in order to allow this to be done so that as a result we can avoid inflationary effects, which otherwise might accrue from those increased incentives which I suggest should be offered.

I want to ask the Government which are the undermanned industries where wage increases are to be permitted. Who is to decide which these are and how is a decision to be transmitted to the wage negotiators. Obviously the question of wage differentials between the various industries is perhaps the most difficult of all, but it must be tackled, and the Government are right to try to tackle it now. How much better it would have been for all of us if they had tackled it long ago instead of toying with the direction of labour. The Labour Party Conference in 1947 chose incentives, and I should like to quote a speech by the former Chancellor of the Exchequer, with whom on this occasion I am in complete agreement, if that does not unduly embarrass him. He said: If you are going to alter the distribution of labour between different industries you can do it only in one or other of two ways. You can do it either by authoritative direction or by the giving of inducements to these industries into which you wish to attract more labour freely In the view of the National Executive, the balance of argument lies in favour of seeking to do it in the manner suggested in the resolution of the National Union of Mineworkers, that is to say, by seeking to arrange and to facilitate relative inducements and advantages for the undermanned industries I agree with that, but the unfortunate thing is the Labour Party Conference having chosen that way, the Government chose another. They chose direction, and so I ask the right hon. Gentleman, which is the country now going to have? I only hope that the Government will have given a little more careful study to the implications of this policy, what I may call their party conference policy, than they gave to the direction of labour.

Let me sum up what the Prime Minister said in his broadcast last Friday night; he told us that we had now reached a point where we must all face the fact that higher wages, salaries or dividends just cannot make the most of us any better off in the long run, and that the only way to do that is to produce more of the goods we all want. I entirely agree. Rising, incomes, be they profits, salaries or wages, can bring no gain to anyone if they merely add to the tide of inflation. More than that, if they make British goods unsaleable they can bring us all to the edge of ruin. Therefore, it is to everyone's interest, wage earners' no less than profit earners', that the process of inflation should be stopped, but it can be stopped only by treating the problem as a whole, and, in so far as the White Paper seeks to do this, it has our support.

We on this side of the House are not in the secrets of the Government, and I do not know who is the author of the White Paper, but there can be no doubt that it bears throughout the imprint of the Chancellor of the Exchequer. I am sure he is primarily responsible for its production and for the policy it contains. The right hon. and learned Gentleman was the first of His Majesty's Ministers to dare to use the word "deflation," and if he intends now to face the real facts and face the people with the real facts, he has in that task our support. I hope that is his intention and that the White Paper is a new departure in policy, and not just another series of pious exhortations accompanied by the shuffling of responsibility from the Government on to somebody else's shoulders. The pressure of time and the urgency of events are too great for that.

Before I conclude I want to say a word in rather a different vein about our national situation as a whole, because reading the facts in this statement makes us sometimes lose sight of the long-term position of this country. The figures that have been given about our balance of payments are very alarming; and some time this year at the present rate our gold reserves and dollar stocks will be exhausted. The effect of that can only be partially met by Marshall aid. Therefore, there is at once a short-term problem, how to deal with this immediate situation, and a long-term problem, how this country is going to live through the years.

If we take the long-term view for the moment, I submit that there is no cause whatever for despair. At a time like this when the situation is so grave, it is not a bad thing to look at it from this angle for a moment. In the 19th century what was our position? We were the leading manufacturing nation of the world. That position in quantity we cannot hope to regain; in quality we ought to be able to hold our own. In the twentieth century our entrepôt trade was the largest in the world. There once again our banking service, our insurance service and the many facilities from the organised markets which London and Liverpool offered have still a contribution to make which is second to none.

Let the House for a moment look a little wider still, and consider the resources that are available to us and to the other countries of the British Commonwealth and Empire. I want to include for the purposes of this brief examination British countries operating in some cases on foreign soil. We have more coal here and in the Empire, including Rhodesia and Australia, than we can possibly need. We are second only to the United States in our potential production of oil. Virtually every metal in the world is to be found in the Empire, and every soil in every climate. We have an industrious and politically experienced population. We have in our African territories alone, the opportunity to secure a fairer balance of our economy than is possible in our small island. It may be that in this field we shall need practical help from others. I think we shall, but, if so, that in no way conflicts with our conception of the development of these vast areas for the benefit of those who dwell therein. But even that is not all, because the Foreign Secretary has perhaps the greatest opportunity of all. Geography has given us a key position in Western Europe with a population of 150 million people. He has an opportunity to bring them together now in closer association than ever before. Can any one say that with all these opportunities before us there is no hope for the future? Of course there is; but only if we handle our business in the right way.

What I have said is a sincere expression of my own faith in the future of this country and the British Commonwealth and Empire, a faith which can only be realised—I hope we all agree—in a free democracy. Here I must express my deep resentment at some words which are reported to have been used by the Secretary of the Labour Party last Saturday. I would have thought the report inaccurate except that it is a report of the Secretary of the Labour Party in [...]The Daily Herald. It can therefore hardly be inaccurate, I suppose. He is reported to have said: There is danger of a collapse in Europe—there is even the danger of a collapse at home If that happens, it means an authoritarian government here in Britain, for there is no democratic alternative to the Labour Government I say at once that such a statement is false and outrageous. This really ought not to be a party issue. Wherever we may sit, it is surely our first aim to seek to preserve Parliamentary democracy? If we were today in power, we should certainly not claim that there was no possible alternative democratic administration for this country, because we consider that is a matter for the people of this country to decide. Respect for the faith of your opponents, I would submit to the Prime Minister, is the hall-mark of a true democrat. The arrogant assumption by the Secretary of the Labour Party that his party is the only democratic party left in this country is a tragic indication of the extent to which the minds of Socialist leaders appear to be slipping into totalitarian thought.

Mr. Bechervaise (Leyton, East)

How does that square with the Gestapo speech of the right hon Gentleman the Member for Woodford (Mr. Churchill)?

Mr. Eden

I am amazed at the hon. Member. I could not be more grateful to him for thus dotting the i's and crossing the t's.

Mr. Bechervaise

I submit that that is no answer to my question. The right hon. Gentleman knows precisely to what I am referring—the broadcast of the right hon. Gentleman the Member for Woodford alleging that if the Labour Party was successful we should have a Gestapo here.

Mr. Eden

If the hon. Gentleman cannot see how unhappily Mr. Morgan Phillips is here lending justification to that speech, he must be very blind indeed.

Miss Herbison (Lanark, North)

Is the right hon. Gentleman aware of the statement made by the Unionist candidate nominated yesterday for Paisley, that clearly the choice now placed before the people of Paisley is whether we go forward as free men and women or as subjects of a totalitarian State?

Mr. Eden

It is obvious that the words of Mr. Morgan Phillips must have reached Paisley by telegram This completely justifies what the candidate says. If the Secretary of the Labour Party says that the alternative is that bench or totalitarianism, it is not surprising that that warning should be pointed out by a candidate.

Miss Jennie Lee (Cannock)

On a point of correction, the statement of the Tory candidate was quite simple. He was saying that at present Britain was a totalitarian State and that the alternative was the party opposite.

Mr. Eden

I am afraid that the hon. Lady must argue with her hon. Friend which is the accurate quotation. I am unhappily not in possession of either. The only quotation I have is from Mr. Morgan Phillips, and about him I wish to ask the right hon. Gentleman and the Prime Minister a question, because this is a serious statement to be made—and it was made. Everybody will agree that it is a serious statement by the Secretary of the Labour Party. [An HON. MEMBER: "What about the hall-mark of a democrat?"] I intend to put my question to the Prime Minister whether hon. Gentlemen like it or not. I said that the hallmark of a true democrat was respect for somebody else's opinion. What I am seeking to discover is whether Mr. Morgan Phillips' opinion in this respect is the opinion of the Government or not. It is certainly not our opinion. I made that plain enough. I said that if we were the Government we would not say that there was no alternative democratic administration.

Mr. Benn Levy (Eton and Slough)

rose—

Mr. Eden

I have given way a great deal and I think I am entitled to ask my question. The question I ask the Prime Minister or the Chancellor of the Exchequer, whichever of them prefers to answer, is whether one or other of them will repudiate that statement as representing the views of their party. If the Front Bench opposite believe these things and feel themselves unequal to the task of Government, it is my duty to tell them that there are others, whether they disagree with them or not, who feel that they could discharge that task with a better heart. [HON. MEMBERS: "Oh."] Yes, with a better heart and with a sincere conviction that under their leadership the nation could ride the gathering storm.

4.19 p.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

I am sorry that the right hon. Gentleman finished his speech with such a difficult subject-matter for himself. I can only imagine that the old adage "Save me from my friends" must have come to his mind. I certainly do not propose to enter into a discussion of some statement appearing in the Press, as to the accuracy of which I have no knowledge at all. Nor do I think that it is very relevant to this discussion. I have my own views, of course, as to the capability of any other party to govern this country at the present time, but perhaps, in order that I may not upset the Opposition, I will keep them to myself at the moment.

There are one or two general matters into which I will not go tonight because I do not want to delay the House unduly, but the latter part of the right hon. Gentleman's speech strayed into much more general subject-matters as regards the development of the overseas territories and matters of that kind on which he knows we are wholly in agreement. My only comment on them would be to say that it is really most unfortunate that past Governments have so neglected that development. [An HON. MEMBER: "A cheap comment."] The hon. Member need not worry; it is not a question of cheap comment at all, it is a question of fact.

Mr. Godfrey Nicholson (Farnham)

The present Government are liquidating the British Empire.

Sir S. Cripps

I am glad to say that under the present Government the British Empire, in the old conception of the word, is being liquidated and the British overseas territories are being developed, which is a much better situation. The right hon. Gentleman was in some confusion as regards what he called the different statements that have been made by the Government over the past year. He mixed up two things. One is the statement of necessarily gloomy facts—because the facts are gloomy—and the other is the cheerful determination to overcome them.

Mr. Grimston (Westbury)

Recovery corner!

Sir S. Cripps

I am glad to say that the Government have given expression to both those sentiments. I want tonight—and in doing so I think I shall answer all the questions put by the right hon. Gentleman—to make quite clear to the House and the country just what our policy is as expressed in the White Paper. There are certain things that we, as a country, must accomplish as a condition of our economic survival. One of the most important is to arrest the tendency towards a continued rise in prices and wages which, of course, react inevitably upon one another. Wage and salary earners say, with reason, that if prices go up, then their personal incomes must be raised, and the manufacturers and distributors say that if wages and salaries are raised, then their prices must go up.

It is from this vicious spiral that we must find a way of escape, for otherwise it can only land us in such an inflationary position that we shall be unable to control our domestic economy so as to give fair shares of what is available to all the people. All experience shows the difficulty of a prompt and equitable adjustment of personal income in the face of a general and continuing rise in prices. Moreover, we shall lose our export sales, both because of a diversion of labour and material to other less essential uses, and by the rising prices of our goods in the world markets. Many other countries besides our own, today have to lay out their money to the best advantage, and, therefore, have to look carefully at what and how much they buy and the price at which they buy it. If our prices frighten off foreign buyers, we shall be unable to buy the food and raw materials necessary, and thus we shall suffer unemployment and hardship and falling incomes for everyone. We should then have to face very painful adjustments in our wage structure and, indeed, in our whole economy.

More production and lower costs are the prime safeguards against these possibilities. We must, therefore, arrest this tendency to inflation. There are three ways, and only three ways, in which that can be done. The first is by the voluntary common sense and self-restraint of manufacturers, distributors and workers: the second is by direct Governmental action; the third is a combination of the former two. We have so far, with the general assent of the people of this country, applied certain Governmental controls and these affect, in the main, materials which are in one way or another rationed or allocated, prices which are controlled in various ways, and the general level of incomes so far as they are affected by taxation. I think it is worth while to review what has been done in this field so that we can see what still remains to be dealt with.

Let me take taxation first. At the present time—and I am dealing strictly with the present and the past, and not with the future—high taxation on companies and high Surtax on individuals diminishes the amount that can be spent by the higher income groups. P.A.Y.E. diminishes the spending power of the lower income groups. In addition, indirect taxation of all kinds, principally on tobacco, beer, wine and spirits, together with the Purchase Tax, bears upon all incomes but proportionately more onerously—as indirect taxation is bound to do—upon the lower incomes, just as direct taxes bear more heavily on the higher incomes.

These general taxes undoubtedly reduce the expendable portions of all personal income, but there is always a tendency for those incomes [...]rise, where possible, to counter the taxation effect, the indirect portion of which is, of course, carried through into prices. The regulation by rationing of such things as food and clothing removes the danger of those with higher money incomes purchasing more than their share; the regulation through allocation of materials prevents to a large extent, the use of those materials for less necessary production; but in both cases the regulations work properly only when the inflationary condition of the market is not so strong as to counter the controls.

The control of prices prevents exorbitant profits in the price of controlled articles, though the difficulties and imperfections of any price control system render it difficult to apply; and there is an added difficulty here owing to the inequality of efficiency between the different producing units. If the price is so fixed as to allow a reasonable or small profit to the less efficient units, then the more efficient units are almost bound to make large profits, especially where demand is unlimited, and maximum prices, therefore, become fixed prices. Efficiency is, of course, much to be encouraged, and within a system of free enterprise the possibility of increased profits is the accepted form of that encouragement. Excessive profits can be dealt with by taxation to some extent, but we cannot disregard the accumulation and distribution of large profits at a time when all sections of the community are being asked to exercise restraint as to their personal incomes. The same difficulty affects retail and wholesale margins, particularly the retail. Here again the margin necessary to enable the small shop to survive means often much greater profit for the large shops, yet the bulk of the goods sold through the small shops is enormous, they are an essential part of the distributing system, and so must be maintained in being.

I would remind the House that we must always remember that what we are dealing with is the actual manufacturing and distributive structure of our country as it exists, and not some ideal system which has its being in our imagination. On the whole, the price control system operates to restrain the more violent increase of prices due to shortage, in respect of those articles, of course, which are subject to the control. Many manufactured goods are not the subject of any form of price control today, although most of those coming into the category of domestic necessaries are controlled in one way or another.

There is a further factor in price in subsidies. These are granted to reduce the prices of the most essential foodstuffs so as to hold the level of wages and salaries more stable. The country contributes nearly £400 million a year, or an average of something like 14s. a week per family, to reduce the cost of living and so to remove the pressure to engender an upward spiral of wages and salaries.

The net result of all these factors has been to save us from any uncontrolled inflation, though strong inflationary tendencies have been present, and have had their effect upon prices and personal incomes. Rises in personal incomes have not yet taken place at a breakneck speed, whether in profits, wages, or salaries. The situation is not yet out of hand, as it becomes in the worst conditions of inflation. On the financial side, the large Budget surplus which is obviously accumulating at the moment is a factor which tends to remove inflationary pressure and this has been helped by the Autumn Budget, which increased the amount of the surplus, and also largely put up the Profits Tax, particularly in regard to distributed profits. The effect of that latter provision has not yet been felt, but when it is in full operation it will, with Income Tax, mean that on the average some 50 per cent. to 60 per cent. of distributed profits will be taken back in taxation. That takes no account, of course, of any Surtax paid by recipients of dividends, which in extreme cases may rise to 19s. 6d. in the £.

I have recounted in a very summary way the policy of controlling the proportion between personal incomes and goods available in order to show that a great deal has already been done by Government action to try to bring the two into proper relationship one with the other. I need not deal with the control of capital investments, or the direction of exports, which are now familiar incidents of our economy, except to say that the stimulation of exports has an obviously inflationary tendency upon our internal economy.

There is one other factor I must mention, although it is not directly relevant. That is the Control of Engagement Order and the direction of labour. This exceptional measure, which was most unwillingly taken by the Government, and by this House, has been accepted by the workers. It was designed to help in manning-up essential industries, and drawing labour away from less essential purposes. It has, therefore, the effect of increasing the flow of essential goods and services, and diminishing the flow of unessential goods and services.

What part of the field, therefore, still remains to be covered, in order to prevent the present inflationary tendency from developing further? The danger clearly is the continued rise in personal incomes, without any more goods being available on the market. The way in which we should all wish to overcome this danger is by making more goods available in the home market. That is what we are aiming at, and that is, of course, the only way in which we can achieve a higher standard of living. That way depends, however, upon what we can do to increase our production over and above what we must send abroad to pay for [...] primary necessities of imported foodstuffs and raw materials. We have not yet achieved our export task, so that there can be no question of either devoting more of our production to the home market or of expanding our imports in any degree.

We have not yet nearly enough exports to pay for our present level of imports. If we are to achieve, even with Marshall aid, a balance of payments, we must greatly increase exports, and if we cannot increase them sufficiently we shall then be driven to reduce our imports still further. We cannot, therefore, for the present, look to an increasing volume of goods on the home market to diminish the potential gap between the supply of goods and the money demand for them. Savings from personal incomes can help to bridge that gap. That is why savings are today more essential than ever. But, even after savings and all the controls I have mentioned, there still remains a grave danger to our economy from a rise in personal incomes and in prices. Indeed, not only do we want to prevent a rise, but wherever and whenever there is a surplus of purchasing power in the hands of an individual, we want to draw it off, either by investment, in savings, or in some other way.

In this field of personal incomes we take the view, clearly expressed in the White Paper, that the Government cannot regulate the amount of individual personal income and we do not, therefore, propose that any direct Governmental regulation should be exercised. The Government, of course, as employer, or in its financing of special services, or in controlling prices, must have regard to its own principles and must give a lead by following its own precepts; but, apart from those special cases, the fixation of the amounts of individual personal incomes must be left to the free negotiation of those concerned. This highly desirable, and almost universally demanded freedom may, however, be of great danger unless those who exercise it understand the situation of the country, and are prepared to moderate their personal wishes and desires in accordance with the interests of their country. In the White Paper the Government make this appeal to the people, in all sections of the community. Here I would emphasise that this effort must be a national effort, by all sections of the people. If any one section seeks to gain an advantage over others, quite obviously those others cannot be expected to moderate their demands upon the community No one is excluded from that national effort, whether they be farmers, small business men or anybody else. It is, of course, a question whether in any case they have or have not excess spending power, but as a principle nobody is excluded.

It is essential, therefore—and from this it is impossible for us to get away—that if wages and salaries are not to be increased generally, there must be a halt in price increases, and wherever possible a reduction in prices, to offset such rises as may be inevitable if there are continued increases in the prices of imported articles. Price reductions will lead to reductions both in overall and in distributed profits, and a decrease in prices is far the most satisfactory way to get that reduction of profits. It is better than increasing taxation of profits because everyone benefits from price decreases, and at the same time they remove the objection that too large a share from the sale of goods is going into profits. That is particularly important at this moment. Where there are many imminent demands for wage increases, as there are in this country today, and where those demands are based on rising prices and encouraged by the knowledge of large profits, the best way to damp down those demands is to arrest and reverse the increasing cost of living.

I have, therefore, addressed letters to the Federation of British Industries and other organisations representing respectively the manufacturers and wholesale and retail distributors both of food and of other goods, asking them to work out some plan for price and profit decreases, and to let me know within a month what they propose to do. I am glad to say that I have already received an answer from the Federation of British Industries that they will do their utmost to assist in this way. I emphasise here the absolute necessity for some effective action to be taken now along these lines, if we are to escape the dangers of inflation, and the country, I think, may properly ask that during this period of consultation those concerned should impose upon themselves a self-denying ordinance not to increase prices beyond those ruling at this moment in any but perhaps the most exceptional cases. I want to see a voluntary ceiling on all prices of goods that do not come within price control. There must, of course, be a few exceptional cases where increases have already been authorised for some good reason by the appropriate price-controlling Departments, and these we must face, but they will be very few compared to the whole wide field of commodities.

For example, there are prospective increases in the field of clothing and food, due to decisions already taken, and based upon a number of factors such as the increased price of imported material. That is the kind of exceptions to which I referred. There can be no doubt whatever that a reduction in prices in some lines of exports would help us—not by any means in all, as we want to sell for full value, but in some. Nor can there be any doubt that the present level of profits in some units in industry is such as to allow of a reduction in prices. On this point there is a special observation I would like to make. There is no need, where prices are fixed at a maximum, for any company to charge that maximum. It has become a habit, because demand is so great, always to charge the maximum no matter what the cost of production may be. In other words, the benefits of efficiency are retained entirely by the profit earner That is wrong and ought not to continue. Reasonable profits are a fair reward, but excessive profits upset the whole economic system and create false values.

If these measures of restraint, or of sacrifice, if that is the term preferred, can be shown by those who draw their incomes from profits, there is indeed a good chance of persuading the wage and salary earners also to exercise restraint in the use of the pressure which the scarcity of labour enables them to apply. Action in these two matters must be simultaneous, or substantially so, or we shall not extricate ourselves from the vicious spiral. It is a great test of our democracy. We must take immediate steps to fight the dangers which I have stated. Can we take them in a democratic way by free choice, or are we to demand the imposition of them by force?

That is the major issue with which the White Paper confronts the nation. Extremists on the Left or on the Right may demand vigorous measures of enforce- ment against employers or against workers, and decry the possibility of agreement. Indeed, they may no doubt urge their followers on both sides not to agree, but I am convinced that by far the better, smoother and more effective way of dealing with this difficult matter immediately is by the consent of all sides, and with their support. I believe that that view will commend itself to the great majority of our nation. If I am right in that, we must all be prepared to take action to implement our plans. Words alone will not save the situation. Action is required on all sides to follow through the agreed policy.

There are still some fields in which the Government can act without transgressing the principles I have stated. That is particularly so in the field of price control. Here I want to make plain to the House the change in the practice of price-controlling Departments which Section 10 of the White Paper involves. At present it is the usual practice of Departments, when considering applications for increased prices following wage increases or reductions of hours, to grant them in full provided they are justified by costings or financial returns, and provided that profits have already been reduced to a reasonable level. In future the initial presumption will ordinarily be to allow nothing on forward estimates, and where costings are subsequently furnished, to disallow the added cost estimated to be due to wage increases which do not satisfy the requirements of the White Paper. Exceptions will be those exceptional cases of wage increases envisaged in the White Paper. This principle will, of course, be applied only in the case of wage increases made after the Prime Minister's statement of 4th February.

As I have already intimated to the House, price control does not cover by any means the whole of the products of British industry. Where it exists it is not, and cannot be, always equally effective. There is, therefore, a danger that our policy in regard to wages and prices may bear more hardly on the essential industries, where they are strictly price-controlled, than on the less essential, which tend, on the whole, to be less strictly price-controlled. Accordingly, my right hon. Friend the President of the Board of Trade proposes, as soon as the necessary orders can be made, to impose an immediate ceiling, at the level ruling in the two months ending 31st January, 1948, on manufacturers' prices of all goods which come within the price control system, and have not already got a sufficiently close price control. Margins for distributors will, at the same time, be prescribed for these goods, and pending the result of my approach to them—of which I have already told the House—they will be such as to allow, as far as possible, returns at the present level.

Each of these steps is only an interim step to hold the position while manufacturers and distributors are considering my requests, and are preparing their suggestions. Our objective is to reduce prices wherever possible, and to reduce profits. What subsequent steps will be necessary must, of course, depend upon the proposals put forward by the various organisations which I am consulting. Those answers will come in well before the Budget. My right hon. Friend the President of the Board of Trade proposes, therefore, in the case of goods over which the cost-plus form of control is the most suitable, on account of their variety and types and qualities, to provide by Order that any increase in labour costs attributable to a wage increase granted after the date of the White Paper shall not, except in agreement with the Board of Trade, be taken into account in fixing prices. This is the immediate action which the Government can take with regard to the situation. Beyond this we must await the response to our suggestions.

I now pass to one or two particular points arising out of the White Paper. Great emphasis is laid upon the necessity to abide by the terms of wage agreements or awards. The reason for this is that in conditions of full employment, and consequent scarcity in the supply of labour available, there is a temptation—to which, unfortunately, some employers give way—to depart from the terms of an agreement, so as to attract labour away from others. This is obviously well calculated to initiate just that sort of rise in wages which is not justified, because it does not arise from any demand by the workers, or from the need to man up the industry. Indeed, this sort of thing often happens in the industries where labour is not so urgently required. It is, therefore, essential, if we are to get stability and keep our economy, that departures should not be made from agreed rates and conditions.

There are, of course, in many industries, cases where it has become the custom over years for extra payments to be made for particular reasons, or in particular instances. These are, in fact, unwritten agreements, and there is no suggestion in the White Paper that they should be interfered with in any way. I would emphasise that what we are aiming at is a condition of general stability. We are not seeking to prevent particular adjustments within a general stable level of wages. Such adjustments must always be taking place, especially in instances where the national needs demand the encouragement of labour into certain essential industries which may be dangerously undermanned, and where an increase in wages is an essential part of that encouragement. We must remember at all limes that it is increased production at which we are aiming, and that we want increased production in particular industries. We must not, therefore, deprive ourselves of the facilities necessary to get that increase.

It is inevitable that whenever there arises such a decision as we are now asking the nation to take, there will be found to be a number of negotiations for increases, and readjustments, in mid-course. We appreciate very fully the difficulty that this causes for those responsible. Hopes have been raised, and decisions taken, and it is difficult to postpone or explain the reasons for postponement. Nevertheless, we must, in the face of our overriding national difficulties, ask that even in these cases the negotiations should either be put off, or else conducted in the light of the principles laid down in the White Paper. We are dealing with the next year or so, and not with eternity. We are not suggesting that there should never be wage or salary increases in the future, but that, until we can see our way out of our present difficulties, we should all hold our hands in this matter of personal incomes, and be prepared to await the time when the urgent needs of our nation are not so overwhelmingly present as they undoubtedly are today.

I have always stressed the fact that the White Paper aims at the stopping of any further general increase in the level of personal incomes. It is made clear that there may be national reasons why particular increases should take place. I have given one particular example that is quoted as an example in the White Paper. It is the case of the undermanned industries, in which a rise of wages is essential to attract labour. Those cases cannot be defined, because they are continually varying and changing. It must be left to the common sense of those engaged in a particular industry, after consultation with the Ministry of Labour, to decide whether special steps are required to induce labour to come into that industry.

It is also clear from the White Paper that, where an increase in production has been attained in an industry, it is not against the national interest to consider some increase in wages and salaries. It is, indeed, right and proper that where efficiency has increased the benefits should be shared by the workers. That is one form of incentive, and it is for the unions and the employers to devise methods by which that incentive can be applied.

It will be noted in the White Paper at paragraph 8 that it is recognised, as the right hon. Gentleman said, that if there is a marked rise in the cost of living, the level of those personal incomes which, as a result, became inadequate would need reconsideration. That is the reason why we must prevent any further rise in prices, and indeed, work for their reduction That statement, of course, covers incomes of all types and not any particular type

Mr. Lipson (Cheltenham)

Will the Chancellor of the Exchequer say something about the effect of a reduction in the Purchase Tax on the cost of living?

Sir S. Cripps

I will deal with that in a moment. It may be that, even at the present time, some exceptional case exists where wage rates are not up to what might reasonably be regarded as a national subsistence level owing to some very special time-lag in their adjustment. In such a case, though it is difficult to imagine one, it would be justified from a national point of view to raise the wage level.

It is not possible to state precisely what the national subsistence level is, but it must obviously be determined by the levels of wages ruling at the bottom end of the scale at any given time. Since, as I have said, we cannot afford any general increases of wages, it would only be in some very special and particular case that such an increase could fall within the exceptions stated in the White Paper. The hon. Member for Cheltenham (Mr. Lipson) asked me whether I had considered the reduction of Purchase Tax in order to reduce prices. If we were to do that, it would not have the effect that is desired of reducing profits. In fact, it might tend in the opposite direction. We have considered it; we have decided that reduction of prices and the maintenance of the tax is the better way in which to proceed.

Mr. Lipson

I was not suggesting an alternative, but an additional, method.

Sir S. Cripps

I am always prepared to consider additional methods but that, as the hon. Member knows, is a Budget matter with which I cannot now deal.

I come back to what I have said earlier, because I believe it is impossible to over-emphasise the fact that what we are asking of the nation is the supreme test of our democracy. No one could have any doubt as to the seriousness of our situation. If there had been any doubt it would have been made clear by the White Paper, issued on Monday last, on the balance of payments. We must, and will, fight our way through these difficulties. Though others may, and we hope will, help us, as we shall try to help others, our success will depend first and last upon our own efforts.

While we are in this struggle none of us can afford to improve our standard of living, because we cannot make more goods available for the home market for some time to come. How long it will be before we can improve our standards depends, firstly, upon our own production, and secondly upon the terms of trade under which we can exchange our exports for imports from abroad. Unless we now exercise democratic restraint, the sheer facts of the situation will demand compulsions which certainly this Government is anxious to avoid. It is worth a great deal to us in the future to preserve through these difficult days our free bargaining machinery, but its preservation depends upon the degree of restraint which we as a nation can now exercise.

I do, therefore, beg the House to give their wholehearted support to this policy put forward by the Government and to do so both in this House and in their constituencies. We must bring home to the people the dire necessities of our situation. We are confident once they understand those necessities, they will react to the leadership of Parliament.

Mr. Baldwin (Leominster)

Before the right hon. Gentleman sits down may I ask him whether, in order to give a lead to the country and show that we really mean business he will suggest—

Mr. Speaker

Mr. Clement Davies.

5.4 p.m.

Mr. Clement Davies (Montgomery)

The House has heard, as it expected to hear, from the Chancellor of the Exchequer a comprehensive and logical review of our situation. He appealed not only for self-restraint from all of us—

Mr. Gallacher (Fife, West)

Not from all of us; just from the workers.

Mr. Davies

But also for unity among manufacturers, distributors and work-people. I take it that he appealed also for unity among all parties in this great crisis. I regretted the end of the speech of the right hon. Member for Warwick and Leamington (Mr. Eden), and the opening, which was a slight retaliation to it, of the speech of the Chancellor of the Exchequer. The situation is really too serious for us to be indulging in party—what shall I call it?—boxing across the Floor of the House.

The situation is serious, and the Chancellor of the Exchequer has certainly done his utmost to call the attention of the House to it. Throughout his career in the Government he has not deviated from his duty but, week in and week out, he has called the attention of the public to the drift of events and whither we were going. He is not lacking in courage, and certainly not in sincerity. May I, as I do with great humility, express my sincere and deep admiration for him. One thing I regret above all is the attitude of large sections of our Press towards the Chancellor of the Exchequer, the making of silly jokes and silly cartoons and so on when a man is doing his very utmost to call the attention of the public to what is happening.

I wish the Chancellor of the Exchequer had devoted a little more time to what is actually confronting us. Perhaps the Prime Minister will do so. We are, without doubt, heading, unless this country can pull itself together, for a really serious disaster. We are so apt to use figures without consideration that they almost become meaningless. The gap still remains of our overspending—or rather, the amount that we are obtaining for our exports as against what we have to pay for our imports—at about £660 million to £675 million. We are apt not to pause and think what those figures really mean. An illustration occurred to me the other day and it brought home to some extent what is involved in this matter.

Perhaps the House will pardon me for referring to my own country. The rateable value of the 13 counties, and of the four county boroughs of Wales, Cardiff, Swansea, Merthyr and Newport, when added together, is only about £11 million, as the annual value of all that is rateable. When I compared it to the gap of £670 million in one year it brought me to a realisation of what is involved. The amount that we have in reserve is now only somewhere in the neighbourhood of £450 million and that is going roughly at the rate of £10 million a week. When we have got right to the bottom, unless something from the outside, such as the Marshall Plan, comes to our assistance, the difficulties that will confront us in April or May will certainly be enormous. We have to consider what we are to do, and the Chancellor has rightly considered all the alternatives. I hope that the Prime Minister will, when he replies, deal with other matters rather than merely with policy regarding wages, prices and so on. Undoubtedly, as the Government admitted by the action they took last November, there has been a misuse of our resources in men and material.

There must be a cutting down of our capital expenditure. I felt at the time that that was not sufficient, and I should like to know whether any further cuts in such expenditure are contemplated? Without doubt, our commitments abroad still continue to be very great. What do the Government propose to do about that? Although there has been a considerable reduction in the Armed Forces, I do not believe that the state of the country justifies us in keeping hundreds of thousands of men in the Armed Forces today. I want to know what the Government are doing to deal with matters which are within their own province.

The situation is difficult, and I am sure the Chancellor has been right in emphasising the price factor. If prices can be reduced, the cost of living of the people can be reduced, and the necessity, therefore, for increased wages will not press so hardly upon them. I am glad that the right hon. and learned Gentleman has chosen the line of appealing to all of us to exercise self-restraint instead of resorting to compulsion in any shape or form. I have toyed with the idea of compulsion in the past, but I have always felt that it is no use introducing compulsory legislation which will not be obeyed. We must carry the people with us; if we can do that voluntarily so much the better, as the Chancellor said. I can assure him that my colleagues and I will do our utmost, in any call he makes upon us, to bring about the unity which he is calling for in the country so that the situation may be saved.

5.12 p.m.

Mr. Lyne (Burton)

It is with some temerity that I enter into this Debate, because this subject is one which can have great repercussions throughout the country, especially in the light of the speech which has just been made by the Chancellor. I think it would be true to say that there can be no difference of opinion about the first part of the White Paper, which strikes me as being something like a lecture about the folly of our present procedure, as a nation, in dealing with our economic circumstances. I listened intently to the Chancellor when he spoke of the attitude which the Government had determined to take to maintain prices at their present level, but I am not clear what he meant when he said that the Government would allow wage increases only in certain circumstances. According to paragraph 7 of the White Paper, the Government have no wish to interfere with the private incomes of our people, but immediately wages and salaries are stabilised, the incomes of a section of our people are controlled.

Sir S. Cripps

There seems to be some general misunderstanding on this point. The White Paper does not stabilise any- thing, or put any ceiling on anything. All it says is that in wage negotiations the two sides ought to have regard to the vital considerations which face us today. There is no question of our saying that wages cannot go up; we only say that in any negotiations present day circumstances must be taken into account.

Mr. Lyne

My right hon. and learned Friend suggested the circumstances in which wage increases could take place. If it is only in special circumstances that they can take place, then that is a method of stabilisation. It is essential, in the interests of the country, that there should be some method of controlling salaries and wages, but profits should be controlled, too. The Chancellor said he would rely on the good sense of those who controlled industry to bring profits down to what was felt to be an economic level, and not to take advantage of present day circumstances, in which there is no competition in the sale of goods either from wholesalers or manufacturers to retailers. That suggests that there is to be definite control of the incomes of one section of our people while another section is to be left to make voluntary efforts. That can never be acceptable to the wage and salary earners of this country.

There are many, not only on this side, but on the other side of the House, who believe that it is essential that we should have a planned economy so that the nation can sell in the world's markets. The Chancellor has expressed that view on many occasions, and has formulated a plan to increase our export. If we are agreed on a planned economy, then the control of incomes is essential to that plan. The question we have to decide, therefore, is whether we shall carry out that plan in a free society, whether each should accept his own responsibility, no matter who he may be, or whether it should be done by compulsion? There is no question but that there is a greater disparity in wages and conditions in industry than existed before the war. There had been a tendency by workers in some industries to obtain a higher level of income because they were in a position to demand bigger wages than the majority.

I would refer to the desire, mentioned in the White Paper, to stand by agree- ments already made by negotiators representing both sides of industry. Very often, in the case of local authorities, there has been a procedure where agreement has been arrived at through a joint industrial council. Recently there has been a tendency for some local authorities to go beyond the terms of the agreements. One can understand the reason. They are the employers, and the workpeople engaged by the local authority are people who help to put in power those who are their employers. This disregard of agreements has led to a vicious circle affecting the whole of the bodies controlled by the joint industrial council system. That is not something about which those concerned ought to be pleased.

Negotiations have been proceeding with representatives of trade unions, through the T.U.C., for a long time. If we are to be successful in carrying out the desire of the Government, as expressed by the Chancellor of the Exchequer, it is of the utmost importance that the trade union movement should have the opportunity of framing a structure which will enable them to lay down a plan and make possible, by the use of statistics, comparisons dealing with the question of the wage and salary earning classes. Because of the changes which have taken place in the past five or six years, it has become more and more imperative not only that those who have the responsibility of Government should make clear decisions which meet with the approval of the majority, but that the structure of the trade union movement should be framed in such a way that it can meet the new circumstances which we and other nations face.

Inequalities exist in our wages structure. In certain industries, conditions necessitate something being done to bring the workers up to the standard of others, so that they can at least share with them in the goods available in the austere circumstances of today. I wish to see equality brought about on a voluntary basis. I believe that the majority of our people are prepared to accept their new responsibilities and to face the odds outlined in the White Paper and described by the Chancellor of the Exchequer. If the appeal made by the right hon. and learned Gentleman is received by the people in the way in which it was received by this House today, it will result in a tremendous fillip to those who hold positions of responsibility and who wish to carry out their duties in the interests of the nation.

Unless we, as a nation, are prepared to accept the responsibilities which have been thrust upon us, then we shall find either that our standard of living must be lowered even more, or that a method must be adopted in which compulsion takes the place of voluntary effort. I am sure that none of us wishes to have compulsion. I hope that whoever replies to this Debate will make clear whether it is the intention of the Chancellor to say that wages shall be increased only where it can be shown that it is essential for the national effort, or for other reasons which the Government have in mind, and whether the control of commodity prices is to be left to the voluntary decision of those engaged in industry. Our aim should be not only to prevent prices from rising, but to reduce them as far as possible. I believe that that is the way of salvation and the way in which our people will meet the call which is being made upon them.

5.30 p.m.

Mr. Osborne (Louth)

The Chancellor of the Exchequer, at the end of his speech, made an appeal to all hon. Members of this House to which I am sure they will all respond. He said, if I took down his words correctly, that no one could any longer be in doubt about the seriousness of our position, and that if they had been in doubt previously, the issue of the White Paper would have made up their minds for them. I am sorry the Chancellor is not here, because my trouble is that so few people have read the White Paper or will trouble to read the Chancellor's speech right through. The right hon. and learned Gentleman finished up by making an appeal to all hon. Members to go back to their constituencies and bring home to the people the seriousness of our position. As far as those of us on this side of the House are concerned, I can say not only that we will do that, but that many of us have been doing it for the past two years.

I would like to make this one personal point. Six months ago, I put down two Questions to the Lord President of the Council. I am sorry he is not here. I asked the right hon. Gentleman about the serious, grim and desperate economic posi- tion with which we were faced. The Lord President, in the first week, said there was no such grim situation and that I was spreading gloom and despondency; and, in the second week, he had the impudence—if I might use that word—to call me a defeatist because I was saying, six months ago, just what the Chancellor has said today.

Mr. Gallacher

Change jobs with him.

Mr. Osborne

I would not join the party. If the Lord President had been in his place today, I should have asked for a public apology from him. I welcome this statement, because, to me, it indicates that the false, fleeting, Daltonian optimism has at last been discarded, and that, in its place, we have got the Crippsian realism. That is the greatest gain we have had since this Government was formed, and I hope that, if there is any danger of the former Chancellor of the Exchequer coming back to office, it will soon be removed, as that would be a great disaster.

Having said that I welcome this statement, I have certain criticisms to make of it. The first is that it is two years too late. Had the Government said this two years ago, the trade union movement would have been much readier to play ball than they are today. Secondly, it offers no real hope to the people of this country, but nothing but gloom. There is no real sense of urgency about it. When we had the Gracious Speech about four months ago, the complaint I made about it was that there was no sense of urgency. There was no call to the people of this country to wake up and make a special effort before it was too late; and, if there is one real criticism to be made of this Socialist Government, it is that they have been asleep for the past two and a half year and have never tried to wake up our people.

The people of this country have become crisis-hardened. They have heard about crisis after crisis in half-tones. They have had the former Chancellor's mush in between crisis after crisis, until, today, they are almost incapable of realising that there is a crisis, and that real starvation and mass unemployment may be just around the corner. Under this Socialist Government, there is no prosperity corner or recovery corner, but a real crisis corner. How few people outside realize that, even today, despite what the Government have proposed in the last six months, we are still living at something like £600 million a year beyond our income.

Sir Richard Acland (Gravesend)

Will the hon. Gentleman allow me? Which political party was it that spread the story that it was only because of the Government that there were these shortages?

Mr. Osborne

I am tied for time, and, in any case, the hon. Member was not in the House. Whatever side of the House we sit on, our duty is to go to our constituents and say that this is a real crisis, that we are living desperately beyond our income, and that, unless this extra effort is made, and made quickly, there will be such austerity that the past two years will seem almost a honeymoon. [Interruption.] An hon. Member keeps talking about profits. I am associated with four different companies, and, for many years now I have kept our dividends down to 5 per cent., and have not paid a farthing more. I am not ashamed of that. If the hon. Member would only keep his mind on Moscow and leave profits alone, he might do better.

The problem before us is to make the people of this country realise the difference betwen real and nominal wages, and also realise that paper wages are just useless unless backed by goods. The wealth of a nation is not dependent upon the volume of paper money; it is dependent upon the coal, clothes, houses and fuel that are produced. Therefore, when the Chancellor preaches production and more production, he is saying exactly what we have kept repeating for years. The right hon. Member for Wakefield (Mr. Arthur Greenwood), who had such a raw deal from his colleagues, said some time ago that pounds, shillings and pence were likely to become meaningless symbols, and it is quite true that they will become meaningless symbols unless we produce the goods to back them.

Mr. Walker (Rossendale)

Why did not the hon. Member agree with him?

Mr. Osborne

I did not sack the right hon. Gentleman; I was not a traitor to him. Whether there is a Socialist Government or not, what we have to remember is that the curse of Adam is upon the lot of us, and that by the sweat of our brow shall we eat our bread.

There is one other comment on the White Paper which I want to make. I think this White Paper should have a special sub-heading "Socialism Debunked" written right across the top of it. It is the case that our economic ills cannot be cured by political methods, as I think the hon. Member for East Coventry (Mr. Crossman) will agree.

Mr. Crossman (Coventry, East)

Since the hon. Gentleman has challenged me, may I point out to him that what the White Paper really says is that, unless they are cured by voluntary methods, political methods will be used?

Mr. Osborne

The difference between the hon. Member and myself is that I believe in a free country, and he, apparently, likes a totalitarian one. No Act of Parliament, not even Acts of Parliament passed by a Socialist Government, can clothe our backs or fill our stomachs. It is only work that produces real wealth, and all this bunk, to which the country was subjected at the General Election, that by legislation we can raise the standard of living of the people, is exploded by the speech of the right hon. and learned Gentleman. The Prime Minister has been annealing for 10 per cent. extra production, and in the question whether he gets that extra production or not lies the answer to this problem.

As one who works in industry, I think the answer to our problems is Saturday morning work. If we could go back for two years to the 48-hour week and work Saturday mornings, our problems would be solved, and the appeal which we have to make to the men of England is that they shall not make their women and children suffer because they will not make this extra effort to get the production which is required. Acts of Parliament will not produce it; it is only work and the use of our hands that will produce that result.

Mr. Gallacher

Look at the worker.

Mr. Osborne

In my final point, I would like to say that I do not believe that our problems will be solved by our quarrelling, either on that side of the House or on this. The only way in which our problem will be solved is by inducing a new spirit into the whole of the country.

Mr. Gallacher

Hand back your loot.

Mr. Osborne

I will give an example of what I mean. In the "Daily Telegraph" on Monday morning, there was a tiny paragraph headed "Cup-Tie Seat Queue," which said: A queue started to form outside the Everton football ground, Liverpool, at 11 p.m. on Saturday for tickets for seats in the stand at the F.A Cup replay between Everton and Fulham next Saturday. By the time the office opened, 12 hours later, it was estimated to number nearly 10,000. I am not against going to football matches. Indeed, I saw Leicester City beat Sheffield Wednesday in a recent Cup-Tie, but until we put the same zest, the same energy, and the same drive into our work as we put into our play, there is no hope of recovery. I challenge any hon. Member to deny that. If we put the same zest into our work as we put into our play, the bosses and the workers alike, Members of Parliament and constituents alike, then there is some hope; otherwise, there is none.

As a contrast to that, I wish to read a quotation from the "Diocesan Gazette" issued by the Archbishop of York in January, which was published in "The Times." The Archbishop said: Recently, on the Continent, I was greatly impressed with the confidence of members of the Communist Party; they have faith in a classless society, free from social injustice, poverty and ignorance, and are pressing forward their plans for it. There is no faith in this country on any side, or in anything. That is what we lack. The Archbishop went on: Totalitarian States enrolled youth in various leagues and movements and inspired them with passionate loyalty to the State.

Mr. Gallacher

Join the Communist Party.

Mr. Osborne

The quotation continues: It was seen in the brigades of voluntary youth workers in Yugoslavia who were now engaged with immense enthusiasm in the making of roads and the building of railways. If we could get the same drive and the same enthusiam and loyalty into our State, even into a Socialist State, which the Communists have apparently got in Eastern Europe, we should soon get over our problems. The White Paper says so.

Finally, the New Jerusalem, the brave new world, which the Socialists offered to the nation two and a half years ago will not be built on hatred, envy, and malice. It will be built only in so far as we face the realities of the situation, and in so far as we take all the risks of being unpopular by stating the position and by working together to pull our country round. Unless we do that, there is no hope for us.

5.45 p.m.

Miss Jennie Lee (Cannock)

The hon. Member for Louth (Mr. Osborne) said that we would never right our problems by envy and malice. I entirely agree with him. I can assure him that it is extremely fortunate for the Government today, in the disquieted mood of many of us on these benches, that we can look back over two years, and can turn to injured people, to sick people, to children, indeed, to groups of many kinds, and see that there has been a kindness and consideration shown to them in this period of national shortages which they did not receive when the party opposite was in power.

I thoroughly agreed with one remark of the right hon. Member for Warwick and Leamington (Mr. Eden). Ours is an industrious and politically experienced people. We shall need all our industry and all our political experience to see us through the problems of today. In fact, I regard the statement made by my right hon. and learned Friend the Chancellor of the Exchequer as a contribution to a continuing, conference and discussion, because I think we all feel that we have not reached, and cannot today reach final conclusions. For instance, when my right hon. and learned Friend was speaking, he said something which seemed almost identical with a remark made by the right hon. Member for Warwick and Leamington. The right hon. Member opposite said that, in dealing with today's crisis, we had to make sure that there was an equal, distribution of burdens between the various parties in society. The Chancellor then said: If one section tries to gain advantage at the expense of others. I resent that. I resent anything that would suggest—although I know that my right hon. and learned Friend did not mean it in that spirit—that there is merely a battle on at the moment, with the employers of labour on one side, and the Trades Union Congress on the other. I consider that there are few, indeed, who can look with equanimity at the condition, for instance, of the ordinary wounded soldier, the injured workman, and the thousands of other families who do not fall into the orthodox category of a fully employed trade union worker, and who are deeply affected by the decisions we are going to make about w[...], price controls, and living standards in general.

I have a letter in my hand which I received from a married ex-Serviceman with two children, who is suffering from pulmonary tuberculosis. He sends me his pitiful little budget on which he is forced to live. He has cut out smoking and does not drink. He begins by listing what he can afford to buy. His gas bill, for cooking and other purposes, amounts to 1s. 6d a week. Coal costs 4s. 6d.; greengrocery 6s.—one does not get much for that when a single cauliflower costs 1s. 6d. His milk bill—for a man with this disease—is 8s. a week. He buys a daily paper, not a Sunday one, which costs him 6d. a week, and a clothing club for all of them costs 6s. a week

I mention only some of the items in this ex-soldier's budget in order that we should remind ourselves that we are not playing tug-of-war, that we have not achieved a satisfactory or even tolerable equilibrium in society, but that we are still living, as my hon. Friend the Member for Central Bradford (Mr. Webb) wrote recently in an excellent article in "Tribune," in a capitalist Britain which is shot through with injustices of every kind We have to face today's problem knowing perfectly well that, in the last year, while there have been sporadic increases in wages, there have also been increases in prices, and increases in some profit sections on a scale which I can only describe as obscene I do not wish to weary the House by giving examples of them, but hon. Members can well imagine the feelings of this ex-soldier and of many an injured workman when they read of these things.

I was grateful to the "Observer" for featuring in its pages something with which many of us have lived with all our lives, but which is not sufficiently well known to a wider public. It is that, even today, a totally injured miner, unable to do work of any kind, can be receiving as compensation less than £3 a week. The figure is £2 10s. a week, my hon. Friend the Member for Houghton-le-Spring (Mr. Blyton) assures me. In our country today million of families are frightened and unhappy because they are having to face rising prices on incomes which are far below anything which can be regarded as an acceptable social equilibrium. In the midst of our many problems—our relations with America, exports, the Marshall Plan—they compare their position as hard-working citizens, or sick or injured citizens, or old people no longer able to work, with other people who enjoy a comfortable set-up; for instance, in the building industry, profits from building materials have increased from £1,659,000 in 1946 to £2,235,000 in 1947. That is not very encouraging.

Mr. Walter Fletcher (Bury)

Would the hon. Lady say on what turnover those figures are based for the two years which she mentioned?

Miss Lee

No, I have no information with me about the turnover, but what is more important than the turnover is the fact that profits are increasing; in the case of ordinary shareholders they have gone up by 25 per cent. in 2,000 companies—although, no doubt, some of those are small shareholders. It is we on this side of the House, not hon. Members opposite, who are trying to protect the poor, whatever the source of their income, because we want to control prices, and that is one of the best forms of protection which we can give them. One can take building materials, tobacco or scores of other commodities and services; the figures are to be found in any serious journal. They are common knowledge. No one in this House would deny those profit rises.

We must recognise that we are facing not just an economic problem, but a psychological problem as well. We must do what is just and competent, and we must remember that other citizens know as well as we do what is going on The Chancellor of the Exchequer is appealing to employers to reduce profits and to increase their efficiency. It will be remembered that the former Chancellor of the Exchequer, who at the moment is sitting on the third bench—although I am quite sure he will not occupy that position permanently; at least I hope not—also appealed to employers to limit their profits and improve their efficiency. I do not think he would say that he is satisfied with the results of his appeal.

We hope with all our hearts that such an appeal will be instrumental in solving our problems but, quite frankly, we do not believe it. Therefore, we turn from exhortation to sanctions. In the White Paper there are two final paragraphs which mean that if we are doing a useful job in society and working in industries where the prices are controlled, it will be possible to hold the prices at the present level, so that just wage demands are met by increased efficiency. But how many of us really believe that that will happen? We know perfectly well that no such thing will occur. Therefore, this White Paper is totally inadequate. I wish we could have had a clear separation between exhortation and sanctions. We should discuss, first, the nature of the disease, and then the remedy for the disease.

The Government will have only themselves to blame if there is a good deal of anger, irritation and dismay throughout the Labour and trade union movement when they get the impression that they are being asked to make sacrifices while nothing is being asked of the employers, beyond the inadequate contributions that are now being made. However, such is the uniqueness of this country that, despite a situation in which the sectional trade union leader has to meet the pressure of the rank and file workers who desperately need improved conditions, the Government will find that the present position will be largely maintained until we can ascertain next month what exactly will happen in hard fact about ceilings to manufacturers' prices and margins of profits. I believe the Labour and trade union movement will hold its hand until next month.

The other day I was in a factory which manufactured a very tine type of modern armchair, constructed of steel instead of wood, and comfortable in every way. The cost of that armchair, including labour and materials, was £14, but sold in a West End shop in London it would cost £35. So many of us are bewildered, and would like further information about these gaps in prices, not only for furniture but for clothes and food. The soldier to whom I referred, with a wife and two children, is restricted to the pitiful sum of 6s. a week for vegetables. I bought 5s. worth of vegetables the other day, and there was hardly a meal for two people. There must be a thorough overhaul of this gap between wholesale and retail prices. We know there are some people, both among the employees and on the management side, who are doing a magnificent job with the maximum efficiency, but there are other workers in inefficient works who are suffering great unhappiness and irritation. They are continually being told that they must work harder, and all the time they are conscious that on the managerial side there is waste and slackness that ought not to exist. Indeed, the Chancellor made that point when he said that in giving a marginal profit to the moderately efficient or inefficient factory, we very often give an excessive profit to those factories which reach normal standards of efficiency. I notice that Sir George Schuster in today's 'Times" has an excellent letter dealing with the whole problem of production, wages and the responsibility of management.

I know the House will not take it that I am simply trying to make a cheap point at the expense of hon. Members opposite. This is our country and our home; in my opinion, it has a unique people and it has unique possibilities of pulling through, in spite of all the difficulties surrounding us today, but we must feel that everyone is playing fair. We know that decent people play fair by exhortation, but we also know that others do not.

The gap between wholesale and retail prices in many industries must be reduced. I am not for one moment suggesting that these excessive profits are a large fraction of our total wealth, but they are the spectacular thing. They are the part of our social economy which makes life impossible for the reputable labour and trade union leader when he goes among his own men and women in industry. I am faced with what to me is a very sore point indeed—the fact that after a second world war we still have women doing the same job as men in many fields and earning less money. That is not just a material and economic problem; it is a problem which arouses extreme indignation, it is an indignity and it has emotional dynamite behind it. We are willing to hold the situation. I say "we" meaning most of us in our movement for we are proud of the fact that one of the priorities selected by the Government has been the lifting of those who were sub-standard, the poorest of all. We do not forget what has been done and we do not forget that we cannot justify, in terms of managerial efficiency, increasing old age pensions or sickness benefits. We are proud of the fact that in this time we have assisted the very poorest of our people to hold their heads above water just because it was just to do so.

We are perfectly satisfied that some of those who have to do the dirtiest and most dangerous work in society are better off than they were. I have never heard a trade unionist, a bus driver or a shop assistant, objecting to increased wages for miners or for agricultural workers. We are very conscious of these facts but, while we will give and take with one another and with any section of the community which is making a useful contribution to the life of our community, what is utterly intolerable for us is that we should still find gross social injustices existing and yet be told that nothing more than exhortation can be offered in asking those who still take too much from society to take less.

I do not want to take up too much time, but I must recall my position in regard to the American Loan, both the first loan and the proposed Marshall aid. I sometimes have a feeling that while hon. Members opposite—not all, but some—tell us we must not rely on American aid, in their heart of hearts they feel that some aid will come, that it will ease the situation, but that in the meantime they must make the most of this point in order to prevent the workers pressing their claims too far. That is not my attitude at all. I believe we are not entitled to depend on any aid from America; it may come or it may not come, or it may come in a form which we find we cannot honourably accept. Therefore, we are entitled to go to our people and say, "You are not living in a Socialist Britain; you are living in a capitalist Britain, but you are spared all the suffering and all the sorrow of civil war in attempting to win forward. In our British constitutional way we have been able to do more for you than has been done for the workers in any other country in the world. We have given relief to those in the greatest need."

Therefore we will hold our hand and tolerate many hardships; we will stand behind the Chancellor of the Exchequer and behind the Government in everything that we can humanly be expected to do, but they on their side must deal with the spivs, with dirty money in circulation that should be withdrawn, must see that prices do not rise, must extend controls and not narrow them and must see that protection is given to the poorest, particularly by the control of their food prices. If the Government do that, I think they will find that the anxious and unhappy acceptance of the present position—that we must increase our total production before there is much more of the cake for any one section—will be turned to a rejoicing and exultant acceptance. Certainly we are all aware that we have already much to be proud of and we shall win through in Great Britain to a society for which it will be well worth suffering temporary setbacks.

6.5 p.m.

Mr. Boyd-Carpenter (Kingston-upon-Thames)

Throughout the very eloquent and movingly-delivered speech which the House has just heard from the hon. Lady the Member for Cannock (Miss Lee), there ran a curious strain of inconsistency. The hon. Lady denounced, with her customary vigour, the excessive prices and excessive profits which are to be seen in various parts of our economic system, but she did not seem to appreciate that these excessive profits and prices were simply the normal symptoms of the inflationary state of affairs. They are the classical stigmata of inflation. They are not really due to any particular wickedness in any particular section of the community. They are the direct and inevitable consequence of the financial policy that has been pursued.

Yet, in the same breath, the hon. Lady hopefully anticipated the return to the Government of the right hon. Member for Bishop Auckland (Mr. Dalton). It may well be that the hon. Lady is right; she is always singularly well-informed on the intricacies of the internal affairs of the Labour Party, and it may well be that the right hon. Gentleman will return as a kind of redoubtable boomerang to com- plete the destruction which he initiated. If that is so, the hon. Lady will not be entitled to come again to this House and complain in her disarming and eloquent way of the continuance of things which are the direct consequence of the right hon. Gentleman's policy. I hope the hon. Lady will face up to the fact that the inflationary situation was created through the action of the late Chancellor of the Exchequer, who is solely responsible for the lamentable state of affairs she has described to the House.

The right hon. and learned Gentleman the Chancellor of the Exchequer marred a speech which necessarily involved an appeal for co-operation and unity by a wholly unnecessary and quite unjustified gibe at hon. Members on this side of the House in connection with their policy of Empire development in the past. It may well be that even more could have been done, but there is no Member of this House less entitled to make that comment than the Chancellor of the Exchequer. Not more than 11 years ago he said: It is a fundamental of Socialism that we should liquidate the British Empire as soon as we can. It is not right for anyone who has committed himself to that proposition to rebuke others because they have been less energetic than he thinks they might have been in building and restoring a political structure which he then desired to liquidate. It is quite intolerable for the right hon. and learned Gentleman or any Member to take that line of attack upon hon. Members on this side of the House, because those words are on record, and although the Chancellor, with his characteristic adroitness and skill, may attempt to explain them, he knows he is unable to deny that he expressed them and they have a perfectly clear meaning in the minds of everybody who heard them.

The White Paper which we are discussing, whatever may be its merits or demerits, has unquestionably one point: it is an emphatic repudiation and denial of the principles and the promises by the aid of which right hon. Gentlemen opposite climbed to power. It is an emphatic repudiation not merely of two and a half years of Socialist administration, but of more than 40 years of Socialist propaganda. The whole essence of the case which hon. and right hon. Gentlemen opposite have presented to the electors on their climb to power has been that there existed somewhere in our system a vast pool of wealth which could be easily distributed and which, but for the selfishness and obscurantism of employers or of hon. Members on this side of the House or of somebody else, would undoubtedly have been distributed to raise the standards of living and achieve universal prosperity. That is the very essence of the case that hon. and right hon. Gentlemen opposite have presented to the country. It is that case by which they rose. It will be by their failure to implement that case that they will fall. It is that case which is repudiated—and repudiated with courageous frankness—in the White Paper which is now before the House.

The right hon. and learned Gentleman has, I think, in presenting this White Paper, not only thrown overboard the principles by which his party rose—and I found very considerable support for that point of view in the speech of the hon. Lady the Member for Cannock—but also even the most recent policy of the Government. The right hon. and learned Gentleman said at Edinburgh over the week-end, as indeed he said in this House tonight, that it was essential to reduce prices. At Edinburgh he said: Enlightened firms have started to reduce prices. He says that as a member of a Government who themselves, by their nationalisation Measures, have control over a number of major industries. When we look at the conduct of those industries which are directly under Governmental control, far from seeing the reduction of prices which the right hon. and learned Gentleman urges upon private industry, we see the exact converse. We have seen an immense increase in the price of coal. We have seen the recent statement of Lord Citrine that electricity prices will rise by some 40 per cent. We have seen the recent successive rises in railway fares. Really, if there is to be any test of the sincerity of the exhortations which the Government are addressing to private industry and private employers, then surely the same things which are urged upon private industry by the Government should be applied by the Government where they have authority to apply them, that is, in the nationalised industries.

Mr. Bramall (Bexley)

I am sure the hon. Gentleman would not wish to mislead the House. Will he make it clear that the rise in railway fares took place before the railways were nationalised?

Mr. Boyd-Carpenter

Certainly, but at a time when—I am sure the hon. Member will recollect—the railways were entirely controlled by the Government; at a time when there was no connection between the profits of the shareholders and the prices charged; at a time when the railway system had been taken over by the State; and, I think I am right in saying, at a time when the increases themselves were effected by Statutory Rule and Order. I am obliged to the hon. Member for underlining—though, perhaps, it was unnecessary—the fact that this Government have not, in the spheres where they have direct control, at any time during the last 2½ years done that which now they appeal to private enterprise to do voluntarily.

I think we are entitled to be told tonight whether it is the intention of the Government to reverse that process so far as the nationalised industries are concerned. Are they prepared to give to industry not merely exhortation but example? Are they prepared, in fact, to carry out what they themselves say is necessary in the interests of the nation? If they do not, inevitably the appeal which they make to private industrialists cannot but be weakened, because then people will see that what they are being asked to do, even in the midst of the manifest difficulties which face them today, the Government themselves are not prepared to do.

The White Paper is a very remarkable document, but there are several parts of it which are not clear. In view of the well-known lucidity of draftsmanship which all hon. Members associate with the Chancellor of the Exchequer, it does seem, perhaps, that this lack of clarity may not be wholly accidental; but I think we are none the less entitled to know what certain parts of it mean. First of all, there is a small question of fact in the fourth paragraph. There it is stated that inflationary rises in prices hit hardest of all the small wage-earner. No one disputes that that section of the community is being and has been badly hit; but it shows, I think, a lack of sense of proportion to point out the effect of this on the small wage-earner and to ignore altogether the equally disastrous effect on those with small fixed incomes—upon the pensioners to whom the hon. Lady the Member for Cannock referred. I hope that the exclusion from this paragraph of reference to those people is purely accidental and that it does not indicate that the problems of that section of the community are being ignored by the Government.

In paragraph 6 reference is made to wage increases in order to secure the manning up of under-manned industries. Does that mean that the policy of direction of labour has been abandoned as a failure? Not very long ago the Minister of Labour stood at that Box and sought to justify direction of labour because, he said, in no other way could we man up the undermanned industries. Yet there is put forward in this White Paper precisely the other way, precisely the alternative method which, in that Debate, was urged from this side of the House. I should like to know whether the fact that the Government have now adopted this proposal for manning-up under-manned industries means that they have abandoned direction of labour as being the costly and senseless fiasco it is.

I do not wholly understand subparagraph (b) of paragraph 7. This is an exhortation to employers not to pay more than the agreed rates of pay. Is that to be applied to the cases—which, as hon. Members on both sides of the House know, are frequent—in which it is habitual to pay more than the minimum rates? In many industries the agreed rates are simply minima, not maxima. There are many industries—I would cite the one with which the Minister of Labour is associated, the printing industry—in which it is habitual to pay rates of 30s. or £2 a week more than the basic rates. What is the effect of this paragraph on industries so placed? Does it mean that the Government are urging those industries to cut down the existing rates, or does it not? If it does not mean that, the paragraph is meaningless. If it does mean that, it is a matter so serious that it ought to be explained and justified.

The whole paragraph seems to be drafted on the assumption that only minimum rates are paid in industry, although hon. Members on both sides know that there are many industries in which that is not so. Let us get it clear. Is it suggested that where higher rates than the agreed rates are paid they are to be stopped? Is it suggested that the employers who pay the higher rates and the employees who accept them are acting contrary to the intentions of the Government? I think we are entitled to an answer on that.

I turn now to what the hon. lady the Member for Cannock called the "sanctions clause," paragraph 10. There it is made perfectly clear that the Government intend to use the machinery of price control to enforce their will in this matter. There is, surely, an extraordinary unfairness in this. First, hon. Members know that during last year many wage increases were granted. They equally know that there are others which are being negotiated at the moment. To apply, as it were, the guillotine at this particular moment is somewhat unfair. To except those who got in earlier and say they are entitled to get away with it is somewhat unfair to those who were less eager in pressing their claims. There seems to be some unfairness between the different sections of industry.

This business of using price control as a sanction is, surely, a very clumsy and very inefficient method. First of all, it is clumsy and inefficient because one can never, in fact, enforce a wage ceiling against employers and employees who are prepared to combine to defeat one. Hon. Members opposite with trade union experience know perfectly well that by adjustment of piece rate tasks, by adjustment of agreements in various ways, it is perfectly possible, if both sides agree, to secure substantial increases without those increases being visible to the naked eye of the Minister of Labour or the Treasury. It is quite unenforceable. Where there is a desire on both sides to raise actual earnings, there will be a rise in earnings, no matter how many threats may be made by the Treasury or by the Chancellor. But even assuming this method to be effective within the zone of price controls, it surely will have one very damaging consequence. There is already the difficulty which the Minister of Labour knows so well, that the effect of price controls on necessities, coupled with complete freedom in what I might call the "spiv" industries, makes it so much easier for that "spiv" industries to attract labour by paying higher wages, to the detriment of the basic industries.

Continuing this process inevitably accentuates this and makes much more difficult the task of the Minister of Labour in manning up the undermanned industries; and to say, as did the Chancellor today, that it is proposed, by order, to put a ceiling on all prices within the price control structure, does not help at all. There is no price control over football pools, and by trying to apply this partial ceiling merely on industries where manpower is wanted, when nothing whatever is done to apply a ceiling in industries where manpower is not wanted—such as the football pools—is simply to make the natural forces of the price mechanism work even harder against us than they do at the moment. That is why I suggest that this is a wholly ineffective method of dealing with the problem.

As two hon. Members opposite have said, it comes down fundamentally to a question of freedom against compulsion. By direction of labour we have already had interference with the freedom of a man as to where he is to work. We are now to have interference by the State as to the amount that he shall be allowed to earn. I suggest that this inevitable progression from one compulsion to another is not accidental, nor indeed malicious nor unintentional, but is the inevitable consequence of pursuing an inflationary policy in which, by a series of falsely and inefficiently manipulated controls, the price mechanism has been made to work against us, thus driving the Government unwillingly further and further along the path of compulsion. That is the direction in which hon. and right hon. Members opposite are being driven, whether they like it or not. They are being driven there because they have ignored the workings of normal economic forces; and they have, therefore, been driven to resort to ever-increasing degrees of compulsion. That is why I rate very seriously threats, which the right hon. and learned Gentleman has uttered twice during the last few days, of the possibility of totalitarian methods and a totalitarian Government in this country.

The Government must surely, here and now, face the alternative between continuing these compulsions along the path already forecast by the Chancellor or reversing and abandoning their whole policy of attempting to legislate by control, and refusing to face the consequences of their own inflationary policy. At the moment, for all the Chancellor's appeals, there is still the same fiddling with the situation, there is still the same empty exhortation, there is still the same refusal to get to the root of the matter and to face the realities of our economic position. It is for that reason that right hon. Gentlemen on the Government Front Bench are not so much appropriate leaders for a great nation in high and adventurous times, but resemble far more a flock of bewildered, if slightly truculent ostriches, their heads burrowed in the ever-shifting sands of Socialist theory, the rest of their anatomies being exposed to the cold winds of economic truth, developing an ever more noticeable tinge of blue.

6.24 p.m.

Mr. S. N. Evans (Wednesbury)

I am sure most of us feel that today the House should constitute itself a council of State to get down to a serious inquest on the economic health of the nation. I certainly do not think we expected a party political speech such as that to which we have just listened. The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) completely ignored the effect of the great war through which we have just passed and the devastation and dislocation which it brought. He certainly left completely out of his calculations the neglect in the period between the wars, the consequence of which is so greatly handicapping our national recovery at the moment. We have 65-year-old locomotives still trundling along; and 75-year-old cotton mills equipped with 75-year-old machinery.

The present Government have to face up to all these things, as well as the effects of the war. Despite what the hon. Member for Kingston-upon-Thames says about the Government Front Bench, there can be no doubt that Great Britain today has much the best Government she has had since the great Liberal Administration of 1906—and I believe the country knows it. I refuse to be tempted into following the hon Member by indulging in party polemics, and I shall make my contribution in a serious manner. Indeed, the times are far too serious for any of us to think solely in terms of party political warfare.

Perhaps I might comment on one thing the hon. Member for Kingston-upon-Thames said. He spoke about the Labour Party propaganda and what we had been saying for 40 years. There is a modicum of truth in what he says. True, Labour Party propaganda, designed to do away with injustice and social inequality, was framed during a period of great British affluence, when everything we ever proposed or promised was quite possible. One of our problems today—and we make no bones about it—is that we have come to power at a time of British impoverishment greater than we have suffered since the buccaneers Morgan, Hawkins and Drake, and the romantic Raleigh, first laid the foundation of British prosperity. That is handicapping us, and the difficulty is to explain to our people, in plain and simple terms, the great change which has taken place.

For myself, I recognise that the problems of a revolution by consent are much greater than we anticipated. And they are none the less so because of the anti-social and psychologically stupid actions of some of those whose political instrument the Tory Party has always been, particularly in substantially raising dividends in present circumstances. I said I would not make a party political speech, but I felt I had to say at any rate that much. One of our greatest tasks is to reduce national and international economic problems to proportions which fit the minds and stomachs of our own people. Until we have succeeded in doing so we shall not be able to break down that sense of collective responsibility, which the British have always had, into one of individual duty and determination.

For years, for reasons that have not been apparent to the ordinary man, we have enjoyed in this country a comparatively high standard of living. We have lightheartedly thrown about at weddings and on other festive occasions rice for the want of which millions of people in the Yangtse Valley and India have died. The accumulated fat of centures has gone, and we are today very close to the bone. The trouble is that we are having to queue up in the only shop in the world with a surplus for disposal, and the shopkeeper will not take £1 notes, francs, marks or lira, but only dollars. In these circumstances, inevitably, the short-term tactics must be to get some more dollars, and the long-term strategy must be to rid ourselves of the need for dollars.

There are other sources of supply, and it is to the credit of the Government that they have flown in the face of all ideological considerations and entered into bilateral agreements with those with whom we are not in political agreement. It is to the credit of the Government that we have entered into bilateral agreements with Poland, Yugoslavia, Russia and other countries. We can get from these countries some of the food and raw materials we so urgently need, but we can only get them if there is some tangible return in the shape of locomotives, motor cars, lorries, textiles and so on. It comes to this. The more locomotives, textiles, motorcars and other products we can produce, the more food and essential raw materials we can get in return.

We on these benches have to ask ourselves some very serious questions. I am glad that the Government have faced up to this question of a wages policy. Let me be perfectly frank about this. On many occasions I have condemned the antisocial antics of boards of directors.

Mr. Attewell (Harborough)

My hon. Friend says he is glad that the Government have faced up to this question of a wages policy. Will he tell us what the policy is?

Mr. Evans

We must accept that the Government consider that in present circumstances there must be a standstill agreement on wages. But I know—none better—that unless the corollary is forthcoming and there is a standstill in the matter of dividends, there will be considerable trouble among the organised workers. I believe, however, that the corollary will be forthcoming in the Budget, and, knowing the workers as we do, I believe that we can expect an act of faith on their part during this interim period between now and the Budget. The Government had to face this question of wages, because it was fantastic to expect the Trades Union General Council, consisting mainly of trades union general secretaries, to come forward with a proposal to freeze wages. The business of these gentlemen, to whom this nation owes a great debt, is to do the best they can for their members To expect them to come forward with a proposal that wages should be frozen is just as stupid as to expect the burgesses for the universities to come forward with a suggestion that university education should be suspended for two years. Therefore, I am glad that the Government have had the courage of their convictions and have come forward with the proposal.

I know that some of my friends feel very strongly on the matter, but someone had to make the first move. When the walls are tumbling down, that is not the time to be arguing about who shall have more, the fire-engine driver or the fellow who trails the hoses; it is the time to get the fire out. I am content that the Government will see there is a "fair do" among shipmates in this matter of profits and wages. I do not wish to labour this point too much, but we are tied to a system of barter, whereby barley and maize can be exchanged for motorcars, bicycles and radio sets. In these circumstances, production is of great importance.

Do not let us deceive ourselves. It is very hard to inculcate rentiers with nice steady incomes with a sense of crisis, and it is equally difficult in the case of the man who has £6 or £7 a week coming in on Fridays. Of course, the Tory Party resorted in 1922 to mass unemployment and a reduction in the standard of living to inculcate a sense of crisis, but we prefer to proceed by way of education, full employment and stabilisation of prices. One of the things which frightens me is the amount of production which has been lost in the last two years as a result of reductions in hours. We realise, some more than others, that we are in grave danger of arriving at a condition of things in this country when we shall be virtually on the verge of starvation. The right hon. Member for Woodford (Mr. Churchill) said in a recent speech that the situation could arise where ten million people would have to emigrate from this country. He was quite right. People will have to emigrate from this country unless we acquire that sense of urgency which is so necessary at the present time.

I will give the House an illustration of what I mean. Before the war we used to export to Canada about 70 million yards of textiles yearly. In 1938, Canada bought from us 75 million yards, whereas in 1946, we were able to send her 5 million yards only, and for the balance she had to go to the United States and pay dollars. So long as this situation goes on, she is compelled to ask Britain to pay in dollars for a large proportion of the food that she sends to us. There is no alternative. With the best sentiments in the world, and all the ties of blood and economic interest, Canada cannot help herself. Until we are in a position to resume exports of textiles to Canada on a scale comparable with the prewar years, we shall be forced to dip into our meagre store of dollars to pay her for the food she sends to us. Therefore, I make no apology for coming back to the question of hours.

I wish to draw the attention of hon. Members, particularly those on these benches, to the very serious loss of production that is being occasioned by the reduction of working hours. [HON. MEMBERS: "Hear, hear."] I hope that no one opposite is going to embarrass me; my task is quite painful enough without that. During 1947, five and a quarter million workers had their hours reduced by 3½ hours a week—something like 18¾ million hours weekly or approximately 1,000 million hours in a 50-week year. I ask all concerned whether this is not a trend which has to be reversed if we are ever to stand on our own two feet.

Mr. O'Brien (Nottingham, West)

Would my right hon. Friend dilate on that? Has he any figures to show that production has substantially decreased owing to the decrease in working hours? I suggest that it is not sufficient to give the figures of reduction in working hours without the corresponding statistics of the effect on production.

Mr. Evans

I do not suggest that there has not been in certain industries an increase in production, despite the reduction of hours.

Mr. Piratin (Mile End)

Or because of the reduction of hours.

Mr. Evans

That could be. The point I am making is that we can put in the most modern machinery, but it does not produce anything unless the men are there to operate the machinery. I think that it may be, and indeed, is a fact that production in certain industries has gone up despite the reduction in hours. What I suggest is that in the present situation we must keep the machines at work for more hours than they are working at the present time. Therefore. I am asking my friends of the trade union movement not only to consider this matter of the freezing of wages but also to discuss with the trade union branches these great national and international economic problems; breaking them down into proportions that fit the minds and stomachs of their members, so that they may be induced, temporarily, at any rate, during the period of national crisis to resume the 3½ hours' work which I have mentioned.

I know that some of my hon. Friends have ideological sympathies which they think that I do not share. I believe most fervently that the most important thing in the world is that Britain should get on to her feet at the earliest moment. We must try to infuse into our people a sense of their own importance. Speaking as one who has travelled many thousands of miles and visited 14 countries in the last two years, I say that it is ironical, but it is a fact, that one finds on both sides of Europe that the experiment we are carrying out in this country is being watched with keen attention. There is more sympathy and good will for Britain today than ever there was before, because people recognise that Britain is the halfway house between boom and slump, on the one hand, and a totalitarian police State on the other. This country has always been the laboratory for social experiments which we have subsequently exported to the world. Today, we are engaged in the greatest social experiment of all time—to abolish want, without, at the same time, abolishing human liberty. If all our people can feel this as keenly as I know most Members in this House feel it, our problem will be solved

6.47 p.m.

Mr. Martin Lindsay (Solihull)

Like many Members of this House, I have a great respect for the high qualities of the Chancellor of the Exchequer, and, therefore, I hope he will forgive me for saying that I was disappointed in his speech. The first half of it was a lecture on the economic facts of life—all very good, but nothing very new. The second half was an appeal for a halt in prices, with which everyone in this House will agree, and an announcement of greater price restrictions, against which I have nothing to say. There was nowhere in his speech, nor is there in the White Paper a recognition of the fact that the only way in which this country can recover is by hard work. In that respect the Chancellor was nothing like so realistic as the hon. Mem- ber for Wednesbury (Mr. S. N. Evans), whose speeches in different parts of the country have caused many people in all sections of national life to admire him.

I acknowledge and welcome the fact that the White Paper marks a great stride forward in the hitherto belated and faltering steps of the Government to face up to the economic problems with which they are confronted; but I regret that nowhere in the White Paper is there recognition of a very simple economic truth. That is that the only means of preventing inflation is by abundance which, with the influence of competition, will alone bring down prices. And we can only get abundance, as the hon. Member for Wednesbury knows well, by harder work, which means longer hours throughout the whole field of British industry.

I regret to say that in the White Paper there is one bad example of doctrinaire prejudice. I refer to the order in which the three charges on industry are placed; profits, salaries and wages. The Government know that profits are only the residue after wages and other charges have been met [Interruption.] Oh, yes, they are. I can see that the hon. Member for Dudley (Mr. Wigg) laughs very loudly. Let me give him an example from the iron and steel industry, which is so well represented in his constituency. The United Steel Company, in the last year for which their figures are available, showed an income of £39 million, of which wages amounted to 30 per cent. and dividends distributed were only 1.4 per cent.

I am sure the Chancellor will be urged to make another slashing attack upon profits, in order to reduce dividends in his forthcoming Budget. I hope he will resist that temptation. I agree with them being pegged at their present level, but I hope he will resist the temptation to have them reduced, because, as my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) said, those who suffer most will not be the capitalists with large incomes paying a high range of Surtax, but the great body of the middle class, the small business and professional men, parsons, teachers, doctors and so forth. These people have suffered a fall in their standard of living, which is out of all proportion to the fall in the national wealth in the last seven years. Therefore, I for one hope that nothing will be done to reduce the modest incomes from investments which many of these people get from their savings.

It is not by party prejudice and partisan legislation that this country is going to get out of its difficulties. Only one thing, namely, hard work, can save us, though the Government have hardly dared to say so. I see the Prime Minister is present on the Treasury Bench, and it is not often that he is present when I address the House. Therefore I want to tell him that I believe that this Government missed a great psychological opportunity before Christmas. What they should have done was to ask the whole British nation to work six days a week for one year to abolish queues and rationing. I am convinced that, if the whole nation were to work six days a week for one year, we should get such an upsurge of production that we could fill the shops and earn sufficient foreign exchange to buy all our food and, except for one or two commodities in which there is a world shortage, we would be able to abolish rationing, as Belgium has done.

It is fantastic today to think of us working only four or five days a week. I do not believe it is going to be a question of a six or five day week, but of a six day or a one or two day week, if we are unable to buy the raw materials which are necessary to keep our industries going. No wonder the tired housewife is unable to find the goods to buy in the shops on Saturday mornings when her husband is sitting at home instead of being in the factory or in the workshop. The Cabinet have now realised the grim economic facts of the situation, as have trade union leaders. I should like to pay my humble tribute to the trade union leaders who are taking an extremely courageous and patriotic attitude today in asking their fellow members to hold back their demands for higher wages, not at all an easy thing for them to do.

I congratulate the Government on their attempts to peg incomes, but I hope they will go further and tackle the root of the inflationary problem by going for higher production. That can only come from longer hours of work. I feel that we as a nation should be ashamed of ourselves today, living as we are doing upon the American Loan, and in the hope as it would appear, of living on Marshall aid for the rest of our lives. It is fantastic that we as a nation should think we are entitled to rest for two days after five days labour when our neighbours are homeless—

Mr. D. J. Williams (Neath)

Is the hon. Member for Solihull (Mr. M. Lindsay) suggesting that the productive workers of this country are not producing their keep?

Mr. Lindsay

Not at all. I am suggesting tht the whole nation, not only the workers or trade unionists, but the management, the people in offices and banks and all of us, should work for six days until we get out of our troubles. I am not having a fling at the working classes, for I say that the whole of the nation should do this. It is fantastic that we should feel entitled to rest for two days after only five days' labour, while our neighbours are homeless and our wives and children ill clothed and underfed.

I want to say one thing further. Our workshy attitude is bringing the next war nearer, because we are reducing ourselves to such a state of impoverishment that we cannot afford sufficient strength to deter an aggressor. We have brought the threat of war as well as that of slow starvation to the doors of each one of us. As a nation we have to get back to work, and the sooner we get back the better it will be for all of us. I congratulate the Government on their attempt to deal with this situation, belated though it be. But exhortations are not sufficient and the Government and we in this House must set an example. The best example that we could set at the present time would be that which was so effective in 1931—a 10 per cent. cut in all Government expenditure from the salary of the Prime Minister and Members of Parliament downwards, very disagreeable though it would be for all of us. I am convinced that an example from the Government must come first and it would have a far greater effect upon the nation than the statement of the Chancellor of the Exchequer that we are under a threat of totalitarian rule.

Mr. Harold Davies

rose—

Mr. Lindsay

No, I cannot give way for I have very nearly finished. I am certain that a Government which, when in extremis, has nothing to offer as an alter- native but totalitarianism should give way as soon as possible to another which can hold out hope of something better.

6.59 p.m.

Mr. Monslow (Barrow-in-Furness)

I rise to speak in this Debate not unmindful of the sombre picture which has been presented to the House and to the country by the Chancellor of the Exchequer. I want if I can to put the view of those who have been closely associated for a long period of years with the workers in industry, and who understand the economics of the industry in which they are engaged. It is rather surprising that the Government should have introduced this document at this stage, when representations are being made by trade unions in the country, representing approximately 8 million people. I want to say to the Chancellor of the Exchequer—and I shall not hesitate in what I am going to say—in all solemnity, that this is a psychological disaster.

The White Paper is illuminating in that it is insidiously directed primarily against the wage-earning section of the community. Hon. Members on this side of the House should not forget that there are many in our basic industries today who are not enjoying even a subsistence level. We are, in effect, saying to the workers, "You are responsible for the inflationary situation which has been created, and we now ask you to accept the main burden of sacrifice to get rid of that inflation." That is a rather strange philosophy. Those of us who have been associated with the trade union movement over a long period of years know that in our negotiations with the employers we have always advanced the argument that wages have been chasing prices. Here is a Socialist Government changing that conception and telling us that prices are chasing wages.

I do not accept that contention. It is time the Government stopped accepting what is, after all, a Tory dictum, that too much money is chasing too few goods. I will give an illustration to show what I am trying to imply. In my constituency I have shipbuilding workers earning £4 12s. a week and railwaymen earning £4 11s. 6d. per week. People have the audacity to suggest that too much money is chasing too few goods, but those people are in not an inflationary situation but a truly deflationary situation—they are unable to buy even their basic needs.

Mr. Harold Davies

They cannot even use their clothing coupons.

Mr. Monslow

It is sheer poppycock to suggest that the great mass of the people have too much money chasing too few goods. I take it that the present wage claims will be decided on their merits. I am not unmindful of the plea set out in the document that there is to be a stabilisation of unearned as well as earned income. I have heard such pleas before, and those of us who have been associated with industry know full well that those pleas have not been heeded and that profits have continued to soar. As has been pointed out, they have increased by about 25 per cent. and wages have not increased by even 12½ per cent.

Mr. William Shepherd (Bucklow)

How does the hon. Gentleman get that figure of wages increasing by 12½ per cent., and on what basic year is he operating?

Mr. Monslow

I am taking the ratio over certain industries, but the average general increase is 5½ per cent. I want to consider for a moment the general thesis of the White Paper. If wage claims are put forward—it is suggested that they should not be put forward—they must not be based on existing differentials between different classes of workers, but on a new set of differentials to conform to the national interest. I should be interested to have some indication of the structure of this new set of differentials. It may appear to those with an academic mind that the problem is easily resolved, but those of us with practical knowledge and experience of trade union negotiations know full well that if that doctrine is applied, there will be created a host of anomalies and even conflicts within a given industry.

In the penultimate paragraph of this document we have the negation of this principle. We have retaliatory action against employers or manufacturers concerned with controlled commodities. In their case, wage increases are not allowed. Price controlled commodities are essential to the nation's economic life, and the only effect of this insidious principle will be to make it easier to give more wages in non-essential trades than in essential trades. The manufacturers of price con- trolled commodities will not be able to meet the situation like those in the nonessential trades.

Before we seek any further sacrifices from the workers, several features should be examined by the Government They should examine the expenses accounts of junior executive officers in our business and commercial houses which are not subject to Income Tax. They are able to live quite reasonably on their salaries because they are making a very comfortable living from their expenses.

Mr. Brendan Bracken (Bournemouth)

The same thing applies in the case of the nationalised undertakings.

Mr. Monslow

It is a feature which might be examined whether in the case of nationalised undertakings or business and commercial houses. There ought also to be an improved fixed price in respect of certain commodities which are at present not within the ambit of the cost of living index figure. We want a very rigid price control.

The Chancellor of the Exchequer referred to maintaining the ceiling of profits, but that is only one aspect of the problem. He made no comment as to the level of profits which has prevailed during the last two years. There should be an examination of the disparity between wholesale and retail prices. I say to the Government: Let us first see an implementation of the policy of rigid price control and fixation of profits before we ask the workers to accept a reduction in their standard of life. When the Government have implemented that policy, those of us who are associated with industry and have some measure of responsibility will go to our organisations to assist the Government and to prove ourselves not less patriotic than any other hon. Members.

I was particularly impressed by a statement by the Chancellor of the Exchequer at Edinburgh during the week-end. He spoke of the danger of totalitarianism. I presume he referred to the growing danger of Communism—I am not frightened of that bogy—or is he afraid of the mountebank Mosley? From my reading of the White Paper, I tell the Government and hon. Members on this side of the House that I am wondering whether it is the prelude to a new Coalition Government. [HON. MEMBERS: "Oh."] At least, I, have expressed that fear. I may be wrong, but time will tell. That is my considered view, and I have expressed it as honestly and sincerely as I can.

7.10 p.m.

Mr. Henderson Stewart (Fife, East)

I do not know whether the hon. Member for Barrow-in-Furness (Mr. Monslow) has any knowledge of a movement in his party in favour of a Coalition Government, but on this side we have no knowledge of, and at the moment no particular interest in, such a proposition. We are more concerned to secure at the earliest moment a change of Government so that there shall be put in office an Administration which we believe can get the country out of its present difficulties.

Mr. Stokes (Ipswich)

A lost cause.

Mr. Stewart

The appeal in the speech of the Chancellor of the Exchequer, with all its earnestness and almost passion at times, was an appeal to the whole people for restraint and extended effort and action. As he delivered that appeal I felt it was one which no reasonable, patriotic man could ignore. I was much impressed by it, but the thought struck me that we have heard that same appeal from the right hon. and learned Gentleman many times during the last 18 months. It is a melancholy fact that each appeal has been succeeded by an increasingly serious economic situation, and one is bound to ask oneself what will be the result of this further appeal? Is it any more likely to bring the result we expect? I can only ask the question, I do not know the answer, but I have serious doubts.

We might examine for a moment why it is that these repeated, eloquent, and passionate appeals by the right hon. and learned Gentleman have attained so little success. One reason is obvious: that despite all his efforts the bulk of the people remain woefully ignorant even yet of what is at stake and what is wrong. Everybody realises, not least hon. Members opposite, that the mass of the people simply do not yet appreciate the seriousnees of the situation. On the whole, wages are better than they were; on the whole, hours are less than they were, on the whole, people are getting their rations, and on the whole the average working man I meet is inclined to say "We are doing reasonably well," and finds it difficult to believe that the politician is telling him the stark truth.

Mr. Harold Davies

Hear, hear.

Mr. Stewart

I noticed that the Chancellor said this afternoon: No one can have any doubt as to the seriousness of the situation. With great respect, he is quite wrong. There are millions of people who have doubts, and unless the Government take drastic measures now to make the facts known to the people, we shall not get out of the present difficulties. It is a duty which lies upon the Government. Certainly we all have our share in that duty, and we shall all do what we can about it, but it is for the Government to undertake now that more vigorous propaganda campaign.

Because of the lack of appreciation of the seriousness of the situation, there are people in all classes who have failed in the last two years to do what is their obvious duty. Take those who would be classed as friends of this side of the House, the so-called capitalists. Let us recognise that there have been among the employing classes firms who have not reduced prices as they might have done, firms who unwisely have distributed larger profits than any reasonable man at this time ought to have done. There is no doubt that amongst that group of people there have been mistakes and disappointments, but it would be quite wrong, as the hon. Member for Cannock (Miss Lee) seemed to suggest, that all the faults lie there. There has been disappointment that, despite all the appeals of the Government, wages have increased, by a substantial amount during the last year and hours have been reduced. We had better recognise, therefore, that not one group of people alone is involved in this—all the people are concerned.

The Chancellor offered two alternatives response to his appeal for voluntary restraint and action or totalitarianism. Neither I nor my hon. Friends accept that alternative. I do not believe that if the Government's policy fails the only alternative is drastic central control. I do not believe that would get us out of our difficulties. I am certain that alternative would bring us absolutely to ruin. I believe profoundly that the way out of our difficulties, not at once, not under this Administration, but ultimately, can only be the releasing of the springs of individual enterprise. The reduction and the ultimate abolition of control alone will lead to the promised land.

But let us face present facts. We are confronted now with a situation, political and economic, in which we have to do what is to our hand, and in that position we must all be exceedingly practical men. There is no alternative for the public-spirited man than to do his best to help the Government to get round this corner, and I am willing to do all I can. There are two ways in which we can help the Government. One is to say openly when you approve of their policy. At the moment I think all here will agree that the action of the Chancellor in addressing the F.B.I. and other concerns with an appeal to reduce prices is an admirable action. I wish it every possible success, and I think it probably will be successful. I think it is possible to reduce prices in many cases and, in that way, probably to reduce profits. I say openly that I welcome that enterprise and initiative.

There is another way we can help. We can suggest additional measures that might be taken by the Government. Let me offer two suggestions. I tell the Government that, unless they themselves set an example to industry, this appeal for voluntary restraint will fail. The example ought to be set in the Budget by a substantial, and almost dramatic reduction in national expenditure.

Sir R. Acland

What items?

Mr. Stewart

If the hon. Member will give me a little time I will give exactly those answers he wants. How can you expect large industries or small to practise efficiency and economy when the grossest inefficiency by the Government is flaunted in their faces every day? Everybody knows that there is a great expenditure of money in the Army and Navy for a grossly poor return. Here is an opportunity to save millions. We would get as good, perhaps a more efficient Army and Navy, and we would be spending a good deal less on it. Unless the Government substantially reduce wasteful and unproductive national expenditure in the hordes of unproductive servants who work for them the Government cannot expect industry to play its required part.

May I offer this last suggestion? I think we all recognise in the Chancellor's speech today one or two hidden—but not too hidden—threats about what is coming in the next Budget. I say with great earnestness to the right hon. and learned Gentleman, "Be very careful in preparing new measures that you do not in that way, by an excessively increased burden on profits, kill the spirit of people upon whom you depend for a revitalising of our present position."

I leave hon. Members opposite to make speeches on behalf of the people they claim to represent, the organised workers. I wish to speak for a group of people whom I try to represent, and who make up a considerable proportion of the population of my constituency and of the constituencies of my hon. Friends on these benches. I am speaking for the small industries, those with less than 100 workers, who represent 70 per cent. or 80 per cent. of the total working population of the land. As an example, I am thinking of a little firm in the constituency of my hon. Friend the Member for Montrose Burghs (Mr. Maclay), in which three brothers are serving agriculture. They were all in the war, and are all "little men." They are sweating blood in building up their industry, which serves agriculture over a great part of Angus. They have no fixed hours, but are at it morning, noon and night, and on Sundays. They are contributing magnificently to the national recovery. If the Government by their efforts so dampen down the enthusiasm of such men and curtail the reward to which they are entitled, the whole nation will suffer.

I also think of another group of three brothers in England, not far from here, in this case serving the coal industry. These men are working from I do not know what hour in the morning until late at night every day of the week, giving everything they have to their effort. If in the new Budget these men are crushed, by removing from them any incentive to work, that firm and 10,000 others may well be killed.

It is the underlying philosophy of this Government that is to blame for our troubles. If you do not believe in private enterprise and reward for extra effort you cannot get extra effort and prosperity will elude you. We believe effort and reward are fundamental to the recovery of our land. If I could only persuade this Government for a year or for two years, to break with their stupid old dogmas, and to try that method, we might recover.

7.24 p.m.

Mr. Blyton (Houghton-le-Spring)

Listening all day to the Debate, I find that many of the phrases used by the Opposition are exactly the same slogans as were used in 1922 and in 1931. In 1922, we had the slogan "equality of sacrifice," and we had the Geddes Committee. The Geddes Committee thought that equality of sacrifice meant slashing pensions, education estimates and health estimates of every local authority, particularly affecting working-class life. At that time we also had higher prices for foodstuffs than we had today. Those prices were shillings higher, and that was the operation of Tory policy in 1922.

In 1931 again we got "equality of sacrifice," and unemployment benefit was cut down. The unemployed man was cut down to 2s. a week to keep his child on and a means test was applied to the family life of the people. That method was applied to 1922, which was an inflationary period, and in 1931. I am satisfied from the speeches I have heard today from the Opposition Benches that had those hon. Members been sitting on this side of the House, their policy would have been the same today as it was in those years. It is because I recognise that their policy is still the same, and that it would be to make the working-class people pay, that I wish to appeal, not to the Opposition, but to hon. Members on this side of the House who are trade unionists to face the position, and to support the Government in the Lobby tonight.

I listened to the hon. Member for Kingston-upon-Thames (Mr. Boyd Carpenter) talking about the price of coal. I wish to tell the Opposition that the days of cheap coal with cheap miners have gone forever. The sooner that is recognised, the better it will be for everyone concerned. The right hon. Member for Warwick and Leamington (Mr. Eden) said that capital expenditure must be in accordance with our resources. If one goes into the Library and reads the terms of reference of the Geddes Committee, he will find exactly the same words used. I ask Labour Members of this House, "Are we to risk the situation which would defeat the Government in this unpleasant position and result in the Tories coming back, to give us what we had in 1922 and 1931?" [Laughter.] The Opposition may laugh, but I lived and suffered in misery and anxiety in the days of 1922 and 1931.

When I listened to the Prime Minister speaking on the White Paper the other day, three questions came to my mind. Would the trade unions stand a sanction on wages, if prices were to rise and profits were left alone? The second point was: if food subsidies were pegged at £392 million and all over that had to be passed to the consumer, could we expect the trade unionist to sit quiet and have to pay higher prices? The third question which occurred to me as a trade unionist was: could there be free collective bargaining between the employer and the trade unionist if there were a sanction on wages before the negotiations started? These are serious problems which trade unionists have to face. I am satisfied that the Chancellor has given a satisfactory answer to them.

In the face of prices being pegged, and profits controlled, can we say to the trade unionists, "There is a choice before you. Are you going to press your wages demands which may bring down the Government in this financial situation, and go back to the position which existed in 1922 and 1931, or can we have a standstill policy until such time as this country has revived economically again?" The present position is not of the Labour Party's seeking. We cannot have two major wars in 25 years and not expect to have to face something of this character. When all is said and done, even the Conservatives only balanced their export-import programme by means of the dividends they were receiving from their investments abroad. Practically all those investments have gone and we now have to face that gap which they met by that method.

I was in France just before Christmas, when inflation was serious. At that time, in France, meat was 10s. a lb., butter 15s. a lb., and eggs were 1s. each. In that situation trade unions were fighting to get higher wages. There were changes of Government and there was a clash in the trade union movement that has split it from top to bottom. If there is a lesson to be learned by my fellow trade unionists on this side of the House, it is the lesson of France in regard to this issue. Therefore, I put my position plainly Representing, as I do, a constituency in which there are shipyards and shipbuilders, railwaymen and miners, I intend to take my corner with the Government on the policy contained in this White Paper. Last night I was talking to Will Lawther, the President of the National Union of Mineworkers, and the Vice-President, Mr. Bowman, and—this may be news to many—they gave me their permission to state that so far as they are concerned, as two miners' representatives on the T.U.C., they are backing the Government policy as contained in this White Paper.

We may be told that we can take up this attitude because we have got our increase in wages and can, therefore, sit back and watch the show, but that is not true. The Miners' Charter, which the National Coal Board has agreed to put into effect over a number of years, means a supplementary compensation scheme in the industry on the basis of its being a hazardous industry; it means amenities in the different mining villages of this country under the welfare arrangements. The decision I have announced by the two main officials of the N.U.M. will have its effect on the miners.

I conclude by appealing to my own people on these benches to realise the danger of creating a position, by not facing up to the policy of the White Paper, which will lead to the Opposition getting into power. That would mean disaster and poverty for our people So, I support the Government's policy as a standstill policy in relation to wages until such time as the economic position of this country is built up again and that standstill order can be withdrawn

7.34 p.m.

Major Haughton (Antrim)

The causes of this crisis have been analysed in a thousand and one different ways, and blame for it has been laid at many different doors. Numerous attempts have been made to formulate and arrange the figures in ways in which they will be easily understood, and these have culminated in the two White Papers which we are debating this evening, "The United Kingdom Balance of Payments" and the "Statemen on Personal Incomes, Costs and Prices." Whether or not the facts and figures are really understood, the Chancellor of the Exchequer has made it abundantly clear that we are now face to face with the crisis. One hon. Member has said that this was not the psychological moment to issue a White Paper of this sort, but psychology does not always rest upon time. The crisis is upon us and has to be tackled, whether it is the psychological moment or not.

My suggestion is that we get down to brass tacks. What is the first brass tack? It is honest to God co-operation in industry, and when I say "honest" I mean honest. I listened with the greatest interest to the speech made by the hon. Member for Cannock (Miss Lee). We all know how sincerely she speaks. In a way, she supported the Chancellor of the Exchequer in what he said, but it seemed to me that in offering that co-operation she was going into this fight—and it is a fight to beat the crisis—with a feeling that the scheme would not work. If we are going into the fight at all, let us go into it with our whole heart. Lip service to collaboration and co-operation is detestable at any time; I consider it criminal now. I say that, because those of us in industry have to go away from this Debate and translate these things into hard facts and actions.

The second brass tack is surely the realisation that the price of goods is not controlled by ceilings or floors or by maximum or minimum prices; it is controlled by the price at which we can sell an article, given British quality and British design, whether it is a motor car or a linen table cloth, in the markets of the world. Accordingly, price and the realisation of price is the second brass tack. What is the third? The Chancellor is asking every one in industry to collaborate, and is asking us to lower prices and costs. I was glad to hear him say, in the course of his speech, that the Government must give a lead by acknowledging its own precept—I am accepting the Chancellor's statement on that matter—because it is futile for the Government to exhort industry to reduce prices when under their own control they have transport, electricity and coal, which play such a tremendous part in our costs. There are, of course, diverse and complicated considerations, and I would be a fool if I suggested that a recital of a few points could simplify these things.

Yet I welcome most sincerely this suggestion which has been made by the Chancellor that the Federation of British Industries and other organisations will be given a chance to show what can be done, and to formulate a plan within a month. As a member of the Council of that Federation, I feel an enormous sense of responsibility tonight, because it has been put on its mettle. It has to produce something, and I hope most sincerely that it will succeed. So, from this side of the House, I join with the Chancellor in great sincerity. We have an awfully difficult task to go back to works in different parts of the country and make people understand that there really is a crisis. In certain places there are higher wages than have ever been paid before, with shorter hours and higher profits. In the face of those things it is very hard to convince people that there is a crisis.

In tackling this problem let us realise there may be two types of factories. There is the factory which is paying high wages, and turning out articles at a price which will command a good market overseas, and, at the same time, paying dividends and making profits. There is another factory not paying such good wages, with no incentives, and not making a profit. I say the former factory is to be commended, and, if necessary, the inefficiency of the latter is to be condemned. It is not a question of welcoming what the Chancellor has said; it is more a case of co-operation.

7.41 p.m.

Mr. Piratin (Mile End)

The hon. Member for Houghton-le-Spring (Mr. Blyton) called on the Members on this side of the House to support the Chancellor of the Exchequer and the White Paper. He referred to his own experiences in 1922 and 1931. It is a very great pity that when he spoke of 1931 he did not remind himself and the House of the whole story. In 1931 it was a Labour Prime Minister who failed to get the support of the Labour Party for his policy. As a result, Mr. Ramsay MacDonald had to form a Coalition with the Conservatives.

Today the working class are asked to support a policy which is not very different from that for which Mr. Ramsay MacDonald failed to obtain their support in 1931. The method is different, but the purpose is the same. We on this side of the House must be careful, when we consider our attitude to the proposals of the Chancellor of the Exchequer, as to whether we should support them. The events of 1931 are still fresh in the minds of many of us. I wish they were fresh in the minds of all. For the working class it was a tragedy, and for the Labour Party a catastrophe. One day they had 290 seats the next day they had 50. We should not forget those days and the policy which brought us to them.

The essence of the White Paper is basically an attack on the working-class standards. It is true that there are general references to individual money incomes, but it is clear that the Government intend only to take measures in so far as wages are concerned. Paragraph 10 has been referred to by more than one speaker, and by the Chancellor of the Exchequer himself. What does it say? … if … remuneration is increased in any class of employment … there can be no presumption … that the resulting costs will be taken into account in settling controlled prices, charges or margins or other financial matters requiring Government action. Each case will have to be considered on its merits in relation to the principles enunciated above. The effect of this would be that if an employer knows that if he reaches an agreement to pay more wages he is not likely to be permitted to charge more for his goods, then, obviously, he is not going to grant more wages. He will refer the matter to the Board of Trade. The Chancellor said that the Board of Trade will decide such a case on its merits. What exactly are those merits, and who is able to decide them? Would it be based on the lowest standard of life? There are workers in many industries today who cannot manage at all. Will it be the Chancellor or the President of the Board of Trade, or will it be senior responsible officials of either of those Ministries, who will decide that £5 is an adequate wage on which a man can keep his wife and two children? Could they live on £5? Are there not millions today who are not getting even £5?

Who, then, is to decide the subsistence level, and the terms of this new means test? What, in my opinion, is worst of all is that the Chancellor of the Exchequer gives lip-service to free negotiations between employer and worker, when, in actual fact, it is the Board of Trade which will itself be the deciding factor. It is the Board of Trade which will fix the wages. I doubt whether trade unionists are prepared to accept such a form of dictatorial arbitration.

Has the Chancellor taken the same firm attitude with prices and profits? Let us look at prices. The hon. and gallant Member for Antrim (Major Haughton) declared himself a member of the Council of the Federation of British Industries. He said he accepted the appeal made by the Chancellor. What did the Chancellor say earlier? He said that, in order to keep down prices and profits, he had appealed to the Federation of British Industries and other organisations of employers, to suggest ways and means. He said they had promised to reply within a month and, further, that they would "do their utmost"—to use his own term—to do so. May I remind the House that some months ago President Truman made a similar appeal to the industrialists of the United States, with no effect, in so far as prices were concerned. Since when does a Socialist Chancellor of the Exchequer feel that he can appeal with confidence for the support of industrialists while at the same time he introduces sanctions against Socialist trade unionists? If there was any question of co-operation, I should have expected that a Socialist Chancellor of the Exchequer would have automatically sought it with his fellow Socialists of the trade union movement. Here we see an entirely different state of affairs.

The Chancellor said that prices are to be stabilised at a ceiling price as operating in December and January last. To a great extent the Government themselves are responsible for the increasing prices of all kinds of commodities. Not a week goes by without an increase in the price of food and other commodities. Food, clothing, rent—everything is now mounting in price. Rents will mount, because of the new houses being built, and the increased interest being paid on the capital costs. The right hon. Member for Warwick and Leamington (Mr. Eden) said he was prepared, to use a colloquial expression, to "play ball." This made me suspicious. What is happening? Is it because we have now reached the height of the infla- tionary period that the Tories want profits and prices stabilised? Are they prepared to go back to prices as they were before they rose to the present fantastic heights? I suggest to the Chancellor of the Exchequer that if he wants prices to stop rising, he should look to his colleagues in the Government, and particularly to the President of the Board of Trade and the Minister of Food. He can start his charity at home, and that would be a test of his sincerity. I was interested to hear the right hon. Member for Warwick and Leamington say that he would like the Government to reduce its own expenditure. Later, I was really intrigued to hear the hon. Member for East Fife (Mr. H. Stewart), no doubt having been converted by my hon. Friend the Member for West Fife (Mr. Gallacher), say that he wants to see a reduction of military expenditure.

Mr. Henderson Stewart

In order to get more efficient service.

Mr. Piratin

Yes, of course. Whatever the hon. Member's purpose is, that is what he said. I commend him. I wish the whole House agreed with him. If the Chancellor of the Exchequer were honest and really meant what he takes so long to say, he would insist, as Chancellor of the Exchequer, on cuts in Government expenditure as was suggested, and where we can most afford them, in the sphere of military expenditure.

There was one phrase in the Chancellor's statement which was, I presume to say, the only genuine phrase worth considering by all sides of the House. It was when he said that whatever steps we took, there was only one answer to our problem—an increase in production. We are agreed upon that. It is the only way out of our problem. The question is, how are we to get that increase? I suggest briefly and succinctly that there are two ways. We can get it by science or by sweat. The Chancellor of the Exchequer asked for it by sweat—the sweat of the workers. The hon. Member for Wednesbury (Mr. S. N. Evans), who I am sorry is not here, said, "Lengthen the hours of the working week." The hon. Member for Solihull (Mr. M. Lindsay) suggests a six-day week. It is remarkable how almost every Member who has spoken from the other side of the House talks of harder work. The hon. Member spoke of a six-day week and went on to cap it by suggesting 10 per cent. cuts in wages, having in mind the example of 1931, which no doubt in his conception was a very good example. That is what he and his party want.

Those hon. Members are only going one step further than the Chancellor of the Exchequer himself. They are probably reading into the Chancellor's words what is in the back of his mind. If the Chancellor were intent upon increasing production he would use the scientific method. On the other hand, what do we find? The scientific method means an expansion of capital equipment and modernising our industry, but the Chancellor of the Exchequer has introduced a policy of reducing capital expenditure. I am speaking of that section of capital expenditure relating to the improvement of our industries. That is the capitalist way, not the Socialist way. The only way for them to get increased production is by the sweat of the workers.

Sir Waldron Smithers (Orpington)

That is what they do in Russia.

Mr. Piratin

Has the hon. Member returned from his sleep in the Library. [HON. MEMBERS: "Oh."] Well, that is where I saw him last. When the Chancellor of the Exchequer spoke, I could sense the feeling on these benches. Labour Members near me and around me were thinking to themselves that had it been a Conservative speech there would have been an uproar in this House. The Chancellor and his fellow-Ministers should take note that there was no applause when he finished. There was not even any applause from the opposite benches. That was not merely because he spoke in his usual sermonising tones, but because there was really no confidence in what he said. Even hon. Members on this side who support him are doing so only because they feel that they have a duty to support him, a kind of loyal, blind duty. [An HON. MEMBER: "Speak for yourself."] I am not supporting him, but the Tories are. The Tories are supporting the Chancellor because it is their policy.

The hon. Member for Barrow-in-Furness (Mr. Monslow) made an excellent and very fervent speech in which he said we were going the coalition way. I suggest to him that there is no need for a Coalition. The Tories are delighted. The Tories are having their policy carried out by a Labour Chancellor of the Exchequer. Had they attempted to carry it out, or had there been a Coalition Government, there would be a revolt in the country. As it is, they hope a Labour Chancellor of the Exchequer may get away with it. They know quite well that they could never have got away with it. Therefore, they do not want a Coalition. I hope that hon. Members on these benches will understand that these are the facts of the situation.

Just three weeks ago we heard in this House the Foreign Secretary introducing the Foreign Affairs Debate with a Tory foreign policy. So it was described by the right hon. Member for Woodford (Mr. Churchill). Today we have heard the Chancellor of the Exchequer introduce likewise a Tory economic policy. I warn this House that the Labour Movement and the working class have not much time to lose. If this is the way we are going, then we are going down the slope pretty quickly. If Labour Members on this side of the House want to ensure the carrying out of a Labour programme and to ensure laying the basis for the path towards Socialism, it is their duty to oppose the White Paper. It is their duty to ask for a policy, as laid down in 1945, from which we have gone so far.

That is what this House should do and that, I submit, is what the working class will do. The hon. Member for Houghton-le-Spring (Mr. Blyton) said that Messrs. Lawther, and Bowman support the White Paper. I wonder if they do. If so, they do not speak for the miners and do not speak for the working class. [An HON. MEMBER: "You do not speak for them."] No, I do not speak for the miners, nor do Messrs. Lawther or Bowman if they support this policy. [An HON. MEMBER: "More than ever you did."] The miners themselves will give the answer for the shipbuilding workers, the engineering workers, the pottery workers and the textile workers. They will say, "We are doing better and those who have suffered all these years have a right to do better." The workers will give the answer, but I hope that Labour Members will anticipate them.

7.57 p.m.

Mr. Spearman (Scarborough and Whitby)

There has been no violent attack from this side of the House upon the Government. That role has been reserved for the representative of the Communist Party who has just spoken, the hon. Member for Mile End (Mr. Piratin), and for the hon. Member for Barrow-in-Furness (Mr. Monslow). I feel called upon by the speech of the hon. Member for Barrow-in-Furness to make an attempt to rush to the defence of the Government, however embarrassing they may find it. First, the hon. Member appeared to be saying that there was no inflation. Then I thought he said that inflation did not mean too much money chasing too few goods. Perhaps he really meant that the money was not that of the wage earners, but another sort of money altogether.

That seems an unfortunate misunderstanding, upon which I would like to comment. I would say two things to the hon. Member. If inflation increases in extent, it means far less of goods and, particularly, far less food. All the people in the country will suffer from that. There is no possible way of protecting the wage earners from suffering from that. Secondly, the bulk of the money in the country now is so distributed that only by checking the expenditure of the wage earners can the demand for goods be reduced. In support of that, I would like to quote from the White Paper on National Income which says that in 1946 the total income added together, of Super Tax payers amounted to £246 million, which was 30 per cent. down on 1938, whereas the income of the people having up to £500 a year, was more than £5,000 millions, which was 55 per cent. up.

I would also tell him that the number of people with an income between £250 and £500 is now over five million, whereas before the war it was under two million. I would also tell him that the total distributed profits on ordinary shares amounts to £400 million, whereas wages amount to £3,000 million, as shown in the White Paper. I am not suggesting that that is a wrong proportion, but I do say that there is no way of taking so much from the £400 million, all of which is subject to tax, as would make any real difference to the inflationary pressure.

I entirely agree with the hon. Member for Cannock (Miss Lee) that there is here a psychological problem, and that the burden must not only be fairly divided but must be demonstrably fairly divided. I should be quite prepared to see a very heavy tax on any increase in dividends, provided it was made quite plain that that was an entirely temporary expedient which would not in any way prejudice the future. I should be sorry to see any greater taxation which would discourage profits because the more profits made on turnover, and not on particular articles, the greater the production and wealth there is for everybody. We must welcome profits that are made in that form. However much we may blame the Government for the present situation, I think we on this side can express our gratitude to the Chancellor for the frank disclosures he has made in recent White Papers and the realistic views which he has expressed about the future. If Members opposite cannot share in the indictment of the Government, I hope that they will, at least, join in the gratitude.

I do not believe there is any more chance of checking the tide of inflation by exhortation than King Canute had of checking the tides of the sea. Inflation does not mean rising prices; it is greater demand than supply, and the consequence of that is rising prices which are nature's cure There is a good deal of confusion on this point. As I understand it, there are four ways by which to prevent inflation: By far the ideal way is to increase production, and get the two legs level—to lengthen the short leg instead of cutting short the long leg, which is a much more pleasant thing to do. That has met with great difficulties, first, because we have not got the equipment in the country—and cannot afford to buy it—with which to bring our factories up to date; second, because all sections of the community have a human dislike of working harder; and, third, because the very fact of inflation has so distorted our economy.

We are not producing anything like all we ought to be producing and, therefore, we must get down to the task of obtaining equilbrium by cutting down expenditure. We can do this by cutting down consumer expenditure by taxation. It may be that we have gone as far in taxation as we can go without defeating its object by creating a disincentive. The other way is by reducing Government expenditure. I believe that the time has now come when the Government should drastically reduce expenditure regardless of whether it is desirable expenditure. It is a choice of evils—to give up what we would like to have to get the food we must have.

If all that fails, I believe there is no other alternative but to allow prices to rise. That is an unpopular thing to say, and one which, I know, is liable to be quoted and distorted, but I believe that to try to suppress inflation by controlling all prices is very like sealing a wound full of poison. We cannot control everything in a democratic country. Those things we do not control will attract men and materials and so distort our economy. Therefore, it is vital if the Government cannot cut their own or consumers' expenditure, if they cannot establish conditions in which we can increase production, to let prices rise. They must alleviate the hardship on those who will suffer most by increasing allowances and pensions.

I believe that the present situation, which is far more serious and tragic than is generally realised, is due, in large part, to the Government's failure to make any real attempt to obtain equilibrium between demand and supply. I do not believe it is possible for the Government to say how and where and when everything must be produced. I believe in decentralisation in dispersing throughout the country responsibility for using our resources rather than that it should be done under one directing super-chief, as in a dictatorship. But I believe it is possible for the Government to estimate what our total resources and total demands will be, and to shape them so that they meet each other.

I would like to quote an extract from "The Economist" of a few weeks ago: It is a remarkable fact that Labour, the party of planning, has been less ready to set the whole of its economic policies into a coherent framework than was the Coalition Government, when Keynes's influence was paramount at the Treasury and spoke through the mouths of Sir Kingsley Wood and Sir John Anderson. During the last two years we have had an immense number of Bills. The legislation we have passed may cost us dear in the future, but what we are suffering from today is not merely so much bad legislation as failure to plan. It is not so much what the Government have done, but what they have not done which is causing so much trouble today. An hon. Member opposite reminded us of the sad times of the inter-war period, and talked about deflation. I entirely agree that deflation is an appalling situation to be in; it brings about unemployment, restrictive practices, poverty and hardship. I believe that Lord Keynes has taught us, whether we are Conservative or Socialist, how to deal with that in the future, how to check deflation so that we may never have the scourge again.

But, bad as deflation is, inflation is just as bad. It is no good saying that because low blood pressure is a horrible thing, high blood pressure is not equally dangerous. We are suffering from inflation, which means that we cannot get men and materials in the right places. We have not the pipelines full of materials with which to get efficient production. Consequently, production is falling, and the power to maintain the livelihood of our people is in jeopardy. As the Chancellor said, it is not only that production is failing but that, through inflation, it becomes increasingly difficult to see that there are fair shares of what is available.

I have just come back from the United States, where I believe there is today a greater sense of co-operation and wish to help Europe than there has ever been before. I have no doubt that that is partly due to M. Molotov and M. Vyshinsky, who have worked hard and well in that cause, which they can hardly have at heart. But I am sure that there is something much more in it. There is a real wish in America to help Europe in her plight—the countries from which her people originate and who created the civilisation which she values so highly. I believe there is a chance now that America will accept the sacrifices which she will have to make to help us if we act properly towards her. America can help us with her surplus, but only by going short herself. That means sacrifice. She has already spent, in helping Europe, £4,000 million since the end of the war, and is beginning to wonder whether it has been worth while for the results which have so far been attained.

I am quite certain that to plead poverty is no way to get help from America. The only way to get help from America is to show that we deserve it, that we are prepared to exert ourselves, to deny ourselves, and to show hard work and enterprise. What is more, I am sure that we have not, and indeed cannot get, aid from America of a sufficient amount to maintain our present standard of living. We can only do that if all sections of the community word harded and if we deny ourselves much more. After all, this country, in its youth, made great progress in conditions very favourable to it. Today, in our middle age, we have lost those foreign investments, through no fault of our own, which should have been a cushion for our old age. Today, we are faced with conditions far less favourable. The terms of trade have gone against us. Yet we have a relatively high standard of living to maintain. We can only maintain it if we work not merely as hard as we used to in our youth, but much harder than ever before.

8.11 p.m.

Mr. George Wigg (Dudley)

The hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) knows only too well that, by quoting something which the Chancellor said eleven years ago, he was not answering the charge that his party neglected the Colonial Empire. The facts speak for themselves—

Mr. Boyd-Carpenter

It would have been out of Order if I had attempted to go into the history of Imperial development many years ago. I did not attempt to do that. I think the hon. Member will agree that what I said was that it does not lie in the mouth of a man who desired 11 years ago to liquidate the Empire, to attack us for not doing more to reinforce it.

Mr. Wigg

The situation requires that each and every Member of this House shall understand why we find ourselves in our present position. The hon. Member for East Fife (Mr. H. Stewart) went out of his way to appeal to all hon. Members to go to their constituencies and to explain the facts of the situation to the people. It did not seem that he really understood very well what the facts are, or that he perceived the numerous contradictions which came from the opposite benches today. Therefore, believing as I do that development of the Colonies is absolutely vital to our future economic welfare, it is important that we should establish the fact that the Conservative Party and its supporters went into the Colonies and tore the economic heart out of them. They left behind in every one of the West African Colonies places where 95 per cent. of the people are illiterate. They left great areas where 100 per cent. of the people suffer disabling disease. I am not referring particularly to the hon. Member for Kingston-upon-Thames. I know him far too well to think that he would personally support that policy. But it must be put on record what the Tory Party left as the result of their Colonial policy.

That is the situation which the Government have to tackle before they can even begin to get any economic return from the plans which the Chancellor is making at present. What the party opposite did in the Colonies, they did also in this country. There exists in all the great industrial areas of Great Britain a fear, a haunting dread, of the spectre of unemployment. Indeed, one of the problems with which the Chancellor and the trade union leaders have to wrestle is that of the very real fear that the day may come when the Conservative Party will be once again in power. The workers look at this White Paper and they begin to see this fear taking a very real form. The danger lies in the fact not that the Opposition want a Coalition, but that the Conservative Party—[An HON. MEMBER: "Why should they?"] Why should they when in fact they are getting a Conservative policy put through for them by the present Chancellor? That is the simple explanation. The implications of full employment have never penetrated into the minds of members of the Conservative Party. Indeed, I wonder whether the implications of full employment have fully entered the thoughts of the Chancellor of the Exchequer.

For the first time since the industrial revolution, the balance of the economic argument rests with the workers. No longer are men and women in fear of losing their jobs in industry. They know only too well that, if they lose the job they have got, they can go and get another. Therefore, when the Chancellor, on behalf of the Government, asks them to give up their economic power, they have a right to expect that they will get something in exchange. I consider that when the Government ask that the wages policy of the trade unions should be put aside, they are asking a very great deal. By wage stability, I do not mean only the wages that come as a result of individual effort. I also include all personal incomes.

I calculate that so long as 80 per cent. of industry rests in private hands, we must, whether we like it or not, accept the fact that profits must be earned. I do not think that the danger lies in great profits as such, but in the fact that the profit margin is far too high. From time to time one hears the disciples of Adam Smith speaking from the opposite Benches. Adam Smith was right when he argued that the sheer burden of pressure on profit margins should be such as to ensure eventually that prices would drop. But the implications of full employment for the wage earner also has a meaning to those engaged in trade. The great demand for goods makes it very easy for people to sell them. The risk of producing goods and not being able to get rid of them does not exist today. The workers, therefore, have every right to expect that the policy of wage stabilisation shall be accompanied by a policy of price stabilisation.

It is a fact that the Government, in the Autumn Budget, broke the chain. They allowed prices to rise. They said that they would stabilise subsidies at just under £400 million. The truth is that if a leak occurs in a pipe in a house, one is not conscious of all the pipes which are not leaking; one is conscious only of the pipe which leaks. Day by day a halfpenny is put on here, and a penny on there. From observations I have made in my constituency, I am certain that for the first time since the war started, many working-class families are becoming subject to rationing through the pocket. A number of my constituents tell me that they are not able to take up their sweet ration or to buy clothes, not because they have not got the points or the coupons, but because they have not got the money. There is a common delusion, certainly it is a delusion from which the Conservatives and perhaps even the Chancellor suffer. They have the idea of a working-class woman going out to shop on a Friday with her bag stuffed full of £1 notes.

Sir S. Cripps

indicated dissent.

Mr. Wigg

If the Chancellor says that he has not that idea, I am pleased to know it. Sometimes he rather talks as if he thinks in that way. The facts are that two-thirds of the wage earners are earning less than £5 a week. A working-class family with less than £5 a week can have anything but a very good time today.

The hon. Gentleman who has just spoken said that he could not believe that there was much good in exhortation and I do not believe that there is any good in psychological tricks. The workers of this country, as the result of the workings of the educational system, have grasped a profound social and economic truth. Their economics may not be very extensive, but they are very sound. They have the ability to add two and two together and make it four, and it is no good going to them and saying, "Look, lads, we are in an inflationary period, and you cannot have any more pay," when, on their trips to London to the Cup Final, or when their team is playing in London, they walk along the West End streets and see building after building repainted, expensive cars standing in the streets and everything that money can buy.

It may be argued that, if we took all the paint off the houses, and took away all the cars and all the labour and expense that had gone into these things, it would not make any difference. One knows very well that, in fact, it is quite impossible for the Chancellor to argue that, at the present moment there are £7,000 million chasing £6,000 million worth of goods, because he does not know the extent of the inflationary pressure. There is less information in that field than there is in the capitalist United States.

I am prepared to take the unpopular line and go back to my constituency and say, "In this situation, it is imperative that we should recognise the facts, and that large increases are impossible." but I am also going to say, "Look, my friends, how did we get into this position?" Was it as a result of the policy of the late Chancellor of the Exchequer, as the hon. Member for Kingston (Mr. Boyd-Carpenter) suggested? No, it was not. Was it as a result of trampling on the spirit of private enterprise, as was put forward by the hon. Member for East Fife (Mr. H. Stewart), or was it because we do not work six days a week, as was suggested by the hon. Member for Solihull (Mr. M. Lindsay)? No, the reason why this country finds itself in a mess today is because the Government, having been elected on a Socialist programme in 1945, in a number of fields now carries out a Tory policy. Wherever the Government have been true to their mandate, wherever they have been true to their faith, wherever Members of this Government have acted in a Socialist way, the results have been a resounding success.

Let us just for a moment have a look at the White Paper and the United Kingdom balance of payments for 1947. There is a deficit of £675 million at the end of 1947. Since July, 1945, no less a sum than £1,500 million in dollars has been spent on the Armed Forces, and with what results? The Government chose the policy of guns in preference to butter, and, in 1948, the reality of the situation is that this country has neither guns nor butter. We have not got an effective military force, because our foreign policy has been based beyond the economic strength of this country to sustain.

My next point is this. The Chancellor of the Exchequer, on 7th August, 1947, used these words: We had hoped, as most countries had hoped, that somehow or other we should be able to achieve an expansionist world policy, based on multilateral trade."—[OFFICIAL REPORT, 7th August, 1947; Vol. 441, C. 1757.] Those words were uttered in August, 1947. After two years of a disastrous foreign policy, and two years of a sterile external trade policy, we now have the frank recognition that this country can only live by facing the facts of the situation. My concluding words are that I recognise the dilemma, which is etched into my own conscience. I knew, when I went into the Division Lobby at the end of 1945, very conscious of what I was doing in voting for the American Loan, that I only did so because I could not face the alternative. If the loan had not been obtained, I knew that we could not hope to see a speedy and fair demobilisation. I knew that the chaps with whom I had served in the Forces would not get a square deal, and that, unless the loan came to this country, we could not hope to get four million men back into civilian life without strife and faction.

Let us see now what faces us I do not know what the Marshall terms are going to be, or what we shall get. In the first year, we shall get something, and then it will be less and less, until, in the last year, it will be very little. What will happen to this country at the end of four years, if the time is wasted as the last two years have been wasted? At the very moment when the full force of American competition is going to be felt in the world markets, we shall be left naked and exposed to every wind that blows. Therefore, it is in these terms that I have to search my conscience and face up to what this White Paper means. If it is just one more step down the slippery slope, one more piece of patching, instead of appreciating the facts and shaping policy accordingly, then I say that this House has a great responsibility to the country. What is at stake? Not only the future of the Labour Party and all that it stands for, but the future of Great Britain and its place in the world. Because remember, from now on there is no going back on our tracks.

8.28 p.m.

Mr. Walter Fletcher (Bury)

The hon. Gentleman who has just spoken started his speech with the usual travesty, to which we have become accustomed from the other side of the House, about what had been done before the war by this party in the development of the Colonies. I must say that, in the otherwise extremely clear exposé which the Chancellor of the Exchequer made, there was the same unworthy blot at the beginning of his speech in this cheap and unjustified piece of propaganda about the development of the Empire before the war. I would ask the right hon. and learned Gentleman at this moment to answer honestly this question. What is he relying on at the present moment to feed this country? The wheat which he gets from Australia and Canada, areas which have been developed by us in the past, copper from South Africa, and tin and rubber which provided £120, million worth of dollars with which to pay for food for this country.

I could go on and give other examples, but it is just a travesty of the truth for any hon. Gentleman on the other side, because they are trying the minor operation of peanuts in East Africa, in which they are already one year behind, to say that they are hampered by the fact that we have not developed our Colonies in the past, and make the cheap gibe that we have not done anything. The trifling £150 million of British money which they have invested is merely peanuts, and represents less than one-hundredth part of the money sunk out there before, as well as the brains and skill. If we are to create the atmosphere which the Chancellor is trying to create, and in which we can go forward now in the development of Africa and the Empire, it is an unworthy gibe to make about those who have done so much in the past.

I have lived for five years in East Africa, and for a good many years in Malaya and the Far East, and anybody who studies the facts, and looks at the White Paper, will see what has come in from those sources, and will know that what I say is justified by fact. It would be a graceful and useful gesture if this implication were to be withdrawn. How can we, who are only part of an Empire, who cannot consider our wage policy as separate from it in any way at all, create the atmosphere that is necessary if, on the tip of the tongue of the Chancellor of the Exchequer is a gibe of this sort?

I join in praising this clear and distinctly laid out plan—the first plan produced, not a patchwork as it was called by the hon. Member for Dudley (Mr. Wigg)—which the Chancellor has produced today. But, every time I praise him for that, it is an equal condemnation of the right hon. Member for Bishop Auckland (Mr. Dalton), because, at the present moment, there is not the slightest doubt that he, with that song in his heart, which was the most expensive piece of music ever written, and for which we are now paying, as we career round prosperity corner, is the architect of the situation in which we find ourselves at the moment. I propose to devote myself to considering this plan, and giving it all the support which those like myself must do when they know what the wages question means to their constituents.

Let us not lose sight of the fact that this situation has been quite largely produced, by a wrong financial policy, by not listening to warnings about convertibility, and by refusing to look for one moment beyond the doctrinaire policy which has plagued hon. Members opposite for two and a half years. The years between the wars are thrown in our faces, but what about the years between the end of the last war and the beginning of the white war which we are now going into? It is two and a half year since this country elected a Socialist Government. A disaster beyond parallel has fallen upon us. That disaster was not entirely due to circumstances; it was accentuated, and made infinitely worse, by the ineptitude, the bungling, and the total unreality of the policy of the Government.

Let us take one phase on figures which comes out in the White Paper. What has been done for invisible exports? They have dropped, as is shown by the figures, in the most disastrous way. They were killed largely by the dastardly murder of the Liverpool Cotton Exchange. That was the first step. The Chancellor smiles, but he would welcome the dollars which the Cotton Exchange could be earning at the present moment, and the industry would welcome the cotton bought in the way it wants, from the people it knows, none of which it has at the present moment. That will come out in the wash when our textiles feel the draught. Other countries have a more rational system of obtaining their raw materials.

Now let us consider this new scheme for the stabilisation of wages and profits. I am afraid it has been considered in a sort of enclave which is extremely unreal. It has left out of account altogether the real overriding factor in our present economic situation. It is not what we think of our situation in this country alone, but what the rest of the world think of it, and how they assess it, and react to it. Even if we stabilise wages and profits, we have still not stabilised the cost of our raw materials which plays an extremely important part in every industrial process. We cannot stabilise raw materials without the consent of the countries producing them. We may try and do it in the British Empire, but, there again, we are inside the sterling block, and, there again, we are running a very great danger.

At the present moment, we can obtain rubber and tin from Malaya because it is inside the Empire. We can take the dollars which those materials produce and keep them, but make no mistake about it, the inhabitants of Malaya, Africa, or any other country within the British Empire, are not going to stand for it for ever, producing dollars or gold for our benefit and getting insufficient return of what those dollars can buy for them. There is the gravest danger that we shall disrupt the sterling block by our economic policy. The Australian pound stands at a discount to the British pound, though the economic situation of Australia and the dawning of sanity in the political world which is going to precede the turning out of the Socialist Government there, is gradually bringing us to a point where we shall wake up one day and find that our wool, tallow, and the other products of Australia, are going to cost us 25 per cent. more. We shall find the same thing in other parts of the British Empire. The policy of looking at our own wages is going to react on our exports to these countries.

Overriding all that is the extraordinary devaluation of the pound sterling. That point has not been developed in this Debate, though it affects the wage packet of every worker in the country. I would ask the Chancellor of the Exchequer to listen particularly to the dangers which I believe in his heart of hearts he knows are there. At the moment, we have fixed the ratio of exchange from sterling to gold dollars in America at 4.03, but the gap between that and the world assessment of it is very great indeed. It may vary between 2,30 and 2.73 in the open markets of the world.

As the Chancellor knows—he acknowledged it in reply to a Question only yesterday—the fact that there is a big gap between the world value of our currency and the fixed value, is driving away from us millions of dollars which should be coming to us. The recent action of the French has increased that danger, but, from the point of view of our export trade, and our export drive, the fact that we shall have to pay more for our goods throughout the world, because the world assesses our currency at a lower value than the official rate, is going to make itself felt increasingly as time goes on. It is quite inescapable that the big rise which has embarrassed everybody in the country, and the Government most of all, in the cost of the goods and the food we have to import, is due, to some extent, to the insurance that the seller takes out against devaluation. There is not the slightest doubt that the seller of wheat in America or Australia or of meat in the Argentine takes that into account.

I would interpose on the question of the Argentine that the profit system, so mocked at in times past, produced sufficient profits for us to develop, greatly to the benefit of the Argentine and ourselves, the whole of the Argentine railways, which we are about to eat during the next six or 12 months, though, in this case, the Chancellor of the Exchequer will not join in the feast in view of the fact that the railways have been turned into meat—[An HON. MEMBER: "And a little cheese."]—and a little cheese. They are being sold at one-half to one-third of their value in order that we may eat them in the next year or so.

The increase in the price we have to pay for everything from overseas is based on the insurance that the sellers have taken against the policy of devaluation. The Chancellor said recently that we are not going to devalue yet. That was an extremely foolish remark to make. Every man in his position in every country, at some period before devaluation, has always said that up to the last moment. I believe that this great gap which is going to make our raw materials more expensive, and, therefore, our export goods dearer, in spite of the controls that are going to be put on, and the genuine wish to see this new plan work properly, will wreck the plan.

I believe that what the Government should be studying more closely than anything at the present time is how to tackle the financial future of sterling and the sterling block, because that has in it the potentiality of wrecking the whole economic plan which we are working on at present. I believe there is only one way to do it, and that is the bold way. If one is bold, and has some knowledge of what is being done, one is successful. What we want to do is to make our currency a currency of confidence by showing our own confidence in it. Everyone on both sides of the House believes that after a considerable period—and I think a longer period than most people imagine—this country will get out of the appalling situation which it is in today and will be standing on its own feet and working a way to prosperity by its own efforts. In my view, that cannot occur for a considerable time, and it is quite certain that in the interim period our currency must be a desirable currency which other people wish to buy and to hold.

In the world today there is nobody outside the sterling block who is a willing holder of sterling for any length of time. That is not because people are hostile, but because they have a fear of devaluation. The Chancellor says that is not true; I say it is true, basing my view on my day to day experience with European countries and countries throughout the world, and the discount quoted on the New York and Hong Kong markets shows it is true—2 per cent. per month. If only we look at these hard facts and see what they are about, if we come forward in a short time and say, after consultation with the Monetary Fund in a perfectly orderly way: "We find ourselves in a situation where we have got to make our currency an open currency. We believe in it"—then we would have buyers of that currency. We could then build up our economy again. There was talk the other day on the possibility of our devaluation. What was the result? An enormous break in commodity prices in America. There is proof, if we want it. The Chancellor seems doubtful about it, but I would back my 25 years' business experience against his forensic triumphs in the courts. When we went off gold in 1930, why did Denmark follow suit the next day? She had to follow us.

The break that we wish to see in these very high prices throughout the world will be brought about by our showing confidence in our currency, and we shall be taking out an insurance against high and fluctuating prices in the raw materials which are vital for our manufactures. I would say one thing about the export drive and the present big gap. I am saying this not for my party, but on my own account. I do not believe that the potential output in this country—improved in every way as it goes along, with scientific improvements, and with an improvement when the workers are less tired and we can feed them better—can close this enormous gap for many years to come. Therefore, it is a kind of by-path of deception for us to say, and to mesmerise ourselves to believe, that export is the be-all and end-all and the one panacea for our problems.

I believe we must face this reality. Having become poor in a most honourable way, we must behave as the poor have to behave. We must look for long-term credits of a different size from what has been discussed in the Marshall Plan or any other plan. It is a matter of our having to be given credit for 5 or 10 or even 15 years—not necessarily from Government to Government, but from one block of individuals to other individuals, and that is one of the things to which this Government must look. Before we can balance our economy we must look forward to a good many years when we should get the credit which we deserve. There is no harm or shame in it; we have the skill, the workers, the imagination and the financial "know how," and we have the tradition.

We deserve credit, and we should seek and take credit. It is perfect folly to believe that in a period such as three years we shall be able to close an inflationary gap of an order of £600 million a year. We can do it, as my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) pointed out, by the development of Africa and the Empire, but this is rather slow. It is deception to talk about the E1 Dorado of the monkey nut and for the Minister of Food to raise within the community the idea that the public is going to get an unending flow of "marge" in a short time.

We must be completely realistic. Here I agree with the Chancellor of the Exchequer. He has put forward a plan which has a chance of success if everybody concerned in it—whether manufacturer or distributor—does his duty, and if everybody realises his duty and tries to make it work; but the only way it can be made to work is not by believing that it has been left in a perfect form by its author's head and is not capable of alteration as it goes along. Let us, therefore, back it, as we have done on this side, with everything possible, but with healthy criticism. Let us see that we do not get the sort of airy optimism that we have had—the sort of pantomime turn the right hon. Gentleman the Leader of the House gave last night. He ought not to be allowed to speak on these matters. Let us get down to the bed-rock of reality in approaching this situation. If we do that, help will be given on all sides of the House and sacrifices will be made, as long as we realise that it is not only a question of money but a question of survival. These two White Papers are two sheets in which the Government has confessed not only our poor position but the bankruptcy of Socialism, and the abandonment of the theses which they have been pushing down the throats of the gullible public.

8.48 p.m.

Mr. Wyatt (Birmingham, Aston)

I found it a little difficult to follow what was said by the hon. Member for Bury (Mr. W. Fletcher). In some moments he seemed to be saying that the Government had been an unparalleled failure in the last two years, and that that was the sole cause for our present difficulties, and the next moment he was saying we had become honourably poor through no fault of our own and we should ask for the maximum credit anywhere we could obtain it. It was a remarkably inconsistent speech. That was probably due to the fact that the hon. Member departed at the beginning of his speech from his usual good humour and let himself be carried away into a violent attack on what he believes to be the Chancellor's views on the British Empire.

The essence of the Government's White Paper is the stress on its voluntary nature. To make anything work voluntarily it is very important—indeed, it is vital—that everybody who is asked to work the thing voluntarily should understand exactly what it means, and the situation on which it is based. At the moment the great mass of workers understand what we mean when we say to them, "Your wages are going to be pegged." That is clear and unmistakable. What they do not quite understand is what exactly is being done about the pegging of prices and profits, because that is a more complicated matter. Because it is a more complicated thing with which to deal, and because wages are more obvious and more easily got at, it is understandable that at the moment wage earners should feel that they are being singled out as the easiest victims. I do not think it is the case that they are being singled out; I do not believe the Government are trying to do that. What I do believe is that we on this side of the House owe it to the Government to encourage amongst wage earners their belief in the Government. The Chancellor in his speech was talking to his friends the workers, saying, "I want your support and I think I am entitled to it." I think he will get it.

He was saying at the same time to other sections of the community not so noted for their friendliness to the Government, "I want your support, too, and I will offer you a voluntary system, and I hope you will comply with it, but if you do not, I would remind you that the Budget is coming along in a couple of months' time." I watched hon. Members opposite very carefully during that part of the Chancellor's speech, and I thought they looked a great deal less cheerful than they did when he was talking about pegging wages. It seems to me quite clear that there is a sting in the tail of the letter to the F.B.I. which will become apparent if the response is not very satisfactory.

It is very difficult, and it will continue to be very difficult, to persuade wage earners that it is they who have surplus spending power so long as so many other people appear to have so much spending power in their hands. It is not really the workpeople who have all this spending power. It is as well to remind ourselves that the official figures of the shares of the various sections of the community in the national income in 1946 show that, whereas since 1938, the share of the wage earners in the national income has gone up by less than 1 per cent., the share from interest, rents and profits has gone up by 3.4 per cent., which is a very much higher rise than that obtained by the workers.

When one also remembers that the difference between 1938 and 1946 is that in 1938 we did not have anything like so much employment—we had not then a situation of full employment—one perceives that the proportionate share of the workers is still less. Consequently, the share of the business men and of me capitalists is up by far more than that of any other people. The Government must explain more fully and in a simple form, what is being done through the Profits Tax to curb that situation.

In Birmingham at the moment we have several large wage claims pending, involving many thousands of people. We shall not be able to persuade them to drop those claims so long as in Birmingham and other parts of the country we have a situation in which expenses entirely disproportionate to the needs of the firms concerned are being charged by directors. Everybody knows that in many cases, particularly in the cases of small firms—and Birmingham is a city of small firms—a director of a firm can have a gardener, a chauffeur, and a motor car paid for out of expenses. Such provision, of course, is part of that man's standard of living. His standard of living has gone up very much more than that of the workers. The worker is not going to be happy, and will not tolerate the sacrifices he is being asked by the Government to make today, unless action is taken against such practices in connection with expenses.

Mr. Drayson (Skipton)

If the hon. Member is in possession of information that directors can keep gardeners and charge that expense on their firm's expenses, surely it is his duty to bring that information to the notice of the Revenue authorities?

Mr. Wyatt

I think that if the hon. Gentleman will inquire of any bank manager or chartered accountant, he will be told that what I am saying is quite true.

Mr. Drayson

rose—

Mr. Wyatt

I am afraid I cannot give way any more. I have only a few more minutes left. I am trying to compress what I have to say into a very few minutes. This whole question of expenses is becoming quite notorious, although it is difficult to deal with because of the shortage of Inland Revenue staff.

Another aspect of this matter, which is to be seen in Birmingham and similar towns, is the fact that while in Birmingham, for example, there is a housing waiting list of 60,000 families, yet every day the Birmingham newspapers contain columns of advertisements for the sale of houses at £2,000, £3,000 and £4,000—and those values are continually being inflated. Someone is making money out of that, and it is the person who sells his house, because he is not paying any Income Tax on it but putting it against his ordinary current spending. He does not pay Income Tax on it because he is not in the house selling business. Similarly, if someone sells his motor car, which has appreciated in value, he pays no Income Tax. These things are being watched very closely by the wage earner, who feels very keenly that no strong action is being taken against it.

Obviously, so long as there is so much industry in private hands we must allow the profit motive to work to some con- siderable extent, particularly with regard to firms which are encouraged to enter the export market, or where money is in vested in speculative ventures, like mining overseas. At the same time, figures recently published by "The Economist" for 2,000 companies showing their profits for 1947, establish that their profits were up by 45 per cent. since 1944, whereas wage rates had gone up by only 22 per cent. So long as such a tendency is in force, no wage earner can be persuaded that he ought to be making a greater sacrifice than the capitalist.

If the Government ask for a standstill in wages they must, at the same time, ask for a standstill in dividends, on the basis that during the next 12 months of this emergency period no company should be allowed to pay dividends higher than it paid in 1946. If wage earners are to be made to understand the position and persuaded to accept sacrifices, it is absolutely vital that the Government should explain in very simple form exactly what is being done about attacks on profits, and what is being done to equalise the sacrifice and to curb fictitious expenses being submitted and inflating people's standards of living. If ever there was a job for the Central Office of Information to tackle, it is this one, and I hope the Government will see that it does that job.

8.58 p.m.

Mr. Oliver Lyttelton (Aldershot)

The hon. Member for Aston (Mr. Wyatt) has raised one or two important points with which I will deal in the course of my argument. The Debate to which we have listened has been a very interesting one, and has taken place against the background of an ever-darkening scene. Here and there the Debate has touched upon the momentous events which are unfolding themselves in our national life. It has gone further than the subjects of the White Paper which originally caused it, and I should like to deal, first of all, with something of the background against which that White Paper is written and against which we read it.

First, let me say quite frankly, as a Conservative, that I admit, and have always stated, that the heritage of world events to which the Socialist Government succeeded in 1945 was dark and troublesome. I make no bones at all about that. But, equally, I say with the greatest sin- cerity that a large part—not all, but a large part—of our present calamities is of our own making, and that we owe many of these calamities to the irresponsible, haphazard and unsound policies which His Majesty's Government have pursued during their tenure of office.

Let us look for a moment at monetary policy. We all agree that in the modern world the most potent weapon in the shaping of national economy is monetary policy. In all economic matters it is finance control to which we should first look. It has this great advantage over the mass of other controls, and that is that it can be exercised by a handful of men, Ministers or officials.

Today, after the revolution—and that is not an exaggerated word—which has taken place in both the theory and practice of monetary control, this weapon is more potent, and its misuse is more deadly than ever before. Our disastrous monetary policy is largely due to the artificial sunshine in which the former Chancellor of the Exchequer used to boom and bask. Of course, the lot of any Chancellor of the Exchequer who has inflation at home, with all the buoyancy in revenue which that means, and vast loans pouring in from abroad which conceal the facts of inflation, is superficially a very happy one. These were the times when a wise and prudent man at the Exchequer would have taken heed, and would have run the national finances with the greatest circumspection, although perhaps with a heavier heart. But he took no heed.

It may be that hon. Members will think that I am exaggerating. Let me support this statement by reference to the estimate put out by the Government in the Economic Survey, 1947, in which their conclusion was that in that year we could not afford to borrow more than £350 million. Yet, the recent White Paper put out by the Government—that is the one about the balance of payments—shows that our reserves have run down during the same year, when we were talking about only £350 million, by no less than £1,023 million, £872 million of which was borrowed either from the Monetary Fund, or from the Canadian or United States Loan. What are we to think of a financial management which leads to such a result? I will not weary the House by disinterring many of the flights of roseate oratory of which the former Chancellor of the Exchequer was guilty. The evil that men do lives after them The oratory had much better be buried in HANSARD, whether it is good, bad or indifferent. Nor has the present Chancellor of the Exchequer always been quite so realistic as he is today. I remember something he said in a broadcast at the time of the General Election: Do not let us stand for the 'cannot-afford-it' attitude, or 'we cannot do it'. We all live and learn, and I am not criticising in any way the very candid and open way in which the present Chancellor of the Exchequer has dealt lately with our economic difficulties. All the standard features of inflation are now obvious to most people, and even to the Government. For nearly two years we on these benches have been pointing out that the honeymoon enjoyed by the former Chancellor of the Exchequer could only lead to acute crisis, if not to complete disaster. All the measures which were then taken in his reign, the rigging of the gilt-edged market, the bogus cheap money policy—and as I am going through this list, it will perhaps be interesting to hon. Members to consider how many of these policies have now been completely reversed by the present holder of the office of Chancellor of the Exchequer—the profligate Government expenditure—if the House wants proof of that, look at the relationship between the present Naval Estimates and the striking force of His Majesty's Navy—capital expenditure, both public and private, unco-ordinated, unbalanced and unplanned—another thing which the present Chancellor of the Exchequer has partly reversed—attempts to stabilise the cost of living without asking for any corresponding stabilisation of wages or salaries; all these have led to what we now see—a mounting spiral of wages and costs, falling purchasing power of the £ abroad and at home, and, of course, increased profits.

All these things are unhealthy, but increased profits are as surely a feature of inflation as the pressure for increased wages. I need not discuss why this is, but once the tide of inflation starts to rise in the harbour, all the vessels which float on it begin to rise together. If businesses did not keep, roughly speaking, the same percentage of profit on the increased prices, they would not be able to replace materials, finance such things as their welfare and amenities, research and development, and keep in a state of solvency.

From that I want to go straight into the main subject which we are discussing, the stabilisation of wages. I see in this part of the policy an extremely difficult and obdurate problem for both employers and trade union officials, and it will be much more difficult and obdurate for trade union officials than for employers. I have had a long experience of dealing with trade union officials and I must say that my experience has always been a happy one, but these officials owe their appointment mainly to the fact that they are elected in order to secure better wages and working conditions for those whom they represent, and we must not discount that. On the employers' side, we recognise that they will try to increase wages gradually, and the employer must try to keep down his costs against rising wages by improved technique and the increased tooling and mechanisation of his industry.

This is the way modern industry has been going and I see nothing very evil in it, but at this moment, for reasons which really have nothing to do either with the employers or with the trade unions or organised labour, we are asked to arrest the whole process, which has been a continuing one, and, in spite of the inflation, to ensure that there shall be no rises in wages except in particular cases. There has been some suggestion—I am not sure if the hon. Member for Aston mentioned it—that the Opposition wish to see the sacrifices involved by a stabilisation of wages imposed solely on the labour side of industry. That is entirely incorrect, and, with some knowledge, I say straight out that if the Chancellor chooses to pursue the same policy with regard to dividends—I shall say something about prices later on—that he is applying to wages, that is, making a voluntary appeal that they shall not be increased during the stillstand on wages, he will meet with a response which will surprise him and will be much more comprehensive and much more easily worked than anything he would get by trying compulsive measures.

I somewhat resent a remark made I think by the hon. Member for Wednesbury (Mr. S. N. Evans), with whom I am very seldom in dispute, except on main questions, and the hon. Member for Aston. They suggested that any still-stand in dividends would only be brought about under the threat that the Chancellor of the Exchequer would undertake the compulsory stabilisation of dividends in the Budget. If I may say so with some humility, that is not at all the spirit in which to treat your fellow countrymen. They come out very much better when they are asked to do something in aid of national policy, and respond much more readily than they do to these veiled threats, which most of us know are fairly empty, because the difficulties of stabilising dividends are almost insuperable. I say, however, that we on this side will support any appeal that, while there is a stillstand in wages, there should be a stillstand in dividends.

Before I leave this matter, I want to get it a little more into perspective. Paragraph 3 of the White Paper confesses that very drastic measures have been taken to curtail the amount of distributed profits, and the Chancellor was particularly fair on this matter this afternoon. However, I want to develop it. First, the distributed equity of the profits of industry has risen since 1938 to an index number of between 150 and 160. I ask the House to accept that figure with some reserve because it is not infallible, although I do not think it is far out. On the other hand, wages had risen to 168 in 1947, and earnings by wage earners to something over 200. So, on the face of it, it would appear that a greater curb has been put upon profits and dividends than has been put upon wages. That is because these profits are first of all subject to the Profits Tax, and for every 26s. 8d. which a company distributes, 6s. 8d. has first to be deducted for the Profits Tax and then 9s. for Income Tax, so that out of every 26s. 8d. distributed, the shareholder gets 11s. and the Revenue 15s. 8d., in one form or another, and that is on the assumption that the shareholder pays only the minimum rate of tax.

There are still some signs that hon. Members opposite think that you can finance increases of wages out of profits or out of "soaking the rich." If there are such I would remind them that there are now 45 people in England who have £6,000 a year to spend, and I calculate that this £6,000 is equivalent to less than £3,000 in 1938, and less than £2,000 in 1913. So if these people are rich in finance, at least they are not numerous. For those who are mathematically inclined—and I understand the Home Secretary is not, from a reply he made—they represent about one-millionth part of the population, or .00001 of one per cent. So, clearly, the scope for soaking the rich is strictly limited.

The extermination of nearly all the advantages of what I used to think were rather admirable things—success and saving—is now almost complete. I suppose one of the reasons is that the Government's record is one of failing and spending, so obviously success and saving are fair game. Before I leave this point, let me make it quite clear that if the Chancellor of the Exchequer appeals for stillstanding dividends, I believe that the response will be wide and comprehensive and we on this side of the House will do our best to support it.

I must say a word about prices. I did not know what the Chancellor was going to say about that matter, but I think that the Act under which these prices are still controlled was originally introduced by me, when I was President of the Board of Trade. No doubt further trimmings have been put upon it. I think it is true to say, pictorially, that price control can only be, so to speak, the iron railings put on top of the wall which we have already erected. During the war we took away purchasing power from the population by penal taxation, which could not continue to be applied in peacetime. We had then a very much greater incentive to saving than there is in peacetime, and our savings drive was on an immense scale, supported by all the patriotism of the country in its need to survive. On top of that there was rationing, most of which we still have, and, then, rather creakily, price control worked.

I beg the Chancellor of the Exchequer not to imagine that price control and price ceilings extended further are going to succeed. I very much wish they could, but in fact they cannot succeed. Many countries have tried them, but they have all failed. The price limits are always swept away by the great difficulties of the descriptions of the qualities of the goods. With the great inflation mounting all the time, one cannot imagine that by any exhortation one can control prices outside this limited field.

Again, there are many ingredients which make up a price and which are entirely outside our control. What happens to the imported raw materials? With the falling value of the £ internationally, the Chancellor of the Exchequer cannot stabilise it unless he is going to subsidise imported raw materials? What is going to happen to the ingredients of production in this country, coming from nationalised industry? I hope the Prime Minister will answer that, as part of the desire and policy to reduce prices, he is prepared to say "We shall reduce the price of coal, we shall reduce the price of gas, we shall reduce the price of transport, and we shall reduce the price of electricity.' Here is a fair touchstone of how sincere the Government are when they talk about the policy of reducing prices. Unless these things are at least stabilised, and probably reduced, what a farce it is to ask wage earners or employers in their branches of industry to impose a stillstand on wages and reduce prices when the Government's own prices of products are rising. However much we are prepared to stand behind the policy of the stabilisation of dividends as part of the stillstand upon wages, I must say—although I do not like saying it at all—that to think that by a ceiling of prices success can be achieved in reducing inflation is a delusion from which many other countries have suffered.

In other respects than those on which I have touched, the White Paper has the wrong title. I would have startled the Stationery Office by calling the document, "The Lost Illusion" because, for the first time, under the impact of really dreadful events, some very true but very unpalatable and plain facts have had to be set down. Generally speaking, they explode once and for all—and I should say it was about time, too—the theory that a planned economy, or to put it more bluntly, Socialist economics, can work in a free society. The first dilemma in Socialist doctrine on these matters—I have often posed it before—is how production is to be planned on a Government scheme, or, as we now call it, planned in accordance with a pattern of Govern- ment priorities, without at the same time planning the lives of all those without whose hands and brains the raw materials become merely inert and dead. Without planning the lives of people what is the good of talking about planned production? It is a farce.

I think that when the honeymoon began to run out, the policy of the Government began to change, something like this: "We, the Government, control the raw materials, we control the licences and many ingredients of production. We will now take these raw materials and these licences away from the industries which we think are less essential. That will cause artificial unemployment in these less essential industries. Having done that, how are we to get this labour which is thrown up by the policy of the strangulation of supplies into the industries which we want to build up? Some of the labour is unsuitable in character, other labour is immobile owing to the shortages of houses. We will do it by direction."

Here is the dilemma. Direction of labour and conscription of labour are poison to the whole of the principles upon which a free society should be conducted. Where are the Government driven to, and what is the defence we now hear from the Minister of Labour about direction of labour? It is very curious and very funny. His defence of his policy is that he is not carrying it out. Any hon. Member who wishes to turn up his remarks, can see what the Minister said in reply to a Question as recently as 3rd February. This is a great difficulty, and I wish to ask the Prime Minister a question. It is not of a rhetorical nature. Does this document mean that we have now abandoned, as I always knew we should have to, the direction of labour, and are we now to adopt the alternative regarding which the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) and I share the same view? There is not much we share together, but we share the view that the only other method is by a selective wages policy, the policy of offering higher wages in those industries which are particularly arduous and particularly dirty.

May I add one thing in parenthesis? Wage inducements are not the only way to attract labour to arduous and dirty industries. Here is a field for the employer and capitalism to make great efforts to try to improve the conditions of these dirty industries.

Mr. Edward Porter (Warrington)

Why have they not done it previously?

Mr. Lyttelton

I have pursued this particular policy for a long time, and I shall be glad to show the hon. Gentleman the results if he can spare me an afternoon. I only put that point in parenthesis. Great efforts should be put forth in that field.

We all know the difficulties which attend a selective wages policy in the present state of our country, and the paragraph which deals with it is pretty courageous on the subject. It is another nail in the coffin of the idea of a planned economy. What greater confession that we have to return to much freer conditions could there be than that the Government believe, as I do, in the collective bargaining system being left alone, although I must say that the statement about collective bargaining is drafted in a form very different from what it would have been if I had drafted it. I believe that collective bargaining leads to great benefits in individual industries, that it leads to the building up of confidence between employer and employed. But it has very often led to wage agreements in a prosperous industry which have proved disastrous when they have been followed in others which could not at that time afford them. The paragraph says the opposite.

What policy could be further away from planned economy than leaving wages and working conditions—the main ingredients in the process of production—to the individual industries for them to negotiate as best they can? If the House wants any further proof of the nails which this White Paper is drumming into the coffin of planned economy, let them look at the sensible statement which says that the Government do not believe in interfering with individual incomes of anybody in the country except by taxation—a sound Tory doctrine.

Mr. Collins (Taunton)

Unplanned.

Mr. Lyttelton

It is the Government's policy and hon. Gentlemen opposite can have it either way—unsound and Labour or sound and Tory, but they cannot have it both ways. It is absolutely the opposite idea to, planned economy. We all recognise that we are now attending, I hope in decent circumstances, the obsequies of nearly all the policies that the Government have embraced during the last two and a half years.

In conclusion, I have no doubt the contents of this document will be highly disagreeable and in some cases very unfair to those to whom it is directed. I say unfair because it is hardly their fault that we are living in these conditions of gross inflation. It is mainly the Government's fault—not entirety but mainly. The document devotes itself chiefly to the symptoms and is notably silent on the cures or causes. All along it says, "You are to keep your temperature at 98.4. It does not matter whether I give you exciting febrile draughts or soothing powders. You must keep your temperature at 98.4 no matter what I do."

Before the right hon. and learned Gentleman's speech in Edinburgh last Saturday on the issue of the White Paper, I felt that the policy outlined here would prove ineffective, because I do not believe that, as yet, the people of this country have any idea either of the severity or the imminence of the economic blizzard which is about to strike. I assure the Prime Minister I am not trying to make any cheap debating point, but I am saying what I believe from my own experience. The Government have been in the great difficulty of how to proclaim the success and blessing of Socialism and at the same time tell the country that we are "bust"—a very difficult propaganda job to do. It is undeniable that the optimism amongst the public is increased by the greater number of paper pounds in circulation than there were before the war. I regret very much that I have not been able to ge hold of these, but there are more in circulation.

The main reason the public is so bewildered about our economic situation is that the Government have spoken with two voices. One day we hear the warm, soothing tones of the Lord President of the Council about being round "Recovery Corner," and another day the right hon. Member for Bishop Auckland uses different words. I thought the Chancellor of the Exchequer took a rather big overdraft on his imagination when he said that my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) misrepresented the Gov- ernment, because the Government's policy was based on grim facts and cheerful determination to face them. Let us see how that works out. The right hon. Member for Bishop Auckland on 29th November, 1947—I am sorry he is not in his place—said this: I believe that we are standing on the watershed of the postwar world and that we are going downhill— that is rather ambiguous— after climbing up to the top of the ridge. I believe we will find it an easier trek going downhill into better times and easier conditions in the future. If that is "grim facts and a cheerful determination to face them," I say that the English language is not what I thought it was. Every time the halcyon boys and their followers have brought the Gulf Stream nearer to our shores, then, of late, the Chancellor of the Exchequer has replied with a series of icy cold douches. Is it surprising that many members of the public with a little more to spend in their pockets—although it will buy very little—are only too anxious to find causes for hope, and that they have remained in a state between complacency and bewilderment which, in my opinion, is one of the dangerous features of the state of the nation today?

I beg the Prime Minister, who, in the document which he has presented to the House, has dispelled so many of the illusions which have been the diet of his party for so many years, to complete the good work and dispel the illusion that "Recovery Corner" will ever be in sight in this country unless we take a pull at ourselves, unless we pay due regard to the extent of our present resources, unless we unite in raising our production and lowering our costs, and unless, at long last, we can begin to do things in the right way instead of continuing to do them in the wrong way.

9.31 p.m.

The Prime Minister (Mr. Attlee)

We have had a very interesting Debate. In the speeches from the other side of the House there has been a mixture, varying with the individual, of merely cheap party points with an attempt to deal with what we all recognise is a serious situation. I think the proportion of seriousness was perhaps best in the speech of the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden). It was not very high in the case of the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton). It was not very high—and this is rather unusual—in the case of the hon. Member for Bury (Mr. W. Fletcher), and the least amount of rather detached judgment of the problem came from the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter). But I am bound to say that the right hon. Member for Aldershot almost excelled himself towards the end. He did his best to make up for a certain number of lapses in the middle. He tried to say that this White Paper was the end of all planning. I was very surprised to hear that. I do not know whether he suggested seriously that in face of the difficulties we should go back to a completely unplanned economy.

Mr. Eden

He did not say that.

The Prime Minister

Therefore, he wants some form of planning and some form of control. That puts him well ahead of the hon. Member for Kingston-upon-Thames. As far as I could gather, he thought that all controls should go. That was the moral, if there was a moral, to his speech. I noted at the time that dependence on the complete taking away of controls had been tried in other countries. As a matter of fact, in the great United States of America, they are trying hard to get back to the controls that they so rashly threw aside owing to their ideological prejudices in favour of the old-time individualism that still reigns in the less enlightened parts of the Conservative Party.

The right hon. Member for Aldershot began by doing what is always a very pleasant thing. He jumped backwards, referred to the time two years ago and what has happened since, and said, "I told you so." Well, they did not tell us so. The suggestions from hon. Members opposite were not that they were saying, "For goodness' sake, do not spend anything"; on the contrary, they urged us to spend on capital goods and expenditure of every kind, and they still do it. We have only to look at the questions they are asking every day about the Armed Forces. They talk about the Navy, but they know quite well that the biggest cost in the Armed Forces is the better pay. I understand that they do not propose to cut that. I do not think the right hon. Gentleman opposed it, because it is absolutely right.

I therefore come down to the curious point which the right hon. Gentleman made when he suggested that, somehow or other, in regard to the nationalised industries, the Government must set an example at once by lowering prices. I remember very well the discussions that took place when I was a colleague of the right hon. Gentleman. For instance, one of the points made about the railways was that fares had not been raised and the increase in fares had not kept in step with other expenses, and, therefore, there was a case in which we could not at once turn back and reduce the fares to what they were before the war, because they had not kept pace with other increases. Let us take the miners' pay. Do they now propose to pay the miners the wages that drove men out of the pits? It is quite impossible to try to organise our industries on these extraordinarily crude lines.

The right hon. Gentleman said he was afraid that people had a certain complacency now, and that now and then they got a scare and he complained of different views expressed by Ministers. It is very hard on Ministers if they say things about the situation and are then to be told that they are preaching gloom. I will quote one more instance. The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) made the statement, which has been so often quoted, about the song in his heart. To be fair, if we look at the context, we find that what he actually said was that, having been a Member for one of these depressed areas, the people of which suffered to terribly under the Governments before the war, when he was putting in new industries into these areas, he did it and paid for it with a song in his heart. Anyone else who had had the iron enter into his soul from representing a place like Bishop Auckland would have felt that revulsion, and yet he was criticised for having that song in his heart.

It is the custom now, when the Government make a statement, to say, "Why did you not do it before?" I will give an example. The hon. Member for Solihull (Mr. M. Lindsay) said that at last the Government had awakened to the need for increased production. We have been talking about it so often that we have been told. "Do not say any more; you have said that so often." I do not know where the hon. Member has been, but that has been drummed in in speech after speech and action after action for months, and yet it is now the custom to come along and say, "Why did you not do it before?"

Mr. M. Lindsay

If the right hon. Gentleman's case now is that the Government are doing everything to increase production, surely, now we have the five-day week, it has met with very little success.

The Prime Minister

I think the hon. Gentleman said we had just wakened up to the need for increased production.

Mr. Lindsay

Why, then, have the five-day week?

The Prime Minister

That is another matter. The hon. Member may have a seven-day week and still need more production, but the point I was making was that he accused us of never being aware of it and never having mentioned it. If he would do us the honour to read our speeches he would find that we have mentioned it almost ad nauseam.

A curious point was made by the right hon. Member for Aldershot. He seemed to suggest that, because we said we believed in wages being dealt with by collective bargaining, we were somehow departing from our planning principles. But we have always upheld that in this House, again and again. Who are the people who have asked for something different? Hon. Members opposite have said, again and again, "Why not produce a wage policy, why not have a wage structure and fix wages?" We believe in the principle of collective bargaining because we believe in the responsibility of both sides acting in these matters. But that does not mean that there should be no attempt to influence the people of this country in their attitude on the wage question. That is exactly what we have done in this White Paper.

We have brought out the facts very clearly, and an appeal has been made to both sides of industry. We have said to the one side, "When you are considering wage claims, just consider what is the position of the country, and consider the dangers of inflation, the money position, and the goods position." We have also said exactly the same thing when dealing with the question of profits and dividends. Therefore, I do not know why the right hon. Gentleman should complain. It is very hard to please hon. Members opposite. We say that we believe in collective bargaining; they say, "You are departing from your principles." At other times, they say, "You are trying to enforce a totalitarian State." What do they want? The truth is that they have no alternative policy at all, but any kick is good enough to aim at the Government. I did not want to deal at length with these party points, but, since they were made, I think they should be replied to.

I should also like to deal with one or two other points made in this interesting Debate, and to deal with one which came from my own side—that raised by my hon. Friend the Member for Aston (Mr. Wyatt). He gave some figures dealing, roughly, with the proportion of national wealth that went to the wage earners and the proportion that went to those who lived on rent, interest and profits. His figures tended to show that less had gone to the wage earners than to the others. I do not think that is correct, because I do not think he was having regard to the incidence of taxation. The figures on retained incomes show that there has been an advance in the proportion that goes to the wage earners. I am very glad it is so; it is a thoroughly healthy thing, and I am not prepared to belittle the achievements of this or the past Government in bringing about a better distribution of wealth in this country.

I should like to correct one or two misconceptions. There is one which cropped up at intervals, although I do not think it arose out of the Debate; I think it must have sprung up outside and been imported into here. It was the suggestion that it was the Government's policy to deal only with wages and not with dividends and profits. It is as clear as can be in the White Paper, and from the speech of my right hon. and learned Friend the Chancellor of the Exchequer—and, I may say, also from a broadcast I made the other evening—that, in this matter, the Government are not dealing with one side, but with both sides—that the efforts we need must come from the whole community. We are trying to enlist all sections of the community, and to urge both the wage earners and the makers of profits to realise what is the position. Again, we have not tried to make this something inflexible; there must be flexibility. We never said that all wages must immediately be standardised; that cannot be done, it is far too complicated. We rejected any attempt at fixing wages by executive action.

Equally, there cannot be some flat way of dealing with a reduction of dividends. We all know how extremely irritating it is, not only for the wage earners but for everyone, to see declarations of very high dividends. I know there are many industrialists who think it is a very injurious thing today and who deplore the declaration of very high profits. The Chancellor of the Exchequer said that what we must work for is a reduction in prices, but I have heard a suggestion that we could somehow have a percentage limit put on. As a matter of fact, that is not possible because, as we all know, owing to the different methods of capitalisation of businesses, some dividends which appear quite low may really represent excessive profits, while others which are higher are really much more reasonable. Therefore, we cannot deal with this thing by trying to apply some flat percentage rate.

It has been suggested in this Debate by one hon. Member that these increased profits were simply the inevitable result of an inflationary situation. I do not think that is so. I believe there could be a reduction in prices in many instances. The difficulty of Governmental action is that, as was pointed out by the Chancellor of the Exchequer, so many times we are faced with the question of the marginal business, just as in agriculture we have the marginal farmer. That is one of the difficulties of endeavouring to fix prices. I do not think we could get away from price control today over a large range. It cannot be applied to every article, but over a large range undoubtedly this price control is benefiting consumers. As an instance of that, if we fix the price at a medium level—not at the lowest—there are bound to be some people who will make excessive profits. We found that over and over again when fixing agricultural prices. Prices were fixed so that the marginal farmer could live, and the very efficient and prosperous farmer made enormous profits. There is the same difficulty in distribution. If the margin of distribution costs is fixed for the small shopkeeper, it means that large profits are put into the multiple shop or the big undertaking. We have to trust very largely to getting that back by taxation.

One or two points were put to me specifically by the hon. Member for Kingston-upon-Thames. He said that when we were dealing in paragraph 4 of the White Paper with the hardship of inflation as affecting the wage earners, we omitted to mention the pensioner. If he turns a little further and looks across the page at paragraph 7 (c), he will find the pensioner's case is fully dealt with. He made another remark on paragraph 7 (b), which he thought was directed against there being any differential wages for higher skill. I gather he thought this was an attempt to bring everybody down to the same level. It is not so. What it was directed against was that where we have a shortage of labour there is a danger of breakaways by employers going outside the collective agreement to tempt away the workers of one firm to another. This was a matter which came up quite a number of times in the war. We had to look after that. It is, as a matter of fact, the danger that one can start the ball rolling in that way. However, there was no attempt here to say that in any case extra skill cannot earn extra money. We are not interfering with things as they are, but guarding against that particular danger.

I should like to deal with one point that has been made in this Debate, though I do not think it was stressed very greatly; and that is the importance of efficiency in industry. There was an interesting letter in "The Times" today from a former Member of this House, Sir George Schuster, in connection with this. We are endeavouring to promote efficiency in industry. Special investigations have been made in practically every industry. In the last year this House gave its agreement to the Industrial Organisation Act. Discussions are going on with several industries about the establishment of development councils. We hope that a number of these will be set up in the next few weeks, and that they will play a great part in bringing the industries concerned up to a high level of efficiency.

I would say a word on that, because it has been suggested that there is a very large range of industry in which we cannot get increased output or increased service. Of course, there is a difference between the performance of service and the production of goods; but there is a great deal that can be done be re-organisation so that, without giving more labour to individual concerns, we do get better service—with, perhaps, a smaller labour force. Therefore, the better organisation of industry does not apply to production, but it applies to distribution, and to transport, and to everything else.

I have dealt with a number of the points that have been raised. The hon. Member for Bury raised a number which I thought would come in very well in a Budget Debate, and which would come in particularly well if my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) were able to answer some of them. The hon. Member talked a good deal about peanuts. He suggested that our schemes in Africa were only "peanuts." Then he talked of that terrible thing, the change in respect of the Liverpool Cotton Exchange. In relation to all these events, the change respecting the Liverpool Cotton Exchange—to use his phrase, not mine—is rather "a peanut." It is not one of the major changes in our invisible exports. The halving of our mercantile marine is far more important than that, and that is due to the war. Therefore, I do not think the hon. Gentleman quite had his sense of proportion there. Perhaps he feels more acutely about it, coming as he does from Lancashire. However, I understand that the organisation of our cotton buying is quite satisfactory—so much so that some countries think we shall gain special advantage through it. Anyway, that is not a major point.

In this Debate we have had a number of extremely interesting speeches and some interesting points made. I was very interested in the speeches of my hon. Friend the Member for Cannock (Miss Lee), and of my hon. Friend the Member for Houghton-le-Spring (Mr. Blyton), and of my hon. Friend the Member for Wednesbury (Mr. S. N. Evans). The Debate is worth reading. In a subject of this wide extent it was, perhaps, inevitable that there was not one theme running through it, although the theme at the back of all our minds is that we are in a difficult situation. Even the right hon. Member for Aldershot recognised that he could not put this all down to the fault of the Government. We are dealing with very difficult times, and times that will try all of us.

The appeal of this Government is that we should get people working together on both sides of industry, and people of every kind to help in this very difficult time. I believe that we shall get the response of the country; and I hope that people will not go about with long faces saying that there is no hope for this country. I was glad of the speech of my hon. Friend the Member for Wednesbury, who pointed out that this country has great assets, great advantages and a great future. Nobody does any good by going around this country, still more abroad, crying stinking fish, because I am certain that we shall come through our difficulties.

9.56 p.m.

Mr. Frank McLeavy (Bradford, East)

I am sure everybody will be pleased with the speech of the Prime Minister. It is perfectly clear from the attitude of the Opposition that their main concern is not necessarily to get over the existing crisis, but to try to make political capital out of the difficulties confronting the nation. Although we of the trade union movement are not very pleased with the situation in which we find ourselves, we are satisfied that the Government are endeavouring to tackle this problem on the only effective lines for finding a solution. Clearly, if the workers are made aware of the circumstances confronting the nation they will respond to the appeal made by the Prime Minister and other speakers.

Our present position is by no means due to the policy being pursued by this Labour Government. It is due entirely to our great sacrifices in two world wars, to the fact that on the altar of sacrifice we placed our manhood and our wealth in order that this nation and, we hoped, the world would be freed from Nazism, and in order that the European nations which had been overrun by the dark forces of dictatorship should be saved. It was those sacrifices which led to our present financial position. Hon. Members opposite know perfectly well that if the Government fail to solve this serious economic position confronting the State they will go down with the rest of the country. The Labour Members and the trade union movement have every confidence in the desire, the honesty of purpose, and the integrity of our Government. This is the people's Government, and we are determined that whatever sacrifices the nation is called upon to make, the Labour Party and the trade union movement will rally to the side of the Government.

Eventually, in spite of everything, we shall overcome our difficulties, and will be in the position, not only of considering the stabilisation of wages, but of thinking in terms of further improving our social legislation. We on this side of the House are entitled to be proud of the social achievements, of the social schemes of reform which this Government have introduced—

It being Ten o'Clock, the Debate stood adjourned.

Resolved: That this House will tomorrow resolve itself into the Committee of Supply."—[Mr. R. J. Taylor.]