CLAUSE 2.—(THE SPECIAL ACCOUNT.) (Hansard, 8 February 1949)

§ Mr. David Eccles (Chippenham)
This Clause deals with the Special Account, and I think it would be convenient if I 204 divided my questions about it into two sections, first, as to what money is paid in, and, secondly, how that money is paid out. The money paid into this Special Account is the sterling equivalent of 981 million dollars unconditional grant which we received from the United States plus the sterling equivalent of 30 million dollars which we receive in drawing rights in Belgium. Therefore we may anticipate that this account may be nourished with the equivalent of something like £250 million.
The details of exactly what payments rank for sterling equivalents are to be found in Article 4 of the Economic Co-operation Agreement, Cmd. 7469. Section 2 begins: The Government of the United Kingdom will establish a special account in the Bank of England. It then goes on to describe what shall be paid into that account. From paragraph (b) it appears that not only the equivalent of the dollar cost of the Marshall goods is to be paid into this account but also any cost of processing, storing, transporting, repairing or other services incident thereto. Therefore, if we have to pay dollar freight for any of these goods coming across the Atlantic, the equivalent of that freight must be paid into this Special Account. Can the Economic Secretary say what is the position of the shipping arrangements in regard to Marshall Aid? Is it still the case that 50 per cent. of these goods must be brought over in American bottoms, because it is clear that it would be cheaper and more in keeping with the general principles of the Havana Agreement if these goods were shipped in British or other ships which could quote lower freight rates? This is a very important question for everyone. If we want the co-operation of the Norwegians, who are now under pressure from the East, and are looking, I hope, towards the West, it is important that these Marshall Aid goods should come across the Atlantic in the ships which can carry them most cheaply. If that were done, it would, of course, reduce the amount paid into the Special Account in respect of dollar freight. That is my first question on, the paying-in side.
My second question relates to the equivalent of the Belgian drawings. We see from the published figures that His 205 Majesty's Government have been very quick to use up all their drawing rights from Belgium. This Special Account at the moment, I understand, has the equivalent of nine months of the total of the Belgian drawings which we are allowed to use at once. Could we hear what is the proposal about trade with Belgium now that the Special Account is credited with the equivalent of the drawings? Are any negotiations on foot to enable trade to continue?
I turn to Subsection (2), which covers the 5 per cent. which the United States Government have the right to use as they wish—5 per cent. of all the monies paid into this Special Account. That will come to something like £12 million in the course of the first year of Marshall Aid. The purposes for which that may be used are mentioned in paragraph 4 of Article IV of the main Agreement, but we have been told that this money can be used for the purpose of buying strategic raw materials and for stockpiling. Could the Economic Secretary tell us something about the stockpiling programme? How is it getting on?
Thirdly, Subsection (3) deals with the disposal out of the Special Account of the 95 per cent. of the monies paid, subject to the agreement of both Governments. If one looks at paragraph 6, Article 4, of the main Agreement, one finds that there are set out three purposes for which this money can be used. First of all, to stimulate productive activity in the United Kingdom. That would mean the investment of American money, the investment with the consent of the Americans of this £250 million or part of it in productive activity in the United Kingdom. The second purpose is the development of raw materials and the production of raw materials outside the United Kingdom. The third purpose is the retirement of public debt. I understand that the Chancellor is availing himself only of the third method of disposal, that is the effective retirement of public debt.
I think we on this side of the House will agree that that is the best way to use this money, but I must ask how the Chancellor proposes to assure the United States Government that public debt has been effectively retired when payments are made out of this Special Account. If the Treasury were to buy a block of Government securities with money out of this account and then those securities 206 were sold by one of the Government Departments, that would not be effective retirement of the public debt. I want to know what is the method by which we satisfy the Americans that we are carrying out that provision.

§ Mr. Jay
The hon. Member for Chippenham (Mr. Eccles) asked first about the provision that 50 per cent. of the goods furnished to Europe under E.R.P. have to be carried in United States ships. It is perfectly true that that was the original arrangement laid down by the American authorities. It has been enforced hitherto and it is in force at the moment; but as a matter of fact discussions are now taking place in Washington to see how far that should continue in the future. That discussion is in connection, of course, with the Bill which is about to be placed before the American Congress for the next year's appropriation. The hon. Member for Chippenham rightly said that from the European point of view the more goods which can be carried in European ships, whether British or Norwegian or others, the better for all of us.
Secondly, the hon. Member inquired about our transactions with Belgium under the Intra-European Payments Agreement and asked me how we proposed to act in the immediate future. It is quite true, as he said, that we have drawn a large proportion of the sums on which we had drawing rights under the original agreement with Belgium. Up to 26th January we had received from Belgium and put into the Special Account a sum of 22,500,000 dollars, which is a little less than the total sum available. It is perfectly true that we shall not have enough Belgian francs under that scheme to cover the deficit we have running at present with Belgium; this was made clear in the announcement made when we completed a short-term trade agreement with Belgium a week or two ago. We shall have to negotiate this matter when we come to decide the drawing rights to be made available under the scheme for the next annual period. We in the United Kingdom will have to attempt to see that we have drawing rights sufficient to cover our deficit with Belgium, but this is a matter which cannot be settled until then.
The hon. Member also asked about the stock-piling programme which the United States is entitled to finance out of the 207 5 per cent. of the monies in the Special Account. I cannot give him any great detail on that, but the United States authorities are anxious to make full use of that provision, and purchases are being made and no doubt will be made.
Finally, I was asked about the use of the 95 per cent., that is to say the bulk of the sterling in the Special Account. It has been used up to date almost entirely for the redemption of debt. We have actually used the sum of £82 million for the redemption of debt out of the sterling in the Special Account. The normal procedure, of course, would be to use that for retirement of short-term debt, for the redemption of Treasury Bills or Treasury Deposit Receipts. There is no difficulty in giving full details of that to the American E.C.A. authorities in London and satisfying them that it has been used for that purpose. We have not yet spent any of this money on any other purpose than debt redemption, although there are under discussion at the moment one or two possible projects, including one Colonial Development project, for which this method of finance might be suitable. I think I have dealt with all the hon. Member's questions.

§ Mr. R. A. Butler
We are anxious to be assured that all the terms of this Economic Co-operation Agreement are covered by this Bill and that is one of the objects of examining the Bill in detail. Will it be true to say, for example, that paragraph 7 of Article 4 of the Agreement itself, which deals with any unencumbered balance in the future, is covered by the final Subsection of Clause 2 which says: If the Government of the United States of America consents that the Government of the United Kingdom should draw upon the Special Account for any purpose, the Special Account may be drawn upon accordingly. This deals with the possibility that there may be an unencumbered balance on 30th June, 1952. That, of course, deals with a future contingency, and we very much hope there may be such a balance, but I do not know whether the terms of the Bill as drafted make provision for that sort of eventuality.
The only other point I have to raise in dealing with what I may say were very fair answers to my hon. Friend the Member for Chippenham is whether the Economic Secretary could describe in any 208 detail the Colonial project or any other project which would be included under paragraphs (a) and (b) on page 6 of the Agreement, whether it were expenditures for production of materials or expenditures on projects and programmes. I should be much obliged for further details on that point.

§ Mr. Jay
In answer to the right hon. Gentleman's first question about Clause 2 (3); as I understand it, that Clause would give the necessary authority for the disposal of any final unencumbered balances. It gives authority for the Government of the United Kingdom to make use of amounts in the Account in any way which is agreed with the Government of the United States; and that, I think, would cover that future eventuality. I am afraid I cannot give much detail of Colonial projects in the future on which this money may be spent; but one of the types of expenditure we have considered and are considering is, for instance, the sending of technical experts, and medical experts, and so on, to the Colonies in connection with development projects. It is possible that some money may be spent in the near future for that purpose. The right hon. Gentleman will remember that there has been an offer of technical assistance from the United States, which we are considering at the moment.

§ Mr. Oliver Stanley (Bristol, West)
Would the hon. Gentleman answer one question about the 5 per cent. for stock piling? Do the British Government act as agents for the United States Government in acquiring the necessary stock, or do the American Government simply buy what they like, where they like, within the sterling area, and simply draw on the 5 per cent. available to them?

§ Mr. Jay
The normal procedure is, I think, that sterling is made available to the American authorities, and they purchase the goods they need; but they do it by agreement with the United Kingdom Government, and in such a way as to cause the least disturbance to trade and our own need for materials. It would not be true to say we acted as their agents in normal cases.