HC Deb 08 February 1949 vol 461 cc232-41
Mr. Jay

I beg to move, in page 3, line 29, to leave out from "agreement," to the end of line 30, and to insert: made between all the parties to that Agreement or by any subsequent agreement approved by the Council of the Organisation for European Economic Co-operation the parties to which include the Government of the United Kingdom. This Amendment arises from the decision which my right hon. and learned Friend announced in the Second Reading Debate to extend drawing rights of 8 million dollars to Turkey. As the Committee will remember, Turkey was not included in the original list of countries which enjoyed drawing rights against the United Kingdom, and the decision to confer drawing rights on Turkey arises from bilateral negotiations which we have had with Turkey since. An agreement has now been reached between the United Kingdom Government and the Turkish Government, and that will, of course, be subject to approval by O.E.E.C.

I am advised that the Bill as originally drafted would not have authorised us to make payments to Turkey under the agreement. The reason for that is that Clause 3 (2) limits payments to those made under the Intra-European Payments Agreement. There is a secondary provision in Clause 5 (1) for applying the Bill to the agreement: As for the time being amended by any subsequent agreement to which the Government of the United Kingdom is a party. That, however, would imply a full dress multilateral agreement between all the O.E.E.C. countries for amending the original Payments Agreement, and is not thought to be wide enough to cover a bilateral agreement approved by the resolution of the O.E.E.C. Council. The Amendment is, therefore, intended to make it clear that the provisions of the Bill will operate in the case of the bilateral agreement we have made with Turkey. Although this has arisen in the case of the Turkish agreement, it will cover any other such bilateral agreements we might make in future with other member countries.

5.15 p.m.

Mr. R. A. Butler

I said on behalf of the Opposition on Second Reading that we were supporting the arrangement with Turkey, and therefore we support the Amendment. I asked on that occasion whether the Chancellor could give us any further information about this matter, and if the hon. Gentleman can oblige us, we shall be very much in his debt. We really have heard very little about it—just an announcement by the Chancellor, and the hon. Gentleman has said very little this afternoon.

The next point is that the Amendment looks to be a wide one. It inserts after "agreement" the words: Made between all the parties to that agreement or by any subsequent agreement. We understand that the Amendment deals with the bilateral agreement with Turkey. Can the hon. Gentleman give us any further explanation of the significance of the words: Made between all the parties to that agreement. Does that only include the Turkish agreement or has the hon. Gentleman other agreements in mind? Can he give a little more information about the Turkish arrangement and any further explanation about the terms of the Amendment?

Mr. Jay

I cannot give the right hon. Gentleman any additional details about the Turkish agreement, but quite recently we have made, as I said, a general agreement with Turkey which also provides for drawing rights of 8 million dollars to be made available. When the original payments scheme was made last summer, the Turkish Government reserved its rights to continue the discussions as to whether drawing rights should be made available in its favour. We have held these discussions and have come to the conclusion, on the basis of the estimates of the prospective trade between the two countries and on general O.E.E.C. principles, that a case is made out for a grant of 8 million dollars. I will certainly see if we can give the House further details of the agreement as soon as possible in so far as it has not been published.

Mr. Butler

Will the hon. Gentleman publish a White Paper on the Agreement? Would that be the most convenient form?

Mr. Jay

I hesitate to say at the moment whether it would justify a White Paper, but I agree that a statement should be made in whatever is the most appropriate form.

As to the form of the Amendment, it assumes that any agreement which comes under it will have to be ratified by the Council of the O.E.E.C. The Turkish agreement is, of course, subject to ratification by the United Kingdom Government. With those safeguards, it does not go unduly wide. This is not really contrary to the spirit of the original agreement. The difficulty is merely that it had not then been contemplated that there would be further bilateral agreements between groups of O.E.E.C. countries extending drawing rights in that way. The Amendment does not really do more than enable us to act towards Turkey, as far as drawing rights are concerned, in the same way as we shall be acting towards other countries who had drawing rights under the original agreement.

Amendment agreed to.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. Eccles

The Chancellor of the Exchequer said on 27th January: As we expect the payments scheme to continue in one form or another next year."—[OFFICIAL REPORT, 27th January, 1949; Vol. 460, c. 1118.] This is the Clause which envisages the continuation of the Agreement. The Opposition want to see a better agreement next year. There are very many lessons to be learnt from the first year's working, and we want to be sure that the hit and miss method of drawing up the estimates of the import surpluses of the Marshall countries and then arriving at the drawing rights in that way will not be followed next year. Indeed, now that O.E.E.C. is getting down to the business of dovetailing the four-year plans into each other, next year's agreement with regard to the little Marshall Plan covering the provision of funds from the net creditors of the group to the net debtors will be of absolutely first-class importance. So I hope that the mind of the Government is open and that it is considering all possible ways of making a better system. On Second Reading I advanced the view that it would have helped if the Americans had made some off-shore purchases in Europe. In his reply the President of the Board of Trade assumed that I wished to put the whole of inter-European trade on dollar invoices. Of course I did not mean anything of the kind. We all know that that would make the dollar the currency of Europe, whereas we believe that sterling is the currency to which Europe is accustomed and which has still the major rôle to play.

However, I do not see any reason why there should not be some pool of dollars in the hands of the Bank of International Settlement, or whoever is the agent, which could be used in place of drawing rights to attract countries to expand their trade and to export essential goods in greater quantities than they would otherwise. I believe that the President of the Board of Trade holds the view that it would be hard to draw the line between essential and nonessential exports. I think that could be got over by making the dollars that came out of this pool perhaps equivalent to 50 per cent. of the additional exports.

The second point which my hon. Friends are anxious to press about next year's agreement is that the suppliers of raw materials from the sterling area should be associated in its making much more closely. The Economic Secretary himself pointed out that our visible trade with France is almost in balance, but that the trouble comes because the French wish to spend a large amount of sterling in Australia and New Zealand and other parts of the sterling area. On this side of the House we said we would like to have more French goods in order to provide them with that sterling rather than that it should be given to them by the British taxpayers. It seems to point to the advisability of bringing these suppliers of sterling area raw materials right into next year's little Marshall Plan, and I ask the Economic Secretary whether that is the intention of the Government?

Mr. Jay

The hon. Member for Chippenham (Mr. Eccles) asked me first whether he thought we should be able to make better estimates of the prospective deficits when we come to fix the figures for drawing rights next year. In view of the difficulties of this matter, I do not suppose that we shall ever get perfect estimates, but the experience of the past year ought to have carried us a long way. If we make use of that, we shall be carrying out the best practical arrangement which exists for getting an estimate on which to base these drawing rights.

Secondly he asked whether it might not be useful to establish a dollar pool which could be used by European countries for off-shore purchases within Europe. As I said earlier, we favoured an idea rather on those lines at a much earlier stage of the history of E.R.P.; but having got to the stage we have now reached, and the American authorities taking the view they do, we hold that it is best to discourage the use of gold and dollars in European settlements during the four years. We wish to encourage the use of sterling to the maximum extent, both within the O.E.E.C. group and in the Commonwealth itself. Having gone so far, that is now, we believe, the right policy during the remaining years of the programme.

The hon. Member pointed out that many of the O.E.E.C. countries are spending their sterling in the Commonwealth and outside Europe, and he asked whether the Commonwealth could not be brought into the scheme. Of course, we are entirely in favour of bringing them into the programme, in the sense of ensuring the greatest possible trade between Commonwealth countries outside Europe and the European members of the O.E.E.C. As I expect he realises, we have established the principle with the United States—and I think this is the main substance of his point—that it is the deficit of the whole sterling area with the dollar countries which is taken into account when the United States is deciding on the grants which will be made to the United Kingdom. That is economically right, although it may appear slightly anomalous that the grant should be made to the United Kingdom. The reason why the grant can only be made to the United Kingdom is because Australia and New Zealand, for instance, are not members of the O.E.E.C. That, in turn, is due to the fact that O.E.E.C. is a European organisation and the original invitation from General Marshall was to European countries to get together and form this organisation. It has grown up on that basis. That being so, we have had to seek the most satisfactory and helpful way of bringing the Commonwealth within the spirit rather than letter of the scheme.

Mr. Boothby

I thought the answer of the hon. Gentleman was interesting and, as far as it went, quite convincing, but surely O.E.E.C. is not a purely temporary organisation. It is likely to continue for many years to come, and in his discussions with the United States of America he ought to emphasise the point made by my hon. Friend the Member for Chippenham (Mr. Eccles). After all, it is not really European competition that the United States have to fear over the next decade, it is European collapse. If Europe was tied up much more closely with the Commonwealth in the economic field, the United States would have far better security and, ultimately, a far better field for investment.

I believe that the United States themselves are gradually coming round to this view. Their prejudice against the Commonwealth as a political unit has altogether disappeared, and I think their prejudice against it as an economic unit is rapidly disappearing. I do not want to say any more tonight than that the more His Majesty's Government can impress upon the United States the desirability in their own interests of strengthening, not merely Europe but the whole sterling area, the better, because it is lopsided without the providers of raw material. It must be so. They are strengthening Europe as a unit, which is primarily an industrial unit, and more than ever so since Eastern Europe is to a large extent cut off. Unless, therefore, in the next year or two they can include the raw material suppliers of that unit, they will not have a balanced or powerful economic unit and their money may easily go into the sand. On the other hand, if they gradually build up the sterling area as a whole, making it a balanced economy, including the Commonwealth, they themselves will have much greater security and the recovery of Europe will be infinitely hastened.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 6 and 7 ordered to stand part of the Bill.

Bill reported, with an Amendment; as amended considered.

Motion made, and Question proposed, "That the Bill be now read the Third time."

5.30 p.m.

Mr. R. A. Butler

We do not wish to detain the House on the Third Reading, but this is an important Bill and I think we have found it valuable to consider it thoroughly and to receive this afternoon some clear answers from the Economic Secretary to the Treasury. From our point of view the time has been well spent.

There appear to emerge from the Bill two major issues which have been ventilated in the course of our discussion and which are covered by the terms of the Measure. The first is that we on this side are particularly anxious to retain for Britain her traditional rôle as an entrepôt trader and great commercial and financial centre, not only for Europe but for the world. We should be very regretful if the rigidity of any Intra-European payments plan did away with our traditional rôle. From what we have heard from the Government in the course of our discussions, it would appear that they are aware of this necessity.

It hardly needs any words of mine to stress the fact that the easiest way in which the Chancellor could overcome his difficulties is by encouragement of what are known shortly as "invisibles." They have always been a great feature of our financial system in the past and without them we cannot hope to balance our accounts as we should do in the future. I trust, therefore, that in making these rigid schemes under the Bill, we shall not only have regard to suggestions made for amending them, but we shall retain our traditional rôle as an entrepôt trader and a financial centre.

The other main point which has arisen in the course of our discussions, and which it is appropriate to mention on Third Reading, is the need to look upon this island as the centre of the sterling area and the centre of an important and lively Commonwealth. That point was made only a few minutes ago, so I need not say much more about it, but I should like to stress, and to draw the attention of hon. Members present and those outside to the fact just mentioned by the hon. Gentleman that in assessing the position of the United Kingdom, account was taken of the resources of the whole sterling area. I should like the hon. Gentleman to elaborate that point and to indicate to us the nature of the inquiries which were made about the resources of the sterling area before the conclusions to which he referred were reached.

In the remarks which I had proposed to make earlier today, I was going to say that on the United States side the most elaborate inquiries were made as to the effect of the proposed Marshall Aid upon the American economy. I wish that a similar inquiry had been made into the whole resources of the sterling area to find out what would be the effect of these arrangements upon the sterling area and what would be the likely drain on sterling. The hon. Gentleman's answer has revealed that this matter has received rather more consideration than we had anticipated. If he can elaborate in any way the inquiries which must have taken place and the conclusions come to on the effect on the sterling area of these plans, he will be doing a further service.

Those are the two major issues. They unite in the one thought that in these matters, this country must lead not only Europe but the world. If this country approaches a plan like this in the spirit in which we have looked at it this afternoon; if it is prepared, with the other countries concerned and with the United States of America, to amend the plan, then we may lead Europe and the world back to better conditions. Meanwhile, we can only express our gratitude to the United States for the aid which makes this plan possible and do our best to co-operate under the plan in order that it may work out in the right way.

5.34 p.m.

Mr. Jay

I should like to associate myself and my right hon. and hon. Friends with the tribute which the right hon. Member for Saffron Walden (Mr. R. A. Butler) has again paid to the generosity of the United States in making this aid possible, and also to say, on behalf of my right hon. and learned Friend, that we appreciate the constructive attitude which hon. Members opposite have adopted towards the Bill this afternoon.

The right hon. Gentleman made two points. First, he emphasised the importance of invisible exports from the United Kingdom generally in our recovery effort. I think that there is absolutely nothing between us on that point. As he knows, my right hon. and learned Friend recently gave figures of the remarkable rise in our invisible exports, which have contributed so much to the improvement in our balance of payments in the last year. We are, of course, taking all sorts of steps to ensure that that rise continues, particularly, for instance, in the tourist trade and in shipping, both of which we are successfully developing.

Second, the right hon. Gentleman said he hoped that the United Kingdom would remain the centre of the sterling area and, in an economic sense, of the Commonwealth. It may well be that the European Recovery Programme will go a long way to strengthen and develop not merely the United Kingdom, but the Commonwealth as a whole, for the reason that it will put into our hands the resources which we can use for the development of many parts of the Commonwealth. The right hon. Gentleman will have noticed that investment, both at home, in the Colonies and elsewhere, figures very largely in our Four-Year Plan, for the reason which I have just given.

The right hon. Gentleman asked me to elaborate about the inquiries made before we estimated the whole sterling area deficit for the purpose of putting in our bid, in a statistical sense, for Marshall Aid. The fact is, of course, that throughout the last two years we have been making elaborate statistical reviews and calculations continuously on all aspects, not only of our own balance of payments, but of those of all the other parts of the sterling area, with the dollar countries. That matter has been thoroughly examined, for the purpose of correcting the dollar drain, and of drawing up our own Four-Year Plan, and, of course, finally for the calculations within O.E.E.C. which were necessary before we could make our applications for dollar aid. That process will, of course, go on, and if the programme continues and prospers, and if we obtain an allocation of dollars next year somewhat similar to what we estimate our needs to be, I have no doubt that the whole of our four-year programme, and the development of the Commonwealth countries in particular, will go forward together.

Question put, and agreed to.

Bill read the Third time, and passed.