AMERICAN AID AND EUROPEAN PAYMENTS (FINANCIAL PRO VISIONS) BILL

HC Deb 27 January 1949 vol 460 cc1111-230

Order for Second Reading read.

3.38 p.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

I beg to move, "That the Bill be now read a Second time."

Since the House was last sitting a number of important Parliamentary Papers have been issued dealing with the economic situation of this country and of Western Europe, and there is also before the House the Bill entitled American Aid and European Payments (Financial Provisions). All these documents are closely linked one to another, and I am sure it will be for the convenience of the House if I deal with them all in one comprehensive statement in introducing this Debate. I fear that this means inflicting myself upon the House for some considerable period of time, but I can see no escape from that course if I am to give even the most summary account of the issues presented by our own long-term economic forecast in Cmd. Paper 7572, the interim report of O.E.E.C. submitted to E.C.A. in Washington on the long-term programmes which has been circulated to Members, and the financial provisions proposed to deal with our E.R.P. assistance, and our contribution to the Intra-European Payments scheme. I should, I think, take these documents in their historical order.

The first matter, then, with which I will deal is the Intra-European Payments scheme and its operation. That scheme, for which the present Bill provides the necessary accounting machinery, is one of the main constructive achievements of the past year in Europeap economic co-operation. It provides convincing evidence that the European nations are willing not only to discuss but to work together to carry through measures to meet their difficulties, thus reducing their calls upon the generosity of the United States. Over a year ago it was already evident that unbalanced trade in Europe, and the payments difficulties to which it gave rise, constituted a problem second only in importance to that of the dollar deficit. Just as the dollar is a scarce currency all over the world, so European currencies were divided into "hard" and "soft," with the result that some European countries were unable to buy from "hard" currency sources goods which were essential for their economic recovery.

Hardly any country today is able to maintain the free convertibility of its own currency into dollars; in the same way, many European currencies are not freely convertible one into another. This state of affairs tends to force countries into bilateralism; each country attempting to arrive at an exact balance in its payments with every other country. In this way, a country may have to buy more from some countries or sell less to them than it would wish to do if it were free to choose where it would buy and sell, only having to maintain a balance in its transactions with the rest of the world as a whole.

The plan that we have adopted for Europe is the same in essence, though on a smaller scale, as that which the Americans so generously offered, and we accepted, for dealings between Europe and the Western Hemisphere. For a time at any rate, the economically stronger countries in Europe have expressed themselves prepared to make grants to their weaker partners, and hence to export goods and services to them for which the exporting country will receive nothing in return. The Intra-European Payments scheme—I.E.P.S.—is directly connected with E.R.P. in that no creditor nation in Europe is required to make grants to other participating countries exceeding the amount of the aid by way of free grant which it receives from America. That portion of the E.R.P. grant which is thus passed on has been termed "conditional aid," as it has been made a condition of its receipt that an equivalent amount in the recipient's own currency should be made available to finance those participating countries Which have a deficit in their payments with the recipient.

This assistance is supplemented in some balances. Thus the sterling which we undertook to make available when we signed the agreement amounted to the equivalent of 491 million dollars of which 282 million dollars represents direct grants by the United Kingdom, from the counterpart of conditional aid, and 209 million dollars the drawing down of existing sterling balances. This will not necessarily be the exact outturn of the year. Some drawing rights, almost certainly, will not be used; under the terms of the agreement, they will be carried forward unless it is agreed to cancel them. We propose, however, to give 8 million dollars worth of drawing rights to Turkey, who signed the Payments Agreement under the reserve that the figures should be re-examined, and we have just signed an agreement to that effect; the agreement is subject to ratification, but I am arranging for effect to be given to it at once, in advance of statutory powers. I am sure that the House would agree that that was the right course to pursue.

Furthermore, the Payments Agreement makes provision under Article 17 for the revision of drawing rights in certain circumstances. A large part of the total sum thus made available will be spent in the other countries of the sterling area, especially upon raw materials; this will result in claims on the U.K. by those other sterling area countries. The Australian Government, by their most generous gift to the U.K. of the sterling equivalent of 32 million dollars, for which I have already most warmly thanked them, have recognised this prospective additional burden upon us, and I am sure that this House will desire to express its great gratitude to the Australian people, for their generosity.

This system of Intra-European grants, amounting to the equivalent of 800 million dollars in all, has greatly assisted the movement of trade within Europe. Those grants are linked under the Scheme with a system of compensation administered by the Bank of International Settlements at Basle, the object of which is to enable debts incurred in one currency to be offset against receipts due in another currency.

There is one important aspect of this matter which I would like to stress—that is the extent of the area covered by these arrangements. The sterling which we make available, can, of course, be freely spent anywhere within the sterling area, and the calculations of our surpluses with the other participating countries on which the drawing rights were based covered the balance of payments between those countries and the whole of the sterling area. Similarly, calculations as to the position of France, Belgium and Holland related to the balance of payments of the whole of the French, Belgian and Dutch monetary areas. Thus the scheme is, in fact, a great deal more than a scheme for Intra-European payments. It covers directly the trade of a large part of the world.

Furthermore, the sterling can be used by the debtor countries not only to settle their deficit with the sterling area, but also within limits to settle their deficits with their other creditors in Europe. We cannot of course allow this transferability to involve us in gold payments but, subject to that reservation, we have stated our intention to allow the facilities that we have granted to be used in settling payments over as wide an area as possible. That is a great multilateralisation of the trade of Europe.

The scheme has only been in operation for a few months so far, and we cannot as yet form any considered judgment as to its working. It has not opened up the channels of European trade fully or entirely done away with gold settlements within Europe. One reason for this is the linkage of which I have spoken between E.R.P. and I.E.P.S.

Switzerland, for instance, receives no dollar aid and, therefore, in accordance with the principle of conditional aid, makes no grants within Europe. Belgium's contribution to the I.E.P.S. though equivalent to four-fifths of the total dollar aid which she received, was not sufficient to provide all the Belgian francs required by other participating countries. This is a generous proportion for her to hand on, but her surplus in Europe is not fully covered by her contribution. We are still having to pay gold on a very considerable scale to Belgium and to Switzerland to obtain essential imports such as steel, flax and machinery, but in the case of other countries without the gold available for such payments, their trade with these two countries has had to be reduced.

It is not, of course, suggested that the Payments Scheme of itself can cure the unbalance of European trade. Just as the European countries must plan their long-term programmes to overcome the dollar deficit by increased production, so they must devise ways of getting rid of persistent deficits in the payments between one European country and another. This is an important aspect of the achievement of viability for Europe, which is the aim of all our long-term plans.

As a step towards better equilibrium in European trade, the Governments who signed the Payments Agreement also undertook to accept certain rules of commercial policy. The essential principle of these trade rules was that the debtor countries should be economical in their external expenditure, and should do their best to increase their exports, while creditor countries should be as liberal as they reasonably could in their import policy, and should not press the debtors to accept exports which they did not require for their economic recovery. It was also prescribed that every country should do its best to maintain and increase essential supplies to the others, so far as it could without prejudicing its own recovery programme. The creditor countries, in particular, undertook to do their best to increase exports of products which the debtor countries were counting on getting from non-dollar sources when they accepted the division of E.R.P. dollar aid that was made in Paris.

Now I come to the American Aid and European Payments (Financial Provisions) Bill. This gives statutory authority for certain financial provisions contained in the Economic Co-operation Agreement between ourselves and the United States and in the Intra-European Payments Agreement of which I have just spoken. In the first place it gives authority for the arrangements—the "Special Account" and so on—which have already been established to deal with the sterling proceeds of grant aid received from the United States, in accordance with Article 4 of the Bilateral Agreement. Secondly, the Bill lays down the procedure for discharging our obligation to make drawing rights available to the other O.E.E.C. countries under the Intra-European Payments Scheme. As I have already pointed out, part of the aid provided by the United States is conditional on drawing rights under the Intra-European Payments Scheme being made available, and the procedure proposed is that the sterling equivalent of the conditional aid received by the United Kingdom should be paid into a new account—the Intra-European Payments Account—and that this sterling should be used to satisfy the drawing rights which other participating countries are entitled to exercise against the United Kingdom.

Thus the Bill creates no additional charge on public funds. Provision is made for the Intra-European Payments Account to be financed temporarily from the Civil Contingencies Fund, in case, that is, drawing rights should have to be made available before the receipt of the corresponding conditional aid. Such advances, however, will be repaid as soon as the sterling equivalent of the conditional aid dollars has been received. The accounting procedure proposed in the Bill has been discussed and agreed with the E.C.A. Mission in London.

Under the provisions of the Bill the transactions of both the Special Account and the Intra-European Payments Account will be subject to full Parliamentary control. As we expect the Payments Scheme to continue in one form or another next year, and we wish to avoid the necessity for fresh legislation, we have not inserted any limit as to the amount of drawing rights to be made available. On the other hand, the present Payments Agreement, and any arrangement of a like sort that follows it, will be subject to ratification by Parliament.

I now turn to deal with the general strategy of our long-term programme as set out in Cmd. Paper 7572. This White Paper contains two important documents. The first, in the first 49 pages, is the long-term programme of the U.K., and the second is what I might term the first instalment of that long-term programme—the programme for 1949–50. I can, I think, most assist the House if, after reviewing shortly the origin of these documents, I attempt to set out the broad economic strategy which underlies our long-term recovery programme, dealing very briefly with the progress that we have already made, and indicating the nature of the tasks which we must carry out if we are to succeed in this great enterprise of national and European recovery.

Our objectives are simple. By the middle of 1952 we seek to make ourselves independent of all exceptional outside aid—or even earlier than that if possible—while at the same time at least maintaining, and we hope somewhat improving, our present standards of living. All this we seek to accomplish not in isolation, but in the closest harmony and co-operation with the United States of America, with our fellow members of the Commonwealth and with the other members of the O.E.E.C.—to whom we are, of course, pledged and with whom we have every desire and intention to cooperate as closely as is possible. Hon. Members must not imagine that in face of the real difficulties of fitting together 19 separate national programmes into one consistent whole for Western Europe, those who seek to solve those difficulties by patient examination and discussion are showing any unwillingness to enter into the fullest co-operation. I am quite convinced that in so novel and vitally important an undertaking a little time spent in laying the foundations deep and strong is indeed time well spent.

The House will be familiar with the origin of the documents in this White Paper. These programmes were prepared last Summer in the light of the information then available and were submitted to O.E.E.C. on 1st October. They were drawn up on the basis of our own situation alone, as we had not then any accurate information as to the plans and intentions of the other participating countries. Obviously 19 separate countries, each planning on its own, cannot arrive at results that all fit in with one another. It was fully realised and, indeed, expected that very considerable modifications would be called for in all the individual programmes before they could be made mutually consistent. It was hoped that we should have made considerable progress in this direction before the submission of the general programme to the E.C.A. But the task, of preparing the national programmes proved so heavy that the timetable had to be put back, and it was only possible for O.E.E.C., before the programmes had to be submitted, to complete the initial stage of the work, that is, the analysis of the programmes of the 19 countries, the diagnosis of the problems which confront them, and the suggestion of some very general lines of action.

The successful passage of this first stage of submission, criticism, and analysis of the economic programmes of the 19 countries is a great international achievement. Nothing like it has ever been attempted before in world history and it has provided a foundation upon which real co-operation can be built. We have for the first time a far more detailed forecast of Western European economy over a period of years than we have ever had before. We must now re-examine our own plans against the background of this general picture so that we can, in collaboration with the other participating countries, bring about a wise and reasonable adjustment of programmes to give the greatest common factor of advantage to all of us out of our co-operation, and that re-examination is now taking place.

It must be emphasised, however, that this task of correlating all the programmes is one of great difficulty, raising very important matters of principle as well as a mass of detail, and it will take much concentrated work. It is, indeed, certain that this must be a developing process which will never reach finality and which will, we hope, continue long after 1952 as the co-operation of Western Europe becomes closer and closer. I must stress the novelty of this work of comparing and correlating plans. The whole operation is one which presents entirely new problems at every stage. These can be solved only by the most patient examination and discussion, and that takes time.

I must now deal, however, with our own programme in the form in which it has been submitted and published. In so doing I shall avoid as far as possible anticipating matters that fall more properly and adequately to be dealt with when we come to discuss this year's Economic Survey. I must first warn the House against reading too much into these documents. The preparation of an economic programme for so long a period ahead is, of course, fraught with the greatest difficulties, especially in times of political and economic uncertainty such as the present. In a country, such as our own, which is so largely dependent upon exports and imports, visible and invisible, for its prosperity, no one can foresee with accuracy the future course of economic events. We are peculiarly affected, because of this dependence, by economic events in every other part of the world, quite apart from the great possibility of changes which may occur in the international political situation.

Nevertheless, if we are to have any real chance of solving our own problems and of co-operating with the other participating country we must—as they must—attempt to arrive at some estimate of the general trends that we wish to encourage or discourage in our industrial development. If changes in our industrial structure prove necessary we must introduce them slowly, unless we are prepared to do great violence to our economy, so that we must try and foresee the necessity for such changes if they exist. We can, indeed, only succeed in achieving our economic independence by 1952—which is our primary objective—if we take action now and continue in the right paths thereafter.

We must, therefore, do our best, not to lay down any hard and fast programme, but to chart our direction, at least in the most important matters, so that we can successively lay down more detailed plans over the ensuing years, directed towards these same long-term objectives. To do this we have to make a number of assumptions, many of which no doubt will prove to be wrong in detail but which can be subject to adjustment as we proceed. These give us a basis upon which to formulate our main objectives. We might, therefore, define our long-term programme as a statement of economic strategy within which we shall work out year by year more precise programmes designed to regulate our economic action.

It was decided by O.E.E.C. that in order to arrive at a comparable basis for all the 19 programmes, certain assumptions should be made common to them all. Thus it has been assumed that the international political situation will not demand any such expansion of Defence expenditure as to interfere seriously with the recovery programmes of the participating countries. Again, it is assumed that there will continue to be a high level of economic activity throughout the world and not least in the United States of America. The basic difficulty in arriving at a stable and balanced economy, both in our own country and in Western Europe, is to maintain an adequate level of trade with the dollar area. It is, therefore, of the utmost importance that increasing opportunities should be provided for importation into the United States and the Western Hemisphere of goods from European countries and their dependent overseas territories.

Other assumptions made are that there will be a reasonable volume of exchange of goods between Eastern and Western Europe; that continued progress will be made in European co-operation, which must be based upon stable internal financial conditions in the various countries participating; that European countries must not count upon being able to earn dollars or gold from one another; and that the terms of trade will remain throughout the period at the same level as at mid-1948. This last assumption is, of course, for planning purposes only and does not imply any particular view as to the future course of prices of particular commodities.

Finally, it has been assumed that E.R.P. will continue, though in diminishing amount, until the end of the four-year period, by which time Europe will have to become self-supporting without such exceptional external aid. These are massive assumptions but they form the basis for common programming by the 19 countries and it is for that purpose that they have had to be adopted.

On the basis of these broad assumptions our economic policy over the next four years must be directed to four major objectives. First, to secure and maintain a balance in our external payments, both in dollars and in other currencies, at a level which will enable us to keep all our resources fully employed so as to achieve the greatest possible national income. Second, to restore and maintain our capital equipment and raise it to the highest attainable degree of efficiency. In this way we shall be laying the foundations for increased industrial production of a quality and at a price that will enable us to maintain permanently a high level of exports against ever-increasing competition. Third, we must seek to establish an efficient and smoothly-working economic system which will give the maximum incentive to high productivity, with control and regulation at the minimum necessary to achieve our social and economic objectives. Fourth, we must strive, while doing all this, to improve our consumption standards as rapidly as our increased productivity will allow. primarily by reducing the cost of production, and so the price charged to the consumer.

We shall pursue these objectives within the framework of the Convention for European Ecorromic Co-operation, and in association with the United States, and our fellow members of the Commonwealth. The most critical of our needs is to close the dollar gap before the Marshall plan comes to an end, when we shall find ourselves in a position to have to get by our own efforts all the dollars or gold we need for our purchases from the Western Hemisphere. In 1947, the dollar gap for the sterling area was £1,024 million. It is that gap which we must close altogether by 1952—3. In Cmd. Paper 7520 of last September the results of the first six months of 1948 were set out. During that period we had reduced the gold and dollar deficit of the sterling area to £254 million, equivalent to a rate of only half that of 1947.

As the figures announced last week show, we have continued to make progress in this direction. Compared with a net gold and dollar deficit of £254 million sterling in the first six months of 1948, the comparable figure for the second half of the year was £169 million sterling, a further reduction of almost one third. We have thus, so far, been successful in carrying out the objective which I announced at the beginning of E.R.P., and that is, to restrict the size of the gold and dollar drain to what can be covered by the amount of the E.R.P. aid that we are being allocated, supplemented by such additional dollars and gold as we can otherwise earn. At the same time, we have made great progress in reducing the deficit on the total United Kingdom balance of payments. In the first half of 1948 it had been reduced from the £630 million of 1947 to an annual rate of £280 million a year. As to the second half of the year, I cannot at this stage speak with any finality, since we have not yet the accurate figures for our invisibles. We shall have those figures I hope in time for the Economic Survey, when it is published shortly.

It is however worth while to examine the figures for visible trade. During the six months July-December, 1948, our gross imports on the c.i.f. basis amounted to £1.054 million. After deducting the conventional and quite arbitrary 10 per cent. allowance for freight and insurance, the figure comes to about £950 million on an f.o.b. basis. During that same period our exports amounted to £873 million, so that the crude deficit on visible trade for the six months was only £75 million sterling. As I have mentioned to the House before, this estimate of a gap between imports valued c.i.f. and exports valued f.o.b. obviously over-states the real gap on trading account, quite apart from the fact that it makes no allowance for invisible earnings, but it does give an indication of the healthy direction in which we have been moving. I should expect this figure to be an overestimate rather than an under-estimate of our visible deficit.

Mr. Walter Fletcher (Bury)

May we get this point clear? Does the figure include the unrequited exports?

Sir S. Cripps

It includes, of course, all exports and all imports. As it stands, that figure which I have given compares very favourably with the figure of £156 million for the first half of the year 1948, "in the Paper from which I have already quoted.

So far as can be seen at the moment the improving tendency of invisibles, which was so marked in the first half of 1948, has continued, but we have been helped in this by some special nonrecurring items due to settlements of wartime debts with various countries. We may therefore expect that our total balance of payments will show better results than that derived from our visible trade alone. The main cause of this improvement has been the very vigorous expansion of our export trade, for which the very greatest credit is due to managements, technicians, salesmen and workers in our industries. It has also been helped by the continued restrictions on imports from overseas and on home consumption, which the people as a whole have shown themselves intelligent and patient enough to tolerate.

Our exports in 1948 were of the order of £450 million greater than in 1947, an increase of nearly 40 per cent. in value—a really herculean task performed by British industry and commerce—which brought us at the end of the year very close to our target figure of 150 per cent by volume of 1938.

Sir Arthur Salter (Oxford University)

The right hon. Gentleman will realise that in that comparison he should perhaps make reference to the £200 million—I think he said—lost in 1947 as a result of the coal strike, or coal shortage.

Sir S. Cripps

One can bring in all sorts of items. If the fight hon. Gentleman would not mind putting that into his own speech, and not into mine, I shall be much obliged.

That is by far the most important single factor in our recovery, but that result could not have been achieved had it not been for the forbearance and self-restraint shown by our people in their determination to restore our national economy and our economic independence.

The full results for the second half of 1948 will not be available for some weeks yet, as I have said, and I cannot prophesy the final results. But I think we shall find, when the full figures are available for the second half of 1948, that we were very close to a balance in our total overseas payments in that particular six months. As I have already said, we were assisted in this period by certain nonrecurring receipts and we shall not be able to maintain our position without a great effort and constant care, but with all the necessary reservations and qualifications admitted, this achievement can be described as one of the very highest order by our people and one in which we can justly take pride, and from which the democratic world can draw comfort and inspiration.

In congratulating our people upon their accomplishment we must always remember that it would not have been possible without the very important outside assistance we have received. Not only has Marshall Aid enabled us over this past year to maintain our essential imports from the Western Hemisphere, without which we could have done little or nothing, but we were enabled to build up to this position of recovery over the earlier years since the war, only by the help of the loans granted to us by the United States and Canada. These enabled us in those most difficult times of readjustment of our industry from war to peace requirements to go forward with our reconstruction and to maintain the stability of our trade and of our currency. I am sure the House will be gratified that the Canadian position has enabled the Canadian Government to authorise once more drawings on the Canadian credit which had had to be suspended since last Spring. We are most grateful to them for their friendly and helpful decision.

Despite this progress that we can record I must draw the attention of the House to the very difficult and stubborn problems that still remain to be solved over the next four years. In present conditions—and so long as the dollar famine continues throughout the world—even with a favourable balance on our overseas payments, we shall not be paying our way. We cannot get from the non-dollar world with which we have our surpluses the dollars we require to wipe out the deficit on our dollar account. We still have to deal with the dollar deficit and get rid of it either by expanding our dollar earnings or reducing our dollar expenditure and that we must accomplish in the comparatively short time before E.R.P. comes to an end. Until this is done we continue to depend upon the assistance of the United States and Canada.

It will be seen from the figures I have quoted that we have made good headway in reducing the total dollar deficit of the sterling area. Our own efforts have been splendidly backed up and supported by our overseas territories and by our partners in the Commonwealth. But a great deal still remains to be done, and the nearer we get to our goal the more difficult the job becomes. We must therefore concentrate our energies on this task in the months and years ahead.

We must attack this problem along four main lines. First, and most important of all, we must export more goods to the U.S.A. and Canada, and to areas where our exports can earn dollars or save us gold. As more countries turn to the non-dollar area for their supplies, and so our opportunities for further dollar saving by switching over to alternative sources of supply diminish, we shall find it more than ever necessary to earn more dollars to purchase the goods we need from North America.

Second, we must reduce imports from the dollar area to a volume for which we can currently pay. In 1938 32 per cent. of our total imports came from the Western Hemisphere. In 1947, so dislocated had trade elsewhere become, that we were compelled to buy 47 per cent. of our imports from that area. But during 1948 we have made a very great effort to reverse that tendency, and we have succeeded in reducing the percentage of Western Hemisphere imports to the prewar figure of about one-third. We hope that it will be possible during this year to reduce this percentage still further. But our ultimate aim is to balance our trade at the highest possible point, and wherever we can we must strive to increase exports rather than decrease imports. This is particularly so in the case of Canada, with whom we have many other close ties besides those of trade.

Third, we must maintain and increase the very valuable contribution made by the Colonies through the sale of materials to the dollar area. This means continued development of Colonial resources—a development which has in the past unfortunately been gravely neglected. It also means that we have to export goods to the Colonies in increasing quantity, both in return for the goods they export and in order that these new developments can take place.

Fourth, we must increase our invisible earnings of dollars in every way possible and especially by encouraging and developing tourist traffic, building up our merchant navy, and increasing our sales of oil in dollar markets.

All these lines of attack are to be found in our long-term programme, which represents our plan of campaign. By these means, we hope to reduce the United Kingdom dollar deficit by 1952–53 to a much more normal point, at which it can be covered by the gold and dollars which we earn in trading with the rest of the sterling area. As the White Paper however itself points out, this balance is precarious, and depends largely on factors outside our control. We shall delude ourselves if we think that it can be achieved without the utmost exertions on our part. I have dealt with this dollar problem in some detail because it is the central problem, both for ourselves and for Western Europe, and it is a problem that must be solved within a comparatively short period of time.

In concentrating however upon the dollar problem, we must not lose sight of the other aspects of our balance of payments and the surpluses which we are now accumulating. Some of this surplus is required to meet the contribution which we are making to European recovery through the Intra-European Payments Scheme. Some is attributable to investment in our Colonies and in the Commonwealth, and is related to the development of new sources of supply upon which we are relying to help in the solution of the long-term dollar problem. Part again represents a reduction of sterling balances, particularly in certain of the Commonwealth countries, but we must remember that in other cases there has been an accumulation of sterling balances over the last few years.

For our immediate short-term purposes these surpluses contribute in a most valuable way to the recovery and development of other parts of the world and particularly of Western Europe, the Colonies and the Commonwealth. In the long-term we are providing for a modest margin with which to continue helping capital development overseas, but apart from this we anticipate that the surpluses will largely disappear in the process of eliminating the dollar deficit.

Our recovery programme as a whole is centred upon the measures required to close the dollar gap, with we hope some improvement of our own standards of living. As a part of our efforts in achieving this aim we must provide materials to assist the recovery of Western Europe and to develop our own resources as well as those of the Colonies and the rest of the sterling area. For all these purposes we must expand our production as a whole including manufactures, mining, agriculture, building and all the rest by one-third above the prewar level. Out of that production we must not only achieve but maintain a level of exports 50 per cent. above 1938 by volume. In addition to that we must secure a large increase in our invisible earnings especially from shipping, oil and tourists.

Mr. Osborne (Louth)

What is the relation between those two figures—the extra one-third production which we must achieve for home consumption and the 50 per cent. more which we have to produce in volume for overseas?

Sir S. Cripps

I could not give the figures for the total value of all the products in the country compared to the value of exports. At the moment I have not got the figures.

Mr. Osborne

Could we have them later?

Sir S. Cripps

I do not propose to elaborate upon the objectives for particular industries which are discussed in some detail in the published programme. I would merely recall that these require an expansion of manufacturing output in four years to a level about 40 per cent. above 1938. This is equivalent to a further increase of 10 per cent., or 13 points of the index, above the level of production attained in the first nine months of last year. Compared with 1948, we hope to raise coal output by nearly one-quarter, electricity generating capacity by nearly one-half and the output of steel by nearly one-sixth. The very fine performance of the engineering industries, whose output is already half as great again as before the war and which contributed last year no less than 40 per cent. of our total exports, will have to be surpassed in order that we can get the extra tools we need ourselves for the job and at the same time maintain engineering exports at least at their present high levels.

But one of the most important jobs of all is that of the farming community. They have a great expansion programme to carry through. It was launched last year and already some very promising signs of fulfilment have appeared, but by the end of 1952 we must increase the net annual value of our agricultural output by no less than £100 million worth over the 1947 level. This would exceed the highest output ever known from our land and would surpass the peak wartime achievement by some 15 per cent.

We must be under no illusion as to the magnitude of the task we are facing, but the aims that we have set before ourselves are not in any sense unrealistic. They are based upon a sober judgment of the situation and are I believe neither unduly optimistic nor pessimistic. As however we have reached the probable maximum of our labour force, and are employing practically all our resources of production, we must look to increased productivity for our greater production. The estimated expansion of output in 1952–53 demands an increase in productivity over the whole range of physical production of about 2½ per cent. per annum from the end of 1948. That is a perfectly practicable rate of increase, very little more in fact than British industry accomplished in the interwar years. If we can exceed that rate, our own standards of living should benefit.

Our higher productivity should be contributed by three main efforts. First, by the new and improved technical processes and machinery that we shall be introducing and that we have already to some extent introduced since the end of the war; second, by the application of greater managerial skill and inventiveness in the methods and deployment of our industrial productive resources, aided by a greater willingness on all sides to try out new ways and to abandon old practices that have since before the war become out of date in the new economic circumstances that we face; and third, by a closer degree of co-operation and more sharing of ideas and information in our factories and in our works through a better and more widely extended system of joint consultation. That joint consultation may well be extended over national boundaries as it has been in the case of the Anglo-American Joint Productivity Council to the very great advantage of both sides.

Since the end of the war we have witnessed some remarkable demonstrations of how output per man year can be strikingly increased, without any major new capital investment, by redeployment of jobs, a better organisation of the flow of materials and a thorough partnership in effort by everyone employed on the job. I do not suggest that these methods are of universal application, in many units much has already been done, but I am certain that there are very few where no further improvement can be made. As to those firms with the best practice, we need have no anxiety. They will continue their advance, but there is a wide—a far too wide—range between the best and the worst. We must bring up the average by stimulating all to achieve the results obtained by the best. There is no other way in which to contribute so largely and so quickly to our recovery and to strengthen our national economy, and I would ask every manager, technician and worker to concentrate their energies upon this task of increasing our productivity.

To help in this task we shall have to maintain a large capital investment programme and we estimate that at least £2,000 million a year will require to be put aside from our gross national income for this purpose. In order to improve our efficiency and our competitive power and to consolidate our industrial strength the equipment of the export industries and of the basic industries serving production as a whole must take precedence over investment designed solely or mainly to increase consumption standards. If it should prove possible to make even further resources available for investment, they will, in the interests of our speedy recovery, be concentrated on industrial investment.

The maintenance of a high level of investment at home, combined with the reduction of our overseas deficit, will demand careful handling of our finances if inflationary pressures are to be avoided. The situation will, therefore, continue to call for a high rate of voluntary saving and for careful observance of the guidance which the Government gave last year in Command Paper No. 7321 to those responsible for determining the level of personal incomes from any source.

What we shall be able to do by way of imports will depend upon how successful we are in maintaining a high level of earnings of gold and foreign currencies, particularly, of course, of dollars. By the end of the Marshall period we shall have to regulate our import programme by our long-term capacity to pay for it without further gifts or borrowings.

If our exports and our income from invisibles reach the expected levels in 1952—53, at mid-1948 prices some —2,540 million of foreign exchange earnings will be available. After allowing for a small net outflow of capital for overseas investments and for the repayment of debt, which will then have become due, these earnings would enable us to buy, at the prices assumed, a volume of imports about 10 per cent. higher than in 1947, or somewhere about 85 per cent. of the 1938 volume. Of this total, imports of food and feedingstuffs would run at some 75 per cent. and raw materials at 100–105 per cent. of 1938 volumes. This proportion, unfortunately, is essential to maintain the necessary level of production. With the additional supplies of home materials that will be available and with strict economy in the use of all materials, it is believed that this level of imported raw materials would just about suffice to provide industry with the supplies which it would need for its expanding output.

The lower level of imported foodstuffs would be more than offset by the increased output from home agriculture so that consumption of foodstuffs should rise above, the 1947 levels. As the United Kingdom Long Term Programme points out, the consumption of food would not only approach the prewar level as a whole, but, owing to the more equal distribution of the national income brought about by Government policies, a large part of the population should enjoy a markedly better, though perhaps rather less varied, standard of foot consumption than before the war. There should be a notable increase in the supply of manufactured consumer goods, which might rise by as much as 15 to 20 per cent. above the 1947 level, with clothing at approximately prewar level and household goods at a higher level than prewar.

Whatever forecasts we may now make, the pattern of our standard of living four years hence will in the result depend on the efforts we ourselves make to develop our own production and expand our exports, on the availability of supplies in different parts of the world and upon the terms of trade on which we shall be able to do business with other countries. With so many uncertain factors, it is obviously profitless to attempt any more precise forecast than I have offered the House.

It would be quite impossible for me, in the time at my disposal, to attempt to summarise the O.E.E.C. Report on the long term programmes to E.C.A., or to deal with any of the 18 other national programmes which it summarises It is an historic document, in the preparation of which our Delegation in Paris have played a very prominent part. While it is only an interim report, in the sense that I have already mentioned, there lies behind it, in the words of the Report, a period of co-operative activity unlike anything hitherto known in the economic relations between any group of independent States. It probes some of the problems of the national plans submitted and frankly exposes a number of the difficulties that will arise in their correlation. It is based upon a careful examination of the individual plans by a very skilled body of technicians, and in each case the national programme has been submitted to examination by a Committee composed of the representatives of other countries. Those examinations have been very searching, with much cross- examination of the proponents, and have, I think, been of great help in elucidating the major problems. I cannot help remarking once again upon the unprecedented way in which all 19 countries have allowed their programmes to be thus submitted to so careful a scrutiny. Surely, this should be a good augury for co-operation in action when we and other countries are asked to adjust their programmes to help our fellow participants in their recovery.

There are three general points which I should like to emphasise: first, that there is no quick ot easy way back to full recovery for Western Europe: hard work by all the participating countries is the only way; second, that economic cooperation can be founded only upon action taken by each of the participating countries within their own economy; and, finally, the task which faces Western Europe is one of immense magnitude. It will not help anyone if we under-state the difficulties of the adjustments that may be called for, or suggest there is some easy way out—political or economic. The problems thrown up must be thrashed out between the countries concerned and nothing would be more inimical to the recovery of Western Europe than an attempt to arrive at hasty and ill-considered compromises.

On the second point, while it is clearly, necessary for an examination of this nature to look at the problems of Western Europe as a whole, this must not be allowed to obscure the fundamental fact that the foundation of joint recovery is firm and decisive action by each of the individual members of the Organisation. Economic co-operation, if it is to be a reality, must be based upon sound and stable economic, financial and fiscal policies within each nation itself. No country can afford to take the risk of altering its own plans unless it can rely upon a degree of stability in the economies to which it is asked to link itself.

There are many different ideas and theories as to how best such a degree of stability can be attained and maintained, and one of the fundamental changes in political conceptions which is imposed upon all who enter upon the sort of economic co-operation that we are undertaking in Western Europe is that their own economy becomes a matter of first-class and legitimate interest to all those who are partaking in the co-operation. We may all seem to be taking what would formerly have been considered an undue and, indeed, an impertinent interest in one another's internal affairs, but in the changed circumstances of economic co-operation none of us can object to this invasion of our economic privacy by all those with whom we are co-operating. This new fact is exemplified by what the Report says upon inflation: This is a matter which is within the sole control of the countries concerned; yet its solution is of immediate concern to all members of the Organisation. The third point is the magnitude of the task facing Western Europe. And let me emphasise at the outset that its size is not a reason for despondency, but, as the Report recognises in its closing words, a severe challenge to which we and the other peoples of Western Europe must respond. I cannot attempt to take the House through the detailed argument of the Report, but, in brief, it reaches the conclusion that, on the basis of the existing programmes, Western Europe as a whole cannot count, in 1952—53, on more than three-quarters of its planned level of imports from all sources, or more than three-fifths from North and Central America. In financial terms, that means a deficit equivalent to three billion dollars in all currencies, of which by far the greatest part will be in dollars. Thus, the dollar problem will still remain the dominating factor.

This criticism is on the basis of existing programmes, and the Report deals then with the measures which must be taken to reduce that contemplated deficit to manageable proportions by 1952, when Marshall Aid ends, especially measures to develop new sources of supply and to earn more dollars on the one hand and to economise imports on the other. To accept such a decrease in imports would, as the Report points out, be "intolerable," and therefore something drastic must be done now to obviate such a disastrous state of affairs while there is yet time. These and many kindred matters will form the main work of the Organisation in the months that lie ahead, and neither its work, nor the recovery of Europe, will be completed by 1952–53. With courage and sustained resolution, I see no reason why Western Europe should not succeed in these formidable, but by no means impossible, tasks. I hope no one will either minimise their size or decry the progress already made.

As to the size of the task, it is pointed out that: In 1947, the participating countries paid for less than 40 per cent. of their imports from the outside world. In 1948–49, they hope to pay for about half. In the 1949–50 programme, the proportion paid for rises to about 60 per cent. In four years' time, we have to be able to pay for 100 per cent. of our imports, subject only to resources provided by any inflow of normal capital investment. As to the extent of the progress already made, I quote from the report: By the second quarter of 1948, industrial production in the O.E.E.C. countries as a whole had recovered to the pre-war level. In the main industrial countries, other than Germany, it was 17 per cent. higher. This recovery compares very favourably with that after the First World War, in spite of greater destruction. Then, it took Europe seven years to regain the 1913 level of industrial production. In agriculture, the progress has been slower, but none the less striking. We are here in quite a new and unexplored territory of international economic affairs, and it will take us all sometime to explore that new territory and to understand the methods by which we should conduct our future economic relationships. The O.E.E.C. is doing a first-class job in this new and difficult field—and here I should like to pay my tribute to the constant help and encouragement O.E.E.C. receives from Mr. Hoffman and Mr. Harriman and their staffs—but a great deal more careful and hard work will be required before we can get down to the most fruitful methods of co-operation. I must also add that we—in playing our part in this co-operation—are greatly indebted to Mr. Finletter and his staff in London for their most valuable assistance at all times.

There are one or two final points brought out by the O.E.E.C. Report, that I would mention very shortly. Every country in Europe is trying to do the same things, to buy as much as possible from non-dollar areas and to sell as much as possible for dollars and gold. This particularly affects us because the sterling area is by far the greatest alternative source of supply and we have adopted the principle that we will not ask any of the participating countries to pay us dollars or gold, while at the same time assuring them that they will not on that account be deprived of the opportunity to get the sterling supplies that they really need for recovery. This obviously has a great bearing upon our programme, and is one example of the sort of questions that are thrown up by the O.E.E.C. report.

The House will realise that the postwar pattern of European trade must of necessity be very different from that of the pre-war era. This raises some very difficult problems which are dealt with in Chapter 5 of the Report. Before the war, the Continental countries of Europe were accustomed to earn surpluses of sterling in their trade with this country, which they then exchanged into dollars and spent in the Western Hemisphere. We were thus a channel of supply for Europe of large quantities of dollars, and that was due to our ability to absorb a large volume of European imports, many of them of a luxury nature, and to the surplus of dollars earned by the sterling area.

It is naturally disappointing to us and to other European countries that they cannot revert to this pre-war pattern of trade. But this is not possible now, when we cannot make sterling convertible owing to our great shortage of dollars in the sterling area, and, what is equally important, we simply cannot see our way to afford the luxuries we used to import until we have first made sure of the essentials that we need. This new state of affairs obviously poses very grave problems and we must do our best to help in their solution.

Europe cannot hope to succeed by concentrating on an increase in the export of manufactured goods alone. Many of the foodstuffs and raw materials Europe requires to import are in short supply, while difficulties would be experienced in selling greatly increased quantities of some manufactured goods unless prices could be considerably reduced. We must not, therefore, neglect the production within Europe of foodstuffs and raw materials which at present have to be bought from other areas outside.

Again, the sum of all that European countries hope to buy from non-dollar countries looks as if it would far exceed the availabilities, and, if the European countries are driven to compete with one another for such supplies, they will not only be unable to satisfy their requirements, but in the process they will drive up the prices against themselves. That is another reason for producing as much foodstuffs and raw materials within Europe itself as can be done. There is a real danger that the terms of trade will turn against Western Europe, and that we should then all be able to get fewer imports for our exports.

I mention these problems to emphasise that economic co-operation is not the simple and easy thing that some people would like to think it is. There is no reason whatever for despair, but there is very good reason why we should not take hasty decisions, and why we should work hard and long with our friends in the other participating countries to find the right solutions to these problems that will allow us to go forward in ever closer co-operation with them. This is now the major task on which O.E.E.C. is engaged.

It will be obvious, too, that all these matters are of great concern to our fellow-members of the Commonwealth and to our overseas territories, whom we have, of course, consulted and do consult closely, quite apart from the fact of the concern of other O.E.E.C. countries in dealings in sterling which bring into consideration the activities of the whole sterling area. We are thus only at the very beginning of our attempts to bring about economic co-operation in Europe. We have successfully accomplished the difficult process of getting out the initial programmes and of examining them as individual programmes. We have now reached the stage when we must concert plans as to what we are to do to make our co-operation a reality, which we expect to be the major task for 1949.

I am afraid I have kept the House all too long in the attempt to cover these very wide and vitally important subjects. I comfort myself with the knowledge that we have in this country the best-informed democracy in the world, and one that is responsible in its considered action, when the facts are placed objectively before it. There is one factor in our present situation that should give us all full confidence as to the future. We have over the last two years as a great national team tried out and put to the proof the policies of self-restraint and high endeavour which have brought us so far along the road to recovery.

We can now see, looking back, that we are on the right road and that if only we will follow the same course into the future, we shall arrive at our goal. We can paint no glowing picture of the result of our efforts over the next four years, but this we can say: If we succeed by our endeavours in accomplishing our purpose, we shall by the end of that time have regained our economic freedom, with all that that will mean for our self-respect and our position in the world. The struggle goes on, but it is not an aimless, hopeless struggle. The way is clear, the path is mapped out, we have the strength for the journey, and at the end we are confident there lies our goal—the happiness, peace and prosperity of our people.

5.3 p.m.

Mr. R. A. Butler (Saffron Walden)

I am sure that we are all glad that this Debate is being permitted to range over a wide field, because this is the earliest opportunity of a thorough and serious consideration of the many and voluminous White Papers and grey documents which have been made available to us by the Chancellor of the Exchequer. I shall endeavour not to detain the House too long, but I, too, shall be obliged to make reference to some of the matters which have been raised by the right hon. and learned Gentleman with his usual clarity this afternoon.

First of all, as we are discussing a Bill, I had better put myself in Order by saying that we do not intend, today or tomorrow, to give the Government as rough a time on this Bill as they had in the discussion last night. In fact, I think that the right hon. and learned Gentleman can be satisfied that we shall accept this Bill as being the most suitable sort of machinery for carrying out the payments to which he made detailed reference. Apart from that, I should like to leave the details of the Bill, which are extremely complicated, to my hon. Friend the Member for Chippenham (Mr. Eccles) who is speaking tomorrow and who will go into this matter with his accustomed knowledge and skill.

I should like, however, on behalf of my right hon. and hon. Friends on this side of the House to support the Chancellor's tribute to the Government and people of Australia for their great generosity. I should also like to say that we support his action with regard to Turkey, and should like to hear more details of the proposal that he has announced in the House today. We should also like to pay our tribute to Mr. Hoffman, Mr. Harriman, Mr. Finletter and all the others who have helped our country and Europe in the framing of criticisms of our plans, and in giving us their advice on many occasions.

Mr. Gallacher (Fife, West)

They are all good Tories.

Mr. Butler

The Bill raises some very important questions, particularly as to the manner in which the sterling which is being made available to other countries is to be spent. I raised this question in the Debate on 16th September. The Chancellor of the Exchequer today confined himself to saying that a large part of that money would be spent in the sterling area. If it were possible to receive some indication of the nature of those purchases and the amount, we should be very grateful. We should also be obliged—and this is my last detailed reference to the Bill—if the Minister who replies could give us some indication of the link between these payment agreements under the Intra-European scheme, and recent payments and agreements made with other European countries. I am thinking particularly of France and Belgium.

After that short introduction on the Bill, I now come to the main issues before us today, which are the British plan and its place in the general European scene. I should like to say at the outset on behalf of the Opposition that we agree that it is entirely essential for this country to Day its way in the world by the end of the European Recovery programme. It is impossible, as the Chancellor has said, to over-estimate the importance of regaining the initiative in the conduct of our own affairs. We are in here together, in a struggle for the liberation of our own economy and our own policy.

I think it also right to make quite clear that the applause which the Chancellor gained from the House generally in support of the great efforts made by British industry—employers, management, workers, and right through the sector of British industry—is supported by my right hon. and hon. Friends and myself. We are glad to welcome the indications of progress which the Chancellor gave us this afternoon. They are all leading in the right direction. I would only add to his words that it is the vast sector of private enterprise which has had this great success in the field of exports. I should also like to stress that it is that vast sector of private enterprise which should gain, I hope, some comfort from some words used by the Chancellor today to the effect that there should be a little less experimentation in our internal economy during the next few years. At any rate, we sincerely trust that will be the case. We sincerely trust also that the necessary incentives and encouragements will be given to private enterprise to enable them to help the Chancellor to carry out his task.

We welcome the comprehensive character of the plan and of the material put before us. There is a prodigal amount of statistics, but, at last, we have from the Government benches something to get our teeth into. In this respect, the Chancellor is greatly superior to his right hon. Friend the Minister of Food. Unfortunately, we are so overwhelmed with the mathematics—higher mathematics and pure mathematics—of the the plan, that we are bamboozled as to whether the sum will work out right in the end. But, as will, I trust, be seen from my speech, everything depends on the spirit in which our plan is worked. We believe that a nation does not depend for its strength upon that which is imparted to it by the Government; we believe the nation has a great strength and vigour of its own which the Government must further release and steer into the right and proper channels. Our call is for the liberation of the latent force and enterprise in human nature. Nothing less is involved than a struggle for British independence.

Throughout our history, British hearts have quickened when we have seen other people fighting wars for their independence, and we have always been secretly on the side of those who sought to make themselves independent in the world.

Mr. Gallacher

What about Malaya?

Mr. Butler

Now is our great opportunity to free ourselves in the economic sphere and to establish ourselves once again as an independent nation. I have, of course, like so many others, read and attempted to digest our particular plan in this White Paper. I must congratulate the Chancellor on having so filled it with extracts of a variety of sorts that it will form a very convenient debating document for hon. Members opposite. There is in it, in fact, an answer to almost everything. There is a little bit of individualism which we are very glad to see. There is a great deal of collectivism which we presume emanates from the right hon. and learned Gentleman's own mind. There is a certain amount of autarchy, there is suitable acknowledgement of multi-lateralism, there is the famous paragraph 53 which warns us that controls had much better be swept away, and elsewhere there is a statement that in a democratic economy controls and planned economy are essential.

There is a little of every sort of investment on every aspect of policy and economics. It is rather like the list that a very respectable family stockbroker draws up for an anxious and correct old lady. "A little bit here, and a little bit there; a little bit on rails and a little bit on rayon, and you will be quite safe." He desperately hopes, no doubt, that his client will have a long and prosperous life before her and will bring him in much future business. As such, the plan is a tour de force, an ideally perfect statistical exercise reflecting the exactitude and austerity of the Chancellor's mind.

But Britain is not in any sense an old lady. She is at the beginning, we believe, of one of the greatest periods of leadership in her history; she looks for risk and adventure and a definite line of policy, and not snippets of a variety of policies in the words of democratic planning. It is in this spirit that I now propose to turn to the assumptions which the right hon. and learned Gentleman himself passed over in the initial part of his speech. The first assumption to which I shall refer is one which he mentioned—namely, that American aid will continue. We on this side of the House trust indeed that this will be so. Here I should like to pay tribute to the wise, statesmanlike and generous speech of President Truman last week which gives us all fresh hope. We must face, as indeed the Goverment do face in their plans, a steady reduction, year by year, of the amount of aid.

We must underline once more the extent of our dependence at the present time on this very American aid. I must remind the House of the extract from the Board of Trade Journal of 16th October last, which said that without American aid, the present position in Britain would be that there would be less meat and eggs, there would be cuts in butter, sugar, cheese and even bacon, cotton goods would have disappeared from the home market, tobacco consumption would have been cut by three-quarters and house building reduced perhaps to 50,000 a year. Unemployment, as we have been told by Ministers, basing themselves upon this document, might well have risen to one and a half million or more and there would have been a lower standard of living resulting in a diminished productive effort.

At the same time as we have this truth before us, we have the speeches of right hon. and hon. Gentlemen opposite throughoút the country claiming that a great deal of the difference between this war and the last, and between the end of the last war and the end of this—a matter to which the right hon. and learned Gentleman referred—is due entirely to the merits of Socialist administration and its success. I think it is necessary to make absolutely clear why, this time, we do not have unemployment and why, this time, thanks to American aid, we have been able, to some extent, to keep going rather better than we did on a previous occasion under somewhat similar circumstances. That is why we trust that during this trying period American aid will continue and that, at the end, we shall be worthy of making ourselves free.

The second assumption which I shall take and to which the right hon. and learned Gentleman also referred, is that the terms of trade will remain approximately the same. We know that the plan had to be based on this assumption. It is important for us to realise that any falsification of this assumption can have very serious results. It is true that the terms of trade are less favourable than in 1938, but before the war we enjoyed unusually favourable terms of trade. As the right hon. and learned Gentleman said in his speech, we are particularly dependent upon the American economy. Let us comfort ourselves that during the last 10 years the American national income has increased by some 80 per cent. and that figures of a very comforting character can be quoted about American productivity. Any substantial recession in business activity in America would inevitably have damaging effects on the whole of our output. The fact is that if we are to succeed, the terms of trade must improve or remain much as they are at present, and the volume of trade must increase. These are indeed, as the Chancellor said, immense assumptions.

It has further to be assumed that there will be no quickening in the present rate of expenditure on armaments. The Interim Report, to which the right hon. and learned Gentleman referred, stresses the difficulties for the whole plan should any substantial additional measure of rearmament become necessary. The truth of this is particularly evident in Britain where our economy at the present moment is stretched near to the breaking point. I regret that our re-armament measures are not necessarily adequate to meet the strain which is being put upon them and which may be put upon them. Nor am I satisfied that the present money we vote for armaments is sufficiently well spent.

An immense responsibility, therefore rests upon the wise and temperate conduct of foreign policy. On this and on the developing situation depends the question of whether we shall have to vote more for armaments. It appears, for example, that in the United States of America some £3,650 million were made available in 1948 and that £3,750 million in 1949 are estimated for the purposes of defence. Our own figures are £692 million for 1948 and some £740 million, according to my figures, in 1949. When we look at the figures of European countries who are forming part of our security pact in Western Europe we find figures at very much lower levels, and it may well be the case that further money will have to be spent on the armament programme.

The final assumption to which the Chancellor also referred is that productivity will increase throughout the period of the plan by about 2½ per cent. a year. This is a big assumption. But I am quite sure that the only line this House ought to take on this matter is that we all ought to unite our efforts to make this productivity possible. We all ought to give the requisite encouragement which will make this possible.

The right hon. and learned Gentleman mentioned re-equipment, new machinery, managerial skill and new methods. He also mentioned the need for further joint consultation. We entirely support that. Indeed, we have said it in our Industrial Charter better than it has been said from the other side of the House. It is our policy in this respect. I would go further. If the right hon. and learned Gentleman will give some rewards and incentives to management, he will get much better results than he is getting from his present taxation and financial policy. If he gives rewards and incentives to the workers in these industries, as we intend to do and are doing, to bring the worker more in the picture, to give him more chance than he gets in the nationalised schemes where he is pushed far away from responsibility, he will get better results and a greater productivity. This question of productivity is something which lies in our power and which we can make come true.

At any rate, there is one assumption upon which the plan is not based and that is that there will be a continuation of the Socialist Government over the whole period of the plan. It is, perhaps, from this non-assumption that we on this side of the House gain most hope and comfort. It must be remember that this plan is bound to pass us over the period of the General Election, and there is the hope that the country will look to end the plan with the right spirit, the right politics and the right deeds. It is, therefore, important for me to make clear that while the Conservative Opposition is determined to do everything that is possible to help this country to pay its way and while in this objective we agree with the Chancellor, we are in no way pledged to every and each method of achieving the aim which the Government propose.

I should now like to give some indication—and these can be only indications—of our general constructive suggestions on how to make the plan succeed and how to fit it in with the European and world background. My observations cover as compendiously as possible the following two objectives. I need not go over all the many objectives the Chancellor stated so clearly in his speech, but I should like to comment on the following two simple objectives—first, the new spirit we must see leavening and quickening our internal economy and, particularly, our fiscal policy; and second, the revised and imaginative attitude we must adopt towards the future of Imperial and European trade.

Let me take first the new spirit which as I say, we must want to see leavening and quickening our internal economy, and particularly our fiscal policy. What is the effect of the British and European plans on the standard of living of our own people? How will these plans—in particular, our own plan—affect the daily food of the average family, and the goods the housewife can buy in the shops, the houses and the schools we need? The Chancellor said we can depend upon only some 80 per cent. to 90 per cent. of our imports at the end of the time, 1952 to 1953. At that date the population is likely to be 3,000,000 greater than it was in 1938, and all these extra 3,000,000, as the Chancellor said at one of his Press conferences—and wisely said—have to be clothed and fed and looked after.

There is another table relating to our imports on page 53 of this Interim Report, which gives the figure of-the imports that Great Britain may expect from non-participating countries by 1952 or 1953, as only 78 per cent. of those of. 1938. On the other hand, the estimates for France are 107 per cent., compared with 1938; the estimates for Western Germany are 114 per cent.; and the estimates for Italy are 137 per cent. compared with 1938. Of course, I am stressing that these are imports from nonparticipating countries, but they give an indication of the extent of the austerity which is being accepted by this country in this plan. In this connection we are wise, I think, on this side of the House to stress the dependence of the lower income groups on imported supplies, particularly of foodstuffs.

Now, we are told by the Chancellor that the undoubted reduction in foodstuffs which we must expect, and the figures of which he gave us in his speech, will be offset by the expansion of home production, particularly of agriculture. He has said in his speech that the net annual increase of agricultural output in money terms is calculated as £100 million. We are entirely behind the drive for agricultural production, and we cannot stress sufficiently the importance of the great efforts which our farmers and workers are making, or the size of the task which lies before them. We are bound, however, to express some anxiety at the rate of progress which has been made—anxiety which even the right hon. and learned Gentleman's happy dinner with the Farmers' Union has, alas, done nothing to dissipate.

The livestock expansion programme is, in our mind, the vital feature of agricultural development, and I cannot myself agree with the literal terms of the White Paper, which actually says that increases in livestock have been registered, because from all the information that I can obtain, the pig population, at any rate, is showing signs of decreasing rather than increasing at the present time. Moreover, we feel that the emphasis which is placed on cereal and particularly wheat production is, perhaps, rather too great in view of the need to do something definite about the quite inadequate meat ration which our people have in this country at the present time.

We, therefore, advise the Chancellor to follow the policy we have set out in the Agricultural Charter which we have published, and which is designed to develop the provision of store cattle, to improve meat production, and to concentrate on this aspect of the economy. The livestock expansion programme in this country shows that the expansion in the United Kingdom is only at some 19 per cent. On the other hand, it is proposed in the Belgian plan that the increase shall be 81 per cent.; in the Netherlands plan, 79 per cent.; and in the Italian plan 45 per cent. We are fortified in our belief that a livestock policy is vital. In the reports we get of the danger of the lack of fertility in our present ploughed-up land there are warnings—which the right hon. and learned Gentleman may have heard in his recent contacts, but which we hear all the time—of this danger of the lack of fertility in the soil if we press ahead with a purely cereal production.

Perhaps the greatest of the problems in our agricultural policy is that of feedingstuffs. We are glad to see—at least, I am glad to see—that an announcement has been made by the Minister of Agriculture that the subsidy has been taken off imported feedingstuffs. Could not the same be done in the case of fertilisers? Reverting to the question of feedingstuffs policy, as I understand the position, in the eight months ended 30th November last some 15 million dollars were spent on machinery, and practically no foreign exchange was spent during that time on the purchase of foreign feedingstuffs. During the same period some 91.5 million dollars were allocated to Europe for the purchase of feedingstuffs.

We on this side of the House do not think that we are having a fair deal, or that the agricultural community is having a fair deal, in the purchase of feeding-stuffs abroad. Eire has derationed maize, and judging from reports we get from that happy island the situation of the stock producer, the pig producer and the poultry producer, is very much happier than it is in this country. We do not, in fact, think that we can have a successful agricultural policy until the problem of feedingstuffs is more adequately handled than it has been up to now by the Administration.

Before I leave agriculture, I simply mention the obvious need, if we want to have agriculture developed, for more houses in the countryside for agricultural workers, and better water supplies for agriculture and for houses in the countryside. I should also like to warn Ministers that some of us on all sides of the House, and not only on this side, are becoming thoroughly alarmed by the manner in which land is alienated from agricultural purposes by Government Departments and various development schemes. The right hon. and learned Gentleman has not heard the last of this, and as the scion of a long range of landowners in the past, I am sure he will be on our side in protecting the land from this alienation. The importance of home food production is seen in the words in the White Paper which say: The level of food consumption implied in these figures, although technically adequate, would represent little progress from the dreary and tightly rationed standards of 1948–49 to the improved level contemplated for 1952. That is in reference to the next year. On page 46 of the White Paper are the words: The consumption of food as a whole would approach the pre-war volume. We have had enough experience of "approaching" targets. We have targets continually put before us which are continually being approached and we are nervous and anxious as to whether, without further encouragement of home agricultural production, we can achieve the targets for food which will be barely adequate to sustain the population in the great effort it has to make.

Had I the time, I could traverse the various industrial targets one by one but I have noted that the Chancellor of the Exchequer has given a good lead in not doing that, because of the time which such a practice would take. I shall simply confine myself to saying about coal that we are sincerely desirous of seeing this target of 40 million tons for export reached according to the terms of the plan. We should also like to see much more devolution of authority in the conduct of the Coal Board and much more responsibility at the point of production. These views have been set out for us very ably by my hon. and gallant Friend the Member for Fylde (Colonel Lancaster) who may or may not be taking part in the Debate later. We also want to see better machinery in the pits, especially for hauling and loading, as the White Paper says, in order to make the number of tons raised equivalent to what is done in the most up-to-date European pits.

I want to deal in general, without going over the particular targets of the various industries concerned, with the question of the re-equipment of industry and the extent of the capital investment programme which it is proposed in the White Paper shall be invested in industry as such. The percentages as set out in the White Paper are somewhat misleading, since the figure for industry is gross while the figure for housing is net. I have tried to introduce a little clarity into this matter by getting out my own statistics which the Minister who replies to the Debate will no doubt be able to correct for me. I work out that something like 35 per cent. of the capital investment programme will be invested in fuel and power, transport and agriculture. Another 35 per cent. will be invested in housing, social services and defence, leaving some 30 per cent., or perhaps rather more, to be invested in industry. But according to the terms of the White Paper industry is expected to expand output by 25 per cent. during these four years.

Of this sum of between £600 and £700 million per annum, a large proportion is required to make good wastage in industry. When one examines this question one finds that it is very much to be doubted whether the sum proposed for industrial expansion, upon which we shall depend so much, is much greater than pre-war investment in the same field. I calculate that the annual gross investment for the next four years will, in real terms, be only about 13 per cent. higher than in 1938, and taking account of prices and so forth I am very anxious as to whether industry can be expanded by 25 per cent. on the sum suggested in the capital investment programme.

I should like to ask the Minister who is to reply whether we can have some account of how these sums are to be distributed in industry. Leaving aside the amount of the sum, industry will be anxious to know what proportion of this capital investment each particular industrial enterprise is to get. It is indeed doubtful whether industrial output can be expanded by 25 per cent. with this extent of investment. It has also been stated by the Government that 60 per cent. of the capital investment will be in Government responsibility concerns and their ancillaries, not in the field of private enterprise, which appears as though it is to be left only 40 per cent. We are therefore anxious to receive serious and considered answers to these questions before the Debate endś.

Major Bruce (Portsmouth, North)

Should it be found necessary to increase the figure for capital investment in industry as such, where would the right hon. Gentleman advocate the cuts to compensate for that? Where should they be made?

Mr. Butler

Perhaps the hon. and gallant Member will refer to his own Government for an answer. I shall be glad to hear when we receive their answer to my argument. The Chancellor is as keen as I am to satisfy industry on this point. I am not speaking in an irresponsible manner in putting these anxieties of industry to the Government.

While the capital investment programme is clearly set out in the White Paper, one of the most striking admissions in the whole document is that there is no indication that the Government intend to deal with the vital matter of the rising and swelling of Government expenditure. It is quite clear that this expenditure is rising all the time, yet this item is the one which is most of all within the Government's control. Those of us who are anxious to maintain the social services, to which at all events I am deeply committed, together with my hon. and right hon. Friends on this side of the House, cannot help noticing that the social services budget will increase by some £100 million by 1952–53, taking the main familiar heads with which we are all acquainted. There are many other increases, including possibly increased money for armaments, to which I have referred. With these increases there is the well known waste in Government expenditure, in the increase in the Civil Service, increased bureaucracy and waste in Government Departments, which is well known to any Member of Parliament.

Last spring we supported the policy of the Chancellor of the Exchequer of a Budget surplus, but we disagreed with his method of achieving it. We said that there were two possibilities£either reduced expenditure or increased taxation. If I am not wrong, national and local taxation and items of that kind now amount to some 40 per cent. of our national income. The question is how long this strain can be borne by the country if productivity is to be increased and management and workers are to be encouraged. We argued at the time that the method of achieving the surplus would defeat its own ends and in particular would dry up the springs of private savings. Alas, this has proved only too true.

Let us examine the figures for the National Savings Movement. The Chancellor told us in his speech this afternoon that we needed careful finance and that we must depend on savings. What has been happening as a result of his not having taken our advice? For the first nine months of 1947–48 new contributions in the form of Savings Certificates, Defence Bonds and deposits in the Post Office and Trustee Savings banks amounted to £116.5 million. For the similar period of this fiscal year these forms of savings made demands on the Exchequer of about £23 million. Various calculations have to be made before a completely accurate picture can be given including the nature of what is lost by the Exchequer, but the "Economist" suggests that the total drain of the National Savings Movement so far this year may amount to something like £90 million. That is a clear example of how this fiscal policy of the Chancellor, by depending upon taxation and not upon reducing expenditure, is having disastrous results in the realm of saving.

The fact is that the more one examines this White Paper, the more all the arguments lead to one point, namely, the monetary situation and the influence upon it of an increasing amount of expenditure. It is the facts of this rising expenditure and not a desire or prejudice of any political party or section of opinion which call for the elimination of all waste. The Government must shoulder this, which is their responsibility, and announce their intentions. We are all agreed that inflation spells ruin and we must also be agreed—on the effect of a successful fiscal policy which should result in the expansion of exports and an increase of productivity and well-being. It will have the result that various controls will be aided by the financial policy of the country and it will then become easier to relax controls, particularly the commercial controls. We attach particular importance to this development taking place. Such a policy also makes possible greater incentive and greater saving. So much for the new spirit which we wish to see quickening and leavening our internal, economy, and particularly our fiscal policy.

For the fast few minutes I want to turn to the foreign and Imperial scene, and to say that this changed spirit in our internal approach will greatly assist us in the bold and imaginative methods we must adopt towards Imperial and international trade. We are anxious lest the approach in the White Paper to these problems is not too autarchic and restrictive. We agree—and I agree with the right hon. and learned Gentleman's words this afternoon—that there has been a change since the pre-war days, when foreign countries used Britain and her sterling as a bridge to cover their deficit for a dollar area. Annually before 1939 as much as between £100 million and £200 million sterling more was sold to Britain than was bought from us. Yet we must not swing away from this entrepôt or liberal position too much into the autarchic position of being self-contained, and I therefore welcomed the recent evidence of realisation of this in the Government's recent French agreement.

The Chancellor said today that co-operation would take time. Let him proceed as speedily as he can on the line of making us in this country good Europeans. Let him realise that Europe consists of a diversity of Governments and peoples; they are not all Socialist planners in Europe; they have not all the same weakness for bureaucratic control; and they have not all the same highly developed and effective Civil Service that we have in this country, which is at present at the disposal—very willingly I am sure—of the Chancellor of the Exchequer.

Major Bruce

They have not all achieved the same recovery.

Mr. Butler

I have read the reports of an interview given by Mr. Hoffman in the "Financial Times" of 23rd January. He says there—as the Chancellor has said today—that one of our main objectives must be to expand, to sell more of our own and Europe's very high quality products, and to adjust our thinking accordingly. These high quality products can be sold only by specialisation in what each nation makes best. The more freedom of choice is restored in a freer economy, and the more the price system is allowed to function, the more quality and specialisation will follow from the re-creation and re-birth of taste and choice.

The other major point in the international field is the question of the dollar deficit and the absolute necessity of our selling more in the American market. At present, under paragraph 215 of the Interim Report, Europe has captured only one per cent. of the American market. We can succeed in selling more in the Western hemisphere if we check the continuing rise in costs in this country, and that again can be done, thanks to the revised fiscal policy to which I devoted the earlier part of my remarks. I had wondered whether some further inducement could not be given to British manufacturers and exporters, as has been done in a foreign country, under which if they sell a certain proportion of their goods in the American market they can be permitted to put a certain proportion on to the home market for domestic consumption, which we so much need.

Finally, we must be good Commonwealthers—I suppose the word "Imperialist" will not be allowed in this Debate—as I will now shortly show. We all support this idea of co-operation with Europe, as is mentioned in the White Paper. We have a Council for European Economic Co-operation. Is there to be a similar council for Imperial co-operation? This country has a dual rôle to play; we are the moral leaders of Western Europe, but also the leaders of the greatest association of free peoples the world has seen. While there is in this document sufficient evidence of the Government's desire to improve the products of Colonial dependencies—although we notice that the groundnuts scheme target has been cut down a bit after recent events—we do not notice in this document nearly sufficient attention to the importance of trade with our partners in the Commonwealth, just as we do not notice proper attention to the need for curtailing Government expenditure.

This aspect of trade with our partners in the Commonwealth and the question of Imperial Preference are two objectives to which we attach the utmost importance. I trust that whichever Minister replies to this Debate will tell us that the Government have plans of an imaginative and worked-out character for developing Imperial trade along the line of Imperial Preference, anti that in this way they will bring us to the prosperity which we need and thus greatly enlarge the scope of our economic discussions.

I conclude by saying that a revived spirit is required in our approach to the economic problems of the next four years. We can sum up the meaning of these plans and White Papers as follows. If all goes well, if there is no further political disturbance—which seems somewhat unlikely according to our recent experience—if American generosity continues on the scale envisaged, which we all devoutly hope, and if the terms of trade do not worsen, then by four years of unrelenting toil and effort, the British people may hope to sustain, and only slightly to improve, their present or austere standards.

But to win through and to do better than that—which is the object of those on this side of the House—our people must be inspired by a refreshed leadership. To the individual we must give more responsibility, more opportunity and more hope; to the nation we must open up the wider horizon of the Commonwealth and the undeveloped regions of the world. The battle of British independence must be won, like so many of our major wars, overseas. It will be won if we harness the enthusiasm of the individual in the service of the country, and if this beleagured island strikes out to lead and to save the world.

5.48 p.m.

Mr. Benson (Chesterfield)

I think that on behalf of this side of the House, I can congratulate the Chancellor upon a very masterly survey of the various documents that have been put before us and of the problem with which we are faced. This plan is so enormous that it touches practically every phase of our national life. I trust that the right hon. Member for Saffron Walden (Mr. R. A. Butler) will excuse me if I do not follow him, because he, like the plan, touched on almost every phase of our national life, and he discussed practically every subject that has been debated in this House over the last four years.

I want in my short contribution to deal with one small point. It is rather a matter of the approach to the problem confronting us. I think it will be accepted on both sides of the House as axiomatic, first that European recovery must be achieved; and secondly, that our own recovery cannot be achieved apart from European recovery. The corollary of that is that we shall have to pay the price for the recovery of Europe and ourselves. I do not suggest that the price is going to be a heavy one. Undoubtedly it is one which will cause a great deal of irritation.

I do not think any of the 19 countries will bear anything like the responsibility for the success or failure—and failure I am not prepared to envisage—of European recovery which will be borne by this country. It is not too much to say that its success will depend on us. We must remember the importance of the British market, to which the right hon. Gentleman has referred, and the fact that we are the bankers and the centre of the sterling area, and also the fact that the proposals of the European countries involve increasing exports to the sterling area to something like 65 per cent. above pre-war. Although I doubt if it will be achieved, they hope to earn dollars through the sterling area.

These economic facts alone put us right in the centre of European recovery, but there are less tangible but none the less important reasons why leadership will be forced on this country. We are the only country in Europe with an historical tradition of international responsibility. For a century we have been forced by our development to visualise the world more or less as a unit. The British Empire so widely spread round the globe, our complete dependence upon overseas trade, the breadth of the scope of our shipping, gave us an international outlook. We were for nearly a century the bankers of the world, and when sterling was the dominating world's currency we controlled that currency of the world. All these things have given us an historical tradition of international responsibility which other countries lack. That throws upon us a responsibility for leadership and example in European recovery.

In another direction, since the war we have had unique experience in planning. The right hon. Member for Saffron Walden referred to our highly skilled and fully trained Civil Service. It was that Civil Service that made the planning possible, and it is a civil service of that calibre which other countries do not possess. We were able to plan and we have planned efficiently. We are the only country that during the war produced an effective rationing scheme and we are the only country in Europe, with the doubtful exception of Finland, which has improved its export—import ratio over 1938.

Our experience will be of vital importance in the process of co-ordination, which the interim report of O.E.E.C. stresses so consistently right through. That is a very difficult problem. The Chancellor and the right hon. Member for Saffron Walden mentioned that difficulty. It is, in effect, an attempt to coordinate economies which historically have always been competitive. Europe has concentrated upon the export of manufactures and upon the import of raw materials. We have got to turn Europe economies from being more or less competitive, into economies which are complementary to a far greater extent than they have ever been before. That is a co-ordination not merely of the paper plan which has been put forward, but of the industrial development of the next few years, and it is the co-ordination of our industrial development with that of Europe.

Co-ordination means planning and planning means interference. It means giving up projects which we regard as profitable and desirable, and that is going to lead to irritation, resentment and frustation in every country including our own. The irritation will be not so much between governments, because I think there is an enormous fund of good will as shown by what has already been achieved, but amongst industrialists and industries in all countries. We know from our own internal planning how frequently that occurs. One firm or one individual views a restriction from his own point of view, and not as part and parcel of a very much larger plan. Each one of us from time to time has had somebody coming to him and saying, "What is the use of the Government preaching increased exports? I could export any amount of stuff to So-and-so but I am not allowed." That is frustrating, particularly if the individual does not happen to sympathise or realise the importance of co-ordination over all control.

That is bad enough when the control is directed simply and solely to our own international interests, but when that type of control, which must inevitably be used if we are going to co-ordinate our industrial development, is employed directly in the interests of other countries and only indirectly in our own, then the possibilities of trouble, frustration and irritation are enormously increased. It gives to the irresponsible Press an opportunity of creating damage, difficulty and trouble about which I shudder to think.

I am fully aware that hon. and right hon. Gentlemen opposite are not particularly fond of planning. I cannot make up my mind about the attitude of the right hon. Member for Saffron Walden. He seemed to condemn planning and then he seemed to demand it. He referred to the necessity for "steering" the national energy. If that is not planning, I do not know what is. We claim to have made a success of our planning. At any rate, we have taken greater steps towards the accomplishment of the aim before us than any other country in Europe, because we are the only country which has planned. If we can get understanding of what is required to co-ordinate European production in the next three years, we can obviate a lot of frustration and irritation, and for the smooth development of our industry it is of vital importance that it should be understood. We must not underestimate the task of the education of public opinion which is necessary.

Only in the last two days we have had complaints of German competition. We all know that production from Germany is vital to the recovery of Europe. The German plan visualises an increase of exports of 4,700 per cent. over that of 1947. It also visualises by 1952–53 16 times as many exports as in 1948–49. At present German exports are a tiny fraction of what they will be, and what they must be if Europe is to recover, and yet immediately the first few goods seep through, we get a squeal about German competition. If they do these things in the green tree, what shall be done in the dry? European recovery means keener competition with us from every other country in Europe, and we must face that. The United States are pouring out billions of dollars for the deliberate purpose of making Europe more competitive with American exports and it would ill become us to squeal if every now and again we found that the shoe pinched somewhere. We must explain this to the nation. Do not let us under-estimate that task, for it will be a very large and difficult one. It is a task which must be done by all parties.

I do not want to be controversial because I hope that this will not be a controversial subject, but I should like to take a parallel from austerity. We all know that austerity is absolutely essential. We know that it is the one great safeguard at the moment against inflation. Yet the battle for austerity has been left to one man only, the Chancellor of the Exchequer. He has received no help from the Opposition and the help he has received from his Cabinet colleagues has been disgracefully little. [HON. MEMBERS: "How does the hon. Gentleman know?"] I know because I read the papers. [HON. MEMBERS: "Oh."] The Opposition certainly cannot claim any credit for assisting the Chancellor of the Exchequer. I do not blame them; an opportunity to fish in troubled waters is very difficult to resist. If we are, to use an Americanism, to "sell" European recovery to this country, the task must be done by us all, for it rests fairly and squarely on the shoulders of each of us.

6.5 p.m.

Mr. Walter Fletcher (Bury)

Every-body will agree that the speech of the hon. Member for Chesterfield (Mr. Benson) was a valuable and thoughtful contribution to the Debate and that as far as possible, it avoided the normal controversy which there is between the two sides. I want to start by paying a tribute to those who are responsible for preparing this document, particularly Sir Edmund Hall-Patch, who is, and has been throughout, our chief representative on O.E.E.C. and whose great knowledge, particularly of the Continental mind and its working, has been of invaluable help in getting over many of the difficulties. It would be ungenerous possibly to refer to this document as the "If-ers Compendium." It is full of "ifs." It is the old story of, "If we had some eggs we could have some eggs and bacon if we had some bacon."

Nevertheless it is of extreme value in that it brings out into the light of day the real problems of economics that face us not only in Europe but also in the rest of the world in the next four years and even beyond that. To sum it up, it asks the question: Shall we be able to make one economic working unit of Western Europe to such a degree in the next four years that we shall be in sight of temporarily bridging the dollar gap and making a further appeal to American generosity unnecessary at the end of the four years?

In approaching that problem, we should take a lesson from what happened with U.N.O. When U.N.O. was started great harm was done because it was inaugurated with too large a fanfare of trumpets and too easy a belief in what it could do, and an insufficient examination of the hard problems, of the real differences of opinion concealed by the original facade which was created. Let us learn that lesson. Let us look at this document and these problems with much greater criticism. That must not be taken to mean a lack of hope or appreciation of what can be done and what may be done.

I am reminded of the story of Disraeli when he was at the very zenith of his power as Prime Minister with a mandate which hon. Members opposite would have found satisfactory even on modern standards. He was approached by a gushing lady who said, "Oh, Prime Minister, is it not wonderful to have all the power you have? Think what you are able to do." Disraeli replied very wisely, putting his old and rheumatic hands together, "Madam, I can do that"; putting his hands an inch apart, "I can do that"; putting them two inches apart, "I can do that"; and stretching them apart, "But I can never do that." If we remember that when tackling these economic problems, we shall get along better.

The first difficulty I foresee is that the 19 countries who are participating and the others who may one day join in, have taken decades, if not centuries, to get into their present economic rut. To believe that within four years we shall be able to get them out of those ruts, and make them alter the whole of their ideas of the development of their own countries sufficiently for them to become welded as one economic unit, is rather over-hopeful. It is not wise to think that we can alter the economics of a continent in four or five years. That is not said in any spirit of despair. It is no jeremiad. It is merely trying to recognise the magnitude of the task and not to do harm to it by being too optimistic, particularly as the time factor is so very heavily against us.

Targets are being set, splendid sentiments have been expressed and there has been recognition of a new spirit abroad in Europe and a desire to understand and co-operate and to make sacrifices, but I want to enumerate some of the difficulties and some of the reasons why I believe it will not be possible in so short a space of time to achieve those targets. Take an instance away from Government policy level and on the level of those in the commercial community who go out in order to co-operate with their opposite numbers in Europe and to create new industries and to trade. The economically ideal spot is selected. It may be the place where there is the cheapest power or the right labour force or the right sources of raw materials. What is the first difficulty we come up against. I should like to have the attention of the Chancellor of the Exchequer because this is a point on which I am certain he can help a great deal.

The first difficulty is the setting up of the requisite form of company in which this work can be carried out. It may be a blessing to everyone concerned but the British business man is immediately up against the problem of dual taxation. Those who are taking the right view about the use of capital and taking the risks which cannot be avoided if we are to create or expand any industry in Europe, have not only to pay the taxation of the country in which it takes place, but have to pay also the taxation in this country for the money which the invest abroad. That means, by and large, that they are asked to take a three to one risk on the investment of their shareholders' money.

The dual taxation involved is something in the nature of 60 or 70 per cent. Between America and this country, it has been possible to reach an understanding, and there is no dual taxation, but between France and Belgium and this country the question of dual taxation, as I have ascertained in Paris and Brussels, is put back to the end of the queue. Why? Because those countries are in an economic state in which they cannot bear the immediate loss of revenue which doing away with dual taxation would create for them and this country. Nearly every country is very much in the same position as we are in trying to balance their budgets. We are not really balancing our Budget but living on dollars which we get to help us. The immediate loss which this dual taxation must mean to them prevents them from going forward with its abolition.

What is the next obstacle with which we are faced? It is the danger of inflation and the instability of currencies. In the case of France the terms of its loans which America have made express clearly the desire of everyone to bring about stability and to avoid inflation and currency devaluation. We have seen in France devaluation in three years from 485 to 860 and from 860 to 1,767 francs to the £. This is the greatest discouragement to the development of business that one could possibly find. Those who have to take an interest in European development are prevented from so doing by this danger of currency fluctuation. In France there is an improvement. In Belgium there is not. We may yet see a country whose currency is in danger not because it is too soft and too weak, but, as in the case of Belgium, because it is too hard and practically unobtainable.

So long as there is not currency stability, the idea that we are going to be able to make Europe into one smoothly run and economic entity is a dangerous one. It needs lots of time to accomplish that, after the stresses of war, and when France has had one form of occupation, Belgium another and Holland another, and when countries have undergone destruction, moral and physical, it takes a long time for a continent to settle down so that there is an avoidance of the risk of currency inflation. These are two instances of the difficulties we get before we can arrive at a situation in which we can develop. Customs barriers are another great hurdle hard to take.

Other things which have not been brought out in this document and which should have been brought out much more into the open by the Chancellor of the Exchequer in his speech, include the question of East-West trade. That is a very difficult and thorny subject. On both sides of this House we have all heard and asked, "What policy should we adopt?" Should we go in for what is virtually a policy of sanctions against Russia and the satellite States, or go in for a policy of continuous, open and eventually full trade. Surely the decision on that question must condition almost entirely the success or failure of Western European recovery.

I think that we have to be quite open about it. I would only say a few words about it at the present moment. From all the experience there was in the application of sanctions in the case of Italy in the Abyssinian affair, one thing is certain, that if the sanction is not effective, it does the maximum harm to the person who tries to impose the sanction and creates the worst possible atmosphere. Therefore, let us not talk too lightly and too easily about the application of sanctions until we are perfectly certain it will be effective, and we have weighed very carefully what the result will be if it is effective.

Russia is a country which is not only the third biggest gold producer in the world but has a large fund of dollars and has been buying what it needs for her stock-piles in large quantities in dollars. In the world as it is today it is obvious that any country with gold and dollars can render most sanctions ineffective. I shall need convincing that any country possessing gold and dollars cannot in the end obtain what it wants by one means or another. Some of the arrangements made by the Government with the satellite States recently called for a great deal of elucidation. They are under the shadow of the big doubt whether we are not really doing what happened in the case of Italy before the war, when we began the sale of iron and steel scrap to Japan and helped their war effort. Remember what happened in the case of delivery of oil to Italy when we tried to apply sanctions to Italy? Unless we think clearly, openly and boldly about this question and its effect on our plans, we are not being entirely realistic.

The hon. Member for Chesterfield (Mr. Benson) raised the question of Germany. Three and a half years ago I was a lone voice when I raised the question about what was to happen about Germany and Japan, but some of the things which I raised then have come to pass now. It is certainly the fact—and the President of the Board of Trade referred to it in Manchester last week—that our textile industries are going to be very seriously affected by what is happening in Japan, where in the recent elections Communism has crept in, even in spite of American vigilance. A question which I think the hon. Member for Chesterfield takes rather too easily is that of German competition. At present it is a cloud no bigger than a man's hand. It is true that it is economically unreasonable to suggest that we must already start suppressing her and see that her exports are not allowed to increase in various ways, but the experience of those who have lived and worked in Germany—and I have done so many years ago—and who have had interests there, and know the character of these people, shows quite clearly that the chance of being able to maintain effective control is not very great.

Mr. Benson

I think that the hon. Gentleman misunderstood me. I tried to emphasise that the growth of German production and export was not something to be feared, but something which was vital to the recovery of Europe.

Mr. Fletcher

I am sorry if I have done the hon. Gentleman an injustice. There is no doubt about it that the German people in the last two years have had the will to draw themselves out of the situation in which they found themselves and have made a beginning of a most remarkable recovery. They have built houses and have not waited for licences or to decide whether four-fifths should be put up by the Government and one-fifth by private enterprise. They have started to build with their own hands and with whatever material they could find, and they have shown the will to accept a very much greater degree of austerity than we have accepted here. It is no use our minimising it. It is no use pretending that this document has an air of reality about it unless we take into account in assessing the chances of success the great recovery made by Germany very much on her own, and the even greater effort which Japan has made, assisted by American brains, raw material and modern technology—Japan which suffered no little war-damage. We are in danger of creating two Frankenstein monsters in different parts of the world and we must see that, when we are considering the economic balance and development of the world and our position therein, as much watch as possible is kept on those two great dangers.

Let me turn now to another aspect. The real lesson to be drawn from that document is this: The hope of European recovery within Europe being sufficiently great within the prescribed four years is a very slender one, even with the possible advantage—a very optimistic hope—of the opening up of East-West trade in Europe; even with having all the breaks or terms of trade in our favour; even with a possible drop in raw materials. It is extremely doubtful whether at the end of the four years, we shall really find ourselves in the position which is the great hope of that document, of true economic balance.

But the real answer there implied—and only touched upon, and not sufficiently touched upon, by the Chancellor—is not in European construction but on the vast expansion that it is possible to foresee by an intelligent handling of all the overseas territories which Europe, including this country, controls, or in which it has a very major say, and of those inside our Commonwealth. That is the real hope and that is why I am going to take the Chancellor most severely to task for one expression he has used before and ventured to repeat today. He said today that as far as we are concerned those territories have been "gravely neglected."

Where is the grave neglect? Were the £3,000 million overseas investments largely drawn from those areas by private enterprise before the war a sign of neglect? Is the rubber and tin, the export of which is more in value than the total exports of this country to America and produces more dollars, a sign of neglect? Is the development of copper in Rhodesia and South Africa a sign of gravely neglected opportunities? The Chancellor is biting the hand that feeds him, even if our diets are slightly different, and he has not the slightest justification for so doing. He is not only repeating the party shibboleth, which is unworthy of him, but is doing a much greater harm, and he, a man of conscience, should, I think, answer this. If there is to be a joint development of the great areas of Africa and the Far East and the West Indies on a basis of partnership between State and private industry, then to throw out slanders of that sort upon those who have developed the countries within the Empire, those who at this moment are providing us with the things with which we get the dollars on which we live, does not create the right atmosphere of cooperation.

The word "co-operation" comes from his lips very frequently but in this particular instance he has, I think, made a grave error in again repeating "gravely neglected." It was not "neglected." Opportunities were missed, I know, and nothing was perfect, but the Chancellor should look around him. Who created the Argentine Railways on which we are living slice by slice or, in his case, grain by grain? Who created in America itself many of the railway systems? Who created and opened up to a very large extent India, Burma and Siam? Canada, Australia, New Zealand, South Africa. Look at them. All these world countries were opened up by the "grave neglect" of private enterprise which he has condemned to such an extent. Let us forget that phrase; wipe it out. This is not the moment to emphasise these things.

Let us look at what can be done and how it can be done. We on this side are often accused of hating plans and not planning sufficiently. I propose to try to give an example of real planning and of how it can be carried out and in so doing I shall, I think, by implication, condemn to a very large extent what has been done on the groundnuts scheme. There is in Western Africa, an area in which nearly every important European country is represented. In that area is the possibility of joint development by the European countries, which is, I think, the brightest hope we can at present see on the horizon. A map the size of the wall of this House should be made, showing these things: first, soil; then ethnology, showing the various peoples and whether they were good at cattle, like the Masai, or a people with a green hand who could grow and produce anything; the location of those tribes, whether they were nomadic or whether they do not like moving about, and things of that sort; labour and its customs.

The question of labour would come first. Next, the map must show such things as watersheds; facilities for transportation; harbour and railway possibilities; where cliffs are to be found, so that use may be made of the force of gravity to put produce cheaply into the holds of ships. All these things must be shown. If such a map of that area were made, it would be found that there was a possibility of real development and real success. Nothing succeeds like success. [An HON. MEMBER: "It has been much neglected."] Not much neglected, but capable of considerable increase. If the right hon. Gentlemen went to places like Takoradi or to some of the other harbours I do not think he would use the words "much neglected." There were many occasions when he was inclined to give away the Empire because, perhaps, he thought it was of so little value. But now, possibly, he thinks slightly differently about it.

The true development of that area will have its vital effect on European economy and can have effect very much more rapidly than we can genuinely anticipate upon old, deeply-rutted European economies. To begin with there must be a considerable cession of sovereignty. Certainly there would have to be some central authority in which all the countries concerned and those on the spot would be represented. We should need a common transport service. That, I know, is already being studied, but I would point out to the Government that they have not taken private enterprise into their confidence in this matter nearly enough.

The meeting held recently about East African transport was held behind closed doors and no report about it has been sent out. It is time that it was. There would have to be a decision as to what extent the development was to be for the benefit of the people of Africa and what for the people of Europe. Are we developing East Africa in order to get cheap margarine for us, or in order to benefit the local inhabitants? These points must be decided, but they are infinitely less difficult to decide because the stage of development of West Africa—or all Africa, or the Far East or the West Indies—is so much lower than it is in the old-established countries in Europe, those other countries not having been in the orbit of development for so long.

Mr. Pritt (Hammersmith, North)

But neglected.

Mr. Fletcher

I will make a present to hon. Gentlemen opposite of the word "neglected." If they really think they they are going to face the future working of the economic policy of the world by talking about neglect that happened in the past, they are doing an incalculable harm on a very serious subject, to which everybody with any sense at all is trying to devote himself in a positive fashion. The neglect, I hope, will show itself at the next election in the hon. Gentleman's constituency.

Let me return to the real question of this big development in West Africa and in other territories of that kind. West Africa is the best illustration, because it contains French, Belgian, Portuguese and British territories. I believe that during the Five Year plan of joint development we ought to find, perhaps, a common currency, which would be an example to Europe, break down every sort of Customs barrier and establish unified Government services. In this way we should be able to produce an example better, quicker, and more productive than can possibly be hoped for in Europe as it stands today.

I have pointed out the extreme difficulties facing the countries of Europe in making these concessions, because the short-term difficulty of unbalancing their economies cannot be undertaken, in spite of the long-term benefit which might be achieved. But if we, who have the greatest possible contribution to make—because we are at the centre of the greatest Commonwealth, which has had the finest record of development, taking Canada, Australia, New Zealand, South Africa and everywhere together—if we go into the open and say, "We will make the biggest possible contribution to the development of the territories under the control of Europe outside Europe," we shall be doing what is plainly indicated as the most practical step in world economic recovery. Therein lies our task and therein lies our hope.

6.30 p.m.

Mr. Albu (Edmonton)

It is with perhaps, more than the usual anxiety that I rise to address this House for the first time. I have the feelings that are normally felt by the hon. Member who does so, and which have been described to me by so many hon. Members including the hon. Member for Bury (Mr. W. Fletcher) who told me that when he first rose in this House he felt as if he was standing up for the first time in a nudist colony. I have an even greater feeling of responsibility because I realise that I am standing in the place of one who did, I believe, win the respect and good will of this House, as I found he had won the great confidence and affection of his constituency. The tragic death of Evan Durbin removed from the party of which I am a member and from the service of his country one whose moral and intellectual integrity was of great value in our public life.

In a very few moments I want to draw attention to the long-term effects of the changing structure of our world economy and its consequent effects on British and European industry. I think that the officials of the O.E.E. are to be congratulated on the extremely lucid statement of the position of the European economy, as set out in the interim report on E.R.P. I am glad to see it quite officially stated that this situation is not due basically to the war or to actions which may have taken place since the war. It is the result of natural world economic developments. We all know that Western Europe was built up and its standard of life was maintained because of the great advance in industrialisation of the countries of Western Europe. This advance, during the course of this century, has very largely been lost because of the industrialisation of other parts of the world, with the result that, before the war, Western Europe only just maintained itself by means of its invisible exports, chiefly by the interest on its foreign investments.

It is not only the increasing industrialisation of other countries which has led to this fundamental change of economic relations; a high level of unemployment in many cases prevented effective demand and so masked the changed economic relations in the world. This fact, combined with great poverty in many parts of the world, ensured a generally favourable position for the buyers of foodstuffs and other primary products, the prices of which were the first to tumble in times of slump.

I am afraid I am not one of those who believe that the terms of trade are likely to turn ever again in favour of this country or of Western Europe. I think we have to face the fact of the industrialisation of other countries and also, of course, the considerable biological changes to which certain rather melodramatic American writers have recently drawn attention. In addition to this increasing industrialisation, and the demands due to full employment, there have been national and social revolutions in many parts of the world which have caused a demand for higher living standards. Particularly in Eastern Europe the distribution of land to the peasants will I think, have the effect of causing a lower productivity and increasing self-consumption. Therefore, we cannot expect again such an amount of food and other materials as we used to get in those parts of the world.

I believe that we are now witnessing a beginning of the levelling out of the world standard of living. In this country there has been, as my right hon. Friend mentioned, a very great redistribution of the national income. It has been carried out by the Government during the course of the war, and it is entirely in accordance with the policy of the Government today and of those of us who sit on these benches. It is difficult to present the actual extent of this change in the national income because of the insufficient data that we have on the national income and on its distribution, and because of the changes in value that have taken place since 1938. I am no statistician, but I have made some calculations. I hope they will not be held against me. I am going to use them merely to demonstrate the extent of the change that I think has taken place. These figures are after taxation and at 1938 prices. Therefore, they are real values.

I estimate that in 1938 the top 5 per cent. of the population received an average income of just over £1,000 per year, whereas in 1946 the top 3¼per cent. of the population received an average of just over £650. In 1938, the bottom 85 per cent. received an average of £145 per year, whereas in 1946 the bottom 89 per cent. received an average of £170 per year. I am aware that many people were getting above or below the average and some may have been enjoying a high level of income due to expenditure out of capital, but the figures I have given mean that between 18 million and 20 million people are getting, in terms of 1938 values, an extra 10s. a week in their pockets to spend. If we consider the effect of those changes on the home market, it is clear that the demand for certain classes of goods is going to rise much more rapidly than the demand for other goods. We know that the percentage of income spent on food falls as income rises, the percentage spent on clothing remains constant and the percentage spent on furniture and household goods, and similar semi-luxuries, rises very rapidly indeed.

I believe that we need to find out a great deal more about what people spend their money on when they get an extra few shillings in their pockets. Unfortunately, we have far too little knowledge about the nature of the expenditure at different income levels. It is very strange that in that bastion of free enterprise, the United States, there is far more of the basic information required for planning than we have in this country. Before the war, two great studies were made on this subject, dealing with the period roughly from 1934 to 1936, one by the National Resources Committee, published in 1939, and one by the Bureau of Labour Statistics, published in 1941. In this country we have nothing but the Ministry of Labour working class family budgets, based on a survey made in 1937 and 1938, and on which our present cost-of-living index is founded. There are also some small private surveys into middle-class incomes. I would urge that we devote much more attention to this subject. I am glad to hear that the Social Survey is beginning to undertake work of this nature, but they should be enlarged and transferred from the Central Office of Information, where they are situated, to the Central Statistical Office, under which they would be more suitably placed.

It is clear that there is going to be a very great increase in the demand for certain classes of goods. Unless those goods can be produced in proper quantities and at proper prices, and if they are not made available, there will be inflation, high prices, and discontent. Can we be satisfied that industry is making the necessary changes to contribute to this end? Is it not perhaps the case that the high cost of living, to which my hon. Friend the Member for Central Bradford (Mr. Webb) referred in a rather inconclusive Debate before the Recess, is due to this factor? I am sorry that we appear to be abandoning some of those utility standards which were a great safeguard for the great mass of lower-income consumers. I believe that both for the home market and for the export market a very much greater rationalisation in types and qualities of goods has to take place, so as to provide for these growing mass markets both at home and abroad. This would increase our productivity by allowing much better production methods and planning methods.

To those who would answer that this process would mean a drab standardisation, I say that that would not necessarily be the case, because modern market research can determine effective consumer choice. There is a large number of goods for which there is no advantage in variety except for a certain snob appeal. I am reminded of a certain story about the higher officials in Hollywood who, finding that there was no way of distinguishing by conspicuous expenditure their different levels of income, took to buying small coloured blocks of wood which were sold at different high prices, and which were then distributed around their drawingrooms.

It is sometimes argued that we cannot achieve American standards of productivity because we produce high quality goods, and not mass production goods, and we need these goods for export. This is by no means true over a large range of products, including light engineering products. In so far as it is true, it is because British industry grew up in an era of what I would call a class market at a time when the mass of the population had little money to spend except on subsistence goods, whereas American industry, with a different social and political background, and for other economic reasons, grew up for a mass market.

The world with which we hope to trade in the future is changing. My right hon. friends the Chancellor of the Exchequer and the Foreign Secretary have told the French and other European countries that we are no longer a market for luxury goods, and, to a large extent, what applies to them applies also to us. After all, our standard of life is higher than that of most other countries in the world. It is certainly true that we must try to produce certain high quality goods in which we are specialists—for example, fine pottery, men's clothing and leather-ware and so on—for the United States and other markets, but the volume is bound to be limited and the market is very vulnerable.

We cannot hope to continue to export the cheapest mass production goods in which we were the first to lead the world. As the hon. Member for Bury has pointed out, there will be competition from Japan and other countries in, for instance, cheap textiles. We must aim to supply those good quality mass produced goods for which the demand rises so rapidly once the subsistence levels are passed, and which require great production engineering skill if they are to be produced in large quantities and at low cost. Those are the sort of goods which I believe will be needed by the suppliers of our essential imports, who are demanding higher standards of life, and they may be the means by which we can persuade them that it is worth while to remain the producers of primary goods.

I suggest that we take the lead in establishing, under O.E.E.C., a great statistical organisation to undertake studies of consumer demand in participating countries and countries with which we trade. I understand that the Americans have offered some assistance in this way, and I believe that we should ask them to put their great experience in this class of work at the disposal of the O.E.E.C. organisation. Planning of international trade and investment would then take place more on a basis of knowledge and less on guesswork. At home we should pursue policies directed towards adjusting British industry to suit these changed conditions. I am aware that there are certain aloof critics, such as the laissez-faire economists of the London School of Economics, who will argue that these changes will take place automatically in response to demand. I believe that we cannot await the millenium for that to take place, but must take far more positive action if we are to raise the standard and reduce the cost of living for the dense populations of Western Europe.

6.44 p.m.

Mr. Turton (Thirsk and Malton)

I should like to congratulate the hon. Member for Edmonton (Mr. Albu) on the very interesting speech which he has delivered. He has come through his ordeal with distinction, and we look forward to hearing him on future occasions when he will be able to give us at greater length his views on economic and other problems. I do not say that I agree with all his conclusions but I should like to approach this question from the same angle as he did.

Whether we agree or disagree with the Government in their policy we are all united in our endeavours to see that the aim to produce more is successful. But while we have this duty we have also a great responsibility to utter our criticisms if we believe that the Government are wrong in this White Paper. I should have thought that the most important thing—and I think that the hon. Member for Edmonton would say so himself—is to see that we create incentives to greater production. He envisages as incentives more utility articles and a greater availability of mass produced goods. I do not believe that that is the best incentive to greater production at the present time.

I believe that what we must get first and foremost is a more ample diet for our people. After all, if one is trying to get a horse ready to win the Derby, what one has to look at first is the quality of the animal's rations. If one is trying to increase milk production it is the increase than one puts into the cow that will achieve greater production of milk. The most gloomy part of this White Paper, as was referred to by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler) is when the Government anticipate that the position in 1950, and 1952 and 1953, will not be very different from the dreary and tightly rationed standards of the present day. We must try somehow to do better than that. If we are to get this increase of production in three years' time, we must evolve some plan for providing a better diet for our people. And I am not talking about pomegranates, plums, pineapples, wines and champagne and rum. I am talking of meat, bacon and eggs. I am certain that what our people are lacking, whether it is in the coal mines, the iron and steel trade, or indeed in the agricultural industry itself, is a diet that has more vitamins in it—I dislike the word—a less stodgy and more varied diet.

Let us see exactly what is the nature of the Government plan to increase agricultural production in this three-year period. I realise that it is a vast increase, but the balance of it is, in my view, incorrect. They are aiming to get an increased production of bread grains of 64 per cent. over pre-war, while the other 19 participating countries are aiming to get an increase of only 14 per cent. Why is this country, under the direction of the Chancellor of the Exchequer, putting all their counters on wheat? Why are we planning to increase our wheat acreage by 700,000 acres over 1946? Two and three-quarter million acres of wheat will, I believe, put the balance of agriculture completely wrong and it will also destroy the fertility of the soil. This will involve ploughing out grassland that ought to be used for the grazing of livestock.

When we come to meat, we see the results of this plan. My right hon. Friend the Member for Saffron Walden quoted the figures, comparing them with the 1949 figure. But let us look at the whole of the plan for meat production in this country and compare it with the plans of other countries. We plan, at the end of the whole of this struggle of three years, to have a level of meat production 2 per cent. below pre-war, whereas the other 19 participating countries are planning to get their production up by 6 per cent. Those figures and that comparison are really not bringing out the full nature of the comparison. In France the meat production is planned to increase in 1952 by 26 per cent. over pre-war.

In Turkey, they are planning an increase of 50 per cent., yet in this country, because we have banked on getting this huge acreage of wheat when wheat is in ample supply in the world, we fail; we cannot even reach our pre-war target. Ireland, for some reason, does not give a comparison with pre-war in this grey document. They compare their plans with the 1947 figure. Ireland is planning by 1952 to have made double the advance from 1947 compared to what we are planning in this country. Her plan is to reach 34 per cent. above the 1947 figure, whereas our plan for meat is to reach 18 per cent. above that figure.

The whole matter rests on the import of feedingstuffs. The reason why other countries are making greater plans for a more varied diet is because they expect to get greater quantities of feedingstuffs from the Western Hemisphere and elsewhere. When the Chancellor talked this afternoon about planning for raw materials for industry to be 105 per cent. above the pre-war level, but the raw materials for agriculture were to be only at the rate of 75 per cent. of pre-war, I could not understand his logic. Indeed, when we read the interim report on the European Recovery Programme, we find that that figure of his was much higher than the figure contained in our agricultural development plan. Our imports of coarse grains for feedingstuffs at the end of this period are to be a good deal lower than the imports of feedingstuffs for last year—not 75 per cent. above prewar, but 61 per cent.

I ask the Government to reconsider this part of their programme. If that plan is changed and we import the same quantity of feedingstuffs as we were importing before the war, the cost of it would be an additional cost of about £48 million a year and we should be able to save some 50 per cent. more than that in imports of meat. Nobody can say now that the feedingstuffs are not available. All the exporting countries have a glut of cereal feedingstuffs. The relative value per ton weight of meat and grain is that the grain comes in at some £24 a ton and the meat at £50 a ton. Therefore. there would be a considerable saving.

I appreciate the reason why the Government are embarking on this policy. It was announced in the House on 12th July, 1948, when the Minister of Food declared: …at the moment, with present world prices, imported meat is a far cheaper source of protein food than is imported coarse grain which is turned into meat in this country."—[OFFICIAL REPORT, 12th July, 1948; Vol. 453, c. 880.] It is because the Minister of Food is dominated by that idea that this country will have a poor diet during the whole of the period of this plan. If we fail, which Heaven forbid, it will be because that decision has been made by the Government. The swiftest expansion in meat production could be made in the production of pigs. I gather that the programme for pig production for next year will still be at only 47 per cent. of the pre-war level. In pork, bacon and pig meat we shall only get up to that level.

Will the Government look around the world and examine what other countries are doing in the way of pig meat production? Two years ago Denmark had got to a level of 57 per cent. of the pre-war figure; Belgium had reached 76 per cent.; France, 82 per cent.; Italy, 104 per cent. and Greece 107 per cent. That was two years ago, and yet one year ahead we are only to get up to 47 per cent. I hope that whoever replies to this Debate will say what are the actual figures today for the production of pig meat in the other participating countries under this plan.

The failure to increase the consumption of food in this country by providing more pork and bacon is due to the lack of cooperation between the two Ministers responsible—the Minister of Agriculture and the Minister of Food. We talk about providing capital for getting this expansion over the whole of this plan, but if any one tries to get capital today for expanding meat production they will meet with failure. I had an instance only recently where a large pig producer wanted to double his pig production. He is not from my constituency but from the North of England. He asked the Ministry of Agriculture for the necessary feedingstuffs and the necessary capital. After a month's delay the reply that he received said: The scheme you outline has been considered. Whilst it is agreed an increase in the pig population is desirable, I would point out the number of pigs in the country depends on the amount of feedingstuffs available. As you will know from your own experience, feedingstuffs are in very short supply.…It is regretted there is no scheme for financial aid for pig production. If those are the facts, they should not be. There is no shortage of cereal feedingstuffs in the world. There should be a plan to increase pig production. If this had been a plan not for producing pig meat in England but in Queensland or in the Gambia there would have been no lack of capital and the feedingstuffs would have been made available. I ask the Government to reconsider this part of their plan.

I make one further comment on this White Paper. I am old-fashioned enough to regret that nowhere in this document can we find out what is the contribution from the Commonwealth and Empire to our import programme. I wish there had been, in addition to Table III, a table which showed what we hope to import from the Commonwealth and Empire and what we expect to receive from other countries. It is really no good basing a plan for our recovery on large surpluses of food from Europe. That is a part of the plan. If there are surpluses of food in Europe, whether in Holland or in Denmark, those surpluses should be directed to the needy areas of Europe rather than to this country.

It is not too late to call a conference of Commonwealth and Empire producers and to put all the facts of the position before them, to ask them what contribution they can make to our problem, and then to appeal to home agriculture to supply the balance. That has never been done. It should be done. The failure of the plan on the agricultural side is that far too much dependence is placed on European agriculture to help out Britain by sending surplus bacon and eggs to us, and also dependence on supplies of meat from the Argentine. We have put ourselves in a most difficult position owing to the bargaining nature of the present Argentine Government. The Government would be wise to avoid that. Last Monday night I listened to the Chancellor asking for great sacrifices and prodigious effort from agriculture. Agriculture will make that effort but they ask for intelligent co-operation from the Government.

7.0 p.m.

Mr. Hopkin Morris (Carmarthen)

The Chancellor of the Exchequer in a very lucid statement this afternoon stressed the importance of the fact that the new international arrangement was a new experiment. So it is, a new experiment beset with difficulties which have been pointed out by the hon. Member for Bury (Mr. W. Fletcher) and others. The major difficulty comes from the difference between the East and West of Europe, but another difference comes from the rapid changes which have taken place throughout this century. I imagine this century has been the greatest changing century of any in history. Although we are only half way through it, we can divide this half century roughly into six or seven periods which are certainly distinct from one another. The Europe that went into the first world war was totally different from that which went into the second world war and the Europe which emerged from the second world war is totally different from that which emerged from the first world war.

The Chancellor is right when he says that we cannot hope to meet the new situation with old institutions, however useful they may have been, nor hope to solve the problem merely by approaching it with the forms with which we sought to approach the problem between the two wars. One has only to compare the physical appearance of Europe at the beginning of the century with that between the two wars and to look at two maps placed side by side to see that there is not a frontier line that is the same, with the exception of the North-Western and the South-Western. All are changed; and transferred population has changed the whole complexion of industry and the channels of commerce, between the wars. The second world war produced still far greater changes. When I hear comparisons made between the period of recovery after the second world war and the recovery after the first world war, I confess they do not convey very much meaning to me. I find very little comparison between the two periods. When it is said, "It took seven years to do this after the first world war, but now we have achieved something in three years" the comparison is not between two worlds which are identical in any way; they are not comparable. It is quite meaningless.

The problem with which we are confronted today is first of all a problem of peace. Whether or not this plan will be carried out in four years, as we all hope it will, the first important fact is that in 1939 the external trade of Western Europe with Eastern Europe was 8 per cent. of its total trade, but today it is less than half that amount and the loss of that trade is a material loss to the recovery of Western Europe. This plan becomes necessary, first, because there is a lack of peace and a lack of common understanding between East and West.

War, unfortunately, does something apart from destroying the material wealth of a country. It destroys the intellectual outlook of the world also. It does something quite different from destroying moral standards, it destroys intellectual values. That has happened in the two world wars. One of the first difficulties, if we are to have this union, is to have a stable currency, not between East and West in Europe, but between the participating countries themselves. The Chancellor admitted that that is going to be a difficulty and I agree. As the hon. Member for Bury said, that cannot be treated as an easy problem which can be solved merely by smooth phrases.

Further difficulties arise from the fact that between the two wars the whole of European trade became a network of restriction, of tariffs, quotas and the rest, decreasing the volume and value of trade. What hope is there of establishing a free trade area within the participating countries? On the success of that, in the first place, will depend the success of the programme of recovery by 1952. That is not going to be easy. The different countries have different restrictive systems and it is going to be a difficult problem to adjust them to one another. But, unless they are adjusted and there is free movement of goods within this area, there is no hope of achieving the programme by 1952. That is a responsibility which we all share alike but when we look at the Report we see a responsibility that we carry alone in this country.

In the Interim Report one of the important observations accounting for the change in the position of Europe relative to the United States, is that not merely were the two wars responsible for deterioration, but that the process of deterioration had set in long before the first world war, before 1913. In that process of deterioration our standard of living relative to that of the United States was gradually going down. That is something which we ourselves can do something about. We have changed the structure of our industries and are changing them and bringing them more into line with the Civil Service. At the same time as we are adding to the Civil Service we are creating another civil service within industry to deal with the Government. We are taking out of industry and production people who are needed.

Throughout every paragraph of the Report the demand is for greater production. The speech of the Chancellor of the Exchequer this afternoon pointed out the urgency of maintaining greater production in the coming four years. The right hon. and learned Gentleman paid very just tribute to managements, technicians and working people for the great achievement of the last three years and the raising of the export figures. It has been a great achievement, but we cannot hope, quite apart from war conditions, to compete with the United States of America and maintain our standard of life in comparison with hers, unless we also adopt the same measure of competition as she does and release for production a great number of our people, instead of taking them from production. It is a matter of urgency for the welfare of our people that this programme should be achieved, but it must depend first and foremost on human elements, the restoration of peace and the freeing of the channels of trade.

7.9 p.m.

Mr. Pritt (Hammersmith, North)

I beg to move, to leave out "now," and at the end of the Question to add "upon this day six months."

There have been a great many views and criticisms in what I think has been an interesting Debate up to now, and perhaps it is not inappropriate that at this moment the negative should be moved to show the views of, I think, a great many people, that, unfortunately, this scheme cannot work and that a totally different course should be followed.

I followed with great interest the speech of the Chancellor of the Exchequer. Its lucidity, perhaps, no one else could have achieved, but any Conservative could have delivered the speech without the slightest change of political view or emphasis. There were four or five words in it that reminded us of the Chancellor's past when he referred to the neglect of the Colonies, for which he got into a great deal of trouble in the very interesting speech by the hon. Member for Bury (Mr. W. Fletcher). I do not want to go into that, although one could have quite a bit of fun with it. One need not remind him either of how magnificently they boosted up rubber and tin in Malaya when it was profitable to do so, and also how, only a few years ago, they were closing down tin and rubber in Malaya, because it was the more profitable thing to do.

The Chancellor quite rightly emphasised the considerable difficulties involved in carrying this scheme through, but that ought not to stop it, if it is the best or the only scheme. It is facing very great difficulties to achieve very little. If all goes well, in four years' time, we will have a standard of living as good as we have at present, and we will not be running into further debt. I do not want to go into Eastern European matters, but if that programme had been prepared in one of the Eastern European countries, the people responsible for it would have been removed and replaced by somebody who could competently and honestly promise to produce in four years' time a very great increase, instead of a bare maintenance, of the standard of living.

One of the principal troubles is that the Government persist in maintaining an unnecessary and expensive armament programme. I do not say that Marshall Aid is called in to close the gap created by that rearmament programme, but I do say that the cutting down of that programme would put an end to the gap. It is highly probable that one of the major conditions of Marshall Aid is that in our military alliance with the United States we shall maintain a very substantial armaments programme. The very great benefits which we are supposed to get from Marshall Aid are probably taken in at one pocket and go out at the other. The difficulty of all criticism of the Government at present is that we can see a great many faults in this Government, but the only alternative available has a hundred times as many faults. [Interruption.] The hon. Gentleman may disagree about the figure, so we will make it 50. Nevertheless, we must point out that it is a little ironical that the Government are saying that unless we accept what is offered by the American ruling classes, we should have—I will not say a couple of million unemployed, since that figure has been repudiated, so I will merely say a large figure—and at the same time are claiming to be a magnificent Government creating full employment. The Opposition, while halfheartedly welcoming the Bill, demand, unless I am doing an injustice to the right hon. Gentleman the Member for Saffron Walden (Mr. Butler), further armaments expenditure, which, of course, would ruin the scheme.

I do not want to say anything more about East and West, except just to borrow and approve a few phrases from the hon. Member for Bury, who I hope will sue me neither for breach of copyright nor implied defamation of character, by saying that I agree with what he said.

Mr. W. Fletcher

I know who I would employ if I did.

Mr. Pritt

That is very sweet of the hon. Gentleman, who obviously is not going to brief me in an action against myself. I can say that I agree with very much of what he said about East and West.

To come to the main features of what strikes me as one of the principal grave troubles that promise to bring this carefully-laid scheme to disaster, it is that it depends mainly on the maintenance and increase of our export trade, and we cannot hope to maintain or increase our export trade if the export trade of Germany is to be allowed to develop. There are many reasons, some of which I approve and some of which I do not, why we shall not be able to put a stop to the developing export trade of Germany. The most sinister feature of that is that under American or Anglo-American policy, we are now deliberately rebuilding a powerful, reactionary Germany, side by side with a powerful and probably reactionary Japan, exactly as we did after the first war and with exactly the same motive—the fear of Bolshevism—and that is going to lead in future to very grave results.

I think most of us will remember how, after the first world war, there was a chance for days, perhaps weeks, that really democratic forces could gain and hold power in Germany, but that it was with the assent of the Allied and associated Powers that some reactionary forces in Germany seized and kept power, sometimes under a disguise and sometimes not. That was the main underlying cause, though there were plenty of others, of the second world war, and we can now see in most of the declarations of most Right Wing newspapers and politicians in the United States and Great Britain speeches for which they really ought to be sued by their predecessors after the first world war for breach of copyright, because they are now simply making the same speeches.

The position of Japan is almost identical. A speech was made in the United States a little while ago by one who was then an Under-Secretary, and who said: We must rebuild the two great workshops of Europe and Asia—Germany and Japan. That is becoming almost a stock quotation, and even hon. Members opposite will have heard it. It shows a serious and deliberate policy to build up, not a democratic, but a reactionary industrial Germany. There are two significant things about that speech, and the first is that the former Under-Secretary of State is now Secretary of State, Mr. Dean Acheson, and the other is that it was delivered 19 months ago. That is a very long time; it is almost like planning.

Mr. W. Fletcher

Will the hon. and learned Gentleman tell the House that, in between, Mr. Dean Acheson has not been in office?

Mr. Pritt

I am sorry if I misled anybody. I was assuming that everybody had the knowledge of the hon. Gentleman. Mr. Dean Acheson was out of office a short time after that, and continually thereafter until the other day, which rather gives emphasis to my point that if anybody thinks that Mr. Marshall's departure and his replacement by Mr. Acheson means any great difference, they are wrong, or I think they are.

Let me now examine the position as to the sort of effect which German exports will have. According to the Government, we have got to export very largely indeed in order to pull through, but before we consider the danger of German exports, we have to consider what is the position in which that export might develop. Capitalist countries do not run very smoothly. The United States has been expecting a slump for a very long time, and its financial newspapers have been boasting about the fact that the rearmament campaign has had the effect of postponing the slump although Marshall Aid has helped too; they cannot do that indefinitely.

We are told by Ministers that our exports are already moving into a buyers' market. A "buyers' market" is a euphemistic name for the beginning of a slump. Therefore, the position is that we may at any time have to face a world in which the really good efforts of the export trade which the Chancellor was mentioning can no longer succeed because there is nobody to buy the stuff. In what markets are left, the United States will be competing with panic prices to try to take them away from us. When, or perhaps before that position develops, we have to face German exports. I agree to some extent with what was said by the hon. Member for Chesterfield (Mr. Benson) which, I think, may even be approved by the hon. Member for Bury. We cannot make Germany into a permanent slum. In the first place, we do not want slums, and, secondly, the Germans are not likely to let us do it.

There remain, however, a good many matters to consider and on which it is right to defend ourselves in dealing with German exports. In the first place, I suggest that having had one war against Nazi Germany and two against Germany, we certainly do not want to see that country built up into a formidable competitor on purely capitalist lines at a time when the task which we undertook of seeing that Germany should achieve a peaceful democratic basis has not really begun. If Germany had really become a democratic country, her exports and her general position in Europe would be an encouragement and a joy to all of us and would be no danger, but if she is to achieve the same measure——

Mr. W. Fletcher

Is it the hon. and learned Gentleman's thesis that a democratised Germany, a Socialist Germany, would produce a large quantity of goods much cheaper, and that, therefore, her competition would be greater; or does he say that there would be some method in a democratic Germany of controlling these exports?

Mr. Pritt

It is good of the hon. Member to develop my thesis for me. As a matter of fact, I was doing so when he interrupted me. If I am interrupted like this, it will take me longer to develop it. I was beginning to give the answer he wanted, namely, that the reason why there is a great difference between a democratic Germany becoming a good export country and the present reactionary Germany becoming a powerful export country is that if there is a democratic Germany which wants to be peaceful she will not at any rate be thinking of war, and the danger of the ordinary peacetime troubles in relation to exports are things which have to be faced anyhow. But if we let them build themselves up, particularly if the Americans are playing a part in it, exactly like the Germany after the first world war, growing more powerful, warlike, capitalistic and thoroughly dangerous, we shall be creating the appalling danger of a third world war.

The second point I want to make is that we ought not to be contemplating permitting the development of German exports, when not only is there no democratic friendly Germany controlling the Ruhr, but when the arrangements for controlling the Ruhr are such that there is really little doubt as to exactly what is the reality behind them. There are only two possibilities. The first is that the old Nazis, disguised as new nationalists and with Mr. Thyssen allowed to join them again, will be the real controllers of the Ruhr without much control from the United States, and they will play straight up for war. That would be the worst possible thing. The less bad is bad enough, because it would mean the substantial control of the Ruhr by the United States, the level of raw steel production controlled largely by the United States, and the exports or other disposal of Ruhr steel controlled by them, and used at the very moment when it suits them, either in the slump or otherwise, to attack or destroy the British steel industry in ordinary trade competition, and, of course, with all the time the holy war against Bolshevism in the background, except when it is in the foreground. We must get out of the idea that the ruling classes in the United States are like a kind uncle, who desire our prosperity even before that of the steel workers in Cleveland, Ohio. It just is not reasonable.

The third point is that we are entitled to say that we are not going to have German exports develop freely against us, when the competition they can produce by low wage rates, and, to some extent, by artificial rates of exchange, can undercut us in a fashion which used to be called "dumping"—an export competition which for the moment is controlled by the Joint Export-Import agency in which the Americans can vote us down every time, and which afterwards would be controlled by the United States or Germany without even that formality.

This process has started. There is already serious anxiety about coal exports and the present difference in price between British and German export coal. At the moment there is a difference in price of six dollars a ton, and the dollar is hard currency. The production of machinery, machine tools, and of electrical engineering has already developed a good deal. I have been having a good many interviews with shop stewards and others in my constituency, and I have asked the Minister of Supply why there is this falling off of orders to firms in my constituency. The reply I get is not directly that it is due to German competition, but it very soon will be.

Motor cars are going to develop very seriously, and that is one of our principal exports. We have heard a great deal of anxiety in this country about shipbuilding prospects, and about the limitation of steel supplied to shipbuilding yards. It is suggested that it is already owing to Marshall Aid control that the shipbuilding steel supply has been limited. I wonder whether that sort of thing was in the mind of the Chancellor of the Exchequer when he referred to the fact that we should have to face and cope with changes in our industrial structure? At the moment I believe that German shipbuilding yards are not allowed to provide ships of more than 1,500 tons, but there is a move to remove that restriction. There are some very good shipbuilding yards in Germany; they have not all been destroyed. We have already seen quite a sensational fall in British exports to Switzerland coupled with a sensational rise of German exports to that country—all of them, of course, at a rate of wages which, on the best calculations I can make, indicate that a skilled worker in the Ruhr is getting the equivalent of about 1s. 6d. a week.

I shall not say that I happened to receive a letter from someone in my constituency, because, having been in previous correspondence with him some months ago, I wrote and asked what was the position up to date. The letter reads: We are exporters of cinematograph equipment generally. We have been very worried latterly by the reappearance of German equipment in markets which have been purchasing from us. These are sensible people: of course, all my constituents are. So they write: We realise that we must expect to face up to competition from Germany in due course, but the prices which German manufacturers are quoting at the present moment appear to be more than one-third below world market prices. We have bitter recollections of subsidised German competition before the war which resulted in prices being quoted to our customers which nobody else in any part of the world could compete. The same sort of thing is now reappearing although the price quoted does not appear to be based on subsidy, but on the completely artificial rate of exchange of the German mark. It is quite fair to mention that most of their markets are markets which were German before the war. That is inevitable. That means it will be competition which will be all the more difficult to face.

Mr. Kirkwood (Dumbarton Burghs)

I think the hon. Member has made a mistake, and I will give him the opportunity to correct it. He said he was informed that wages being paid to workers who were producing motor cars in Germany were 1s. 6d. a week.

Mr. Pritt

I am very sorry; of course I meant 1s. 6d. an hour. Wages of 1s. 6d. a week would be a bit low, even in Japan.

Finally, there is the further very substantial consideration that after the first world war American money built up Germany, not with the object but with the result of strengthening her for the second world war. That process has not yet been repeated, but it is on the threshold. It has already been decided to release for capital investment in Germany pre-war foreign holdings of German marks. These are largely held by Americans. Moves are also going forward towards the admission of foreign capital for investment in Germany. The Americans will be there again and they will have control; and the other steps which I have outlined will necessarily follow.

I shall deal shortly with the position which Japan occupies. She occupies almost the same position in the picture as she does in Mr. Dean Acheson's speech, and perhaps she has gone a little further in this sense, that the amount of injury felt by some of our manufacturers and industrial exporters through the production of various goods in Japan, if anything, has gone further.

There were various other matters with which I wanted to deal, but I have taken up a good deal of time and I will come to a very short conclusion. The picture painted by the Chancellor of the Exchequer was not a very happy one. I suggest the programme is almost bound to break down in the next two or three years. In any case, the picture is not very happy. We could not expect that it would be after a war like the second world war, but we want to avoid the direct operation of setting up a strong reactionary Germany for a third world war. We should have learned that 20 years ago. From 20 years ago onwards everybody thought that if we encouraged Hitler and armed him, his gun would point only eastwards. It was discovered afterwards that it would swivel. If we try the same trick again we shall have the same trouble.

I return for a moment to the Eastern countries, the growing countries, where standards of living and standards of production are going up very fast. If we could trade with them we should be in a position of less dependence on the United States. We should not need anything like this very elaborate Marshall Aid programme. We should see our way through and should be an independent country more rapidly and in a more real sense, because we should no longer be the poor cousin or a branch establishment of the United States of America.

7.34 p.m.

Mr. Gallacher (Fife, West)

I beg to second the Amendment.

Listening to the Chancellor today my mind went back to the days before the war when I felt it my duty as a good citizen of this country to try to control, as far as possible, his revolutionary fervour. He was a wild man in those days. I listened to him today and I thought not only of the days when he took the platform with me but I thought much further back, to the period before the First World War when a gentleman named Haldane made a general remark in quite a carefree manner, "We are all Socialists now." I felt that the Chancellor, in the same carefree manner, could have waved his arms and said, "We are all Tories now." I am certain there is not a Tory in this House or in the country who would find anywhere any fault in what the Chancellor said today. Work, work, work.

We are told that the Communists do not want production. On the contrary, the Communists understand the need for all the production that can be obtained. But in connection with production it is necessary to ask who is going to get the advantage of it? That is the all-important question. Let me say here, if the advantage goes to the capitalist class at the expense of the working class, nothing in heaven or earth can prevent collapse and chaos. Any Socialist could tell you that, but I do not know if there are any left on these benches. If the advantage goes to the workers at the expense of the capitalists then we are on the road to the elimination of capitalism and the realisation of Socialism. No one seems to be prepared to face up to that all-important question. The Chancellor says we must stabilise our economy. What does "our economy" mean? Is it economy as it is seen by the other side or is it economy as it is understood by the old Socialist movement? That is the big issue. Not just a question of production.

We were told when Marshall Aid was introduced that it was a generous gesture on the part of the American capitalists, the American Tories. It was said there were no strings. What is this Bill? Is it a string or is it a rope; or is it a link in a chain which will enslave this country? It was said there were no strings, but Marshall Aid is the most important factor in American foreign policy—in American capitalist foreign policy which involves, if necessary, a war against Socialism and the crushing of Socialism in Europe.

The Chancellor of the Exchequer tells us we cannot stand on our own feet. Of course I cannot agree with that; I am certain the workers of this country could stand on their own feet without any Marshall Aid or any assistance from the American Tories. But he says this country cannot stand on its own feet, yet look at the amount of money and energy which is being directed towards militarism. Why? Not because the Soviet Union or the countries of Eastern Europe are threatening this country but because of American Tory foreign policy which seeks world domination for trade and investment purposes. Yes, it was said in the early days that there were no strings to Marshall Aid but no one dare say that tonight.

The Chancellor spoke of this great democracy of ours. What sort of democracy is it? It is a Tory capitalist democracy which keeps the Tories at the top and the workers at the bottom. I want hon. Members to think over that. Democracy is not something fixed and standardised. It has always been in the process of development. This is a Tory capitalist democracy as distinct from the workers' democracy in Eastern Europe. A Tory capitalist democracy needs the workers; it cannot do without them. A workers' democracy does not need the Tory capitalists; it can do without them very well. So when we are talking about production we have to decide who has to get the advantage, and the sort of democracy that we want. I say that this Bill is a part of the chain that the American monopoly capitalists are binding on this country.

I heard a Labour man the other day say that this was the best Government that ever was. But then they tell us that if it were not for the American Tory millionaires this would be the worst Government this country had ever known, and that the conditions would be the worst this country had ever known. Which do we believe? I say that this Government with the backing of the workers; could battle through our economic troubles without Marshall Aid, without the assistance of the American Tories; and I ask the Chancellor, through this Amendment which I gladly second, to associate himself with me in throwing out this Bill, and to allow the workers an opportunity of standing on their own feet.

7.41 p.m.

Viscount Hinchingbrooke (Dorset, Southern)

We have certainly had from the hon. Member for West Fife (Mr. Gallacher) some basic arguments against this Bill, but from the hon. and learned Member for North Hammersmith (Mr. Pritt) we had, disappointingly, nothing but mild criticism. I really could not see why he took the trouble to put his name down to an Amendment for the rejection of this Measure. I have often heard him make much more violent speeches than the one he made tonight without any Motion to speak to at all. It was the mildest speech that I have ever heard the hon. and learned Member make. He was actually in agreement with my hon. Friend the Member for Bury (Mr. W. Fletcher) on quite a number of points, and particularly with regard to trade in Eastern Europe. I also agree with him in that and in congratulating the Government on their having concluded trading treaties with Poland and Yugoslavia and on their not being afraid to enter into the prospects of trade with Russia—provided of course, they do not send Russia materials for war. There is a great diplomatic strategy behind any proposal for trade with countries in Eastern Europe, apart altogether from its advantages to our people.

As to the point of Germany's reviving, I agree with the hon. Member for Chesterfield (Mr. Benson) that while Europe is short of goods there is no harm in Germany's reviving; although I would say to the Government that I should like to see Britain in a stronger position in Germany, for it seems to me that Germany is reviving under exclusively American suzerainty, and I should be much happier if our merchants, and businessmen had a stronger trading position with Germany today, although I agree that it is right that Germany's trade should revive.

From the Chancellor of the Exchequer we had one of the longest speeches he has ever made. It was a speech which put hon. Members on all sides of the House into a kind of slap-happy mood, and even my hon. Friends here—in spite of the arguments contained in the speech, to which I shall come in a moment and which I personally oppose very strongly—towards the end of the speech smiled and nodded weakly. It is all very well when we have a Budget Debate to dwell with some exactitude on all the figures of the Budget, for we have the papers before us, and we can see their relevance and the record. But when taking part in a deliberative assembly, and making a speech which is partly rhetorical in character, it is quite ridiculous to include a whole array of figures about the future, because they mean practically nothing at all but are mere guesses—the sort of guesses which have been put into successive Government planning White Papers for the past four years, all of which figures have been falsified by events. I shall not be surprised if every one of the figures the Chancellor used tonight is falsified by events in a very short time.

The Chancellor, I was glad to see, showed that he had some idea in his mind now about the limitations of planning, for he said we must "chart our direction." When he was talking of the mosaic of O.E.E.C. he allowed himself the eulogistic phrase, "We have seen nothing like it in all the world before." I wonder if that is true. In 1945, when the Socialists came in, they said their national, purposeful economic planning was the greatest thing ever seen in the world, and now the Chancellor is extending that out to Europe and the smaller States. I shall not be surprised if the planners in Paris soon invent techniques to relieve them of the necessity of making any plans at all, and will get the bankers and businessmen of Europe to do their task for them.

Then we shall have seen the return to the free European trading system which has served us so well in the past. I can well imagine the Chancellor's coming down to this House then and saying "Nothing has been seen like this in the world before." That will be when we have reproduced the system which served European civilisation for a thousand years and culminated at the end of the last century.

Mr. Fairhurst (Oldham)

Even if the bankers supersede the present planners they will be planning.

Viscount Hinchingbrooke

Of course, businessmen always plan and have always planned. What we object to is the comprehensive State national planning, and we also object to comprehensive, governmental, international planning of the kind we have on foot in Paris. What we want to see restored as soon as possible, with safeguards we all recognise for employment and so on, is a free trading system.

What should be the prime objectives of British economic policy at the present time? I think that from what the Chancellor of the Exchequer told us today he has not rightly conceived the situation. The prime aim ought to be to restore the fortunes of the British people at the earliest possible time; to maintain the highest possible standard of living for our people; to modernise our plants and transport; to provide large quantities of housing; to create as soon as possible, as my hon. Friend the Member for Thirsk (Mr. Turton) said, a satisfactory diet for our people and a prosperous agriculture; to fill the pipelines that supply us with food and raw materials; to establish trading links with every country in the world; and finally, as my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler) said, very rightly, to provide for well-equipped fighting services with a full armament behind them.

In other words, we must get ourselves into a position in the shortest possible time to withstand any shock that may come to us from overseas, to sustain any war that may threaten us in the future, and to sustain it industrially, economically, and spiritually. If my right hon. Friend the Member for Woodford (Mr. Churchill) is right in saying that the Russians are working on the atomic bomb, and that we ought to carry things to a point of decision with them, it is madness on the part of the Government and the Chancellor of the Exchequer not to plan for Britain to become the centre—the teeming centre—of activity in the earliest possible time industrially, economically, and militarily. Therefore, the emphasis should not be on an exactly balanced budget by a particular time, should not be on exporting, but should be on importing and on investment here from overseas.

I maintain that the Chancellor's yardstick is entirely wrong, for he is working for self-sufficiency in 1952, and to little else. Of course, self-sufficiency pleases the economists and figure jugglers; they like to read that we are going slowly from the red towards the black; but meantime austerity prevails, and some of the people of this country are carrying on a kind of treadmill life, grinding out exports which they never see. There is a danger from the international point of view in forcing the pace; harm is created to other countries by any world debtor trying to get into the position of a world creditor too soon; unemployment may be exported. We are having meetings of the Standing Committees dealing with the Iron and Steel Bill, and what is emerging there is that under the impetus of Government our steel industry will develop at a very rapid pace, and the steel industries in other countries in the world may, through the subsidised pressure of Government in this country, suffer unemployment themselves in supplying the markets of the world. Again, we infuriate the French by putting a ban upon their imports and forcing our exports upon them; we shall not take the customary products they have sent us for so many years.

To force a debtor into being a creditor too soon produces that effect upon other countries and will not help us to establish a satisfactory Western Union. The objective ought to be to fill Britain with life and activity, to pump power into the system; every export from this country ought to be regarded as a loss of sustaining power, as a knife to carve out for ourselves from the world something to add to our own power and resources. It is quite crazy to think that every country in the world can become a creditor. To whom can they become creditors? To the Seven Seas? Are the exportable surpluses they are busily trying to create to be dumped into the middle of the ocean? Some nations must be debtor nations, and the nations that are debtors ought to accept the position and appeal to the creditor nations to invest in them and assume full responsibility of being creditors, as we ourselves were creditors in the last century.

The Chancellor says that we must be independent in the shortest possible time. I do not know that independence is a very good international principle. I prefer the principle of interdependence, which was the prime objective of the Coalition Government in the immediate months after the war. If we go out too much for independence as a political objective it will encourage every kind of nationalism and separatism, possibly in our own Empire and Colonial system. It is a very dangerous phrase to use in the modern world. My right hon. Friend the Member for Warwick and Leamington (Mr. Eden), in an admirable speech at Toronto the other day, called upon Canada and the United States as commercial nations to lend to and invest in the sterling area on the largest possible scale.

That is what I want to see done after 1952 when Marshall Aid may come to an end. We ought to invite Canada, Australia, New Zealand and the United States—and I am not averse to inviting Argentina and Sweden as well—to invest in our industries and services. Of course, we cannot do that if we carry on with a level of activity as low as it is today; many of these creditor countries are today working very much harder than we are, and they will not relish the idea of investing in this country if they are not to see eventually good results to their investment. We must be a going concern, and never a poor relation to be sustained in idleness by other countries.

My right hon. Friend the Member for Woodford has spoken in glowing terms about Britain as the centre of a system of three intersecting circles, and we must regard ourselves in that light; we must fill the heart of that system with a teeming prosperity, and every device ought to be resorted to in order to ensure that. Why is that not happening? It is not happening because of the selfish nationalism of British Socialism. The Socialists are terrified of Dominion and foreign capitalism having a stake in our system here; it would interfere with their precious nationalisation and their regulated economy.

This view, I regret to say, is beginning to prevail over the Marshall Aid administrators, Mr. Hoffman and Mr. Finletter, who so far from carrying on the original idea of Marshall Aid, which was to introduce free economics in the West, now seem to me to be returning to America impressed with British Socialism, so that the Government might even congratulate themselves, not on the fact that we are able to export tangible goods to the United States, but on the fact that they are for the moment, until the Americans find them out, succeeding in exporting collectivism to that country. I say quite definitely that I regret that at the moment the United States seems to be losing her grip on the prime political purpose behind Marshall Aid, which was to drive Communism back into Central Europe by insisting on a free economy in the West.

I believe that the party on these benches ought to stand foursquare in support of the Marshall Aid principle, and also foursquare in support of the British economic objective of maximum economic power and influence in the shortest possible time, and not get smeared with the authoritarianism and austerity of the Chancellor. The Chancellor does not believe in Britain as the pulsating heart of a great imperial and international trading system. We do believe in it, firmly and passionately, and we must refuse to have anything to do with an economic policy which prevents the attainment of that objective by all honourable means in the shortest possible time.

7.58 p.m.

Miss Jennie Lee (Cannock)

I feel that the hon. Member for South Dorset (Viscount Hinchingbrooke) must now be one of the loneliest people in the whole world. When we hear the Communist thesis put forward in this House by the hon. Member for West Fife (Mr. Gallacher) and by the hon. and learned Member for North Hammersmith (Mr. Pritt) we know that, although they can see nothing to admire in Britain, that although to them we are just a wicked capitalist country, and although they see still less to admire in any section of American life, which is to them a monolithic reactionary country, they can look elsewhere in the world and find their spiritual home. But when the hon. Member for South Dorset now addresses this House it must indeed be a tragic situation for him, because in earlier Debates he has looked across the Atlantic to America to sustain his economic and social ideas, and I am afraid that today America is very sadly letting him down.

The same reasons which arouse the disapproval of the noble Lord give great encouragement and great hope to some others of us in this House. I was one of those who immediately at the end of the war was extremely critical about, indeed opposed in speech and vote, the first American Loan. We were "broke"; we had been blitzed; we had gone through a great war; then in the most undignified fashion, at the shortest possible notice, we were asked as Members of this House to agree to loan terms that were completely impossible. I did not like the loan; I did not like the terms; I did not like the atmosphere in which hon. Members said in private, "Of course we know the terms are impossible." I do not like that furtive way of doing things, of signing our name to propositions which the more thoughtful Members of the House, on all sides, knew to be impossible of fulfilment.

But I confess that at the end of the war my fears about financial arrangements tying America, Britain and other parts of the world in close co-operation were not objections based simply on technical grounds. I also felt—and my beliefs were given to me largely by Americans—that there was a great likelihood of postwar America going Fascist—that there was certainly a likelihood of the governing social and economic opinion in America being such that in their dealings with our people and Europe or anywhere else we could hope for only rather brutal extremely one-sided treatment. Therefore, in spite of everything we had gone through during the war, I held it was worth holding out for very different policies.

Now we have before us another kind of financial proposition, and I do not think that the Chancellor of the Exchequer over-stated it when he said that this was one of the most momentous and imaginative proposals that has ever been put before mankind. We criticise ourselves and one another. We know all our shortcomings and our weaknesses, but just occasionally in our collective capacity we might say a kind word about poor struggling humanity, which in an incredibly difficult psychological and economic impasse throughout the world, seeks to find some way whereby we can not only help ourselves but one another. For me the note in these proposals, which give them dignity and make them possible, is that as Members of this House we and our country are asked not only to take but also to give. We are asked to take on honourable and reasonable terms, and we are asked to give on terms that make our giving no less generous than that of America when our respective strengths are compared.

I do not want to overstate the position. I do not want to appear as saying that at the end of the war I thought America was a dark angel to be feared, but that now in America everyone is sprouting wings and we too on our side were of such lofty disposition that all the old sins of nations, business firms, individuals and groups seeking to get the better of one another no longer needed to be feared. Of course, it is not like that. But we would be very ungenerous and totally misunderstanding in this House today if we did not know that these American proposals are not a Wall Street threat but a helping hand from the ordinary American people, particularly the organised industrial workers of America——

Mr. Osborne

And Wall Street too.

Miss Lee

And Wall Street too, or a bit of Wall Street. The big part, however, has been played by the organised workers of America. These workers have got their candidate into the White House. One has got to be very careful when making comparisons, political, social or economic, between our country and America, but, at least, let us appreciate that it was not easy for American public opinion to come to the decision that made propositions of this kind possible, that there was great agony and argument all over the country. The hon. and learned Member for North Hammersmith made reference to Mr. Dean Atcheson and before that to Mr. Marshall. No doubt, he would have preferred the ideas of the American Communist Party and Mr. Henry Wallace to have prevailed. I have seen a great deal of the organized industrial workers of America. They asked Mr. Marshall to come and explain his plans to them. They made clear first to Mr. Marshall and now in co-operation with Mr. Truman and Mr. Dean Atcheson, that they are not seeking to dominate the economic life of this country, Europe or anywhere else. They understand that if we should collapse then America collapses too. Intelligent self-interest and fine sentiments are marching hand in hand.

I imagine it must have been the hon. and learned Member for North Hammersmith, the hon. Member for West Fife or one of their friends who got hold of Mr. Henry Wallace when he was in this country and told him that, of course, Britain would not be permitted to nationalise its steel industry because Wall Street would not permit it. When Mr. Wallace went back to America, he appeared before an important public committee and based his objection to Marshall Aid partly on those grounds against what is in fact happening. The hon. Member for South Dorset must be feeling, as I said, very lonely for we have President Truman telling the American steel masters that if they do not produce sufficient quantities of steel to meet America's needs, the Government are going to build their own steel plants. In other words, far from the most reactionary elements of American capitalism dominating our way of life, we can pride ourselves that many of the things we have done in this last year or two have been so much admired in America that America to a considerable extent is going in the same direction.

When the economic situation is difficult a real contribution can be made by the right kind of faith. Sometimes we err by thinking we are very clever and understand the dangers and the hopes in the world but that other people cannot be expected to understand. Maybe there was even a small element of patronage in some of the things we said and thought about the general American public. We assumed they could not see through Mr. Dewey, could not see that the barefooted boy from Wall Street would be a disaster for America. We thought that a Presidential candidate pledged to free America's important trade union movements, pledged to great housing projects, pledged to health service schemes rather like our own, pledged to restore controls and rationing if necessary, was the kind of appeal to which the American public could not possibly have responded.

One of the happy surprises of the postwar world is that America is working wholeheartedly with progressive opinion here and in other parts of the world, some calling themselves Socialists, some Liberals and others without any definite party labels at all, but all working towards a common social pattern in which we plan our economic resources to give maximum productivity and usefulness, while at the same time cherishing free speech, free opinion, free religion and free institutions. Is not that something immensely worth while? Is it not intellectually and emotionally exciting that we can look back on the crisis of 1947 and to our mood immediately at the end of the war, and now in this House today, although we are not dewy-eyed optimists and although we have still many difficulties to overcome, can see the conscience of the Western world insisting that we help ourselves by helping one another. Nor in doing so do we forget the needs of India, Burma, China or Malaya, where the great rice and primary food needs are still unsolved. The background of these financial proposals is really as wide as the world.

I am grateful to the dominant current trends in American public opinion and Government circles which make it possible for us to face our problems cooperatively. I sometimes feel dizzy when I hear the noble Lord the Member for South Dorset speak, but I agree with him at least when he says that this is not an age for old-fashioned nationalism. What we have now to decide is not whether or not we are to be linked with other nations but what form the link will take—whether it will be dignified and fruitful co-operation or servile and humiliating bondage.

Turning from the receiving to the giving parts of these proposals, I have been looking at the 19 programmes with a considerable amount of scepticism. I do not want to seem unjust or ungenerous, but maybe one reason why it is possible for Labour Britain and free enterprise America to be as friendly as they are now becoming, is that America knows that she can depend on us. Americans know that if we make a plan and say so much will be our contribution, it will be so. Now we are put in the same relationship to many European countries as we have been to America. We have to consider how far we can tie our finances, economics and industries to other countries some of whom, for all kinds of reasons, have not got our type of Civil Service and often do not pay their Income Tax as we do. We do not like paying Income Tax but in the main we find that the Chancellor of the Exchequer can get from us the money he is determined to get.

I hope that side by side with the economic co-operation which we are planning in Europe there will be more meeting together of Members of Parliament from all the freely elected assemblies of Europe. It is not enough for governments or government-chosen representatives to meet for they bring with them their national briefs. It is important that we, the French, the Germans, the Italians, the Dutch and the rest should meet together and discuss our difficulties and dangers without giving offence to each other on a national level.

The hon. and learned Member for North Hammersmith, being a little subtler than the hon. Member for West Fife, disguised his thesis in what he thought might be a palatable method by rousing our fears of German competition. He omitted many considerations but said that one reason for rejecting these proposals was that Western Germany was in a most reactionary condition. I agree with him that the Government's record in the handling of the Ruhr industries is not what it might have been. I wish that the heavy industries of the Ruhr had been socialised, and I think they could have been if we had exerted ourselves a little more. It may be said that that is impossible but I do not think that these problems will be solved on the basis of attempting to internationalise only the Ruhr industries; all we can hope for from that kind of expedient is the most vigorous revival of German nationalism. We must get out of our rather timid and old-fashioned notions. We must realise that in the modern world it is sometimes easier to do a big job than a small patching job.

It was from some Americans that I first heard enthusiastically propounded that we ought to be preparing to internationalise under public ownership and control not just the heavy industries of the Ruhr but the heavy industries of all Western Europe. What is wrong with that? It does not appeal to our Conservative Party but we cannot afford to be hopelessly old fashioned in such matters. If such ideas do not gain credence throughout Western Europe we cannot begin to marry our economic and political aspirations for greater unity within a framework of expanding economic resources needed to secure rising standards of life for all of us.

The Chancellor of the Exchequer said if we all worked hard and exported a great deal in the next four years, we should not only be able to reach the fine goal of freedom from American dependence but also be able to improve our standard of living a little. I do not blame the Chancellor for it, but what he omitted to tell us was the form at which that increase in our standard of life would occur. Will it go to the butcher, the baker, the railway man or the miner? Which section of the community will benefit? Unless he defines rather more clearly where in terms of social justice he thinks these easements should go, he is inviting us to a kind of free fight in which we shall see how far our pressure groups can win advantages. For instance, every trade union member in this House knows the difficulty he has about his lower paid workers. Will such hon. Members get a share specifically for their workers?

Will the Chancellor of the Exchequer say to the women of Great Britain—women in industry and professional women alike—"You did a fine job during the war. We agree in principle that if a woman does the same job as a man she should be paid the same amount, but please do not embarrass us, please realise that there is an economic crisis and do not make any demands this year, next year or in the years after." I want to know where I stand on this matter because I do not like cheating, and I feel that if we tie ourselves to this programme there is only a very limited field for manoeuvring in which we can get advances. Against the background of the needs of children, old people and family units, it was not possible in the crisis of 1947 to press as an immediate economic proposition the demand for equal pay for equal work. But do not forget that this is not only an economic demand but also a profound psychological need. We require more workers and willing workers. Among women we shall get more workers and more willing work if in industry and in the professions, they feel that they are having fair play.

I appreciate the difficulties of the Chancellor of the Exchequer. I appreciate that in the next four years there is not a great deal he can do to achieve a rising standard of life, but I hope that he will remember that some of us have played the game over these sectional interests and would now therefore like him to define which industrial groups, and particularly groups where women are being paid abnormally low wages, can hope to benefit in the next four years. If he does that, he will find that we are not unreasonable and that we are all very proud of the collective record of this country and very certain of the contribution our country will make to the welfare of the world now and in the future.

8.20 p.m.

Mr. Spearman (Scarborough and Whitby)

I think that the hon. Member for Cannock (Miss Lee) will be glad to know that while I do not often agree with what she has to say, tonight is an exception. I entirely agree with her that the vast majority of the workers in the United States are entirely behind the Marshall plan. I am quite convinced that people of all ranges of income in the United States are prepared to make sacrifices, and let us remember that to send Europe goods in the way that they are doing means denying themselves on a very considerable scale, and I believe that classes are willing to do that in their effort to preserve those countries in Europe from which so many of them have originated and which created the civilisation which they value so highly.

We have had an Amendment to this Bill. As I listened to what was said by the proposer and seconder, I thought of the speech that General Smuts made last year in which he said: There is very great opposition to the United States Marshall Plan from a country which prefers to see poverty, misery and confusion because it is only in such conditions that Communism will prevail. It would be quite improper for me to suggest that the mover and seconder were more concerned with the interests of Russia than this country, but I think that I can say that those who are more interested in the success of Communism than in the maintenance of democracy are the people who will attack this plan.

The Chancellor of the Exchequer, in that balanced survey which he gave us, made considerable claims for the achievements of this country during the last year. He did that with the personal modesty which we always expect from him, but perhaps without all that caution to which we are usually accustomed. But I do not think that he would himself disagree with the hon. Member for Chesterfield (Mr. Benson) who made it clear that if there is not economic recovery in Europe our position in this country will be desperately precarious. I think that the Report makes it very clear that the economic position of Europe at the present time is not only due to the last war or to the last two wars but to deterioration over many decades. In fact, what civilised Europe has to do today is to change a trend which has been going on for over half a century, and to do it after the destruction caused by the war and without the physical assets that it used to have. This is a most momentous challenge, and we can only hope to meet it if we can put aside those petty differences which divided us in the past. I would agree with the hon. and learned Member for Carmarthen (Mr. Hopkin Morris), who is the only Liberal who has attended this Debate, when he urged that we must try to get rid of these impoverishing trade barriers which have divided us in the past.

The United States, with their great generosity—and as the receiver of it I would rather not compare their generosity with ours, as the hon. Member for Cannock did—have made it possible to formulate a plan. Therefore, there is hope, and it would be entirely wrong to be alarmist or defeatist, but I think we should be anxious and apprehensive. The consequences of failure are so awful. Failure now, as the Report says, will have disastrous consequences. Unless there is a change of policy we shall only get three-quarters of the imports planned, which would create an intolerable situation. The right hon. Member for Saffron Walden (Mr. Butler) told us how the official Board of Trade Journal described what would have happened without Marshall Aid—an enormous cut in rations and an enormous rise in unemployment. The last Economic Survey said that without external aid there would be wholesale unemployment, distress and dislocation of our production which will delay for years the prospect of a decent standard of living for our people. I think that in spite of the measured optimism of the Chancellor there can be no doubt of the great gravity of the situation. It is very disturbing how little this is realised. Indeed, the Government's own White Paper says: The difficulties of the present economic position do not present themselvs in an obvious form to the British public; a real and grave crisis in economic affairs seems remote and unreal. We are indeed infinitely poorer than is generally realised. We on this side of the House do not blame the Government for the situation in which they found themselves, but I think that we might rightly criticise them for their apparent blindness to it. I cannot understand how people responsible for the welfare of this country can possibly be expanding Government expenditure to four times what it was in 1938. I see from the Interim Report that in this country the proportion of national income spent by the Government and local government departments has increased since 1938 by 50 per cent. In France the proportion is the same, and in the United States of America the proportion of the national income spent by the Government is actually materially less than it was before the war.

While I accept the optimism of the Chancellor of the Exchequer, I look with considerable apprehension to the targets of the United Kingdom. For example, what is expected from oil? It is anticipated that we will earn in 1953 950 million dollars from oil, in spite of the fact that last year we actually spent 800 million dollars. To turn a deficit of 800 million into a favourable balance of 950 million in four years seems a tremendous task. We are told that the total invisible earnings, which last year amounted to 140 million dollars, will rise by 1953 to 1,050 million dollars. That may happen, but it is a little reminiscent of the mistaken calculations from which we have so often suffered in the past. For example, in the Survey of 1947 we were told what the deficit in the following year was likely to be, and in the following Economic Survey was a paragraph stating that the deficit on current account was £325 million greater, that is 93 per cent. greater, than was anticipated. With that sort of record, I do not think that we can have complete confidence in the estimates put forward in this way.

Let us at once realise that our position is certainly much better than anywhere else on the Continent. I think that a considerable degree of credit goes to the Chancellor of the Exchequer for reversing the catastrophic deflationary policy of his predecessor. He very soon made it clear that expenditure at home does, in fact, affect the balance of payments abroad, whereas before he became Chancellor the Government, apparently, took the view that what they spent at home had no effect whatever upon our balance of payments.

Credit is due, even more than to the Chancellor, as he will be the first to admit, to the British people, who have consented to be taxed and rationed on a scale as never before, and infinitely above that of any other country. I must point out to him, however, that we have reached a stage of taxation which is a serious disincentive and that even here there comes a breaking point, a stage when people will try to evade taxes and rationing to an extent not known in this country but which has been witnessed on the Continent. I warn him not to go much further.

The Chancellor, in that part of his survey which was optimistic, compared production in 1948 with that of 1947. But that is rather misleading, for 1947 was an exceptionally unfavourable year because of the fuel crisis. We are not justified in being quite as satisfied as the Government apparently are, with the rate of production in this country. The chairman of Lloyds Bank, for example, said last week that in the year ended September last our production of goods was per cent. above pre-war average with a labour force in manufactures and construction which was 6 per cent. higher. In view of the great technological inventions which have taken place during that time, and the fact that we can expect an improvement in production year by year of only, say, 2 per cent., these results are very disappointing.

Major Bruce

Would the hon. Gentleman name the source of those figures?

Mr. Spearman

The Chairman of Lloyds Bank. When I asked for the source of these figures the bank told me they came from the Digest and that, should any questions be asked, they would be glad to supply figures. I suggest, therefore, that the hon. and gallant Member contacts Lloyds Bank tomorrow.

Major Bruce

They are entirely inaccurate.

Mr. Spearman

If the Digest is inaccurate I cannot be blamed. For my part, I have assumed that it is only in their estimates for the future, and not in their history of the past, that the Government were inaccurate. The Report shows that in comparison with this country, where production, alas! has increased so little, production in the United States is over double what it was before the war. It is a most discouraging contrast. Production in a free country has been on a scale with which we cannot compete.

It is vitally necessary for us to produce all we can at home and to sell all we can abroad. The problem is not only one of improving conditions in the immediate future but of avoiding disaster. To increase production we must do three things: first, secure a far better distribution of labour. We cannot afford to have over 10 per cent. of our working population employed by Government and local Government Departments, nor to have so many people engaged on relatively unnecessary tasks. We must create conditions where men and materials will be drawn into the industries making the goods which are vital for export or essential for home consumption. Second, we must create conditions of competition so that industrialists are no longer protected by being allocated supplies of raw materials which are not available to new firms. We must establish conditions where the inefficient will go to the wall and the efficient reap a rich reward. Third, which is very important, we must improve capital re-equipment. At Workington only a few days ago the Chancellor said that our consumption requirements must come last; that exports were first, the capital investment of industry second, and the needs, comforts and amenities of the family last. Those were hard words for him to say. All courage to him for saying them. I wish that those views were supported by the remainder of the Government.

Major Bruce

And by the hon. Member's party.

Mr. Spearman

The hon. Member for Chesterfield (Mr. Benson) told us that the support of the Cabinet in these matters has not been very encouraging during the last few years.

Major Bruce

What about the Conservative party?

Mr. Spearman

My right hon. Friend the Member for Saffron Walden (Mr. Butler) expressed a good deal of doubt whether, in fact, anything like as much was being spent on re-equipment as was implied by the Chancellor's figures. I share those doubts. When allowance is made for the amount spent on repairs and on covering stocks at higher values, it is very doubtful whether we are spending on fresh re-equipment any more than we did before the war. We must realise the vital importance of capital re-equipment on those things which will make for industrial productivity rather than for social welfare. For example for a time we must concentrate on factories rather than on schools.

Major Bruce

What about housing?

Mr. Spearman

The Interim Report makes this comment: Investment and amenities, however desirable, must for the time being be postponed as far as possible. If resources are to be available, either the Government must spend less or they must force the public to spend less by means of higher taxation. Taxation, however, has reached a level which is such a disincentive that to raise it further would be harmful. This is true not only of industrialists but of workers. A man earning £6 a week may have to pay three times the amount of normal taxation on any extra earnings he receives.

The time may soon come when we may not be able to sell all that we can produce. Therefore, world trade must be expanded. I support the plans made at Havana to remove tariff barriers. Technical criticisms about Havana may be justified, but I think that we must support the spirit of those proposals. An increase in world trade is vital to this country. At the pre-war volume of world trade, in order to pay for the amount of imports actually bought in 1938, we should have to secure half the total world trade in manufactures. That proposition is an absurdity. We must concentrate much more, therefore, on getting a slice of a big cake rather than a large slice of an ever-diminishing cake.

I was pleased to hear the Chancellor's reference to the Colonies, and that my hon. Friend the Member for Bury took the opportunity of so clearly repudiating his accusation of past neglect. I hope that if we are unable, as we may well be, to divert men and material now to develop the Colonies, we shall welcome the co-operation of the United States to do so, in order both that the world shall be richer by their action and that the Colonies shall not suffer through our present inability to help them. We must, perhaps, make even greater efforts than are now being made to produce goods which we can sell at the right price. When I was in Canada two years ago I heard continual complaints that we were not sending enough to that country. Last time I went there the complaints were all about price. Let us remember that every increase in wages and in the charges of our nationalised industries, for coal, transport, and so on, may mean less exports and jeopardise the food for our people.

Thirdly, I believe that we have to sell more to the United States itself. The Report says: Western European exports of manufactured goods to the United States are only one per cent. of the total United States market for manufactures. I believe there is terrific opportunity there. Tariffs in that country have already fallen perhaps more than is generally realised. United States tariffs have fallen from 48 per cent. ad valorem before the trade agreements to 25 per cent. Now, Americans realise that they have to provide us with a great deal and it is better that they should get something in return, so that I think we can expect this process of tariff reduction to continue. First, we have to concentrate on selling outside New York, especially on the Pacific coast, where British goods are not well known and where there is a great preference for foreign goods, not because they are better. Secondly, we have to concentrate on quality because in craftsmanship we are superior to anyone.

When I was in New York recently I went to a lot of stores and looked at their shirts and other textiles. I was told by the salesmen that it was easier to sell an English shirt at 10 dollars than an American shirt at six dollars. Of course, there are shirts there of a quality which would make any Englishman or Scotsman very envious, but he can only look at those things and here he can only buy a very inferior quality. I sympathise with him, as I sympathise with the man whose car went wrong and when he took it to pieces he found chalked on the chassis, "Not fit for export, for home consumption only." I do not disagree with that—I think it is inevitable—it is very unlikely that we can compete with the United States in mass production. However, we can and do compete in quality where individual craftsmanship counts. We should be substituting the shadow for the substance if we tried to beat the Americans at their own game, instead of concentrating on the craftsmanship in which the British workmen excel.

I will read a paragraph from a letter I have received two days ago from a friend of mine who is a resident of Washington and I am sure he is well-known to the Chancellor of the Exchequer. He says: I wish you would press all the time for selling outside New York and particularly on the Pacific Coast. No one seems to realise the advantages we have there. East Coast goods sold in California are sent largely by sea and the cost of operation of the merchant marine is such that I believe freight rates between Liverpool or Glasgow and San Francisco are actually lower than rates from New York to San Francisco. I agree thoroughly with what you say about quality. If we don't try mass-production and concentrate on quality we have a large market and one that no American manufacturer will bother to try to stop. Are the Government really doing all they can in this matter? Are they encouraging quality? It was a little disturbing the other day to hear a Minister say she did not know the difference between margarine and butter. I am not sure that all is being done to encourage the quality of things we sell. Do they realise that if industrialists can sell easily here they will not all sufficiently exert themselves to find fresh markets abroad? This Government has been very willing to take on vast responsibilities which many people, even less well disposed to the Government than those of us on this bench, think rather a mistake, but are the Government taking on responsibilities in that line in developing our trade with America?

I had hoped to make a point that I do strongly believe in, that we could get far more dollars from tourists if the Government, by Treasury restrictions which irritate and discourage and by other policies, were not lessening the tourism we could get. But I have taken much longer than I realised and I must skip that and come to my final point. I have tried to say three things. The first is that our position is very precarious, the second that we have to produce more and at a lower cost, and my third is that we cannot do this in a democracy unless there is a balance of demand and supply. There must be more competition and we will only get that by less inflation, more incentive which we can only have by less taxation, and more capital re-equipment. All thes things mean that for a time the Government must take a smaller share of the national income. Many things which the Government are doing are desirable enough in themselves, but not so vital as enough food for the people to eat and enough raw materials to keep our people employed.

I agree with the Chancellor of the Exchequer that there is no easy way out. Indeed, once the competitive price system is permitted to disintegrate beyond a certain point there is no practical stopping place, short of a completely regimented totalitarian State. We have to produce enough to avoid sliding back to misery and poverty. We have a choice—the totalitarian plan of driving people to work by the threat of machine guns and concentration camps, or temporarily to reduce Government expenditure at this critical time. Have the Government the courage and determination to do this, or are they afraid of temporary unpopularity? Do they think the people's vote more important than the people's suffering?

8.47 p.m.

Mr. Fairhurst (Oldham)

It is no discourtesy on my part if I do not follow the arguments advanced by the hon. Member for Scarborough (Mr. Spearman) but I propose to touch on two points raised by my hon. Friend the Member for Cannock (Miss Lee) and to make a passing reference to a statement made by the noble Lord the hon. Member for South Dorset (Viscount Hinchingbrooke). He referred to information that Russia was now producing the atomic bomb and that this country should become a hive of industry and military preparedness because of that. My observation on that point is that I am not too keen to pass on to the U.S.S.R. an open invitation that we should be the receivers of the first atom bomb they make, and the reference suggested to me that there was a possibility of that happening.

I shall try to make my speech in my own way and it may be somewhat different from the speeches we have heard this afternoon. Probably I shall take a more general view of the whole picture. The last war demonstrated in no uncertain fashion that the impact of war is far more devastating today than it was in the past upon our way of living and it can now become catastrophic. Every Government, in every country, today should be charged with the responsibility of creating a peace atmosphere, for war is a Frankenstein monster born of a fear man has not yet overcome and fed on a system and way of living that ensures its growth and development. Kill the monster by taking away that which it thrives upon and mankind will step out on to a higher plane of civilisation than ever before attained and Governments and peoples will witness economic and social problems fitting into the general scheme of things more easily than ever before.

Man, we can almost say god-man, today stands on a pedestal surveying a world that he has conquered, because he has wrested from nature the secret of how to live and to live more abundantly than ever before. Yet he finds himself threatened with destruction because of the cardinal factor in society which he will not face up to and try to remove. In spite of all his greatness, how fearful, craven and ignorant he is. It is more pitiful when one realises how quickly the barriers that impede his progress could be removed.

From such a background I shall advance and develop my argument. To effect the economic rehabilitation of the world the family of nations, as I see it, must understand that they are, in very truth, their brothers' keepers, and that only co-operative effort can do the job. That is a far cry from what obtains in many parts of the world today. The competitive struggle by nations for economic survival, just like major industrial competition within nations, is doomed and damned. The world has almost grown out of that period, and the conflict between co-operation and competition must soon resolve itself, or the inevitable chaos between nations and within nations will result in tragedy.

We who live in this island are caught up within the vortex, but I would say that we have a better chance now than previously of emerging, purified by the fire of adversity and experience, a monument to how modern civilisation can grow and develop. Thirty years before the last war our export trade had been in a decline, owing to the reactions of industrial development in other countries. We could not send our goods to every corner of the earth and rake in the shekels as we had done. As long as the profit motive prevails and is paramount between nations, we can only survive if we are the most efficient and least wasteful, and are more highly mechanised and more industrious than other nations.

To become so, then creates a problem for other nations which they must solve, and can only solve if they become more efficient, less wasteful and more highly mechanised than the rest. As I see it the result is a recurrence of all the difficulties and miseries experienced in the past. The only answer is national and international planning, bilateral and multilateral arrangements between countries developing their social standards as a means of using up the productivity of the machines and reducing the hours of physical toil.

The Chancellor this afternoon made an exhausting speech. I think he was speaking for an hour and a half, something that rarely happens in this Chamber. I would suggest that very few hon. Members are capable of doing it. One could only try to assimilate the principal points he made. He was arguing from many mighty assumptions. It may be that he gave the correct answer, and it may be that he suggested the right path to follow. The economic integration of 19 European countries suggests great possibilities. But such an act cannot contain itself there. If we are to bring 19 countries within an orbit it cannot end there; it must expand or it will again destroy itself. I would put this before the House. Everything depends on good international relations so that nations can go forward with confidence, and Marshall Aid, operating through E.R.P., can become of great assistance. Again that can only be of a temporary character.

I agree with the four major points put forward by the Chancellor when he referred to the balancing of our trade, the restoring and improving of capital equipment, an efficient production of goods for export and the need to improve our consumption by reducing our costs of production. I am also glad that he made mention of a policy of further expanding our agricultural activities. I am sure that that is vital. At the present time the farming fraternity are not too happy about what is taking place with regard to the excavation of out-crop coal. They suggest that at a time when they are being urged to produce more food than ever before, thousands of good acres of arable land are being despoiled in this way and will never be fit for cultivation again. From what I have seen of the way some places have been left, I think they are quite right, and it is a point that should be looked into more closely.

The Chancellor in his masterly review this afternoon, sounded very well when standing at the Despatch Box. But I wonder how this thing is to penetrate to all the millions of people implicated in the plans and ideas that he was putting forward. It would be very difficult even if every one was agreed. But we must realise that everybody is not agreed. There are difficulties and reactions amongst different classes of society, and amongst nations, which will make those plans much harder to bring into operation.

I wish to speak about some of the problems that will have to be resolved and I would refer to the question of the freezing of wages and profits, prices, shortage of goods and especially the shortage of fats. All these matters, small as they may be, have an effect on the general scheme. The Chancellor has not only to produce a balanced national Budget, but he has set himself to produce a favourable international trade balance. That is a most laudable and desirable project. Public necessity No. 1 at present appears to be to obtain the necessary dollars to enable us to purchase our requirements from dollar-controlled countries now termed hard currency areas. Increased wage demands, increased prices, reduced productivity, waste and many other factors are cited as subversive forces liable to ruin the national effort to bring about full economic recovery.

A target to increase our export trade to give us £100 million favourable balance so that we can buy more wheat, feedingstuffs and bacon and perhaps bring back some of the gold stored in other countries—provided of course that such commodities are available—is one which is well worth attempting. At present we are importing raw cotton, grain, tinned goods and a host of other articles and we are exporting manufactured goods to the amount of about —250 million in value less than our imports. That results in an unfavourable balance which must be met in ordinary circumstances from our gold reserve. At present it is being met by Marshall Aid.

Therefore, producers—and I include in that term all whose labour power reflects itself in the value of a commodity—are exhorted to increase production not only of capital goods but of goods for export, until we reach a point where exports equate themselves with imports, or where our export balance becomes even more favourable. For that reason, wages and profits are to be frozen. The workers must work harder and maybe in 1952 we shall be in a position to improve the present level of our social standards. Such is the Government policy. Our Chancellor is a person of simple habits and tastes. He lives an austere life, probably more so than many of us. He has great ability and courage and possesses many qualities which others might desire. If I do not swallow all he says hook, line and sinker, it is perhaps because I am not capable of assimilating his vision.

His general aim is good, but I venture to say that the policy he is operating, and the way in which it is being operated, is not so good. Neither are all the people who are operating it selfless patriotic citizens. A policy of wage freezing where it involves economic stringency for a large number of our people will not be conducive to his objective, and such cases can he quoted. Nor has the appeal to the profit-earning classes reflected itself in falling price levels. I am tempted to prophesy that the average rate of profit for 1948 will not be less than it was in 1947. If the profits which have been general in the textile industry until recently are any guide, they will be far in excess of what they were in 1947. Prices do not show any marked tendency to fall. On 9th January of this year the "News Chronicle" reported the Chancellor as saying: We crash if we grab for more pay. If our people or any sections of them were now to try to grab larger money incomes it would lead to our inevitable failure. Those who are urging the workers to make such demands are either thoroughly ignorant of our economic situation or worse. Some months ago I asked the Chancellor if he could justify the fact that an ordinary family of four persons should exist on a wage of £5 a week. I got no answer, and I am asking him the same question tonight—if he can justify any family of four living on a wage of less than £4 or even £5 a week. It is all very well to say that we are going to fix prices, profits and wages, but when we have a vast section of our community—and I have in mind the textile industry and the transport workers—where we find wages levels of less than £5 a week, I ask the Chancellor in all seriousness if he expects these people who are suffering from economic stringency to do their very best in the national interest?

I say that there are other ways of achieving the object, by improving the technique of industry, by improved machinery and redeployment and refashioning of the methods of production, by which we can get the increased production we need, while the lower wage-earners have a standard of living which would commend itself to them. If the Chancellor and the Government do not do that, they will lay themselves open to a charge that even they, our Labour Government, are forcing back a section of our workers to conditions that are not humane and not right.

This problem is both a local and a national one. It will have to be faced, and I think the Chancellor ought to be frank and open on this matter and say exactly where he stands. He ought to say whether it is his intention to bring into operation a minimum wage for all adult people which will guarantee them economic security. If he will do that, there is a chance that he will carry the people with him over the next three years in this vital endeavour to bring the nation out of the morass in which we find ourselves.

9.8 p.m.

Mr. Heathcoat Amory (Tiverton)

I should like to say how completely I identify myself with the observations which have been made by my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman). I have no quarrel with the rather hopeful note that runs through this Report. I think that, on the whole, a fairly hopeful note is justified, and when one embarks on a big undertaking it is as well to go into it in good spirit and with confidence in one's powers. It would be wrong, however, to hide from ourselves that optimistic assumptive note which it seems to me is to be found in it. The supposition is that, on the whole, international economic co-operation is likely to go pretty well. I hope it will, but it seldom seems to do so for very long.

The greatest fear which I have as a manufacturer is the emphasis which is, perhaps necessarily, being laid by all nations on increasing exports and reducing imports, and the risk that, when the backlog of the war shortages is made good, the total of world trade will fall somewhat short of what is required. As regards this document itself, it refers quite honestly to the limits of planning in a democracy. I think that is right. Nevertheless, it seems to me that we may be relying too much on the efficacy of Government planning. We must remember that the carrying out of the plan will depend on the creation of the right incentives.

As regards the targets, I wish to say only two things. In agriculture, as several of my hon. Friends have said, I wish that more emphasis had been placed on the expansion of livestock and livestock products, because that is where we in this country have, on the whole, the most natural advantage. As regards the textile targets, I think that very few textile manufacturers would hazard a guess as to whether we shall, in fact, be able to reach those targets. Competition is undoubtedly going to be very severe indeed. We can only hope for the best, and do our best.

Among the many prerequisites for success, I think that the three following are the most important. First, that there should be a measure of responsibility and discipline on the part of the nations of Europe sufficient to justify the United States in continuing to help; secondly, that the total of international trade should continue to expand; and, thirdly, that we should, in our production, go out for the very highest standards of quality and produce at prices at which people will be willing to buy in a very competitive world. I wish to make one or two observations on each of those headings.

First, Marshall Aid. In considering this subject we ought to pay a tribute once again to the big-mindedness of the American people. I am quite sure that none but a great and generous nation would have attached so few strings to this aid. I had the good fortune recently to spend six weeks in the United States as a representative of the British-American Parliamentary Group and I did a tour under the auspices of the British Information Services, who, by the way, I think are doing a good job. As usual, one was overwhelmed by the friendliness of the reception one received. Everywhere I found a very evident sympathy with our troubles over here, and the hope that we should get through. By almost everyone, a readiness to help us to do so was expressed. The one condition was that they wanted to feel assurance that the help they are giving is likely to be effective. Two doubts seemed to be in their minds about that. One was whether, in all cases, we are, in fact, using our internal resources wisely—and they note the growing burden of the cost of Governmental administration. The other was the difference in relative productivity between their industry and ours.

When abroad, one finds unaccustomed responsibilities settling on one's shoulders. Since I have returned, I have been dismayed to remember the ingenious arguments I sometimes managed to muster to account for the policies and actions of right hon. Gentlemen opposite. It has sometimes kept me awake at night to remember them. As regards the second, I shall have one or two observations to make in a minute. If we value this aid which is being given to us, and if, as I do, we want to see our relations with America growing ever closer, the very best service we can render to that cause today is to show that we are creditworthy, and are going flat out to help ourselves. The Americans judge things by results; they do not like excuses, but they respect a dogged fighter. I agree, as my hon. Friend said, that we ought to remember that this aid means a very definite sacrifice in higher taxation for every American family. I believe that the aid they are giving abroad amounts to something like 10 per cent. of their federal budget.

Turning to my second question, that of the size of international trade, I suppose we must regard it as inevitable that the road back to some kind of multilateral trade will be via a system of biggish free trade areas composed of nations with the same kind of way of life and certainly with comparable standards of living. What I think we are justified in urging on our American friends is that it is difficut for us to make a long-term plan for international trade until we know the rules they themselves will adopt in the future.

The third question is that of the efficiency of our own production, our ability to deliver goods overseas which people want to buy and at prices they are willing to pay. I think most of those who are connected with the export trade are rather concerned about two things. First of all, there is the evidence which is already beginning to collect that in some cases our prices are too high. I say "already" because I am afraid in most cases British prices are still tending to rise and because, although the world market has become steadily more competitive, competition has not yet fully developed.

The second thing which causes us concern is the question of quality. I am afraid it is true that in some cases—only a minority—goods are still going out from this country which are not at all in keeping with the very high traditional standards on which we have built up our reputation. In some cases—again a minority—I am afraid that is even true of the trade in which I am myself interested, the textile trade. I am not referring to durability but to such things as finish and turnout. The resulting damage done by a tiny minority of the trade is very alarming and can be very serious for our future prestige and prospects. These two questions of cost and quality are really different facets of the same problem.

In the two visits I have made to America and Canada in the last two years I have tried to reach a sort of balanced view on this question of relative productivity. It is very easy to over-simplify it. So far as output per worker goes, there is no doubt that they are very greatly ahead of us—possibly twice as high. So far as output per unit of capital is concerned—and this is all-important—the position is more difficult to assess. Of course, it is only these two things together which can give one a reliable, effective, true cost. But without being dogmatic I say that I am afraid it is true that in many cases, effective United States productivity is definitely higher than ours.

It is alarming that in some cases the gap between our relative productivities is tending to widen and not to narrow. If that is true, and as far as it is true, that again is serious. Under the pressure of very high wage rates and also out of sheer dynamic enthusiasm, the drive over there for higher output and better output goes ceaselessly forward, in some cases with really amazing results. When one comes back after seeing that terrific momentum one is concerned occasionally to find our rather more easy-going methods over here. By contrast it seems that we are suffering from a rather acute form of low blood pressure. I think complacency is as usual our besetting and most dangerous national sin.

I hope that the Anglo-American Productivity Council will produce some good results. We must not expect too much, but, anyhow, I am sure we wish it luck in the work it is doing. As regards our national plant and equipment, of course, in many ways we have a tremendous lot to do in replacements. I was glad to see in the Memorandum these words: Should any additional resources become available for investment they will be concentrated on industrial investment. That, I think, is good and right, but in the meantime our immediate job is to make the very best use of what we have. My hon. Friend quoted the words the Chancellor of the Exchequer spoke the other day, when he was referring to national priorities, and he said," First are exports, second is capital investment in industry, and last are the needs, comforts and conveniences of the family." I have no quarrel personally with that order of priorities. I have never had any doubt myself that exports must come first whatever the temptations to the contrary.

But today the exports problem is a question of costs, and I should like to consider for a moment why our costs are getting dangerously high. First of all, there is the rhythm of production. I think that is somewhat better than it was 18 months ago, but it is still in some cases sluggish. That is one thing. Secondly, as my hon. Friend has already mentioned, the output per man year is no better than it was 10 years ago, and that is really, even allowing for our circumstances, rather a terrible admission that we have to make. Next, there is the continually growing burden of unproductive costs that is falling on industry and is becoming heavier and heavier every day. Then, I think, every manufacturer finds that as the months go by, a smaller and smaller proportion of his costs is under his own control. These are the things that give manufacturers a good deal of anxiety today. They are all out, most of them, to try to do their best, but so many of them find that only part of their effort is under their own control. I do urge the Government to insist on the very highest possible standards of efficiency and the lowest costs in those industries for which they are themselves responsible, and on which the rest of industry so much depends.

If what I have said is roughly true, what are we to do about it? Are we to allow ourselves to be left behind? I am certain that we need not, if only we have the will to do the right things. We have many advantages, and not least among them is the absence of bitterness in industrial relations in this country today. I am sure that in that respect we are ahead of America, and surely that is ground on which we can build something worth while. If we can only get a real working partnership going in industry, so that with combined forces we can fight the same battle, I personally believe, as I have said before in this House, that that alone would bring us an increase in production of something like 10 per cent. What a difference that would make. If we really believe in that, apart from just paying lip service to it, what should we do? I have only two or three suggestions to make, and I make them fully conscious of the fact that my own experience has been wholly on one side of industry.

First, I suggest that we should try to keep politics as far outside industry as we possibly can. Directly we bring politics into industry we confuse the issues and take people's eyes off the ball. There are, surely, lots of things we have to differ about politically without our having to go inside industry to do it. Secondly, let us agree that for many different reasons, incentive is weak today and must be strengthened. Let all of us honestly go out to encourage all sections of industry to produce practical plans for increasing and improving incentive; and let this House make its contribution towards solving that problem by reducing direction taxation.

Next, let us agree that controls, whatever their merits and whatever their necessities, have very definite drawbacks. That is mentioned in paragraph 53 of the report. They do discourage efficiency and the enterprising manufacturer; they are appallingly expensive in manpower, and they interfere with the normal pace of industry. The tempo of Government administration is, and I think must always be, different from the tempo of industry. I would suggest that in some ways this last drawback, this difference in pace, is likely to prove the greatest danger of all of having too many controls.

During the last few years, during the sellers' market, perhaps speed and flexibility did not matter all that much; but with the kind of business this country has got to do, and with the kind of competitive market it has got to do it in in the future, flexibility, resilience and speed of change will be of the utmost importance. We must be more on our toes than ever before, and more on our toes than any of our competitiors, or we shall lose the race. I beg both right hon. Gentlemen concerned to look at controls from that point of view, and to remember that industry must have what might be called freedom to manoeuvre quickly if it is to do the job it has got to do.

The last suggestion I make is that all of us in industry—owners, managers and workers—should do some more burying of old hatchets and agree that the highest possible efficiency for British industry shall be our common goal, and that inertia, listlessness and lack of drive spell inefficiency. Let us work single-mindedly and with loyalty to one another towards that end. Recognition of this common interest in efficiency is, I think, the one respect in which American industrial relations are perhaps ahead of ours.

The kind of thing I mean is that we should, together, do some objective thinking about the functions of profit. I know of no one word which causes more misunderstandings and trouble than that wretched little word "profit." Much of it is unnecessary, because I believe that when we get down to it, and get away from the economists, we agree more than we think we do. If we could make a fresh start and think of some new word for that much maligned element in costing we might get along better.

Finally, I want to ask my trade union friends on the other side of the House to believe that to most of us employers our businesses mean a good deal more than merely instruments for earning dividends, just as we know that their jobs meant more to them than the pay packets they used to get at the end of the week. We are ready to give a good deal and to go a long way to earn the positive good will and active co-operation of all who work in our businesses. Many of us are trying all we know to get going a real working partnership, and if we ought to be doing more, or if we can do more, I ask them to tell us what it is, and provided that their suggestions lead to greater efficiency we shall not turn them down lightly.

I have one other suggestion which I think the Chancellor might find useful. I think that today the nation is suffering from a multiplicity of figures; we are all getting bewildered; and if he could think of one index which could be selected and put before the nation at regular intervals as a rough measure of our progress, that might be useful. I do not know whether "current gap" might do. It might be 300 one month, 295 the next, and 285 the next. If something like that could be issued it might attract interest, enthusiasm and arouse hope—a sort of symbolic carrot. It might be blazoned in neon lights in the centre of every town, and perhaps the Chancellor of the Exchequer and the President of the Board of Trade would wear it in the front of their hats.

The first phases of this economic campaign which have confronted us since the war were the Battles of Reconversion and Production. We have entered another and perhaps more important phase—the Battles of Quality and Efficiency. I believe that we can win these battles but on one condition—if in an honest, single-minded pursuit of a common object, we work together with a common sense of purpose toward a single goal to raise British industry to the highest possible level of efficiency. This plan has set the nation a tremendous task. Divided, distracted, confused and half-hearted we should be bound to fail; but united, with a clear purpose, knowing where we are trying to go and with a single-minded determination to do the job, we shall succeed. Whatever our political differences on other matters, let us have a truce within industry. Let us combine our forces and make the utmost use of our national assets, our character, our skills, our energy, and our resources. By doing so and only by doing so we shall set our feet firmly on the road to recovery.

9.32 p.m.

The Economic Secretary to the Treasury (Mr. Douglas Jay)

The hon. Member for Tiverton (Mr. Amory) has made a helpful and constructive speech, very much in the spirit of the speech with which my right hon. and learned Friend opened the Debate this afternoon. The hon. Member for Tiverton made practically no criticism of the Government's economic policy. Indeed, the most striking fact about the whole of this afternoon's Debate has been that no serious alternative to the Government's economic policy has been put forward anywhere, and no serious criticism has been made of it. Our policy is one of full support for the European Recovery Programme, and the pursuit within that programme of our own longterm plan. It is gratifying to find such universal support for these policies and, indeed, universal recognition of the progress already made.

Many foreign statesmen who have praised Britain's recovery efforts in the last few months are now being joined by our own newspapers such as the "Economist" and "The Times," and this afternoon the ranks of the British Tory Party have not been able to forbear to cheer for their own country's achievements. If it is true that we are now advancing along the right road, it is surely something for which we should all be profoundly thankful, for when we give the main credit, as we must, for the birth and growth of the European Recovery Programme to General Marshall and to my right hon. Friend the Foreign Secretary, we ought to remember, not merely the magnitude of what has been achieved, but the magnitude of the disasters which we have avoided. It is certain that if after the harvests failures in Europe of 1947 there had been no Marshall Aid, Western Europe in 1948 would have plunged into economic collapse. There would indeed have been starvation in many European countries, and how far democratic institutions would have survived, we shall never know.

I noticed that today hon. Members opposite have not even really tried to argue that though the results are admittedly good, the methods of the Government are wrong. A more simple explanation is that the results have been good just because the methods have been right. The guiding principle throughout our policies, both in E.R.P. and in the Four Year Programme, has been our determination to take deliberate control of our economic destinies and our economic resources and not to leave them to the blind chances of laissez-faire. if we had not set ourselves three years ago thus firmly on the path of deliberate planning, there could have been no European Recovery Programme and no Four Year Recovery Programme for Britain either.

I also noted that hon. Members opposite have been much less bold in their denunciations of planning than they were a few months ago. Indeed, the right hon. Member for Saffron Walden (Mr. R. A. Butler) seemed to me to have already been half converted by the speeches of the Chancellor of the Exchequer. He spoke about "steering" our economic resources, and also talked with enthusiasm of joint consultations. So it seems that 20 years of Socialist propaganda have not been in vain. The fact is that the experience we have gained in peace-time planning during the last three years, and the work already put into the preparation of the British longterm programme many months ago, proved invaluable both to us and to Europe when O.E.E.C. had to undertake its practical job. If we had not embarked on these policies already, we should have had to do so then, only in a rather more hurried and amateurish fashion.

In case there is anybody left today who doubts that those policies were necessary, it is perhaps just worth reflecting what would really have happened if we had taken the advice that used to be proffered to us by hon. Members opposite to "take a risk," for instance, with food rationing, as Lord Woolton once advised us, and to leave large sections of our economy to chance. The fact is that in anything like laissez-faire conditions in the last three years, without the essential controls on prices, imports, exchanges and on the allocations of materials, disaster could not have been avoided. Natural forces let loose in these recent years would have meant that very soon a large part of our dollar earnings would have been swallowed up in luxury imports, food and raw materials would have become intolerably short, and shot up in price, unemployment would have increased to the pre-war level for lack of materials, and an uncontrollable spiral of prices and wages would have set in. That is what we have avoided.

I also noticed this afternoon that it is not merely the general principles of democratic planning which are apparently now so widely accepted, but that the main lines of our Four Year Programme, which we published a month ago, have also commanded general approval. Speaking for the Opposition this afternoon, the right hon. Member for Saffron Walden gave, if I understood him right, a general blessing to all the principles of that plan. He gave us some advice——

Mr. R. A. Butler

I said that while we wanted to achieve these objectives, the Opposition must retain liberty about their methods when they return at the next General Election.

Mr. Jay

However, in saying that, the right hon. Gentleman in fact implied and assumed that this plan both should and would go forward. Therefore, I think we have his support to at least the main lines of the plan.

The first principle of this plan is to achieve in this country economic independence through the balance of our overseas account by 1952. Everybody, I think, is now entirely in agreement with that. The second main principle is the devotion of a large proportion of our economic resources to re-equipment and development rather than to consumption in these years. The programme provides that 20 per cent. of our national income should be used for this purpose, and that compares—the right hon. Gentleman asked for this comparison—with about 14½ per cent. in the immediate pre-war years. The right hon. Gentleman asked also about the distribution of our investment, and he referred to the table on page 33 of the Four Year Programme on that subject. He was quite right in saying that we gave the figures for housing excluding maintenance, but, as a matter of fact, the figures for plant and machinery in industry exclude maintenance, although, for statistical reasons, the figures for industrial factories do not.

The interpretation which he gave of that distribution was, so far as I understood it, correct. The point which perhaps the right hon. Gentleman missed is that the volume of our new investment in productive resources will now be running under the plan at several times the rate of the pre-war years. It will be very much larger, and probably several times as great. We are giving a high place in that investment programme, as he suggested we should, to investment in the Commonwealth overseas and in particular in the Colonies because we believe our economic future is indissolubly linked with the development of these areas.

He asked what our policy was for trade within the Commonwealth and, in particular, our attitude to preferences. Our policy is certainly to develop trade in the Commonwealth to the maximum, but what we find in fact many of the Commonwealth countries are most anxious to have is long-term contracts and bulk purchases, rather than mere preferences; and bulk purchase as the right hon. Gentleman knows is also our policy. He asked us what the distribution of our industrial investment would be between individual industries. I cannot give him precise figures for the four years because, quite frankly, we do not believe in rigid planning to that detailed extent; but I can assure him we shall concentrate on the main basic industries like steel, electric power, chemicals and so on, where the processes of production are large-scale, elaborate and expensive, partly because Great Britain in the future will not be able to compete in the world merely in the old staple manufacturing lines but will have to get ahead in these newer and more complicated industries.

I think that not merely has there been little quarrel with the main aims of our plan this afternoon, but, so far as I can see, there has been very little quarrel with our assumptions either. I do not think that the right hon. Gentleman attempted to argue that they were too pessimistic. It is true that we have assumed the terms of trade throughout the four years to remain on the 1948 level. We have assumed productivity to increase by only 2½ per cent. a year and our total exports only to reach 150 per cent. of pre-war volume, not very much more than the present level, by 1952. I would like to emphasise, however, that these are working assumptions rather than targets. We have to try to do better than this, and if we do better no one will be more pleased than the Government. We have been exceedingly anxious not to underestimate the magnitude of the task or to mislead the country into thinking that the problem is easier than in fact it is. For all these reasons we have been deliberately cautious. The assumption that the 1948 terms of trade will last until 1952 is, of course, a basic one of O.E.E.C. planning generally and, probably, looks rather less pessimistic today than it did a year or so ago.

I agree fully with those who have said today that this programme means restrained consumption and self-denial throughout the next four years. That, in fact, is what our national survival demands. Our policy is, and always has been, one of hard work, few luxuries and fair shares. It has been quite clear today that nobody has any alternative to offer. One of the reasons—as, indeed, the programme shows—why our consumption cannot increase as quickly as we should like is that in our import programmes, particularly with the dollar areas, food and feedingstuffs are in competition with raw materials. Therefore, if we are to have more raw materials for our steadily increasing production over these years, we cannot at the same time rapidly increase our imports of food.

The hon. Member for Thirsk and Malton (Mr. Turton) put forward a very familiar case on the subject of feeding-stuffs. As he knows, we have been importing feedingstuffs on a very large scale during the last 12 months from Russia and Argentina. In so far as we can get feedingstuffs from non-dollar areas, we shall be very glad and anxious to do so. He mentioned also that the programmes of some of the other countries, in comparison with ours, provide for a rather high volume of imports of feedingstuffs. It may prove, however, that some of their estimates for future imports are perhaps less realistic than ours.

It is for all those reasons, and because of the competition of raw materials with food imports, that any increase in food consumption must come partly from home production of food during these years and why, accordingly, we lay such emphasis on agricultural expansion, as, indeed, did the hon. Member. It was he I think, who expressed anxiety about the progress of that expansion. For myself, I think that the success of that programme in its first year is in many ways very encouraging. Our grain production, for instance, in 1948 was 24 per cent. above 1947, and 70 per cent. above pre-war; and our production of potatoes, sugar beet and milk, as the hon. Member is aware, are also a long way above what they were before the war.

It may not be quite so well realised that our cattle and poultry populations today both exceed the pre-war figures. The hon. Member said that the pig population is lower, but, as he well knows, it has risen greatly during the past year.

Mr. Turton

May I correct the hon. Gentleman? The actual production of cattle for beef is 350,000 less per year than pre-war.

Mr. Jay

Although the production of meat is less, the cattle population has risen a good deal, and is actually above the pre-war figure, which, I think, is a hopeful sign. Certainly the programme implies restraint in consumption. But any suggestion that our general health and nutrition standards have declined, or are declining, as a result is crushingly refuted by the mortality figures—and infantile mortality figures in particular—which were published last week. In 1938 the infantile mortality figure for England and Wales was 53 per thousand; in 1947 it was 41; and in 1948 was 34. That is no doubt partly due to the improvement in medical science, but it is also quite certainly partly due to the redistribution of national incomes which my hon. Friend the Member for Edmonton (Mr. Albu) described in his very interesting maiden speech, on which I would like to congratulate him.

Several hon. Members have argued in the past that although they support the general idea of democratic planning, they doubt the possibility of carrying it out by democratic methods. The hon. Member for Scarborough and Whitby (Mr. Spearman) today talked about the maldistribution of labour, which he thought we had failed to correct. I believe the experience of the last three years really points in the opposite direction. We have succeeded in our major aim of raising exports to virtually 50 per cent. above pre-war. We have 30 per cent. of industrial labour today working on exports, compared with 14 per cent. in 1939; and we reached in October and November of 1948 a rate of total industrial production actually 27 per cent. to 29 per cent. above 1946—much the same percentage above 1938. Three years after the 1914–18 war, general production stood 45 per cent. below the 1913 level, and incidentally there were two million unemployed. It is a remarkable fact that not until 19 years after the 1914–18 war had the general industrial production index risen as far above 1913 as today it has already above 1938.

Mr. R. A. Butler

Is the hon. Gentleman taking full account of the American aid we have received after this war?

Mr. Jay

Yes, I am, but the right hon. Gentleman forgets that the terms of trade were very much more in our favour then than they are now, and those two facts cancel each other out. [HON. MEMBERS: "Oh."] Well, if the right hon. Gentleman measures them arithmetically he will find that is so. Again, in this matter of planning and redistribution of labour, if we take even the case of coal and textiles, where I think we are all agreed the difficulty has been greatest, we have had considerable success. We have raised the labour force in coal today by 35,000 above the figure at which it stood in December, 1946, which was the last month of private ownership in that industry. Our coal production is 14 per cent. above 1945, and our coal export target last year was met. In the case of textiles——

Mr. Spearman

Would the hon. Gentleman agree that the Government planned for a sharp reduction in labour in the distributive and Government services, whereas there has been actually an increase during the year?

Mr. Jay

I am not saying we have entirely reached every target, but we have had more success in manning up the specific industries we set out to man up than is realised. I wonder if the hon. Member for Scarborough realises that total exports of British textiles last year reached the remarkable figure of £325 million, compared with £225 million in 1947. I wonder if he realises that the textile industry finished 1948 with a labour force 43,000 higher than at the end of 1947, and actually 200,000 higher than at the end of 1945. I am not saying that there is not a great deal more to do, but this shows that our democratic methods are capable of achieving our aims.

We retain faith in our methods, therefore, although we insist on being cautious in our estimates. For whatever happens, we must not under-rate the magnitude of the task that faces this country and Europe as a whole. The O.E.E.C. Interim Report has shown that the methods so far adopted will not be sufficient to secure more than three-quarters of the planned level of imports, and that measures the problem which still faces us. The solution, of course, for Europe and for this country is simple in theory but very hard in practice. It is to produce more dollar materials, to export more to the American continent, to continue restraints on consumption, to develop the overseas territories of all the participating countries and finally to organise co-operation among those countries. The next job, on which we are now engaged, is the study of further possibilities of European cooperation, and to that we shall give our full support, although I would warn the House against imagining that there is some magic solution by way of co-operation which can easily sweep away all these difficulties.

But I believe that the most vital of all conditions for recovery will be the belief of the European peoples themselves in their own democratic institutions and in the possibility that, through those institutions, social justice can be realised. Speaking of his own country, President Truman said last week that democracy has proved that social justice can be achieved through peaceful change. I believe that that is true of the past 10 years both in the United States and in the United Kingdom. The greatest single driving force in our recovery here in the last three years has been the belief of the masses of the people that they were getting a fair deal for the first time, and if any hon. Member doubts that, he should compare the figures for working days lost in industrial disputes after the first war and after the second war.

In the past year the "Daily Worker" and the "Daily Express" and their respective friends in this House, two of whom I believe have moved the rejection of this Bill this afternoon, have often told us that the flow of Marshall Aid which now is assisting our economy was simply the product of what they call American capitalism. I think this idea of a nation of 140 million large capitalists has always been rather a quaint one. It always seems to me that American workers and farmers may have had something to do with this flow of goods, and indeed with the framing of the E.R.P. programme. We have also been told by the "Daily Express" and the "Daily Worker" that if the British Government accepted Marshall Aid, we should have to abandon our programme of social reform and public enterprise. But it does not seem to have turned out that way.

Not merely have all these attempts to make mischief between the British and American Governments failed dismally; but anybody who was foolish enough to believe this particular line of propaganda must have been very puzzled when he read the American President's declaration a few weeks ago, which was mentioned by the hon. Member for Cannock (Miss Lee) today, and heard the President of this allegedly reactionary Government proclaim his faith in social security, in full employment, in price and other economic controls, in fair shares, and in public enterprise for electricity, housing and even the iron and steel industry. I think we were told also that the British Government would have to abandon its policy of nationalising the iron and steel industry, if we went on with E.R.P. It does not seem to have turned out that way either.

Meanwhile all those who have supported both the economic and social policies of the present Government must indeed have been heartened to find that not merely was our economic policy so closely linked with that of the United States, but that perhaps the social policies of the two countries are not quite so divergent as many people expected. For all the Western European democracies and the United States are now linked closely together in the European Recovery Programme; and the mainspring of the whole of that great enterprise is, and will remain, the belief of the peoples in all those countries that their democratic institutions will give them social justice as well as political freedom.

Debate adjourned.—[Mr. Snow.]

Debate to be resumed Tomorrow.

Mr. Speaker

Tomorrow, from what I know about it, if the speeches are of the same length as they have been today, about one in four of those whom I already know wish to speak will have the chance of getting in. Perhaps I may leave it at that. Apart from Front Bench speakers, we have had today from back bench speakers about two speeches an hour, or very little over. In that position it is very difficult for me to choose people. I make this announcement to the House in the hope that they will help me tomorrow.