§ [FIRST DAY'S DEBATE]
§ Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Whiteley.]
§ 3.41 p.m.
§ The Chancellor of the Exchequer (Sir Stafford Cripps)
I am this afternoon privileged in a way that I believe none of my predecessors has ever been, for there are amongst my audience six other Finance Ministers from the Commonwealth as well as the heads of two other Commonwealth delegations. I am sure the House would desire me to express to them our appreciation and our pleasure that they are able to attend this Sitting. It was just over a week ago that I announced the state of our dollar unbalance was such that we had already been obliged to take certain steps for a stand-still in new purchases from the dollar area, and that we were about to have a series of consultations, after which we should be able to announce some further steps that we should be taking.
We have since then had a busy week, and after a most fruitful discussion with Mr. Snyder and Mr. Abbott at the end of last week, the result of which was reported in the subsequent communiqué, we started yesterday upon the Conference of Commonwealth Finance Ministers. It is in the light of those events that I am today able to give the House some more details as to our plans. We can also with the passage of a further week see the picture of the last three months in somewhat clearer detail.
I should like to start, therefore, with a factual, objective examination of our position as at the end of the second quarter of the year. The figures for the first quarter of 1949, as the House will remember, repeated the experience of the latter part of 1948 in that we had attained an approximate overall balance of trade, and the dollar deficiency had been reduced to proportions which were manageable with the help of E.R.P. and the Canadian Loan. Though there were already signs, which had been slowly developing in certain parts of the world, of a fall in demand and in the level of activity, we ourselves were, in fact, still experiencing the continuance of those recovery trends, which caused some satisfaction to our friends and ourselves in 1948.
674 In the realm of physical production we had indeed much more than recovered. We had surpassed our 1938 production by something like one-quarter, and our productivity was up by about 10 per cent. Our exports were still reaching record levels, levels, indeed, which our critics a year or so earlier had claimed to be impossible. Moreover, until the early part of this year our exports were making good progress in some at least of the hard currency markets, though the most spectacular progress was perhaps in the non-dollar markets. We were in general more than holding our own, though in a few markets, where competition had become particularly keen, we were no longer able to make fresh ground.
I draw attention to these facts, because there has been a tendency to assume that United Kingdom exports have been so high priced as to be unable to face competition. We must however remember that we have still to face the full force of post-war competition, and it is of vital importance that our export prices should be able to meet the challenge of this keener competition for markets, which has developed during the last few months with a general shift from the sellers' to the buyers' market. I shall return presently to this important question of costs and prices.
We were, therefore, entitled to regard the efforts which our people made in the 3½ years since the end of the war as both praiseworthy and encouraging. No one who followed the dollar-sterling relationship since before the first World War and its development in the last few years could imagine that the problems of that relationship had been finally solved. In paragraph 50 of the last Economic Survey we stressed the fact that the dollar deficit remained the crucial problem, and one requiring to be attacked from a number of angles. None the less, what had happened, and perhaps with remarkable speed, was that we and other European countries had gone a long way with our recovery, thanks to the backing from the United States of America through E.R.P., of Canada, and thanks, too, to the growing strength of European co-operation as the result of the Brussels Pact, Western Union and the setting up of O.E.E.C.
We certainly had not overcome all our grave post-war problems but we had been making good progress in an atmosphere 675 of expanding world economy. The high level of economic activity in North America has, of course, been an important influence on the progress of European economic recovery, the rapid expansion of international trade being naturally conditioned by the size of the United States purchases, both of primary commodities and of manufactures. The sterling area, in particular, owing to the great volume of its trade with the dollar area, was dependent upon an expansion of that trade for its own continued progress. We realised that in all probability 1948 had seen the peak of immediate post-war demand, and there might at any time be a significant change in the supply and demand relationships.
There has now occurred a turnover from the sellers' to the buyers' market and this vitally important—and somewhat rapid—development in world economic affairs has inevitably had its effect upon our sterling economy. It has tended to slow down and indeed temporarily at any rate to reverse the progress that we have been making towards a dollar balance. As President Truman has so accurately remarked in his mid-year report to Congress,The decline in United States business activity is reducing imports and this is an important factor affecting the ability of foreign countries to earn the dollars required to restore their economic health.As the House knows, for many past decades neither we in the United Kingdom nor Europe as a whole have had a direct favourable balance in our trade with the United States. We made up the gap in our balance with the aid of invisible earnings and of the surpluses earned by other parts of the sterling area. The real dollar earnings which kept the world in balance through the sterling-dollar exchange were invisibles—interest on investments, shipping, banking, insurance, tourism and so forth—and the primary commodities that the United States imported from all parts of the sterling area, assisted where necessary by the gold produced in sterling area countries. To mention a few only of these commodities, rubber, tin, wool, cocoa and jute were all large dollar earners for the sterling area. Indeed, prior to the last war, it was through the sterling area that Europe was able to balance her dollar accounts.
676 So far as invisible earnings are concerned, many will never be restored under the changed conditions. The most important factor is the loss of interest on dollar investments, resulting from their sale during the war. In other cases circumstances have changed, as, for instance, with the dollar earnings of our shipping. It was because we all realised that our invisibles could no longer play as great a part as they had played before the war in helping to pay for our imports that it became more than ever necessary to stimulate to the utmost our direct dollar-earning exports, and at the same time to seek to increase the sales of primary products to dollar countries from the rest of the sterling area.
Before coming to the explanation of what has happened to us in recent months and of the reasons for the worsening of our situation, I would remind the House that this difficulty of balance between the dollar and sterling areas had started to show itself before the First World War and was therefore, quite apart from its war-time acceleration, a deep-seated tendency with which we should in any case have had to deal at some time.
Members have before them, I hope, the short document* we have prepared for this Debate providing a comparison between what we have actually experienced in the first half of this year and our forecasts as set out in the Economic Survey. If hon. Members will be so good as to look at the last three tables in this document, B, C and D, they will see that the tables give a certain amount of information on the course of our trade with the rest of the world which may help to counteract a number of factual misrepresentations which seem to be current.
From Table B it will be seen that our total imports and total exports in the first half of this year to and from the rest of the world were as close to the forecast as any reasonable person could expect. I cannot yet give an estimate for the invisibles, as it is too soon after the end of the half year. In spite of a certain worsening of our situation in relation to the invisibles with the dollar area in the last part of the period, I believe we shall find no great divergence from the original forecast.
§ * For text of document, see Col. 799.677
§ On this assumption, we shall be able to say that, as we expected, over the first half of this year, the United Kingdom was approximately in a balance on its external accounts, taken as a whole. The two tables following, C and D, illustrate the course of our export trade and show how those exports were distributed among the main geographical areas of the world. Here, too, with the single but very significant exception of our exports to the Western Hemisphere, I think the forecasts have been pretty near to the mark.
§ I now turn to the first table of this series which gives the facts as to the most important part of the story, namely our gold and dollar deficit. As hon. Members will see, taking the six months as a whole, the total gold and dollar deficit amounted to £239 million sterling, compared with a forecast in the Economic Survey of £195 million, involving therefore an excess of £44 million. Looking first at the United Kingdom part of this table, I draw the attention of the House to the fact that the expenditure on dollar imports was exactly in line with our expectations. In fact, it is obviously fortuitous that the accuracy should have been so great. Nevertheless, it emphasises the point that the worsening in our affairs is not due to any uncalculated over-spending on our part.
§ As against this, our dollar exports were £12 million less than we expected. This is mainly the result of the fall-off in our trade with the United States over the last three months. Trade with Canada has kept up better, though we believe that still further efforts are needed, and will be made, in this vital market. The receipts from our dollar exports are no doubt still declining. I hope that by the time my right hon. Friend the President of the Board of Trade speaks later this evening he will be able to give the House details of the June figures.
§ Even more important than the shortfall in exports has been the worsening of the position of our general dollar invisible account. This contains, as the House knows, a whole complex of items covering a large and varied number of payments and receipts. Although it is too early yet to give any detailed story, it is already obvious that the deterioration shown is partly the result of rather heavier outgoings and smaller receipts 678 on financial items, than were anticipated, and partly of a considerable reduction in our receipts from items such as the sales of oil and of diamonds in the dollar area. As a result of all these developments, the United Kingdom deficit with the dollar area has come out on present calculations—I emphasise that fact because these figures cannot be final, obviously, at this stage—at £160 million sterling, or £30 million worse than we forecast.
§ At £37 million there is an increase of £22 million over the forecast for the rest of the sterling area, which likewise therefore shows a larger deficit than was anticipated. I have already given the House some indication a week ago of the developments which have thus adversely affected the earnings of the rest of the Sterling area. Prices of a number of important primary commodities produced by the rest of the sterling area have fallen during the half year, and, even more important, the volume of their sales, particularly again to the United States, has gravely diminished. In addition, there has been a certain increase in dollar expenditure in a number of countries, though the effect of this has been much less than the fall in their income.
§ Finally, we come to the gold and dollar payments to non-dollar countries. It will be seen that these in fact were lower than our original estimate, though the estimate itself represented a considerable increase over the figure of £35 million under this heading in the second half of 1948. This item continues to be a serious strain on our resources, and I am afraid that we can take little comfort from the fact that in this half year the figures are lower than we had anticipated. We hope, however, that the new Intra-European Payments Agreement will ease our situation in this respect.
§ I may perhaps here interpolate a word or two about this agreement and its possible effect upon our economy. The new scheme will lead to a considerable improvement in our position with Belgium as compared with last year, when we had to make large gold payments which were not taken into account in the division of Marshall Aid. There will be a similar improvement in our position with Switzerland if she joins in the scheme as well, and negotiations are now proceeding with the Swiss upon that point. In the case of Belgium, the result will be that our deficit 679 will be covered partly by drawing rights, the amount of which has not yet been precisely determined as between different countries, and partly by credits granted on terms similar to the E.C.A. credits which we have taken.
§ So much, then, for a general explanation of the gold and dollar deficit in comparison with the forecasts. The total figure for the half year, as I said, has come out at £239 million, but, as the House is already aware, this total is made up of two very unequal quarterly figures or one might say six very unequal monthly figures. In the first three months of the year the deficit was £82 million; in the second three months it was £157 million.
§ It is this deterioration during the latter part of the half year which has caused us all so much concern. Part of it was forecast and expected. We looked for an increase in our programmed expenditure on imports during the second quarter, and this increase was realised, accounting possibly for £25 million more than expenditure in the first quarter. That is partly seasonal. We also expected some seasonal reduction in Colonial earnings, but the decline which has actually taken place is much greater than those expectations. Though accurate figures for Colonial earnings are not yet available, the probability is that earnings from sales to the United States were almost halved between the first and second quarters of the year, falling from nearly £33 million sterling to about half that figure.
§ Other countries in the sterling area also suffered a reduction in their income during this period, notably from reduced sales of wool, jute goods, and a number of other commodities to the United States. Our payments to countries such as Belgium and Switzerland were, in accordance with our anticipations, heavier in the second than in the first quarter. About 65 million dollars were paid to Belgium and Switzerland, compared with less than half that figure in the first quarter.
§ Thus, in general outline, we see the reason for the increase of our gold and dollar deficit during the first half of this year. The larger part of it results from smaller receipts from the dollar area, though some of it is due to an increase in the outgoings both of the United 680 Kingdom and of certain other countries. Put in its simplest form, the sterling area is currently running a deficit with the dollar area at the rate of £600 million sterling a year or one and a half times the total of its gold reserves. No one will doubt that that condition of affairs must be altered.
§ I mentioned a few moments ago that the prices of many primary commodities, except tin, had fallen steeply—some of them very steeply—in the last few months, so that there can be no question of the price factor preventing sales in these cases, in which there is, indeed, a free market. The fact is, of course, that buyers have held back, as they could afford to do, relying on their stocks and hoping for further falls in prices. This is a normal feature of a decline in trade, and it is, of course, the very danger against which such an arrangement as the International Wheat Agreement is aimed.
§ Indeed, it was to promote stability in the primary commodity markets of the world and to avoid the special difficulties which beset the trade in primary commodities when supply and demand get out of balance that a whole chapter on this subject was included in the draft I.T.O. Charter. This is obviously one of the fields in which the countries of the world should re-examine the possibilities and come to some agreement upon the remedial action to be taken so as to enable them to carry out their pledge to provide full employment.
§ So far as the fall-off in our own exports is concerned, we must examine the situation in a little more detail. Exports of United Kingdom manufactures proper have given fluctuating results over the past months in the United States market. That is, of course, natural, as a single month is much too short a period in which to display a trend. I would remind the House that some of the items which are included in the United Kingdom exports are not really United Kingdom exports at all—for instance, reshipped rubber comes into the United Kingdom exports—and therefore one is apt to get a somewhat fallacious idea unless one analyses the actual figures.
§ Among the principal groups of manufactures exported to the United States, we find that there have been material declines in the amounts exported in 681 certain cases during the last two months. For instance, the vehicles group shows a decline from a monthly average of £780,000 in the first quarter of the year to £315,000 in April and £206,000 in May. Machinery, electrical goods and cutlery show a decline from a monthly average of £345,000 in the first quarter to £273,000 in April and a slight recovery to £276,000 in May. Exports in the textiles group have declined to a less extent, while exports in the pottery and glass group have roughly maintained their position. Outside North America our exports are still running at a high level, and during June, which was a short holiday month, total exports reached a volume of 145 per cent. of the average monthly figure for 1938, as the House is aware.
§ I should here, I think, point out to the House that this comparatively small decline in our dollar earnings would not have been so serious a matter had we had ample reserves. We should still have to seek a remedy, but there would not have been the same need for most urgent action. The change in trend of world trade which I have mentioned has highlighted the deep-seated maladjustments between the dollar and sterling areas, and we must, therefore, concert long-term steps to remove that maladjustment if we can; but in view of the state of our reserves, we must also take immediate steps to arrest their decline.
§ Our general aim and object has always been to have a system that would allow sterling to carry trade all over the world. Our economy is such that it must depend upon a world-wide export trade in hundreds of different manufactures, and anything that impedes that trade is, in the long run, bad for it. We therefore have prided ourselves in maintaining even through the most difficult times and at great cost, a wide area of multilateral trade throughout and, indeed, beyond the sterling area. We have, indeed, according to the size of our country and our population made a very large contribution towards world recovery running into many hundreds of millions sterling—as I stated the other day—and we have incurred huge dollar loans and liabilities which have been used to maintain the strength and stability of the sterling area as a whole.682
The long-term problem that presents itself to us and to which we must try to find the answer, primarily in consultation with our American and Canadian friends, though with others too, is how we can secure a stable relationship between the sterling and dollar areas that allows the maximum degree of exchange of commodities while yet preserving to each country concerned the right to decide upon its own internal economic policies. We are prepared and anxious to make our contribution to such a solution, but that solution must be sought upon the basis of continuing full employment in each individual country, a cause to which all the world is most definitely pledged. Perhaps I may remind the House of the words of the draft I.T.O. Charter upon this subject:
Each Member shall take action designed to achieve and maintain full and productive employment and large and steadily growing demand within its own territory through measures appropriate to its political, economic and social institutions.
This end must no doubt be achieved in different ways according to the political philosophy of different nations, but we are all excluded from seeking a solution along the lines that precipitated the tragic slumps and mass unemployment between the two wars.
It is the search for this long-term solution that we started so auspiciously at our meeting last week with the United States and Canadian representatives. As the communique which was issued at the end of the conference states:
It was agreed that the general approach to existing problems must be based upon full recognition of their profound and long-term character. The difficulties of the past few months were no more than an aggravation of deep-seated maladjustments.
This is the starting point for a new effort by the countries primarily concerned to see whether it is possible—and again I quote the words of the communique—
to find solutions which would maintain high levels of employment and enable world trade and international payments to develop on a multilateral basis.
In other words, in a free multilateral world economy can we by national action prevent declines in trade from spreading into slumps such as we experienced between the two wars, or must the various countries or groups of countries to some extent attempt to insulate themselves for
protection against the possible spread of unemployment?
Undoubtedly the war-time developments in Europe and in America have, owing to their unequal effect upon productive efficiency in the two continents accentuated this problem, and it has proved to be deeper seated than some people may have imagined. It is with regard to this "profound and long-term character" of the present difficulties that the communique states:
All parties concerned must be prepared to review their policies with the object of achieving a pattern of world trade in which the dollar and non-dollar countries can operate together within one single multilateral system.
§ The really important result of the discussions with Mr. Snyder and Mr. Abbott was that our three Governments were in complete agreement that the problems before us could not be solved by any easy improvisation or by any one country alone, and that it was therefore imperative that we should together try to find a fundamental solution. To that end it has been arranged to hold further high level Ministerial discussions in Washington early in September. These discussions will be preceded by preliminary fact-finding talks between officials.
§ So far as the longer term aspect is concerned, I cannot therefore go further today than to say that we regard it as highly satisfactory that our Canadian and American friends should have shown themselves in agreement with us upon the profound and long-term character of our difficulties in which they and we are alike deeply concerned, and upon the necessity of our getting together as soon as possible to search out a solution and decide what each one of us must do to make that solution effective.
§ These discussions do not in any way affect our attitude towards O.E.E.C. The communique to which I have referred stated that there was full recognition in the discussions of the vital part which assistance under the E.R.P. is playing in maintaining the economic position of the United Kingdom and of the other countries participating in the O.E.E.C. Our recent discussions and those which are to take place in September will, we hope, strengthen our ability to carry out the co-operation to which the United Kingdom is pledged in common with its 684 other European partners. The solution of this sterling-dollar problem is in our view essential to enable not only the United Kingdom but also the participating countries to achieve the objectives to which they have all subscribed.
§ I now turn to the immediate situation for, while we are with the help of our friends finding a long-term solution to our problem which will we hope give stability to world trade, we must maintain the strength of our own great multilateral area of trade, the sterling area.
§ Sir S. Cripps
First of all let me draw attention to one other passage in the communique which will, I hope, lay at rest rumours which have been circulating for some weeks. I read the passage without any further comment:In this connection no suggestion was made that sterling be devalued.And that, Mr. Speaker, I hope, is that.
The strength and stability of the sterling area must continue to be of great importance to the future of world trade. Indeed, any failure to take decisive and immediate action to safeguard our own position and that of the sterling area would render more, and not less difficult, the attempt to reach a fundamental solution. As I stated in the House a week ago, our immediate reaction to these new difficulties was to order a standstill in new dollar expenditure, and I would like to make it quite clear that we regard this inevitable, but we hope temporary, cutting down of our dollar expenditure as a thoroughly evil necessity, both from the point of view of our economy and that of the world. Any restriction of trade is highly undesirable, and therefore we shall do everything possible, in association I hope with the other Members of the Commonwealth and with the United States, to stimulate immediately the dollar earnings of the sterling area.
I now come to these short-term expedients as I will call them, for I shall not give them the name of remedies. The standstill on new commitments applies to all purchases of imports, both on Government and on private account. We are, of course, continuing to honour all existing contracts and commitments and all import licences which have already been 685 issued. The standstill applies to new purchases. We are making exceptions in particular cases where essential purchases are necessary on seasonal grounds or where failure to make small purchases would have altogether disproportionate effects upon our production and our dollar earnings.
This is the basic principle upon which we shall be working. As far as private imports are concerned, I think it might be helpful to the House and to industry generally if I were to give two illustrations. Spare parts urgently required for machines already in this country clearly satisfy the condition which I have just stated. Production parts for assembly here would normally come within the field of existing commitments. For raw materials which are urgently required, we shall issue licences for the appropriate quantity. This is all emergency action and we shall do our best to operate it in a manner which causes the least dislocation to industry, and I am sure that industrialists will co-operate with us and exercise restraint in their applications to the Import Licensing Department of the Board of Trade.
The standstill, as I indicated last week, will not of course give any quick result in a reduction in the actual rate of expenditure. I do not expect it to secure significant results on the expenditure in the current quarter. The reason for that is that in the normal course of business—and this applies to Government buying agencies as well as to private importers—supplies which will actually be coming forward during the third quarter have already been placed on order.
The standstill is the most drastic curtailment of expenditure which it is possible to make, short of breaking existing contracts. But of its nature it can only be used as a temporary measure. As quickly as we can, we shall need to get back to a more normal programming procedure. But it is no good remaking the programme of imports until we are in a position to make a reasonable judgment of the position for a year ahead. As soon as the process of the division of E.R.P. aid in O.E.E.C. has been done and the present series of talks are over, we shall get to work on a new programme for 1949–50 so that we can then abandon the standstill and work according to a new and definite plan. I hope we shall be 686 able to get that programme out in September.
In the meantime, however, some medium-term decisions have to be taken. For this purpose we have decided to work on the assumption that we shall not be able to afford in 1949–50 more than 75 per cent. of our imports from the dollar area in 1948. These imports in 1948 amounted to about £400 million. We are thus working for the time being on the assumption that we shall not be able to afford to import dollar goods at a rate of more than 75 per cent. of that figure, or £300 million sterling.
I shall now deal with the effects of such a reduction over the next few months, always bearing in mind, of course, that these are provisional arrangements which may, when we come to make the full programme, be varied. So far as food is concerned, the House is aware that we have bought little food from the dollar area since 1947 except through our contracts with Canada. Wheat represents an existing commitment—the last year of the four-year contract—and will not, of course, be affected. The only marked effect will be upon sugar, and we must, in order to maintain the stock position and not waste dollars in the coming months, reduce the ration as from 14th August to 8 oz., with a corresponding reduction in allowances to catering establishments. This will save 150,000 tons of sugar, costing about 14 million dollars in the period up to the end of the year at 30th June, 1950.
We have also decided, for reasons of which the House is fully aware, to reintroduce the rationing of chocolates and sweets from 14th August at a level of 4 oz. per head per week. This will give a saving of 30,000 tons of sugar in the period up to 30th June, 1950, as compared with the present rate of consumption without rationing. There will be no reduction in sugar for manufacturing purposes, which means that the jam position will remain unaltered. As regards other foods, we do not expect that any reductions in the basic rations will become necessary as a result of the standstill.
My right hon. Friend the Minister of Food is, in fact, today announcing certain increases in other rations. These increases relate to items—butter, meat and bacon—of a perishable character, and are 687 governed by the current level of supplies coming forward from non-dollar sources. Our food situation, indeed, with the very important exception of wheat, depends more on the course of supplies from our own agriculture and from the non-dollar world than upon supplies from dollar sources. But, even so, do not let us forget that we have to pay for non-dollar imports with exports as well. On feeding-stuffs we hope to be able to maintain the extra rations which my right hon. Friend the Minister of Agriculture announced two months ago. The greater our import difficulties, the more important is our own food production When the programme for this year was originally drawn up the amount of tobacco provided for would, as I said in my Budget statement, have been enough to allow a modest increase in the supplies of cigarettes. This would have meant a large increase in expenditure compared with last year, when we were living on our stocks. It is now necessary to reduce the 110 million dollars originally provided by 20 million dollars, but this will still mean an expenditure of substantially more dollars in the United States than on our purchases from the last crop. Of course, not all our supplies come from the United States, and I understand that this will mean that manufacturers in general will in due course have to make some reduction in supplies to the public, although probably by not more than 5 per cent. They will, however, be able to maintain the present level, including the special additional supplies which have been got ready, during the holiday season.
Petrol is a difficult problem with wide international implications, and I have not at this stage asked my right hon. Friend the Minister of Fuel and Power to impose any new restrictions upon oil users. I would, however, remind the House that all petroleum products, whether so-called "sterling oil" or so-called "dollar oil," contain a very large element of dollar expenditure, and oil economy is essential if we are to deal with our dollar problem.
On machinery and miscellaneous manufactures the standstill will operate as I explained earlier. Any interference with imports of machinery is obviously undesirable, as we want the best possible re-equipment for our industry; that means in special cases importing some 688 machinery. But the raw materials to run existing industrial capacity must come first, so that as things now are we cannot afford the considerable quantities of dollar machinery that we have been importing. But of course, when we come to reprogramme we shall include a new import programme for machinery, though necessarily on a reduced scale.
Finally, we come to raw materials. I naturally regard these as the least desirable things to be cut, but there is no alternative. We must, however, see to it that such cuts do the least possible damage to our productive effort. No question of any general shortage of raw materials should arise, as from all sources we expect to import substantially more raw materials than we did in 1948, even after making our new cuts. On the assumption upon which we are provisionally working, there should be enough raw materials to sustain the present overall level of production.
The difficulty will arise because certain raw materials are mainly or largely obtained from the dollar area. The effect of cutting dollar materials is thus to create real difficulty for certain industries, while not affecting others at all. I intend to deal with this situation with great care, for this is a circumstance in which contrivance by industry and flexible action by the Government can do a lot to help to prevent serious dislocation which might otherwise arise.
There are many materials, most of which are known only by the people who deal with them, which play a small but vital function in a wide range of industries. Individually, the imports of each are small, but their industrial importance is far-reaching. If one such material runs short, it may prevent a substantial amount of industrial production. The first principle must, therefore, be to ensure that such materials do not run short. The import programme for these materials has, of course, already been rigorously screened, and it is therefore all the more necessary that we should cut the big items with ascertainable effects, rather than the small items with unpredictable effects. That was the practice followed throughout the war, and I am sure the House will agree that it is right.
Cuts will be necessary in the imports of all the important dollar materials, but the effect of these cuts will vary from 689 material to material because the proportion of total consumption that we import from dollar sources naturally varies. The principal materials to be affected will be timber, paper and pulp, non-ferrous metals, steel and cotton. As regards timber, dollar imports will have to be cut substantially, but we hope we may be able, by further purchases from the non-dollar area and otherwise, to carry through the housing programme without any substantial alteration. Dollar imports of paper and pulp will also have to be cut substantially—possibly by as much as one-third—but here again we hope to be able to increase our purchases from non-dollar sources, and consequently we hope the effect will not be great. In the case of non-ferrous metals, the cut in dollar expenditure will amount to some 25 per cent., but, because of changes in sources of supply and alteration in prices, we expect that it will be possible for consumption to be maintained at about the existing level.
I should draw attention to the fact that these cuts are on the anticipated programme, and not on the actual existing level; and, as the House knows from having studied the programme put forward for 1949–50, there were increases anticipated in a number of items. I hope it will be possible, therefore, to maintain the existing consumption of non-ferrous metals. As regards steel, we shall have to cut off a part of our imports, so that the maintenance of a high level of domestic production becomes more important than ever. [HON. MEMBERS: "Hear, hear."] I agree with the enthusiastic reception which has been given to that passage and I agree with those who have made it that we hope that the continued spur of the hope of nationalisation—[Interruption]—will continue to give the good results that it has given during the past 12 months. In fact, I hope we shall be able to consume—
§ Sir S. Cripps
I hope the right hon. Gentleman is not being overcome by the hot weather. If he is not, anyway, his manners are. Now, I am afraid that it will not be possible to import all the dollar cotton we had hoped to be able to import. Nevertheless, we shall expect to import at least as much as last year 690 so that the existing consumption level of United States cotton by Lancashire should not be appreciably affected.
The net result, taking these main items of dollar imports and comparing them with our actual expenditure in 1948, is that there should be a reduction at the rate of 400 million dollars, or from 1,600 million dollars to about 1,200 million dollars. The combined effects of the standstill and of the reduced import programme, which will be worked out in detail, should eventually produce a marked reduction in the drain on our reserves. The Commonwealth Conference, which is now proceeding, will, we hope, also result in similar immediate action by the rest of the sterling group.
In addition, as a result of positive steps taken here and in the United States and in Canada, we hope to increase the dollar receipts of the sterling area and so to improve the earnings side of our dollar accounts. We must realise, however, that before we can restore to the full our dollar spending we must put back at least some of the reserves which have drained away over the last three months and which will continue to be spent during the current quarter before the full effect of the various emergency measures can come into play.
To summarise the immediate effects upon consumption in this country, certain cuts are, as I have said, inevitable—notably in the personal consumption of sugar and tobacco. The industrial use of raw materials of dollar origin will also be affected, though we shall do our best in consultation with industry to limit to the minimum the adverse reaction upon the level of activity in the various industries concerned which should not be very marked.
I will not deal myself with the positive dollar earning efforts that we must make in this country, as my right hon. Friend the President of the Board of Trade will cover that ground later this evening. All I would say at the moment is that a direct increase in our dollar earnings—and in those of the rest of the sterling area—is more essential than ever as a result of what has happened over the last few months. Reductions in expenditure, inevitable though they are, represent a purely negative approach to the problem; our main hopes for future prosperity rest, not upon such reductions, but upon 691 positive and constructive measures calculated to increase the volume of world trade and our own earning capacity.
I might also mention that a number of short-term measures which are designed to improve our dollar position are at present under discussion with the United States and Canadian Governments. None of them is a suggestion for new financial help outside what is already operating; they are rather methods by which existing arrangements can be made more effective and helpful in present circumstances.
I have now, I think, covered the range of problems from immediate to long-term, and it is all these that we are now discussing with our Commonwealth friends, and as to which we seek their co-operation and assistance. It must be clear to the House that in this matter the interest of all the sterling area countries is the same—to preserve the stability of sterling and the strength of our reserves. Exactly what contribution we can each make to these purposes and how best we can make them must, of course, depend upon the form of our trade with the dollar area. Broadly, we must all of us sell all we can for dollars—even if it means some of the rest, including the United Kingdom, having less as a consequence and we must, as I have already indicated the United Kingdom will do, cut down our dollar expenditure. Those matters I am now discussing with my colleagues from the other Commonwealth countries.
There is one final matter to which I should make a reference, namely, the cost of production in this country and its effect upon our balance of payments. The main elements in cost of production are the prices of raw materials, labour costs and overheads. [HON. MEMBERS: "Taxation."] Taxation on profits is not an element in costs. There is no doubt that in many instances we have had to pay unduly high prices for raw materials, these high prices being to some extent a reflection of the scarcity of dollars in part of the world, as well as of a high level of demand. We have, for example, had to pay high prices for Egyptian cotton due to the extent of the demand for this type of raw cotton in view of the dollar shortage. That high price has necessarily been reflected in the cost of our manufactured goods, since a considerable part 692 of our cotton industry has been built up upon the use of Egyptian cotton.
There are many other cases in which a concentration of buying on non-dollar materials has resulted in our having to pay higher prices for raw materials from that source than for similar materials from the dollar area. This situation is not likely to right itself unless and until we have achieved the fundamental solution to which I have earlier referred, and it becomes possible once again to purchase goods freely from either dollar or non-dollar sources. The acute shortage of dollars must, of course, tend to relieve the pressure of demand for dollar goods and increase the pressure of demand for non-dollar goods, with the result that dollar prices tend to be lower and non-dollar prices higher for the same goods.
Apart from the incidence of higher raw material costs there are other elements of high costs in our production, particularly in some of our older industries, elements which are within the control of our own managements and workers. I must emphasise here, as I have done so often in the past, the need for our production methods to be brought and kept up to date and at the highest point of efficiency if our industries are to remain fully competitive in world markets. That is not to say that all our prices are at present too high or that all our methods are old-fashioned—very far from it. But we must examine those particular sectors of our industry which show themselves uncompetitive through high costs and see where and how their efficiency can be improved. There is a positive and pressing duty upon all engaged in such industries, whether managers or workers, to put into operation methods which can improve their productivity.
I need not enumerate here what those methods should be—they have been explained and discussed as long ago as in the original Working Party reports and elsewhere. The provision of more mechanical and electrical aids, more standardisation and simplification where this is appropriate, a more efficient layout of production—these are some of them. What we need to do is to increase efficiency and reduce costs by paying greater attention to such matters as the staffing of machinery more economically and the doing away with outworn traditional restrictions on the use of labour. 693 I must appeal to all engaged in industry, both management and workers alike, to be constantly alert for new ideas and improved methods, whether they result from new research or from the experience of their competitors, and to resolve to put them into effect with the minimum of delay.
There is also a positive and pressing obligation upon all sides of industry to maintain and increase our dollar sales, and to put them in front of other exports wherever possible. At the same time, and side by side with our attempt to reduce prices by greater efficiency, we must avoid all countervailing increases in our costs due to rising personal incomes, especially so at a time when each and all of us is called upon to do our utmost and to put forward our best efforts.
It is only those with a total disregard for their own future welfare and that of their country—or those who have the active desire to destroy our economy—who will at the present time press for general wage, salary or profit increases. I must again warn the House and the country that unless the maximum restraint is shown in this matter by all sections of the community we shall indubitably find ourselves unable to surmount our difficulties.
Provided that we in this country are prepared, in the various ways which I have outlined, to make the great effort demanded of us, I do believe that, with the help of our American and Commonwealth friends and with European co-operation through the O.E.E.C., it is possible for us to find a long-term solution to the problems of our dollar-sterling balance of payments. That will not be a short task. We hope to resume our talks in Washington in September, but we could hardly hope to work out a complete solution in the course of a single series of meetings. It will quite probably require further consultations after those in Washington which may occupy weeks or perhaps even months. During that time we must see to it that our reserves are safeguarded so far as is possible.
I am very glad that the people of this country have accepted these new difficulties in a sober and responsible spirit and have not allowed any disabling atmosphere of crisis to spread itself. They can, I believe, be confident that both 694 their own Government and the Governments of the other countries concerned are fully aware of the seriousness of the situation that has developed and are determined to deal with it by fundamental means that will preserve throughout the world that full employment which has been the main economic and social aim of our civilisation since the end of the war.
Democracy, economic independence and full employment form a magnificent programme for the free peoples of the world; we are now challenged by events as to whether we can maintain all these three objectives. We must spare no effort to see that we establish these three as the great safeguards for the liberty of the peoples of the world. Their achievement will establish our victory in the cold war, it will justify the claims of democracy and will ensure the freedom and happiness of the future generations. Much is at stake. Let our response match up to our responsibilities.
§ 4.48 p.m.
§ Mr. Oliver Lyttelton (Aldershot)
I think it would be fair to say that the Chancellor's speech divided itself into about four sections. The first section was a discussion of the figures which have led to the increase in the dollar and gold deficit of the country in the last quarter. Upon that point, I only wish to ask the President of the Board of Trade whether he can tell us what has been the deterioration in the position during the last few weeks. Speaking from memory, I recall that the figures show that in the first quarter the deficit was £82 million and in the second quarter £157 million. My belief, which I should like to have confirmed—or rather which I hope will not be confirmed—is that the rate of deficit is increasing.
§ Mr. Lyttelton
I hope that the President of the Board of Trade will be able to give us some figures.
The second part of the Chancellor's speech was a homily on the advantages of multilateral trade which came rather oddly from a Chancellor who has a number of bilateral agreements in both pockets, and whose solution of many of the difficulties which now beset us is in the increase of bilateral trade.
695 The third part of the Chancellor's speech dealt with immediate cuts, and I take issue with him over that. I thought that some of the things that he said about those immediate cuts fell little short of being deplorable. Although he was strictly accurate in everything he said, the whole tendency of his remarks was to make the people of this country believe that the sufferings which they will have to undergo as the result of cutting imports will be of negligible proportions. What he said about every commodity upon which he touched had this message "But of course this will not matter; by this means or that the impact of these cuts will be reduced."
I suggest that this is not at all the way to deal with the situation and I will have something to say about that later on. It is absolutely ridiculous to suppose that if we cut imports from hard currencies by £100 million the effect upon the rations and on the other necessities of the population will not be very severe. They can be measured exactly in the terms of £100 million. If we could always have done without them, as the Chancellor appeared to suggest, why did we have a programme to spend the money originally?
Upon this point about cuts the Chancellor said that this was the negative part of our policy, and this negative part is to be continued—the cuts are to be continued—until the Finance Ministers and the right hon. and learned Gentleman himself resolve the long-term problem. One of the results of the meeting at Chequers has been to discover that the disparity in the balance of payments between the Western and Eastern Hemispheres is a deep-seated problem; not a very startling result of these discussions, and I shall have something to say about that, too. The last part of the speech consisted of elevated discourse about the need for reducing costs and making the necessary national effort.
I should like to say this generally on the point of presentation to the public. I think that both the original statement, the Chancellor's communique from Chequers, and the statement we have heard today convey extremely little to the man in the factory, or the field or the mine. What does he really think of phrases like "personal incomes"? We 696 ought to be more blunt and say we mean wages and salaries. That is more readily understood. Do not let us shy away from using the word, "wages," because it is a common word, and will be understood—[Interruption.] The Chancellor is trying to tell me that I do not understand what "personal income" means. If I do not understand it I do not think that others who are not daily concerned with these matters will understand it any more.
I personally think that over all these things the Minister of Fuel and Power was nearer the truth than the anodyne statement which the Chancellor has put out this afternoon. He has been laughed at for betraying emotion. I do not think we should laugh at him, nor do I think that he should apologise for it. He should remember, what Disraeli said, "Never apologise for showing feeling; remember that you are apologising for truth." The phrases like those with which we have been regaled do not bring home the truth to the population. Nor are phrases like, "high-lighting the deep-seated maladjustment" either elegant in themselves or very explanatory to the public at large. Even to us they ring oddly, and I think falsely; because if the maladjustment was so deep-seated is it not rather curious that the Economic Survey and all this galaxy of Finance Ministers should only have discovered it in the last week or so, and find it necessary to incorporate such a resounding platitude, such a blinding flash of the obvious, in a week-end communiqué?
All this Economic Survey of 1949 was intended to do was to give a reliable estimate upon which a reliable picture could be formed of our position in 1949. All that it has really done, except in the unessential figures, is to underline the depth of the Government's miscalculation of the major items. The Chancellor was quite fair in his explanation of the figures. He rightly said that over all those items which do not matter the Economic Survey has come out about right; but on those that do, such as the balance of payments in the Western Hemisphere, they are wildly out, and the deterioration has been very much greater in the last quarter than it was in the first.
The really serious thing is that the situation is deteriorating, and deteriorating rapidly. That is what wants to be said; 697 and that these cuts, although they are immediate and in some respects will be crippling, are only a small foretaste of what is going to happen to this country unless the "deep-seated maladjustment" and "long term problem" is resolved. Upon that we heard that the Government is to set up a fact-finding body of officials. It is rather late in the day to find facts now. And what "fact-finding" means in Government jargon is that they do not know what to do and want a period when they cannot be over-questioned, during which they will say, "We are still trying to ascertain the facts."
There was one part of the Chancellor's speech which I thought was a little unfortunate. It was the part dealing with American conditions. There was a time, not very long ago, when the rise in business activities in the United States and the increase in prices were one of the main causes of our disaster.I said"—said the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton)—that we have run into a great storm. … These are not the same dollars that we borrowed by reason of the depreciation in their purchasing power. That is the first reason why this storm has suddenly risen. …"—[OFFICIAL REPORT, 17th August, 1947; Vol. 441, c. 1655–6.]The Chancellor, later in 1948, said:Although we do not want to see any catastrophic fall in prices or raw materials and foodstuffs, because that would only further upset world economy, we can very legitimately welcome a reasonable fall."—[OFFICIAL REPORT, 16th September, 1948; Vol. 456, c. 251.]I advise him to pass on those words to some of his followers, because it is now generally said in the country by Socialists that the reason for these catastrophic cuts of which they have had some notice is the fall in business activities and falling prices in the United States of America. Rising prices, worse terms of trade for this country; falling prices, falling exports. In both cases disaster. I think it would be a good plan to look for some of these causes rather nearer at home.
The Chancellor, I think I am right in saying, attributed the cause of the increase in our deficit earnings first to the decline in sterling exports to the United States; to the decline of sterling area exports; to some increased gold losses to Switzerland and Belgium and, I think, some further 698 loosening of blocked sterling. He can interrupt me if I am wrong, and he—
§ Sir S. Cripps
I think that what the right hon. Gentleman has omitted is the invisibles. I said there had been a considerable falling off.
§ Mr. Lyttelton
I would add to the ones which he stated—and I am afraid I must say it, because I believe it—a growing lack of confidence in sterling. If that is true, it is by far the worst of these things. I believe myself that the Chancellor's principal difficulty is fear that those who become possessed of sterling balances will try and turn them into some other currency, either because they regard sterling as an unstable currency today, or because they believe that by changing it into some other currency they will be able to buy things cheaper than they can here.
This is the peril, and it is not to be glossed over by saying that a cut of £100 million—which is the negative part of our policy—will not be felt by the population, or will be felt only to a small degree. This is not the way to treat the British public at all. They must be told now that these cuts are only the precursor of very much harder conditions which will come. So far not only is it true that the maladjustments are deep-seated but the remedies to be applied to those maladjustments will be very long and hard; and during all the period of the Chancellor's remedies a regime of decreased imports and decreased raw materials will apply.
The right hon. and learned Gentleman has not made it clear yet, and I think it is the plain duty of the Government to convey to the public, that this is not a remote or distant danger. It is not like an earthquake in China—a disaster which is far from us. This crisis is immediate and urgent, and it is not financial. The balance of payments concerns the whole life of everybody, and it is not just a loss in financial game. The public are still unaware of the severity of the crisis. Most of them do not read "The Economist," and have not read that burning sentence—a terrible message: 699In the long run nobody owes the British people a living, and the point must come when they enjoy only that standard of living for which they are prepared to work.I criticise the Chancellor's general approach to this subject because he has not made it clear that dollar deficits mean two things—less to eat and unemployment. They mean less to eat because we cannot pay for the food, and they mean unemployment because, as the Chancellor has already partially confessed, we shall be unable to import the necessary raw materials to maintain the present activity in our industries.
Last week I read two articles—I think they came from the same hand, that of the hon. Member for East Coventry (Mr. Crossman)—in the "Sunday Pictorial" and in the "New Statesman." The effect of those two articles was to say that the Tory policy consisted of wishing to force down Government expenditure so as to allow unemployment to rise, wages to be lowered and sterner discipline to be imposed in the industrial machine, and that these measures were intended to restore confidence in the minds and hearts of American bankers. These charges are, of course, false, and I do not think they would be worth denying if they did not contain something which is dangerously misleading to the public upon the very subject on which they now want guidance. It is dishonest to pose an alternative like this: on the one side, a Tory régime with high unemployment and the dollar deficit or gap bridged by American bankers; and on the other side a Socialist régime with full employment and what the hon. Gentleman calls "fair shares for all," by which I think he means rations on the present scale, and the gap in dollar payments still unresolved.
That is not the alternative at all. Government expenditure has to be reduced, nationalisation arrested and the confidence in the £ restored, because without that confidence we cannot eat and without restoring that confidence we shall have large scale unemployment, for we shall not have the raw materials to nourish our industries any more than we shall have the raw materials to nourish our bodies. We want to know soon what this Government of planners are going to plan concerning these vital questions of food and raw materials. All we now 700 know is that they are to be cut in the immediate future, while the Chancellor and his colleagues seek out a long-term remedy for a long-term maladjustment. So far as I can gather, the policy of His Majesty's Government is further doses of the same medicine.
I have already dealt with the cut in imports. I again say and I cannot say it too often, that lower rations and unemployment are the inevitable consequences of this policy. I hope that the President of the Board of Trade will enlighten us a little more about the standstill upon raw materials which form a part of British exports. I did not think the Chancellor was very precise upon that point concerning raw materials which come into this country and afterwards form a part of our exports. Is there to be a series of criteria, such as what the conversion rate between the raw materials and the finished export is going to be, or are licences going to be issued to those who say that the end product, as the American call it, is ultimately going to be exported? This is the point on which there is a great deal of uncertainty at the moment, and the President of the Board of Trade will do a lot of good if be resolves that question at once.
The second feature of the plan, so far as I can discern it, is the series of further bilateral agreements; and the homily about multilateral trade was merely an academic exercise, however it may have appeared to the right hon. and learned Gentleman. The object of these bilateral agreements is to oblige people who earn pounds sterling to spend them here on goods which they might not otherwise wish to buy, or which they might consider too high in price. Bilateral agreements are the pupae of the Schachtian philosophy and doctrine, and we are gradually building up a great number of artificial values for the £ as a result of these bilateral agreements. I think that in this part of our economic history they will tend to intensify and aggravate our present difficulties, because they will wrap up the £ and British trade in a sort of bilateral cottonwool.
I now have a serious question to ask the President of the Board of Trade, to which the House is entitled to have an answer this evening. Has he concluded either de facto or de jure a bilateral 701 trade agreement with Russia? If so, what is its extent, and in concluding this bilateral agreement has he been in consultation with the American administration and are all the details known in Washington? I should regard it as unfortunate if, while seeking aid from the Americans in this general alliance, we did not make those details known to them.
§ Mr. Lyttelton
Of course, I suggested nothing of the kind. I only said that when we are asking the aid of certain people, when we are discussing deep-seated maladjustments, when we are pronouncing homilies about multilateral trade, and when we have signed an international agreement and subscribed to the theory of multilateral trade, it is necessary to say that we are still continuing bilateral agreements with a country from which many supplies are now being cut off by our future partners. I did not suggest for a minute that our policy must be subordinated to that of America, but I do say that they are entitled to be informed. That is where I stand. I also say that this House is entitled to be informed. I am asking the President of the Board of Trade to give us a definite answer this evening.
The third part of the positive policy seems to be a great drive to increase exports to America. Part of any economic policy must be to try to increase our dollar exports, and nobody could deny that there is a field for increasing dollar exports. At the same time, however, it is deluding the public to leave them with the idea that any practicable quantity of exports to the United States will solve the balance of payments difficulty or bridge the gap. The United States are the home of manufactured goods. They produce the catalogue, so to speak, of modern manufactured goods. Those who think that there is an almost unlimited field—tariffs or no tariffs—for British manufactured goods in the United States ought to see their doctor, if they have one. There used to be a phrase about "sending coals to Newcastle," which is now obsolete. By trying to sell manufactured goods to the United States, 702 we should be "sending coals to Newcastle." My estimate of the possible increase of our exports to the United States, with every barrier taken down and with conditions which do not exist today is that they could not possibly increase by more than £40 million or £50 million. That is a notable contribution towards bridging the gap, but it does not close the gap permanently.
§ The President of the Board of Trade (Mr. Harold Wilson)
The right hon. Gentleman is making an important statement. Was his estimate of £40 million or £50 million made on the assumption of all the barriers down or on present assumptions about the American market?
§ Mr. Lyttelton
Naturally, I am an unofficial person and I must make an unofficial estimate. It is not based upon nothing. If the right hon. Gentleman looks into the archives of the Board of Trade he will discover that in other days a study was made of this matter. On the assumption that there is nothing to prevent British goods going to America, then an increase which I estimate to be £40 million or £50 million above the level of exports now would be possible.
§ Mr. Lyttelton
With no tariffs and with such assistance as the United States Government can give. I should be happy to hear that my estimate is too low.
§ Mr. Harrison (Nottingham, East)
If we keep tariffs as they are, what would be the right hon. Gentleman's estimate of the possible expansion of our trade?
§ Mr. Lyttelton
That is a question which I could not accurately answer. My main point is that it is not mainly tariffs which keep British manufactures out of the United States, but the fact that America is the home of manufactured goods. Anybody who thinks that he will be able, to sell large lines, say, of sewing machines, to the United States, ought to consult the Minister of Health and get a panel doctor to look at his brain.
The whole of this situation leads me to express an opinion with which I have 703 often troubled the House before. It is that we cannot readjust this deep-seated maladjustment by exports only and we cannot deal with this situation only in terms of current trade. There must be movements of capital between the Western Hemisphere and the Eastern. One of the effects of such a movement of capital will be of the greatest advantage in developing the Empire and dealing with Imperial problems. That is one of the long-term solutions to the problem. [Interruption.] I think I overheard the Chancellor saying that that was very obvious. It may be very obvious—
§ Mr. Lyttelton
But it is entirely neglected by His Majesty's Government. What are the necessities which must be satisfied if we are to get that movement of capital from West to East? The first is a belief by the investor in the Western Hemisphere in the economic soundness of Western Europe and of this country. The second is that they must feel that the currency which they are going to buy in order to make that investment is more likely to rise in value than to fall. The third is that the investment they make should result in the production of goods at competitive prices. The fourth is that they are not going to be taxed out of existence in life and robbed when they are dead. The fifth is that they will be able to sell the pounds if they wish to reverse the investment. The last is that they are not to be bought out by the State when their business is in a prosperous condition and afterwards paid out in depreciated Government scrip.
§ Mr. Lyttelton
It is no exaggeration to say that none of these conditions exists today, nor can they be made to exist by the Government policy of further poultices of bilateralism abroad and Socialist austerity and cuts at home. The tragedy about the Socialist restrictionist policy is that the more they restrict the 704 worse they make the situation. If British travellers have to be turned upside down and shaken in the British Customs to see if anything realisable falls out of their pockets or their clothing, it is not usually considered to be a very good means of advertising the confidence of His Majesty's Government in the international value of the £.
In exactly the same way, when we require to buy goods from foreign countries, if the only form of negotiation which His Majesty's Government favours is bilateral negotiation, that again tends to weaken confidence in the £. The crying need is to begin to break out of some of these bonds. It is absolutely necessary to say that no Government of any political complexion can reverse the trend very quickly. It is necessary to make a beginning, and instead of making a beginning the Government are going further into these measures—more bilateralism, more cotton wool, more restrictions, more cuts in imports. The plain fact is that the Socialist economy will not work. That is very serious. It will work neither under the right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) nor under the right hon. and learned Gentleman the present Chancellor of the Exchequer. What is still more serious is that the rest of the world has found out that it will not work.
We must allow the icy wind of competition to blow through some of these bilateral agreements. We must have new brooms in these swollen Government Departments. We must even go so far as to cut down some of the Ministerial limousines. It will not work. The impact of events has already knocked down some dearly-loved Socialist doctrines.Rough winds do shake the darling buds of May.—May Day. One of the things that has gone overboard in the last few days is the theoretical justification of bulk buying. As an economic theory it has now disappeared, for we see the spectacle of the Minister of Supply, who was at one time a member of the London Metal Exchange, following—avowedly following—world prices up and down from day to day. I wish to be fair. I do not underrate for one minute the practical difficulties of opening the London Metal Exchange under present conditions. I do not under-rate them, but the Metal Ex- 705 change is kept closed not because the Minister of Supply any more believes in the bulk buying of non-ferrous metals but because he thinks that it is too difficult to open that Exchange for practical reasons. All that has happened is that we now slavishly follow world prices up and down from day to day, and instead of these world prices being made in an open London market and earning us some foreign currency, they are now made elsewhere.
I agree profoundly with the Chancellor of the Exchequer that there is no short-term solution to this problem. It is the trend which must be reversed. I must say that in face of an emergency which I think the Chancellor has much underrated, for reasons which I do not profess to understand, it is an act of wanton cynicism to proceed with the nationalisation of the iron and steel industry. The remarks which the right hon. and learned Gentleman made upon the subject of the dawn of nationalisation being the cause of the increased production of steel, are really quite unworthy of him.
In conclusion, I would say that the people can have a welfare State with full employment and today's rations and the present financial policy, only for a very short time. All these extravagances and follies are coming home to roost. At the end of the argument, when the tally is struck, the welfare State can guarantee its citizens everything except the two things which really matter. They can guarantee the welfare of the citizen from the cradle to the grave. They can protect them in times of emergency from the terrors and evils of unemployment and of sickness. The only things with which they cannot provide them are food or work, and this is the problem which hon. Members opposite have to ponder when they look at our very serious crisis and study soberly what the solution should be.
§ 5.20 p.m.
§ Mr. Clement Davies (Montgomery)
With some of the statements made by the Chancellor I find myself in complete agreement, and I would begin with the tribute which the right hon. and learned Gentleman paid to the country for the continued and gallant effort which it has made, not only since the war, but indeed for a period of ten years from the beginning of the war, and which it is still making. The second one is the need, 706 in order to maintain our standard of life, our social services and this country's position among the races of the world, to restore world trade upon a multilateral basis. I gathered that the Chancellor himself would condemn bilateral agreements and accept them as purely temporary measures, and that what he really desires is general multilateral trade.
The next point is that sterling should be accepted in every country of the world as it used to be as a medium of exchange. That means, of course, that at all times and everywhere sterling and the dollar will be interchangeable. Next, the Chancellor also desires—and, incidentally, this desire is not a monopoly of the right hon. and learned Gentleman or of his supporters—to maintain full employment, not only here, but in every country in the world so that each may support the other. Finally, very rightly, the Chancellor again called the attention of the House and the country to the seriousness of the situation.
No good purpose can be served by decrying or attempting to decry the gravity of the situation. The position is critical. Our indebtedness has started to grow again, and our gold reserves have been seriously depleted. We are having greater difficulty in selling our goods, and unless we are able to stop this decline, it will lead us to disaster. Not only would there be a cut in the standard of living, a cut in the amount of raw materials which we could obtain in this country, but there would be mass unemployment.
The only query that I would put here is: How much longer have we to go on having statements of this kind? The Government have now been in office for four years. They came into office immediately after six years of world war, and credit is due to them for a great number of things which they have done, but, surely, the point ought to be reached now when we could say that this policy is not succeeding and that we ought not, all the time, to be faced with some new crisis. We have had a whole series of crises during the last four years. Difficulties were inevitable at the end of six years of world war, and especially when one remembers the tremendous part which was played by this country during those six years. We remember our position with a population of 50 millions, of whom this 707 country itself can feed only two-fifths, having to buy the food for all the rest from abroad, and that we can only do that by continued trading and selling our exports so that we are continually able to buy the raw materials which we have to import in such large quantities.
Of course, in those circumstances, difficulties were inevitable, but some of us were calling attention to these very matters and difficulties when the war was still going on, and we were asking what the policy of the then Government was likely to be when the war terminated. We kept on pressing for something to be done, and, at last, the Coalition Government produced the first White Paper. All that it did was to describe factually what might be our position, as well as the problems that would confront us, but there was no suggestion of what the policy should be in order to deal with that situation.
Then, this Government came into power in 1945 when the war was over, and they issued their first White Paper in February, 1946. It was again a review of the situation and of the problems that would be confronting us, but making the statement that all would be well if we could reach a volume of exports amounting to 175 per cent. of what we were exporting in 1938. I agree that the Government did not pin themselves down to any exact moment when that position could be reached, but, undoubtedly, the impression was left upon us and the country that that point would be reached in a fairly reasonable time. It has not been reached today.
This is July, 1949, and that was the estimate made in February, 1946. What happened? Soon afterwards, we had our debates, very much the same as the Debate which we are having today, and it was quite obvious towards the end of that year that we were getting into real difficulties which would be intensified. We would have had unemployment and would have had to make deeper cuts in food rations and raw materials, but for the £1,000 million which America put forward as a loan to us and the £250 million from Canada. We then supposed that all would be well, and we remember the statement made by the then Chancellor of the Exchequer that all would be well certainly by 1950, that we would have gone some way to getting 708 on an even keel and that by that time we would be repaying that loan with interest. That was towards the end of 1946.
Two years ago, almost to the very day, as the result of strong requests made by some of us, we had a Debate exactly similar to this. Again, the crisis was coming, and, unless we could meet it, disaster was facing us. It will be remembered that the Prime Minister came down to the House and made a speech very similar to the one made by the Chancellor today. A whole series of cuts followed—a cut in petrol, cuts in regard to food, a cut in paper and a cut in timber—almost exactly following the same lines. The Prime Minister began by asking us, as the Chancellor has asked us today, for greater work and greater energy, and finished by asking that there should be an extension of the hours of work.
Now, the Chancellor has made his statement about the desirability of having sterling once again a universal symbol accepted by foreign countries, and has repeated the view about the desirability of multilateral trade. It is all very well encouraging us to greater efforts and telling us what we can achieve, but it is left to mere exhortation, and I cannot see how we can leave the matter in that position.
Whilst hearing all the time about the desirability of multilateral trade, we get news of some bilateral agreement that has been reached with consequent higher prices which we have to pay for the goods that country sends us, although, I agree, compensated for by the higher prices we can obtain for our exports to that country. That is one of the difficulties which the Chancellor of the Exchequer and the President of the Board of Trade will have to face. Though they are now asking that more goods shall be sent to America instead of to the non-dollar countries, what a great temptation there is to send them to non-dollar countries because of the high prices obtainable there owing to these bilateral agreements.
Returning once again to the position at the beginning of 1946, in spite of the cuts and in spite of all that was then facing us, nothing was done with regard to a policy. I remember standing here at that time and asking the Government what was their policy. We have heard about these cuts, and how the Govern- 709 ment are going to meet the present crisis. But what would have happened if just about that time, or a little later, Marshall Aid had not been mentioned, and we were now about to consider it? At that time, the gap, even for this country, was rather greater than is today the gap of the sterling area as a whole with regard to the dollar countries. It was over £600 million. We were, undoubtedly, face to face with a tremendous difficulty; but then Marshall Aid was to come to our assistance.
We had our Debates with regard to that, and what were we promised? We were promised that all would be well if this could be continued from year to year, and that we should find ourselves going comfortably along into a safe harbour—not only ourselves, but the whole of Europe—and that by 1952 we should be so well established that we should be paying back what we owed and able to stand on our own feet. In the very first year of Marshall Aid, here is the Chancellor once again telling us that the gap is widening, that our difficulties are increasing, and that sterling cannot possibly compete with the dollar. The world is still divided into two—a dollar and a non-dollar world. We are still far away from the point where the sterling is accepted everywhere as the symbol of exchange. Am I, therefore, putting the matter too high when I say that the Government's policy has failed?
On these occasions, one does not want to introduce party politics; the situation is too grim. We are all in this together, and surely our one desire is the success of this country, general prosperity, the maintenance of our standard of life, and full employment which is so essential to it. But once again we are face to face with this difficulty which has to be met by new cuts which the Chancellor has just mentioned, under a policy the nature of which we do not yet know, but which will be the subject of discussion some time in September somewhere in the United States. What is the Government's policy? How do they propose to achieve it? I fear that the Government have relied all along on political and legal sanctions rather than on economic sanctions, and that these political and legal sanctions have misled them.
When the Chancellor was speaking, it occurred to me how wrong it was to 710 control everything from the centre. He has made cuts in all kinds of essential raw materials coming from the dollar countries. He said, "Do not worry; all will be well. We can make up for what we do not get from the dollar countries with what we get from the non-dollar countries." Why wait until now to make that discovery? If the Government are so well versed in the position, and if they can watch it from day to day and guide the country, why could they not have avoided this crisis? What is more, we are now passing from the position in which I could see the necessity for political and legal sanctions.
During war, of course, we had to surrender all power to the Central Government. One cannot change overnight from a war to a peace footing, but one can change overnight from a peace to a war footing. What is more, after a long war such as we have just experienced, there is bound to be a world shortage of pretty nearly everything, and there is likely to be tremendous competition for the goods that are so much in demand. Therefore, it was necessary to keep political sanctions in being. But now the position has changed; four years have elapsed since the war ended, and there is now not the great shortage that there was. Indeed, we are now being told everywhere that the sellers' market has disappeared and that we are now in a buyers' market. A new situation has arisen, and we can say that, whatever policy we were following during the first two years, or even the first three years, of peace, the time has now come for us to turn our minds away from the conditions which guided us in time of war to what should be our general policy in time of peace.
I fully agree with every word of condemnation that the Chancellor uttered of restrictive practices. Such practices have been the cause of more disaster to world trade than almost anything one can mention. Unfortunately, this country in particular has suffered from them since 1914. It was not the Socialist Government that began restrictive practices. Right hon. and hon. Members above the Gangway on this side have always rather favoured certain restrictive practices. Such a policy has hit this country particularly hard because prior to 1914 it was, for trade purposes, the freest of all the countries in the world; but since that time we have not only had the restrictions of the 1914–18 711 war but in between the wars we also had protection here and there, cartels, quotas, agreements, bilateral agreements between major companies, and things of that sort, all of them restrictive, and all of them leading inevitably to a narrowing of world trade and the upsetting of the natural balance and flow of trade.
Although they helped to give a certain protection to certain sections, all of them tended to assist people to play for safety. The result is that today we are not trading naturally, but all the time, even down to the smaller concerns, we are playing for safety. The one bright feature of the statements recently brought to the House by the Chancellor was in the statement, to which the right hon. and learned Gentleman referred this afternoon, which was issued on Sunday as a result of the talks at Chequers. It was that our aim must be the achievement of a pattern of world trade—not merely dollar trade, not merely Empire trade, but general world trade—in which the dollar and the non-dollar countries could operate together within one single multilateral system; not two worlds, as we have today, but one.
What I want to know is whether the Government as a whole believe in the need for multilateral trade? I know that the Chancellor of the Exchequer, I believe the President of the Board of Trade and I am certain the Prime Minister have referred to this, but if the Government really believe in that need, what is their policy to try to achieve it? We are told all the time about this dollar shortage. What does it really mean? It means in ordinary terms that we are unable to sell enough of our own goods at such a price as will enable us to pay for goods which we are buying from the Western Hemisphere. In our failure to sell sufficient to pay for the goods we need, undoubtedly tariff walls have played a very considerable part. I therefore approve very strongly of the interruption made by the President of the Board of Trade a few moments ago. Undoubtedly tariff walls have played a part.
But they are not alone. I am surprised by what the Chancellor of the Exchequer was obviously hinting at today—which was contrary to every speech he has made hitherto—that prices do not enter into it. Surely it is competitive 712 prices that matter most of all, and it is because competitive prices sometimes hit home producers that we get tariff walls put up. In spite of the tariff of the day, we are able to export quite a large quantity to America, but will the President of the Board of Trade deny that we could export far and away more if the prices were more competitive? As I understand it, the difficulties we face in America—and the President of the Board of Trade has referred to them—are (1), high prices; (2), bad dates of delivery; (3), bad make-up; and (4), poor advertising. If these could be cured in some way there would be a far greater sale of our goods.
The Government may be able to do a considerable amount in connection with the first point—the price. The Chancellor rightly said that high taxation does not enter into the question of costs, but it can affect the manufacturer in his replacement of machines and it can affect very considerably our methods or the improvement of our methods of production. The Government can give considerable help in connection with the first point, and they can also help with the other three if they do not encourage, by these bilateral agreements, easy sales at high prices to those countries where quality and date of delivery do not matter anything like so much as they do in America. If the Government could say to those people, "Do not export to Yugoslavia or any of those countries; keep your bargain, be to time, and deliver at a price which will tempt the Americans to buy," there would be an improvement.
Is it denied that prices are too high today, not merely for the dollar countries but also for the non-dollar countries? Is it not true that some of the European countries will not buy because our prices are too high? Is it not also true that our prices today are even too high for the home market and that housewives, having known what shortage was and desiring to buy at the time of shortage, now can see the stuff in the shop windows but at a price which is too high for them.
What, therefore, do I think is necessary? It is that we create the greatest possible measure of competitive conditions in every market and every industry. I want to see the fresh, bracing air of competition coming into industry. No more of this protection and giving them 713 safety. No more of this position where they need not trouble what is the price of their raw material because they can be quite sure of selling at a sufficiently high price. As has been said by Member after Member of the Government, we ought to forbid all restrictive practices, wherever they come in. That was said by the Prime Minister two years ago, but what has been done to forbid them? If they come from employers—indeed, especially if they come from employers, with rings and things of that kind—the power is in the hands of the President of the Board of Trade to stop them. Equally bad are restrictive practices if they are the out-of-date restrictive practices by trade unions from the days when we had mass unemployment and when people were afraid of being out of work. This is not the moment when the country can tolerate restrictive practices which hamper production.
Then, with a complete and full acceptance of the real necessities of life, surely we can remove a number of the controls which hamper production at the moment. It is no good asking me which; I am not in the same position as the President of the Board of Trade who is able to go with care through these controls. I know he has gone through a great number and has taken away many forms, licences and so on, but surely we can go much further than that. The right hon. Gentleman knows, as we all know, that allocations are wasteful in every way. They waste time in applications for these licences and, human nature being what it is, what is there to prevent a man, unless he has a very sensitive conscience, from asking for double what he really requires in order that he may be quite sure that he has sufficient to carry on with, should there be another shortage?
Let us allow prices to be determined competitively. With regard to the Government's own expenditure, two years ago, in 1947, they made cuts. I ask them again to look at what they can cut down in unremunerative capital expenditure. I do not mean such things as houses; houses represent remunerative capital expenditure because, if we get a healthy people, all the better—our production goes up. There must be any amount of material in a Budget of £3,500 million where there could be a very helpful and probably a drastic cut.
714 These matters are drastic and they are bound to be painful. The only question is, how can we bring this country back into a strong position where it need not go cap in hand to anyone and where it can maintain its standards? How can we best do that? It is not so much a question of how can we do it with the least pain. It cannot be done without pain and trouble which restriction always brings. The only question is: what is the best policy which will bring us safely into harbour?
The Chancellor told us about the fall in our exports to the United States. I suggest it was due first to high prices, and secondly to the fact that there has been a decrease in trading activities. I think those two account for the fall in our sales. Not only was there a fall-off here but also there was a fall in the other non-dollar countries. That meant there was a reduction in their contribution to the dollar pool; there was a drawing from the dollar pool by countries which were in deficit and which otherwise would not have needed it. Thirdly, there was no fall in the price of some of our imports and that, as the Government know, must be due to a very large extent to the long-term contracts they have made.
Then, finally, it was due to loss of proceeds on exports from the sterling area to the dollar area, due to more exchange of transferable sterling for dollars; and that led, of course, to the losses of gold to Belgium, Switzerland, and the Bizone, due to the transfer of sterling to them from other countries. These were matters mentioned by the Chancellor of the Exchequer when he explained what happened when he arrived at the meeting in Paris. That, as he rightly said, was a minor matter, and on Sunday he properly referred to it as an aggravation of a deep-seated maladjustment.
What is proposed at the moment? Only these further restrictions. I agree that, for the moment, we have got to submit. It is the only way of dealing with the present position. However, I was glad to hear the Chancellor say that these restrictions should be limited to the shortest possible time. What I am anxious to know is: What is the policy that will lead us beyond the shortest possible time? And what is going to happen afterwards? We did not hear a word from the Chancellor today about what we 715 should do with regard to the war debts which have brought us to this sudden crisis, as he knows, by the drain of gold from the non-dollar countries, the conversion and the leakage that are taking place.
I wonder whether the House remembers what these are? These are the heavy war debts that we incurred in order to maintain the freedom and safety of the world, when we bled ourselves white, not only on our own behalf, but on behalf of the world. When the war ended the amount that was owing by us to those other countries—non-dollar countries—amounted to something like £3,500 million. We undertook to America that we would control those sterling debts. We undertook that, as the Chancellor knows, before they would lend us even that 1,000 million dollars. We have failed to control them, and it is because of our failure to control them that we have this immediate crisis.
§ Mr. Ellis Smith (Stoke)
The right hon. and learned Gentleman has used those figures before, and has stated how America and the rest of the world were in debt to Britain for our enormous effort during the war. Is he aware that the "Statist" analysed a previous speech of his and the figures, and stated that the position was much more serious, and that America and other countries owed Britain even more than the right hon. and learned Gentleman had said in his previous speech?
§ Mr. Davies
I am much obliged to the hon. Member. He and I have made that point before in the House. However, I do not want to deal with that. I am dealing now with the sterling debts which are still owing by us. Because we have not exercised that full control over them, they have brought about this sudden depletion of our gold reserves. There is only one way of dealing with the problem. We have blocked them to a certain extent. We have not blocked them fully. The right thing to do is to freeze them now. Let us be honest and say to all that we cannot pay, that they were war debts incurred on behalf of all. That is the only way to get back into our ordinary trading position.
Let us say to these other countries, "You are all the time drawing upon us for something we did years ago during 716 the war." Let us be perfectly honest and say, "Though we are freezing them, we will refund you. We will pay you interest, but we cannot pay the amount in full." It may be that we may allow them discount, but on one condition, that the terms of repayment from this country should not be altered. If we were to do that, and only if we were to do that, would I say we were getting back to a proper position. Then, and then only, could we allow the £ to find its proper value.
I do not think that there would be great wrong. The world has not been accustomed to trade in dollars; for 150 years and more the world has been accustomed to trade in sterling, and the world knows sterling. There is a resiliency and buoyancy about it which will bring it back to its proper position. It is in that way and that way only, as the right hon. and learned Gentleman knows, that we shall find a long-term policy. I hope that that is what the Government will put, not only before the members of the Commonwealth, but also before the United States of America and other countries of the world. We shall not be alone. Others will quickly adjust themselves to us. It will not make any appreciable difference, perhaps, for the time being, but at any rate it will open the channels of trade once more, and we shall get this great country looked upon not only as a great trader but as the one that makes all the contracts for other countries, the one they can always trust as being the great medium of exchange for the world. I should have liked to hear from the Government what their longterm policy is. It is because I have not heard it, that I am so grievously disappointed today.
§ 5.56 p.m.
§ Miss Jennie Lee (Cannock)
I was encouraged in the last few moments of the speech of the right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) the Leader of the Liberal Party, when, at last, he turned to deal with some of the concrete problems before us, because until then I felt he had receded entirely into romantic, nostalgic, diehard Liberalism. I do not think anyone of us in any part of the House would disagree with the ideal of a free trade world in which there were no tariff walls, particularly in America. But, we should be very irresponsible 717 indeed on the Government benches if we had nothing more immediate or practical than that to offer at this moment.
I listened with rapt attention to the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton), because we must assume, as he was speaking officially on behalf of the Conservative Party, that he had had the advantage of consultation with his colleagues, and that we could expect, therefore, a responsible statement. Maybe he was unfortunate in following the Chancellor of the Exchequer. Maybe that made his contribution seem even smaller than it was. But I am bound to say that, having taken as I did, the most careful note of his thesis, he had not—and I should be glad to be corrected if I am being in any way unjust—he had not, so far as I could see, one single substantial contribution to make to the solution of the problems we are discussing.
The right hon. Gentleman ended with a sneer at the welfare State, and talked about extravagances and follies in Government expenditure, cunningly avoiding saying what particular items he was referring to. In the middle of his speech he gave us a three-point policy. "Reduce Government expenditure." That was the first item. Again, he did not tell us what expenditure ought to be reduced. This becomes monotonous. We have those general remarks made again and again from hon. Members opposite. Again and again they say, "Reduce Government expenditure."
§ Miss Lee
I accept that from the noble Lord, because he is an exception on the benches opposite in that he does believe in his Conservative Party, he does not try to manœuvre into some kind of coalition, and he has the courage to say in his speeches that he would like to see the social services cut. Most speakers on his side of the House do not talk in such plain terms, and certainly the right hon. Member for Aldershot did not do so today. He talked vaguely of a reduction in Government expenditure. He made his party point about arresting nationalisation.
I wonder if the right hon. Gentleman really believes that we can help to solve any economic or any political problem 718 by undermining the confidence of the people in their Government's fulfilling its election pledges. I pause for a moment to say that if hon. Members opposite disagree with me they should now say so, because if there is one dangerous sickness—or, if you like, deep maladjustment—that can do irreparable harm in the whole world, it is when ordinary people in a democratic country go through all the processes of a free election, freely decide the policies they want carried out, and then find that their Governments are not doing everything in their power to carry out those policies.
§ Miss Lee
We are even untying the tied cottage.
The third point made by the right hon. Member for Aldershot was that we had to restore confidence in the £. Splendid! But not one single word of recognition or credit did he give to the Chancellor for the distinguished way in which he has advocated the cause and policies of our country in doing just that—in maintaining confidence in the £—against all the threats of devaluation. Let it be remembered also that if some hon. Members opposite were a little bit more patriotic when they are talking to their American friends, in particular—
§ Miss Lee
Especially when they are abroad. If only they did not go round the world, all the time preaching a doctrine which is morally indefensible and economically illiterate, to the effect that our difficulties in Great Britain are due to what they sneeringly call "the welfare State."
Would it be too much, in an assembly of this kind, to ask that we should try to clear our own minds on the distinction between how we distribute the wealth of a nation internally and how we settle our external obligations? In addition to hon. Members opposite their high priest of gloom, Mr. Geoffrey Crowther of "The Economist," goes off to America, and from reports that come back to me from many sources he is deliberately creating the impression that Great Britain has its difficulties today because we are a welfare State, and the Americans are, for instance, paying for all the wigs, free teeth, medical services and the rest.
§ Miss Lee
Then I hope that if I explain this elementary point to him the explanation may travel even a little further afield. Even before this Labour Government there were in Britain doctors, nurses, hospitals, chemists and opticians, and medicines were supplied. But the cost of those things was borne by the sick persons when they were ill, and when hon. Gentlemen opposite now talk about the cost of the medical service, the only item that can legitimately be included as extra is the increase in cost now as compared with the past.
§ Mr. Gandar Dower
If I am asked whether there has not been a tremendous increase, and in a large sense an unnecessary increase, in the cost of these services, I would point out that £25,000 was paid to one dentist in Scotland in 11 months.
§ Miss Lee
I thank the hon. Gentleman for making the point, because it enables me to say that when the Opposition talk about waste, there are certainly all kinds of items which we bring right out into the light of day, and are corrected. So much for the smaller points, But nevertheless, it would be helpful if the Opposition would also assist in making it known to the world that the administrative cost of this service is 2.1 per cent. I believe that on one reckoning it is 2.3, and not many business firms could compare favourably with even that figure.
When the hon. Gentleman interjected, the point I was making was this. So far as I can calculate—and it is difficult to make an exact analysis—the additional cost of the Health Service now compared with what it was before, is between £50 and £60 million. Therefore, the rest of that money represents a redistribution of income within this country rather than anything affecting our balance of trade with America. I am glad that the right hon. Member for Aldershot has now come into the Chamber, because I wish to mention one point on which I can agree with him. He very properly said that if there were no tariff walls to contend with in America—remembering that America itself is the largest centre of manufactured goods—we might hope to increase our sales there 720 by £40 to £50 million sterling. I think that was the figure he used. Obviously, he is talking of a "never-never" situation.
The Americans are not going to remove their tariffs, so I would have discarded that point as rather too unsubstantial to be worth following through, except for the further point he made. Apparently the right hon. Gentleman thought that he was helping to clarify our discussions by saying that at one time we complained about American prices being too high and said this was the source of our difficulties, and that in another phase we complained about American prices being too low. Certainly the right hon. Gentleman ought to know that we are in difficulties because the American economy is an unplanned economy; it is a capricious economy; it is an economy with which it is exceedingly dangerous for a country like our own, which is trying to plan and organise its resources, to have dealings. The fact is, if there had been the same increase in the prices of our imports from America as there was in the prices of our exports in 1948 compared with 1938, instead of having an adverse balance of trade on visible exports of £218 million we would have had a favourable balance of £40 million.
§ Miss Lee
I do not think it is a "never-never land" to try to say a little to our good British people about what is happening and just how much they have done, and to try to find out the source of our troubles and how we can cure them. I have been diverted from my argument by the hon. Gentleman, but let me add for the record that we ought to remind our people that, although since 1945 we have received some £1,400 million from the United States and Canada, including Marshall Aid, we have been responsible for aiding other countries to the extent of approximately £900 million. I think that is pretty wonderful, when we compare the relative populations and the relative resources of our two countries.
I do not think there need be any hangdog atmosphere about this Debate this afternoon. We are in our dollar difficulties, as every one of us knows, because during the war, in a common fight against Fascism, we exhausted reserves of every 721 kind, so that there is not just a British problem but also an Anglo-American problem—and indeed a world problem—in seeing how we can, not by the people of one country hurting the people of another country, but by plans for our mutual advantage, get a little sense into our international prices and international relations.
I now wish to draw to the attention of the House what I consider to be one of the most important, sane and optimistic statements that has come out of America. We keep talking about the Americans as if all Americans were of one point of view, whereas the real argument that is going on is not between the Americans and the British, but between some Americans and some of us who are like-minded and hon. Members opposite and their reactionary friends over there who are also like-minded. It is very important that the ordinary working family in America should realise that the interests of the American workers and the British workers are not in conflict. What is good for them is good for us.
§ Miss Lee
Yes. Nothing can be more despicable than at this moment to try to tell some of these four million unemployed Americans—if we take in the half-employed and the self-employed, there is reason for believing that that is a very conservative estimate—that the reason why they are in this extremity—we have to remember that many of them are married with families, which perhaps brings the total up to 10 million—is because an idealistic, generous and extravagant American Government has been sending money over here to supply us with teeth and wigs.
If I can do something to get rid of that impression I shall be very glad, because the American workers themselves, through Mr. Philip Murray, the President of the C.I.O. [HON. MEMBERS: "Oh."] Do hon. Members have something to say, or is it a snarl under their breath? I hope there is nothing improper in quoting a statement put out by the president of a very large and powerful trade union, with 40 national unions stretching from coast to coast. The president, who is dealing with the men who are suffering from unemployment and wage cuts, tells 722 them that the way to deal with this present world situation is to see first that if the American worker is out of a job he has better unemployment benefits. He goes on to emphasise the importance of the American Government introducing work projects at a time of recession, particularly housing projects, and thus maintain full employment.
What is wrong with that? I said it would be a very serious thing for us, having made promises to our citizens, if we had run away from those promises when we were elected, and I say, with all respect to our American friends, that it is also very serious for an American Government if, having fought an election and made definite promises to the people about full employment, they run away from those promises. The root of the whole problem is American production, which has now become so colossal, about three times what it was before the war. American production is now so vast that Europe, ourselves, and the American workers are menaced by the fact that wages in America are too low and American social welfare work too primitive. We are always told about the high wages in America. Of course there are some workers with high wages, but when we are dealing with wages what matters is the proportion of the total amount that goes back to the population, either directly in wages or in education, health services, housing projects and the rest.
The most encouraging feature of the American situation is that we have a President there who at least wants to carry out his election promises. Some of our most influential friends in America, who in no way share my Socialist point of view, will feel ashamed if America runs away from her promises to the world to be responsible for maintaining full employment in America. I say to our American friends: "To thine own self be true," and then they can do no harm to us or anyone else, because in this C.I.O. seven-point programme, which I hope Members will look for in the British Press, although they will need a large microscope and a private detective service to find it—
§ Miss Lee
Very well. Briefly, the first point is increased unemployment benefits; the second increased and extended public 723 assistance; the third is to give tax relief to the lower income groups, which sounds awfully like what the British Government has done; the fourth, to develop public works, particularly housing, which is so desperately required; the fifth, an increase in the minimum wage; the sixth, to grant allowances to new and small businesses; and, lastly, to pay transport costs to points where work is more readily available, which is the same thing we are doing over here where we are transferring British miners from Lanarkshire to Fife-shire.
Mr. Philip Murray goes on to say that the real source of the difficulty is that unreasonably high prices and exorbitant profits are exacted by big business in America, which forces the American people to cut their purchases because prices are too high and incomes too low. On the most careful and scrupulous calculation, I am satisfied that it would be possible for the Americans to bring down their prices, both for their own people and for our people. The American Minister of Agriculture, who must have noted once more what is happening over here, is asking that farm prices should be subsidised in such a way that there is a living for the farm population without all the costs going on to the domestic and foreign consumers.
I say that when we were faced with a very serious situation at the beginning of this Parliament, I was extremely doubtful about tying up our interests with America in any way. I modified my views when the Marshall Plan came along, and particularly after the election of President Truman, for it appeared that the American people were catching up with our ideas of the welfare State. I thought they were seeing the importance of full employment and rising standards of living within America, which would have had every kind of beneficial effect for the rest of us as well. It is very hard if the Americans are now taking back with one hand what they have given with the other.
I regret what our Chancellor had to say about cuts in tobacco, timber and other imports from America, because I know that means hardship for many Americans. It may mean unemployment for many Americans, but let us make it clear from this country to the American 724 people that our interests do not conflict with theirs, and that if only they could try to control the greedier and more socially irresponsible elements in their capitalist society, it will be possible for us to go on in terms of deepening friendship and trade. On the other hand, no proud nation, certainly not this nation, can go on indefinitely being lectured by the Americans and having all our plans interfered with because of the capricious economy of another country.
§ Mr. Michael Astor (Surrey, Eastern)
Why should this be one-sided. Why should the hon. Lady not like the Americans to criticise us, if she is prepared to criticise them and think that they like it?
§ Miss Lee
I know the Americans well enough and get on well enough with them to know that they prefer my plain speaking to much of the mealy-mouthed messages which go across to America. The sort of things I am saying are precisely the sort of things that the Americans understand. They do not hesitate to talk frankly to us, so let us talk frankly to them.
If we cannot see sanity in the internal American economy, there is nothing possible for us to do but that we should go on, not to diminish bilateral trade, but to expand bilateral agreements within the Commonwealth, with Eastern Europe as well as Western Europe, and with Russia as well as in North and South America. There ought to be no corner of the world or no peoples excluded from these schemes. In a world where we want our own standards of living to be maintained and improved, we have got to think also of the standards of other people. It is a bit romantic for the Leader of the Liberal Party to think in these days that we can simply buy in the cheapest market and sell in the dearest. In a difficult and divided world it is necessary to see that not only our own country has its essential foods and raw materials, but that we try to sustain the standards in those other countries that supply them.
Finally, I would ask, are our Tory friends both here and in America completely crazy? What do they think they are doing at the present time, when in America there is an enormous anti-Russian campaign going on, an enormous dread of the spread of Soviet power and 725 endless condemnation of dictatorship of the police State, while at the same time there seems to be both here and in America an insufficient recognition that the one country on this side of the Atlantic, which is most fully sustaining the hopes of orderly constitutional progress not only of the people here but of America and of Europe, is Great Britain. If our Socialist economy in its democratic setting can sustain our people by a policy of fair shares for all, however modest the level, then there is no fear of either Fascism or Communism. But if we lift the "Sunday Express" and papers of that order, we read about the most wonderful food to be got in Germany. Of course it can be got. We read of the wonderful time to be had in Belgium. Of course we can. But the Belgian unemployed do not share it. All over Europe at the present time there is a growth of either Fascism or Communism, the growth of the parties of depair and of dictatorship.
§ Mr. Boothby
The hon. Lady has only got to look at the recent elections, and in particularly the election in Belgium, to see that there is no evidence of any growth of Communism at all.
§ Miss Lee
I have looked at recent elections, and I have studied the reports given to me by the leader of a great Socialist Party on the Continent, who, the other day, analysed in detail for me the movements of opinion in Germany, in France, in Belgium, in Holland, in Italy and elsewhere. Wherever there is in the modern world a community in which the ordinary people are pushed aside, are unemployed, are under-nourished, under-housed and under-doctored, while at the same time they see excessive wealth on the surface of society, then there is a danger of Fascism or Communism.
§ Mr. Beverley Baxter (Wood Green)
The hon. Lady should look within the Commonwealth, and she would see how in Canada the other day, the Socialist Party, no doubt as a result of the Canadians studying conditions in this country, was wiped out—
§ Miss Lee
The hon. Member can enjoy the recession in the position of the Canadian near-Socialist Party in the meantime, but what I am saying is substantially true. I do not want to talk about Canada or the Empire because we on this side of the House have already in terms both of our economy and our political relations with our people in the Empire, come much closer to them in the main than is the case with hon. Members opposite.
§ Miss Lee
I repeat what I said, that in Germany and in many of the most important parts of the world today there is to be seen the growth of Communism and of Fascism—of the parties of despair—and they cannot be answered by going back to laissez faire capitalism, where public opinion is shocked by great excesses of wealth and poverty. The same progressive elements among the American people, which in the main elected President Truman, and the great organised American Trade Union movements along with the main currents of opinion in our own country are the best hope offered our tormented world. There is no need for gloom if we can use our rising production figures as a basis for fairer distribution of the wealth of our world both within countries and between countries.
§ 6.26 p.m.
§ Mr. Boothby (Aberdeen and Kincardine, Eastern)
I found myself in agreement with most of the first part of the sentences in the speech of the hon. Lady for Cannock (Miss Lee), but not with the second part of those sentences. She seemed to open her arguments very well, but then she reached a different conclusion from what I would have done. I have detected a considerable swing to the Right in recent elections on the Continent, and I have not detected any great increase in Communism. But then I am only going by the figures. Psychologically there may be some spread of Communism as well. With regard to her references to the United States, if one sponges on people, and is 727 apparently prepared to go on sponging indefinitely, it is only reasonable to be polite to them. We are at the moment being kept by the United States of America to a very large extent.
§ Miss Lee
I ask the hon. Member for East Aberdeen (Mr. Boothby) to be more responsible. It is exactly that kind of statement which goes back to America and gives the unemployed in America an impression that there ought to be less and not more aid to Europe, and in that way they would be better off, whereas in fact they would be very much worse off if E.R.P. were reduced.
§ Mr. Boothby
It is in the interests of the United States of America to look after this country and the other countries of Western Europe, but we should be in a pretty mess at the present time if Marshall Aid had not been given to us, and I do not see why we should not say so. The hon. Lady complained bitterly that we were subject to criticism by the United States; but they have every right to criticise us, and they will go on having that right so long as they continue to subsidise—if hon. Members opposite prefer that word to "sponging"—us and keep us. It is only a matter of a phrase.
It is very much better that we should face up to the fact that, although we are being governed by a Socialist Government, we are at the present time, and have been for a long time past, kept by the greatest capitalist country in the world. I do not see why we should not say so. It is true. It pays them to do it, and it pays us to take it; but for my part I hope it does not go on for ever. What I am worried about is the complacent view of the party opposite, who seem to regard dollar subventions as something that should go on for ever and ever.
§ Mr. Boothby
Not in the very least. The hon. Member knows that I was using that as an illustration. I thought that the hon. Lady was pretty rough in her treatment of the United States, and I said—by way of illustration—that if you sponge on somebody you may as well be polite. I think that is a reasonable thing to say. Why do we flinch from this issue? Does any hon. Member deny that we are receiving gifts that go on, month after month, and year after year, from the United States? So long as that position continues, the United States will be entitled to criticise us.
§ Mr. Boothby
No, I cannot give way. I have an enormous speech to make. Let me come to this great oration which I have prepared with such care. In the course of it I shall answer some of the arguments of the hon. Lady, and also the arguments of the Leader of the Liberal Party. With one exception, which was when he was talking about restrictive practices, I was in total disagreement with him. I have the greatest regard and affection for him as a politician, but we were far apart today.
It is not true to say that our present situation is merely the result of the transfer of economic power from the old world to the new, or, as the famous Chequers statement said, "the aggravation of a deep-seated maladjustment." That phrase evoked the admiration of the Leader of the Liberal Party, but it made me feel faintly sick. This cause of our trouble, as the Chancellor of the Exchequer pointed out, has been going on since the beginning of the century, although it has been aggravated by two world wars. But our situation is also the result of the economic policy pursued by the present Government during the last four years. We can all see now that that policy has completely broken down in practice. I do not think that it is possible to deny it.
It is intolerable for hon. Members to quote their own speeches, but, since the American loan has been mentioned frequently in the Debate, possibly hon. Members may remember the Debate which took place on 12th December, 1945, when the hon. Lady the Member for Cannock and myself were in close agreement. In the course of that Debate, I made two propositions. I said: 729The first is that multilateral trade and free convertibility, to which this Agreement admittedly commits us, are impractical in the modern world.Then I said:My second proposition is that we cannot have a planned national economy with international economic anarchy. … The next time that an American slump comes … His Majesty's Government are by these measures, depriving us of every weapon by which we might protect ourselves from its most dire consequences.I concluded by putting forward an alternative, which was this:It is the alternative of the sterling bloc, based upon the British Empire, and fortified by the countries of Western Europe."—[OFFICIAL REPORT, 12th December, 1945; Vol. 417, c. 405–407.]That was a very long time ago; but at least I put forward a policy which had a theme, and a coherent theme. It demanded four things. It demanded increased productivity on the part of this country, and in the sterling area generally. It is not enough simply to produce goods in normal times. It is also quite important to be able to sell them. The policy further demanded an extension of the system of Imperial Preference; a close co-ordination of our national economy with the economies of the countries of Western Europe; and, most important of all, a restoration of confidence in sterling. There, at least, was a policy and a theme.
What have the Government done? Let us take those four points in turn. First, productivity, which is output in relation to costs. Hon. Gentlemen opposite, or some of them, and particularly the hon. Member for East Coventry (Mr. Crossman), are now trying to wish on my party the desire to bring about unemployment and to lower real wages. That is not true. The party to which I belong has never suggested that we should deliberately induce unemployment, or lower wages. We want to avoid that. I go so far as to say quite frankly that no amount of cost-cutting and price-slashing will enable us to export manufactured goods in very large quantities to the United States ever again. To pretend otherwise is gross wishful thinking, and I hope that the President of the Board of Trade will stop it. He goes on jawing about the goods that we are going to export to the United States. What my right hon. Friend the Member for Alder- 730 shot (Mr. Lyttelton) said on this subject was absolutely true. It is like what used to be called sending coals to Newcastle.
The United States want a lot of things, but manufactured goods are not one of them. They want specialities such as whisky or high-class tweeds and other articles like that, which we can supply very nicely from Scotland. By and large, they do not want manufactured goods in large quantities, and they will not take them. We are now exporting to them only at the rate of about £3 million a month. The real cause for anxiety is that we are ceasing to be competitive in non-dollar markets at the present time. We are therefore quite right to stress the importance of productivity. This argument is supported by a very interesting document, which has not yet had the circulation that it ought to have had. It is called "The Economic Survey of Europe, 1948." It was published the other day. It says:In itself the restoration of equilibrium in foreign payments will not contribute to the raising of living standards; it is even possible that, in the process of restoring financial solvency, standards of living might have to be lowered. The more fundamental problem of the European economy is the increase in the productivity of industry and agriculture which alone could satisfy the universal desire for better standards of living.That is true. Therefore, when hon. Members complain, as they have done in this Debate, that we lay too much stress in this party on the importance of productivity, I hope they will see that we are absolutely right.
§ Mr. Cecil Poole (Lichfield)
Would the hon. Gentleman quote further from the same document and give the figures relating productivity in this country to the wages paid?
§ Mr. Boothby
At this moment, no. If the hon. Gentleman knows the figures that he has particularly in mind, then he should not ask for them.
What have the Government done about this matter? They took office, to find the accumulated wealth of a century destroyed by two world wars, and the country heavily in debt. Instead of concentrating on the question of national productivity, as the number one priority, 731 the Government chose to construct an elaborate welfare State, which has consumed during the past three years a great deal more than we have produced. I am not against a welfare State in principle; but I do not think that we were in the position to construct this particular kind of welfare State until we had restored our productivity.
The Government used the post-war boom, caused by universal shortages, and the American loan, to conceal the realities of our situation from the British people. That is what I do not like. They lived riotously on borrowed dollars, to which they had no intrinsic right, because no one owes us a living—least of all that kind of living. That great economist the Chancellor of the Duchy of Lancaster had progressed sufficiently in his studies to apply the remedies proposed by Keynes for an endemic world deflation to a rip-roaring inflation. It was like a doctor who diagnoses high blood-pressure as pernicious anaemia and prescribes port wine instead of salts to the patient. That was what the Chancellor of the Duchy of Lancaster did, greatly aggravating the inflation in the process, Just because the present Chancellor of the Exchequer leapt on to the footplate of the national engine and pulled over all the levers to prevent an almighty smash, he is hailed as a great exponent of sound finance. But what has he actually done?
Admittedly, the quantitative output of British goods has increased, but so has the cost of production. Why? We say, and we are right, primarily because of the colossal Government expenditure and the crushing burden of taxation. It is no good pretending that a taxation rate of over 40 per cent. of the national income is not a factor in the cost of production. No economist will agee with that contention, The Chancellor of the Exchequer tries to deny that taxation is a factor in the cost of production. I say—and I remember that the Minister of Health once agreed with me, although he may prefer to forget it now—that no economy, Socialist, Communist or Capitalist, can sustain indefinitely a burden of Income Tax between 9s. and 10s. in the £. I say that no economy can function efficiently under a level of direct taxation as high as this indefinitely; and I 732 deny that it does not enter into the cost of production, because I am certain that it does.
§ The Minister of Health (Mr. Aneurin Bevan)
Is the hon. Gentleman quoting me? Surely it is not something which I said in public?
§ Mr. Boothby
It was the general inference which I drew. I am not quoting a passage from a speech by the right hon. Gentleman, but I have heard him express the view that no economy—
§ Mr. Boothby
All right; I will let the right hon. Gentleman have that one. The Chancellor of the Exchequer has been expending the fruits of the productivity of this country before they have been earned; and it is a physical impossibility to make the future pay for current production, which can only be maintained through the expenditure of incomes previously earned. Productivity depends—I think that we are all now beginning to realise it—on hard work, adequate savings, adequate incentives, and sufficient flexibility in the national economy. In this country at the present time nobody can save; there are no incentives to work flat out, and the Government have imposed on us a rigid high-cost economy. Wages, prices, interest rates and exchange rates are all frozen.
What does this mean? It means that every single economic adjustment can only be made by the clumsy and difficult method of direct physical controls, and these controls are inevitably and necessarily restrictive in character. All such controls must be. I do not blame the Government for that; but they have now given us such an economy that there is no other method of making necessary adjustments.
We lay stress upon productivity not because we want to lower our standard of life, but because we want to maintain it. This is not a crisis of deflation like 1931, out of which we can spend our way. It is a crisis of the balance of payments, out of which we can only produce and export our way. Even the hon. Member for East Coventry, who sometimes stumbles upon the light, wrote the other day:Keynesian pump-priming may succeed in America, with its huge domestic market; but 733 it cannot ward off disaster for more than a few months in a country which has to export in order to buy its food and raw materials.He wrote on:In Margate, in 1947, the conference"—the Labour Party Conference—passed a series of resolutions which were sublimely irrelevant to the crisis which broke a few weeks later. Will this happen again at Blackpool? It seems only too likely.It was only too likely. It happened all right.
Now I come to my second point, which is the extension of Imperial Preference. Having put this country in an economic strait-jacket, the Chancellor of the Exchequer is now committing himself—and he goes on committing himself in speech after speech—to a long-term policy designed to remove all discriminatory practices, to eliminate preferences, and to return to a system of free multilateral trade. I should like to know from the President of the Board of Trade how he proposes to compete successfully in free world markets against the surplus products of the United States without any monetary reserves at all to back him up during the next few months or years. How on earth is he going to do it now that the sellers' market has come to an end and the buyers' market is here, against the United States, with growing surpluses of practically every product, as a potential competitor in every market? The Chancellor of the Exchequer did not tell us this afternoon.
This is a point on which we want to try to knock some of the nonsense out of the Government. As I have said before, the Government are pursuing a policy of nineteenth century Socialism at home and nineteenth century Liberalism abroad. Both these things are highly undesirable, neither of them is suitable in the twentieth century; and they are also completely incompatible. We cannot have a so-called planned Socialist economy at home and international competitive anarchy abroad. But it is to this that the right hon. and learned Gentleman has now committed us. He says in public that he is against discrimination; but does he not realise that in a world suffering from an acute dollar shortage the effect of nondiscrimination can only be to throttle down the total volume of international trade to the lowest common level?
734 I come to my third point. The right hon. and learned Gentleman talked again this afternoon, as he has talked so often, about the great economic rapprochement which he is bringing about between this country and Western Europe; but any kind of integration of our economy with that of Western Europe demands, first of all, some constructive direction of production and investment in the basic industries at a high level, some co-ordination of monetary and fiscal policies, and the gradual elimination at the lower levels of trade barriers and exchange controls through the creation of an inter-related currency system. Not one of those objectives has been attempted by the right hon. and learned Gentleman up to date.
The "Economic Survey," from which I quoted just now said:There can be little doubt that, with greater co-ordination of the investment plans of the various countries, the real return of capital investment in Europe could be considerably enhanced by increased specialisation and industrial development.What does it go on to say? It says:The danger inherent in the present methods of planning is that they will influence the economic development of individual countries in a more autarkic direction and thus lead to the increased economic isolation of the individual countries of Europe from each other. This is almost inevitable, so long as economic plans are drawn up separately for each national area and controls over foreign trade are operated on a purely national basis.That is exactly what the right hon. and learned Gentleman is doing. He has not given up one ounce of effective economic control to any European authority. The Chancellor of the Exchequer pays lipservice—I suppose to please the Americans—to the principle of multilateralism, but he is being driven daily, and almost hourly, to a policy of increasing national autarky and undiluted bilateralism. Whatever he may say, that is where he is taking us.
My fourth and last point was confidence in sterling. We all agree about that. Apart from the Government and our high-cost economy—both of which can be removed and, I have no doubt, will be removed in a very short time—the most important factor—this point was well put by the Leader of the Liberal Party—undermining confidence in sterling today is the sterling balances in London, which hang like a millstone round our neck, demand a continuous flow of unrequited exports, and cause continuous leakages of 735 hard currency from this country. This is really a problem which could have been tackled radically four years ago. That is one useful thing which might have been done at Bretton Woods. I do not know why they did not tackle it there. Until this question is resolutely faced, I do not believe that any Government in this country will ever restore complete confidence on the part of the rest of the world in sterling. It is like a suppurating wound. No principle is applied to it. Occasionally pressure is put upon us to release a bit more; and it may well be that secret arrangements are made to obtain convertibility into dollars or gold, but as far as I can make out no principle is involved, and there has been no substantial reduction in the total amount of the balances. I blame the right hon. and learned Gentleman very much for not having had the guts to tackle the problem long ago.
Where are we going from here? I have tried, and failed completely, to discover any valid intellectual basis for the Chancellor's position or for his policy, which contradicts in practice every theory he proclaims. We could at least see what the Chancellor of the Duchy of Lancaster was up to when he was Chancellor of the Exchequer. He borrowed dollars to go for a spree and damn the consequences. At least we had the spree, and it was quite fun while it lasted. It was bound to come to a sharp end, but we had it. What about this Chancellor of the Exchequer? All his surveys have erred on the side of optimism; all his prognostications have been falsified by events; sometimes in the course of a few days. He now says that we can achieve in this country complete economic self-sufficiency and independence by 1951. I do not believe it. He pins his faith upon this great increase of exports to the United States. That seems to me to be equal nonsense. He subscribes to the view that the Marshall countries can achieve and sustain an increase of more than 40 per cent. over their pre-war exports, with the United States as a potential competitor in every market. They will not be able to do that.
A climax of absurdity was reached in the Chequers declaration which says, in one fantastic breath, that we can all go back to free multilateral trade but that there must be no devaluation of the £. 736 What does that mean? Where is the coherent thought underlying that declaration? Where is the thought at all? There is nothing that one can get hold of; it is just plain nonsense, and it is about time that the Government faced up to it. We are all so awed by the alleged brains of the right hon. and learned Gentleman that we are inclined to sit back and think that, when he declaims some profound theory, he must be right because he is so clever. But if one is clever, one is not always right; one can quite often come to wrong conclusions. I would rather trust stupid people—[Interruption.] I am not now talking about any of my colleagues, I am talking about myself.
In conclusion—I have been shorter than I thought but I have rattled through my speech very fast as hon. Members must admit—I say that there is no short-term remedy for the world dollar shortage. Would it not be a good plan to face up to that, instead of talking all this nonsense about short-term remedies that do not exist? If the International Monetary Fund could be persuaded to raise the dollar price of gold it would help, because it is obviously absurd to make gold the basis of international credit and then peg its price at an artificially low level, lower than any other commodity in the world. But one fundamental fact remains. The United States today are capable of producing a surplus of practically every commodity that the world requires. Their productivity has been more than doubled in the last eight years; their costs are already lower than ours; their imports in 1948 were only five per cent. greater than their imports in 1937, although their production was two-thirds larger. Just think of that.
It is a delusion to suppose that the currency of the world's greatest seller can do the same job as the currency of the world's greatest buyer in the 19th century. It is nobody's fault. It is not the fault of the Americans. It is just not possible. It is equally fallacious to suppose that a solution of our economic problem can ever be achieved by a return to promiscuous, cut-throat, competitive international trade, because we are not in a position to conduct it. The material basis of our economic economy is too small. If it is to compete in free world markets against the vast, flexible, free economy of the United States, we cannot 737 do it on level terms. They know it and we know it. Why not face up to it?
The long-term remedy lies in increased productivity and trade in the non-dollar area; and, of course, in extensive capital investment abroad by the United States of America. If they are to do this, we have to give them something worth while to invest in. Do you think, Sir, that the right hon. and learned Gentleman offers such a tempting bait in this country for investment on the part of the United States? I do not think so. Do you think, Sir, that, in isolation, all the petty little national economies of Europe offer a tempting prospect for the investment of dollars on the part of the United States? I believe that a revived sterling area would and could provide a field for such investment: and that until this is achieved we can never hope to come to a good arrangement with the dollar area, or restore any kind of genuine equilibrium between the old world and the new.
Whenever I go to universities I am struck by the fact that the younger generation in this country are beginning to lose faith in everything. They are certainly losing faith in Socialism. Too many of them no longer believe in anything.
§ Mr. Boothby
No, it is the younger ones, and that is what bothers me. As we get older, our faith increases. My own increases hourly. It is better, on the whole, to believe in something than to believe in nothing; and I am an unrepentant believer in Imperial Preference and in the preferential system generally. It is flexible, and it can be applied not only to the Empire and the Commonwealth but also in Western Europe, and the dependent territories of Western Europe. Further, I believe that the creation and development of regional economic systems is an essential prelude to any kind of global system.
Therefore, I think our first task is to use our commercial experience and our special position as the political centre of what is still a great Empire—in spite of the Government—and the financial centre of the sterling area to create a new system of reciprocal multilateral trade within that area. It involves increasing our productivity, restoring confidence in 738 sterling, the co-ordination of monetary policies, the negotiation of trade and payment agreements, the establishment—for the time being and for the emergency—of a dollar pool, the abandonment of the obsolete doctrine of non-discrimination to which the Chancellor has again committed himself, and the extension of the preferential system. It involves, in fact, the direct antithesis of what I must call the Cripps policy.
Meanwhile where are we? We are in this position, that the right hon. and learned Gentleman has imposed a rigid, planned, high-cost economy on this country, and is at the same time committing us, in theory if not in practice, to the most relentless competition in free world markets that we have ever had to face in the whole course of our history, with practically no monetary reserves, and with about one-tenth of the wealth which we possessed in the nineteenth century.
I cannot see any possible way out of our problem along these lines. It is absolutely crazy. The document issued at Chequers the other day again commits us to that policy. We cannot do it. We cannot have a rigid high-cost economy and at the same time embark upon free competitive multilateral trade. Therefore, I say that there is not the slightest chance of this country emerging from its present difficulties until we get another Chancellor of the Exchequer, and another Government which will restore the confidence not only of the United States but of the whole world in this country and in, its currency.
§ 6.58 p.m.
§ Mr. Stokes (Ipswich)
I find myself in disagreement with the hon. Member for East Aberdeen (Mr. Boothby) to an extent that is rather unusual for me. With many of the things he says on economics and trade I often agree, but today, apart from regarding his speech as a criticism of the Government, which it was, I did not see that he gave us anything very constructive to go on. When the hon. Member talked about "sponging" upon America, I agreed with the hon. Member for Cannock (Miss Lee) that it was the most mischievous thing to say. And it is not true. It is all very well to say that at this moment in terms of monetary symbols America is supplying facilities whereby we can continue 739 to enjoy a certain standard of life, but it is wrong to say that without having regard to the background against which it happened.
We all know what happened in the war. We accepted Lend-Lease and abandoned all our export markets. We were not allowed to use material for making goods for export. The whole effort was concentrated on the war effort. The intention was that Lend-Lease should go on after the war ended. But what happened? The supply was turned off at the tap. There were bound to be four, five or six years of restoration period during which America, as the big creditor, was bound to supply the wherewithal to the people who were all do debt because they had blown everything skyhigh in the war effort. I do not call that "sponging" but pooling our resources after the cessation of hostilities in order to get the world on its feet again. To call it "sponging" is mischievous, and it is a statement which causes much damage among ordinary people in America.
§ Mr. Boothby
The hon. Gentleman has just said that the Americans are pooling their resources with us and giving us monetary symbols. Why should we not face that fact?
§ Mr. Stokes
I am not arguing at all about whether America is generous or not. I think that the Americans are a marvellously generous nation. But what I say—I have said it again and again, and I do not think anybody else will deny it—is that Marshall Aid works both ways. It may certainly be getting Europe out of its difficulties, but it is certainly helping America to avoid getting into the greater difficulties which would arise but for Marshall Aid. Surely, it is not unfair to say that. The more often it is said, perhaps, the sooner the general public will begin to understand it. Of course, the general public in America regard themselves at present as indulging in a one-way traffic. That is because there is so much misrepresentation about it. If people could really understand what the truth of the matter is, and if it was being constantly rubbed into them—which the American Press does not do, from what I know of it—we should find a very different attitude among the ordinary people there.
740 The hon. Member for East Aberdeen said that it was wrong to foist on to the party opposite a desire to get back into power and then bring about an era of unemployment and lower wages. He said that his party were never going to do that "intentionally." But that is just the danger—we never suggested they would do it intentionally; that is precisely what has happened in the past and it is precisely why they will not get back into power next year.
The hon. Member spoke about productivity and said that our productivity had not gone up. I did not come to the House today in order to produce a balance sheet of trade or production; no doubt, the President of the Board of Trade will answer that. But so far as I know, our productivity is vastly in excess of what it was in 1938. It may not be as much in excess of what we should all like it to be. It may not be as much in excess as is necessary to raise the standard of living to the height to which we want to get it—that may be true; but to put about that our productivity is lower or is not any better than it was, is just arrant nonsense; it is not true.
I want to deal with a point which was made by the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) in opening the Debate for the Opposition. He referred to what he called "the colourless statement from Chequers." I wonder sometimes what people expect in these statements. First, they expect a statement—they do not like it if there is no statement; I never did. I always wanted to know what the right hon. Gentleman the Member for Woodford (Mr. Churchill) was up to, although he did not by any means always tell me. I thought that the statement from Chequers was on the whole rather good. The Chancellor was, no doubt, handicapped by the fact that he has very important negotiations now taking place and cannot be too explicit; but that statement, it seemed to me, had three very important points.
First, it contained a declaration that there was to be no devaluation of the £. Nothing could give more confidence more quickly in the export markets and lead to a purchasing of goods in this country than that declaration. Secondly, there was in the statement what seemed to me to be important, but what the hon. Member for East Aberdeen does not 741 seem to regard as so important. It contains a recognition that there are very many difficulties to be resolved and of the desirability of moving into what I call a single economy. I do not know whether that conveys to the House the meaning which I wish to convey, but what I want is a single world economy—I make no bones about it. This is not just a dollar-sterling battle; it is a great international problem and the whole world is in it. If we do not lead the world out of it, we shall get into a very great mess and so will the rest of the world.
As for the declaration by the right hon. Member for Aldershot that there is a loss of confidence in sterling, I admit that when one goes abroad now it is not as easy to change a pound note as it was 10 or 15 years ago. But I defy anybody to contradict me regarding that part of the world to which I have been—South America—when I say that the confidence in sterling improved steadily all the time I was there. Even dealings on the black market got better. After all, that is the best yardstick of all, not only in those countries but in other countries too, and I say this not in any derogatory fashion. It is not true to say that sterling is weakening all over the world. I found that it was much better. It is true that those peoples could not buy from America because they did not have the dollars to buy. At any rate, I can compete with the Americans, even if the South Americans had dollars.
The hon. Member for East Aberdeen began his speech by referring to the great Debate in December, 1945, when, unfortunately, the Government did not take the advice of the mixed bag of unexperts of whom I was one, who went into the Lobby against the Bretton Woods Declaration. I do not see that any new situation has arisen since 1945. The situation today is pretty well the same as it was then. In some ways it is better—it has improved, we have got further away from the war and things have sorted themselves out a little—but the financial and economic difficulty is just the same now as it was then; but it might have been a great deal better if our advice had been taken. I do not want in any way to be unctuous about it, but I cannot help feeling how right we were in the first place to protest against the loan, which, I repeat now, we are never going to 742 repay. That is what I told all my American friends to try to stop them from lending to us. The only way we can pay it back is by America taking goods, but America does not propose to do so and, therefore, it will never be paid back.
We insisted at the time that the solution of the problem was in the export of coal, steel and capital goods; that there was no hope in the consumer goods market; and that we could not compete with the competition which was bound to arise when Italy and Japan were put on their feet again. We protested against the importation of films and tobacco from America, but nobody took very much notice. The extent to which tobacco is being imported is still excessive. As for films, I cannot discover the figures; I am told that they are on the secret list, and the Board of Trade will not tell me what they are. I shall return to the attack. Finally, we insisted and prophesied correctly that a return to the gold standard would once more prove disastrous. All the pundits tried to persuade us that we were not returning to it; it was all a complete quibble. We all agreed that it was not the gold standard of 1939 or 1914, but it was a gold standard nevertheless, and we said that the sooner we got off it the better or, at least, if we got on, the sooner we valued gold in the right way the better it would be for all of us.
In my view, the Chancellor in his opening speech today was over-optimistic. I do not view the immediate future very optimistically. Here, again, I understand the Chancellor's difficulty—I have never been Chancellor of the Exchequer—
§ Mr. Stokes
That may be—that in his remarks today at the Box he was restricted by his negotiations. Surely, therefore, it is up to back benchers to say some of the things he could not say, and I propose to say them. Whether the Chancellor would have said them if he were a back bencher will always remain problematical.
There are three lines of policy we must follow, and I propose to devote the rest of my speech to suggesting the things which should be done rather than indulging in party nonsense. I divide those 743 three lines into a short-term, a medium-term and a long-term policy. My short-term policy is this: we must concentrate on the increase of production of capital goods, of coal, and of steel. In my view there is absolutely no way out or no method of closing the export gap effectively except through those three means. They demand, first, improved efficiency; secondly, we must have more men available.
Here I wish to make a few remarks about conscription. I think that our present method of running the military forces is absolutely "crackers." One hundred thousand young men are taken every year just at the time when they are most wanted "to get their eye in," in industry. They are shoved into an Army which does not want them because it wants to get rid of them as soon as possible—it only keeps them for a year or so, anyway. They ruin the Army; they are no use as soldiers, and when they have finished their service they come back to industry, or do not come back, as the case may be, and industry is handicapped. I suggest to the Government that we should chuck conscription and that we should have universal Territorial service for three weeks or a month a year for everybody between the ages of 18 and 35. We should thereby get a better Army and more recruits into industry.
Thirdly, I want to say a few words about absenteeism, and in doing so will my miner friends please understand that I am not criticising the miners; I am criticising the Coal Board. The Coal Board supplied me recently with some figures—I cannot understand them if they are true—and said that voluntary absenteeism at the face of the mines is 7.68 per cent. and involuntary absenteeism 6.45 per cent., or 14 per cent. overall. A 7 per cent. difference in attendance at the face represents 14 million tons of coal a year; 14 per cent., therefore, means 28 million tons. I want to ask the Government to explain if voluntary absenteeism in the mines is measured in the same way as voluntary absenteeism in any other branch of industry. If it is not, it ought to be said, and if it is, the miners ought to be chased up in it.
§ Mr. Stokes
Of course the hon. Member for South Ayrshire (Mr. Emrys Hughes) has not listened to what I have said. I do not want to put anyone down a mine. I think it is antiquated and the sooner we can stop it the better for everyone concerned, but now we cannot. Some works in my area have absenteeism of only 3 of 1 per cent. Whether it is true or not that voluntary absenteeism in the mines, on which the whole of heavy goods industry depends, is as high as 7 per cent., if the method of recording is quite different from that in other industries, it should be said because otherwise those figures are misleading. If it is different, why is that not said? As I understand it, voluntary absenteeism is being absent without leave, not because of sickness or for an agreed reason.
§ Mr. Emrys Hughes
Will the hon. Member come to my constituency and go down a coal mine? He will not need any further explanation.
§ Mr. Stokes
I do not suppose I should be any use in a mine and if I worked there I think output would go steadily down! The whole solution depends on our getting another 15 million tons of coal. That is the honest truth. It is a fact, but it is not said often enough.
I also suggest that we should alter our method of producing a Budget every year. I think it is quite silly not to have both a Capital and a Revenue Budget. If I tried to run a business in the way the Government try to run the country, I would be "bust" overnight—[HON. MEMBERS: "Hear, hear."]—not for the reasons hon. Members mean, but I refer to the method of accounting. It makes a tremendous amount of difference and must get into the price of goods. If you insist on writing off everything as you spend it, of course taxation weighs you down and it is impossible to produce goods at the right price.
§ Mr. Stokes
The hon. Member appears to have said something of the kind; if so, it evaded me.
745 I am going to say something which, no doubt, will be unpopular, but I do not believe it is possible for us to go on expecting to be on a high standard of living in this country after two great wars and at the same time enjoy shorter working hours than most other people. Either, as the Chancellor and others have said, we have to get greater output by greater efficiency, better use of our brains and better administration—and all that comes into it, but we cannot wait much longer—or if we cannot get that quickly we shall have to go back to a longer working week. It is wrong to think of a working week as being one of so many hours. I do not think everyone who works should work the same number of hours. It follows that a heavy worker, who has obviously more physical effort to put in than a light worker, should work fewer hours than a light worker. It should not be that everyone should work the same number of hours. That is a crazy way of approaching a big human problem.
§ Mr. Stokes
I turn to my immediate policy, and the first item I have on the agenda is trade with Canada. I said the other day that it is about time Canada was brought into the sterling area, and now that the Canadian Finance Minister is over here I wish to say it again. One of the senior Members of the Government challenged me outside the House and asked how I proposed to do it and if I proposed to send a couple of tugs over to pull her into Europe. It does not depend on geography at all; not the slightest bit. It seems odd that Canada should be in the British Commonwealth of Nations and yet refuse to accept the family tickets. I can see the convenience to Canada, but if we look at the trade figures we shall realise that we cannot go on very much longer like that.
Last year we bought £146 million more goods from Canada than she bought from us and that is about 584 million dollars out of balance. On the other hand, Canada bought from the United States 305 million dollars worth of goods more than she sold and we had to provide those dollars. That is absolutely crazy, and if a member of the family will not play ball with other members of the family, sooner 746 or later there is going to be serious trouble in the family. I wish that pressure could be brought on Canada to close the gap.
§ Mr. Baxter
I think that is a very unfortunate description of our trade with Canada when we think of her gifts and credits given in order to give time to adjust the matter so that we are not paying more in imports than exports. I would not like that to be said about our trade with Canada.