ECONOMIC SITUATION

HC Deb 14 July 1949 vol 467 cc747-99

Question again proposed, "That this House do now adjourn."

Mr. Stokes

Now that most of the causes of interruption have been removed, I shall probably be able to conclude my speech with greater celerity. I was speaking about my medium-term policy for curing our present problems, the second point of which deals with the question of unrequited exports and blocked sterling arising from the war, to which several previous speakers have already referred.

I suggest a very simple method. I do not propose we should default on them, but I should like to send a bill to India, Egypt and Irak and others to the full amount of the blocked sterling arising out of the war, requesting them to put a twopenny stamp on it, and charge the Indians for having saved them from the Japanese, the Egyptians for having saved them from Rommel, and the Irakis for having saved them from the Communists. That seems to me to be a simple and not unfair way of dealing with the matter.

The present position is quite crazy. In the olden days when any nation engaged in war it beat up the other man, stole his women, children, goods, cattle and lands, and made him pay for whatever had been lost in the process. After the 1914–18 war we tried to make the Germans pay but found that it did not work. We did not try to do that after the last war. On the contrary, America, ourselves and others have done an enormous job of work and have contributed largely towards putting the Germans on their feet again, while at the same time being milked, through these unrequited exports by the use of sterling balances by the people whom we saved. The Governments of the world should get together and realise that the best thing to do now is to wipe out the lot completely and forget it.

My third point, and this is very important, is to press the Chancellor to set about getting the price of gold revised. I objected strongly to Bretton Woods, and complained about going back to a gold standard. It never occurred to me at the time, otherwise I should have protested much more strongly, that it was a return to a gold standard with gold fixed at an entirely fictitious price. We have today a so-called free market—it is a limited market I agree—where the price is £22 10s. per fine ounce, but under Bretton Woods the price paid for 40 million ounces of gold in 1948 by the U.S.A. was £8 12s. 3d. In consequence what has happened is this: last year the United States made about £560 million, that is about 2,200 million dollars merely by buying gold at £8 12s. 3d. and hoarding it at £22 10s.

I wish to argue that a change should now take place. When I asked the Chancellor of the Exchequer who fixes the price he said it was fixed by the United States Treasury which astonished me. When I put down a Question the answer I got from the Economic Secretary to-day was completely phoney. It was a reply prepared by one of the "back room boys." What they said was that the United States Treasury fixes the price of gold in the United States. That I can understand, but what I am interested in is who fixes the world price for gold. I agree that if 40 million ounces of gold were allowed to go free on the open market it is possible that the price of gold would not stay at £22 10s.; but I am sure that it would not go down to £8 12s. 3d. The proof is that nearly everything we buy today costs three times what it did before the war—grain, machinery, iron and steel and the rest of it. Yet funnily enough gold, the monetary basis of value of all these things, is only valued at twice as much as it was in 1938.

I want to know why the Chancellor of the Exchequer, as reported at a Press Conference the other day, when it was pointed out to him that Mr. Fetcher suggested to Mr. Snyder that the price of gold should be raised, replied: I do not share the view and had no part in putting forward such a view. I do not think it [raising the price of gold] would solve our problems. He did not give any reason why and I should have thought from the figures I have, apart from automatically bringing about a greater expansion in dollar availability, it would have closed the dollar sterling gap to the tune of £321 million. That is over half of the gap which we expect to have this year of £478 million. There is a good reason why this revision should be done. It is laid down in the Articles of Agreement of the Inter Monetary Fund, Article I, Clause (2); that the object of the members of the Fund, which includes the United States and ourselves and other people, is: To facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment. … Since then there has been the International Trade Organisation the declared object of which is to bring about full employment.

It is clear that whatever else should be taking place in the world today, this restrictionist value on gold and the consequent shortage of dollars is bringing about a high level of unemployment in the United States itself, and by so doing will affect the rest of the world. So we have the right to go to the members of the International Monetary Fund and demand a revision in the price of gold. This would make an enormous difference to the Commonwealth; to South Africa. It would put the Gold Coast on its feet again. Now only 600,000 ounces of gold is produced there because most of the low bearing ore is unworkable at the present price and most of the mines are closed down. It would make gold operate in the way it was intended to operate instead of the way it should not operate. It is crazy to have goods costing three times as much as in 1938 and the base metal being valued at only twice as much.

I wish to put this to the House. Is it not a completely idiotic situation to have a yard stick which does not in any way keep pace in value with the capabilities of the world to produce goods and services? I have often referred to the bus ticket analogy and the hon. Member for East Aberdeen agrees with me. Here we have a more idiotic situation. It was silly, before we decided how many buses we were to have and where they were to run, to sit down at Bretton Woods and argue about how many tickets we should print. But here we have a worse situation; we have three or four times the amount of buses and only issue about half the number of tickets because gold is undervalued. It is even more insane than what I regard as the ordinary monetary system. Gold must in any case have a restrictive effect—why accentuate this by undervaluing it? So the buses are all empty and trade cannot go on.

I hope that as a result of my arguments the Chancellor of the Exchequer will take a little notice of these matters and will take much less notice of those "back room boys." I should like to get into the Treasury and have a thoroughly good purge there. The main cause of the trouble is that some of those people are living in the dark ages and they should get some new ideas into their noddles. Then I think we should get international trade on its feet again very speedily.

I agree with what other people have said that this is a world problem, and not merely a battle between the United States and ourselves. I do not know whether it is practicable, but I should like to see a sterling-dollar area. I should like the United States Government and ourselves to declare that wherever the dollar runs there should be four dollars to the £, and wherever the £ runs it would be worth four dollars. They do not run their currency on gold in any case. The amount of their fiduciary issue and credit is not measured against the amount of gold hoarded in the vaults at Fort Knox, which must be something pretty formidable; something like 24,000 million dollars worth of gold is stocked there. [An HON. MEMBER: "It is £6,500 million."] If we revalue the gold that becomes worth 72,000 million dollars which would be available for broadening the currency issue. But I do not believe they take any notice of the amount of gold there and it would be much easier to follow the much simpler solution of stopping the digging for gold altogether. There are 500,000 people busy on this idiotic sport of taking it out of one hole and popping it down another and those 500,000 people could be put on a much more useful service, but if to gold we must all be pegged we must go on digging for it.

There are three alternatives before us. Either we can give away our surpluses. If we produce too much we can give it away, which is not at all a bad thing to do—call it Lend-Lease or Marshall Aid or what have you. Or we could lend money to people who have not got it in order to enable them to buy the surpluses; which is called investing in a foreign country and what usually happens in the end is that they default on it. Or we could change our payment system.

I wish to draw the attention of the House to a report from the Federation of Chambers of Commerce of the British Empire which was held in South Africa in September of last year where what is known as the 20th century economic system was closely examined. That Congress stated: … Congress has closely and critically examined the London Chambers proposals, and is satisfied that, basic and comprehensive as they are, they merit a thorough and immediate investigation at the hands of Commonwealth Governments with a view to their early adoption. Before I tell the House what it is all about I wish to ask the President of the Board of Trade if he will tell us whether this proposal is receiving consideration by the Commonwealth Ministers while they are over here? What it means is this. Instead of doing what we do now which is endeavouring to pay an exporting country with the currency of that exporting country, we should pay the exporting country with the currency of the importing country.

At the present moment if we want to buy from America we must pay in dollars. America makes it impossible to get dollars unless she gives them to us, and she is getting tired of doing that! She will not buy goods from us, but there is no means of getting the dollars unless we sell her our goods, and yet we have to pay dollars for everything we get from America. Under my system she would be paid in sterling. I know that she thinks she would not like it very much at the moment, but there would be a day-to-day check of exchange of goods between countries at a central clearing house, and there would be a statutory limitation on the out-of-balance which, after a period of say five or seven years, should be written-off as un-negotiable.

In the case of anybody out of tune for example to the extent of £2,000 million of rights to exercise a lien on goods in this country, at the expiration of five or seven years the amount would be torn up. It would be a very good system indeed. I am not going to start to develop the details of this system because it would take too long, but I do emphasise it because it has the approval of chambers of commerce in this country and it has been endorsed by the Commonwealth chambers of commerce assembled in South Africa who have asked that it should be examined. I would like to know if that is going to be done.

I should like to refer to one point of the hon. Member for East Aberdeen with which I agree, that the whole problem is one of exchange of goods and not goods versus money all the time. We are still living in a completely out-dated monetary system. My mind goes back to a celebrated remark of President Roosevelt in 1941 or 1942—I forget which. At one of his conferences in New York he said, "Forget the dollar sign and cut out the financial nonsense." That is what we have got to do if we are going to do what is obviously necessary—to make raw materials available and useful to the benefit of all mankind.

7.42 p.m.

Mr. Maclay (Montrose Burghs)

I promised to raise a matter with my hon. Friend the Member for East Aberdeen (Mr. Boothby) before dealing with the speech of the hon. Member for Ipswich (Mr. Stokes) because I think my hon. Friend is entitled to be slightly more thirsty than the hon. Member for Ipswich. He described with great emphasis his enthusiastic faith in building up the sterling area into a relatively self-contained unit. I should like to ask him how a country in the sterling area would get its capital equipment and how the people of that country would live while that process was going on unless the United States of America or some other nation—perhaps Russia—came in and did the job.

Mr. Boothby

I do not intend to make another speech, but I suggested that the solution to the problem lies in extensive United States investments within the sterling area, and that it would not be worth their while to invest anywhere else.

Mr. Maclay

That is the point I wish to get clear. I am no great enthusiast for Imperial Preference; I think it has a definite place, but one of the most fundamental things to bear in mind is that there should be a much better understanding in the United States and in our country of the advantages and disadvantages of such a system. If we followed the remarks of my hon. Friend the Member for East Aberdeen too carefully to their logical conclusion, it would become a more tightly-planned economy than anything contemplated, not by the Chancellor of the Exchequer, according to his statements, but by some of his supporters.

I should like to refer to one point in the speech of the hon. Member for Ipswich. If the Government have got from that speech a clear-cut coherent policy with which they can proceed straight away to solve the matter, they are pretty clever. I wish to deal chiefly with the hon. Gentleman's remarks about Canada. He wrote off Canada's problem too lightly. I do not know whether he was serious or not, but if he was not serious, he should not have said it. He must remember that geography happens to be a very important influence on the Canadians, who live next door to the United States. Their wireless programmes come from the United States and advertising comes on the wireless. Before the war, Canada geared her economy to buying a very large quantity of her goods from the United States and selling her production in soft currency countries. She has depended upon the multilateral flow of trade to get her position with America right.

Mr. Stokes

I am not lambasting Canada at all. I am a friend of the Canadians. What I said was that under the present conditions it is about time Canada came back home, like the prodigal son.

Mr. Maclay

The only way in which Canada can begin to do that is by some effective multilateral system being made possible. There is no other way unless we ask Canada to change her whole method of living and join the United States outright. There is no possible way by which she could come back to us except by a multilateral system. I do not think I should go on with that subject now, because I have certain other remarks to make, but I shall be prepared to take up the point on another occasion.

Coming down with some difficulty from these more lofty planes, may I say that what has surprised me most in this Debate and the events of the last few weeks is that it appears that this financial crisis, or pending financial crisis, has come as something of a surprise to the Government and not only to this Government but to other Governments.

Mr. Sydney Silverman (Nelson and Colne) indicated dissent.

Mr. Maclay

If it has not come as a surprise, why is it that quite suddenly we have Commonwealth Finance Ministers arriving, meetings in Brussels between Mr. Harriman and the Chancellor of the Exchequer, and all sorts of emergency action being taken?

Mr. Silverman

Was it a surprise to the American Government?

Mr. Maclay

I said that I thought it was astonishing that it appears to have come as a surprise not only to our Government but to other Governments. I would say straightaway that the prime responsibility for drawing the attention of the members of the Commonwealth and Empire, as well as the Governments of the sterling area and the United States, to an impending crisis of this kind rests squarely with the British Government because they are at the heart of the whole system which they are trying to build up.

Mr. Silverman

Surely the responsibility must rest with the Administration of the country in which the crisis occurs.

Mr. Maclay

I do not think it is worth following up that point, because the crisis is going to affect all of us, and there has been a failure to get ready to meet it. I was arguing that this country was in a position to know what was coming. I know that the Chancellor of the Exchequer and many other hon. Members have been saying that something of the sort would come sooner or later, but they have not made it as clear to the country as they might have done. If there was any evidence of the extreme danger of this position, it was in the Interim Report of O.E.E.C. It was made clear that, even on the optimistic assumptions of peace, full Marshall Aid, maintenance of full employment and the continuance of a sellers' market, it was very doubtful whether the Marshall Aid countries could be viable by 1953. The disappearance of any one factor was bound to lead to immediate crisis. That is what has happened. The sellers' market has disappeared. It is useless to argue that by some magic means of implementing a policy of full employment, the United States could have prevented a falling-off in buying.

There has been too much of this attempt to put the whole blame for the situation on the United States. Following the war there has been great destruction all over the world. The United States has sent out goods in many directions to replace that destruction. The American consumer was not buying goods during the war at anything like the rate which people over here believed. I was in America at the time, and I know. Immediately after the war they began to buy, and now they have slowed down; they have got all they need.

Mr. Silverman

The hon. Member will surely admit that the American Administration, immediately after the war, took off all their price controls; that the result of that was that prices rose in America and went on rising uncontrolledly for over three years; and that the result of that was that the prices rose beyond the ability of the American people to buy, and so the crisis came?

Mr. Maclay

That has been argued before in this House. I do not propose to argue it again now.

We are delighted, of course, that the Commonwealth Ministers are here, that really serious discussions are going on with Mr. Snyder, and that other activities are planned. But is it conceivable that, with this crisis obviously bound to come sooner or later, there has not been some process going on which is better than merely keeping other people informed of what the British Government propose to do? Surely, if we have any hope of coming through this period and building up a new world, or whatever we are trying to do, on the multilateral basis which the Government Front Bench keep on saying that they are trying to do, there must be some permanent and proper economic consultative committee, or some economic machinery. It should not be just on the top level but on a departmental level which will ensure that the Governments of all the nations concerned will be constantly informed of all the problems of all the nations and none will not be caught short, thus having to try to take emergency measures at short notice.

There is a great deal of evidence that no preparation has been made for that kind of system and that, whatever meetings may have been going on in Geneva, New York, Lake Success or wherever they may be held, the key nations in this situation do not yet know what each other's difficulties are and are not working out the solution together. If any evidence of that is needed, it can be found in the speech of the Chancellor on 6th July when, nearly at the end, he said: If in the future we are to have the convertibility of currencies and the multilateral form of trade which we have sought ever since the end of the war, and are now seeking, we and others must begin to build the permanent policies that will make these desirable objectives possible of attainment."—[OFFICIAL REPORT, 6th July, 1949; Vol. 466, c. 2165.] The words that frighten me there are: "begin to build." In 1949, that is quite terrifying. I cannot believe that the Chancellor ever believed that we could get through this period without a situation roughly comparable to the situation we are in now. It might have come six months ago or two years hence. It is terrifying that we are only now beginning to build a future.

There are still further failures to which I must draw the attention of the House. When the various Governments signed the Convention for European Economic Co-operation, they undertook, among other things, to: develop, in mutual co-operation, the maximum possible interchange of goods and services, and to this end to continue efforts to achieve as soon as possible a multilateral system of payments among themselves, and to co-operate in abolishing as soon as possible those restrictions what at present hamper such trade and payments. Those who try to follow fairly closely what is happening in Europe know that our own Government have been making considerable efforts to achieve that objective, and that a lot of other European Governments have genuinely been trying to fulfil that obligation. But I assure the Chancellor that that is not the impression in America. It was not the impression in the United States four weeks ago. I was in Canada at the time where I met a large number of American business men and Canadian people. There was no shadow of doubt, from their conversation and from the Press, that the United States thought that Europe was falling down hopelessly on that obligation solemnly entered into when we signed the Convention.

Mr. Norman Smith

Tory denigration!

Mr. Maclay

Not a bit of it. The Press was full of this. I will deal with the intervention in the normal flow of my speech. We can hardly blame the general American public for that lack of understanding. They know that the Government have talked a good deal of multilateralism, that they have signed the Geneva Agreement and initialled the Havana Charter. They have made all these gestures, and at the same time people in the United States read in the Press with the utmost regularity of the conclusion of new bilateral treaties.

That is what the American public see. One might foe rather inclined to write it off and to think that it is merely a lack of proper information on the part of the American public. The hon. Member for South Nottingham (Mr. Norman Smith) should realise that some Americans have had an exaggerated idea of what Europe should be able to do in the way of developing a free trading area very quickly under Marshall Aid. I agree that there has been exaggeration on this point in some parts of the United States. The United States cover a great area without internal tariff barriers and there is a high standard of living. People have too easily believed that, with Marshall Aid, in two, three or four years Europe ought to be able to achieve exactly the same result.

But what does one think when one finds the Chancellor going over to Brussels where apparently Mr. Averil Harri-man presented him with practically the same story? Does it mean, as stated in the newspapers, that not even Mr. Harriman had had the difficulties fully explained to him, that he bad not been told of the reasons for some of our actions? According to the Press, the situation was that there was an attack developing on the United Kingdom for its failure to take certain steps.

Sir S. Cripps

I really hope the hon. Gentleman will not take newspapers as being accurate as regards Mr. Harriman's attitude to the United Kingdom. There has never been any question of his attacking me or the United Kingdom. He made certain suggestions over which we compromised as regards a solution. Because somebody makes another suggestion to ours it does not mean that he is attacking us.

Mr. Maclay

I fully accept that, but I cannot accept it as a rebuke. It leads up to the point I wish to make. If that is not a correct version of what took place, there is something lamentably wrong in the presentation of our case and of what happens at these meetings. Something much better must be done. I assume that my remarks could be turned into an attack on the Press, but I am not attacking the Press. I wonder what the communiques were in the early stages of these discussions.

Sir S. Cripps

I will tell the hon. Gentleman. There was an agreement amongst all of us that no communiques should be given until the completion of the proceedings.

Mr. Maclay

Is not that the answer? Surely, people learned during the war years that that kind of agreement was just the way in which to get matters wrongly interpreted everywhere else. I am astonished at that answer. It means that we are only beginning—we are hardly beginning—to understand the problems which must be faced if we are to get the international confidence which is absolutely essential in order to solve the problems which confront us. This is a very serious matter.

The Argentine Trade Agreement is another case in point. Here we had an Agreement which when it was finally published proved to be not really discriminatory to any serious extent at all. But in the three weeks before the final Agreement was published, the Press released a different story. On the other side of the Atlantic they appeared to be official releases. I have not got one here, and I cannot prove that they were official. They indicated that the United States Administration was not fully informed, did not really understand what was happening in the negotiations with the Argentine, and that they looked on it as a grave departure from the solemn undertakings made by the British Government when signing certain documents.

Mr. Crossman (Coventry, East)

Is the hon. Gentleman blaming the British Government for the fact that a hostile Press has consistently misrepresented things against the British Government? Is that the fault of the British Government or the hostile Press?

Mr. Maclay

If the hon. Member had listened closely to my speech he would know that I said that there was a lot of evidence that the Administration itself did not know what was really happening and that they thought that Agreement would be infinitely more discriminatory than it proved to be.

Mr. Crossman

Would not the hon. Gentleman admit that the State Depart- ment, after the Agreement was signed, denied the whole thing and proved that it was merely the invention of a hostile Press, which had been put out in the previous three weeks? Does he not take the word of the State Department against the Press allegations?

Mr. Maclay

I have not seen that statement.

Mr. Crossman

It is about time that the hon. Gentleman did see it.

Mr. Maclay

I wonder—because the statements I saw were pretty damning. Anyway, if this is true, there must be some means of getting the proper version to the public, and we must face the fact that this is one of the problems we have to solve. I leave it at that, but it is a problem, and it is no use trying to pretend that it does not exist.

I had intended to go on in some detail to deal with what I believe to be the real problem—and this is not an attempt at a purely political manœuvre, because one must say what one believes. It is, however, extremely difficult to believe that the heart of this Government is in the urge to revive the multilateral system, and I say that with all sincerity, because I believe that the operation of the multilateral system runs contrary to the practices and theories of the Socialist Government. There are only two of these which I would mention.

The first surely is that multilateral trade, to be effective, depends upon the maximum flexibility of trade by all those involved. Can that be achieved in any system of State trading whether by nationalised industries in the export markets or by any extended system of bulk purchases? I really cannot reconcile these two things, and I do not see how it is possible. We cannot expect to build a system of multilateralism out of the bilateral system, and I consider that objective to be quite inconsistent with the policies which the Party opposite has been preaching for years. If they are changing their minds on those policies, I hope they will say so, but it is wrong and very misleading to argue that one is pursuing a certain objective which is known to be inconsistent with the basic theories in which one believes.

Secondly, does anybody opposite believe that these things can be solved without a big degree of foreign investment by the creditor nations, and, if so, do they not agree that there must be some conditions in existence which would encourage foreign investment to the full? Can these conditions arise under a Socialist Government? We should remember that what is happening in this country is watched very closely in other parts of the world. If this Government continues to nationalise, that will have its effect elsewhere. It means that, over a widening area, there must be increasing reluctance for the nationals of any country to invest abroad, and to use that method of finding some solution to the problem of the dollar gap. It is not just the private investor with whom we have to be concerned today. I cannot foresee the time when another Socialist Government overseas which is a creditor nation—if such a thing might emerge—is going to embark in foreign investments, if it believes that the other nation may nationalise the properties concerned and take them over itself. The whole thing does not make sense.

The only solution of our present troubles lies in building up, stage by stage, the multilateral system again. I do not think that regionalism or Imperial Preference areas are necessarily inconsistent, but this system must be made to work properly and can be built ultimately into multilateralism proper. I suggest that that is the alternative which hon. Members opposite ought to face today, but it cannot be a fixed one. They cannot promise our people a Socialist planned economy at home and try to build up a tightly planned trading area abroad, because, having done that, I can only promise them a steadily decreasing standard of living, possibly with equality, but equality on a lower level than we have known for many years.

8.5 p.m.

Mr. Cobb (Elland)

Most of the hon. and right hon. Gentlemen who have spoken from the Opposition benches in this Debate have agreed on one point, upon which I should like to follow them. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) said he would like to see an increase in competition. I am glad to see this conversion on the right hon. Gentleman's part, because he and I happen to be in the same industry, and every time I have made the competition a bit hot for him, he has either personally or through one of his managers suggested a price agreement. I am therefore looking forward with a great deal of interest to the day when he really faces up to this question of competition. [An HON. MEMBER: "Tell us some more."] It is not quite fair to give away more secrets of his industry when the right hon. Gentleman is not here to answer.

I would like to mention the speech of the right hon. and learned Member for Montgomery (Mr. Davies), who said the same thing. He would like to see more competition and less restrictive practices. If any of the rump of the Liberal Party were left in their places, they perhaps might have answered him on this point. I believe that this country today would have been in a far better position to deal with its difficulties if the Liberal Party, when it was in power in 1906, had followed its policy to the logical conclusion by going in for "trust-busting" in the manner of Theodore Roosevelt. That is what they were supposed to do, and, if they had passed that into legislation in this country, we should have had real competition from 1907 onwards and British industry would have been in a far better position to deal with the last war and the position in which we are placed today.

Again, the two right hon. Gentlemen I have mentioned referred to the prospects and difficulties of productivity, and here again I should like to follow them. The Chancellor stated on 6th July that it was fundamental that industry itself must quickly achieve a decrease in costs and prices by improved productivity. It is, of course, a question whether the Americans will buy our goods at any price. In the position in which we find ourselves, how are we to go about this question of increased productivity, and what are the consequences? Here I want to talk about the self-government of industry in connection with joint consultation. The Government have quite rightly said that we ought to have a rapid spread of joint consultation. The trade unions have backed them up, but there is still something stopping this growth of joint consultation, and I believe that it behoves us on this side of the House and those in industry generally, to face the practical difficulties in the spread of joint consultation.

Over two years ago, I went to manage a factory which employed about 1,000 people. Today, 381 people are turning out more goods than the 1,000 people turned out two years ago, and, to a very great extent, this was due to joint consultation in that factory. I will admit that it was also due in measure to the fact that rank bad management had existed at that factory before, but nevertheless, point consultation in my experience can lead to largely increased productivity in the truest sense of the word. I observed, in the course of getting this tremendous increase in productivity, that in the first three or four months I was in desperate arguments with shop stewards and workpeople about discontent, and this is where joint consultation started. When we started joint consultation, the discontent disappeared very rapidly, and the district trade union secretaries ceased coming to the factory because there was no need for them to come—there were no problems to be dealt with. Then the workpeople turned round and said, "Why do we need these people? Why pay them; there is nothing for them to do?"

We on this side of the House have to face this problem squarely because it is one of the reasons why the trade unions are not pushing joint consultation. Some of them are loyally pushing it, but others are wary about it. That is quite understandable; it is human nature. This is the kind of thing that is going on up and down the country where joint consultation is being tried, and some people in the trade unions are suspicious of it. I believe that we ought to do our best to overcome that suspicion because I know the dividend that can be obtained when we really push joint consultation to the utmost limits. It will not do any good unless management is prepared to give all the facts to the workpeople; all the facts must be put on the table, because, if they are not, this latent suspicion, which has been there for generations, will not be resolved and we shall not get an increase in productivity.

Having said that, I want to deal with joint consultation from the management side. I honestly believe that the best way of installing joint consultation in a factory is when it is done by a willing and capable management. Unfortunately, while there are many capable managements in the country—though not as many as I should like to see—they are not willing to give this thing a real trial. How are we going to get it? I believe that joint consultation at the top level is almost useless. It has got to grow from the floor of the shop upwards, and that is what we have not yet got.

I believe that the best agents for selling this to managements are the trade unionists on the floor of each shop, and I should like to see them have in their hands the real information that is necessary for obtaining it. I should like to see my trade union friends build up a small corps of specialists in joint consultation so that when a factory management has been convinced that joint consultation ought to be installed, the trade unionists can call on one of these specialists to come along and stay on the plant for a few days, in order to devise a tailor-made joint consultative arrangement for that particular shop.

As it is, we get this kind of situation. A management is convinced that they ought to try joint consultation, and then they do not know how to go about it and the people in the factory cannot tell them. That is perfectly true, and is going on at the present time. Somehow or other, we have got to see that these difficulties are overcome because of the tremendous dividends in productivity that will flow from a really rapid spread of joint consultation.

Mr. Gallacher (Fife, West)

I have listened with very great interest to what the hon. Gentleman has been saying about production committees, because I think they should be made statutory. He says that the managements and the shop stewards ought to get together, but we have been continually told here that shop stewards are, somehow or other, in a conspiracy with the Communists, and that their business is to disrupt production. Is that the hon. Gentleman's experience of shop stewards?

Mr. Cobb

My experience is that if the management is the right kind of management, one does not get any trouble of that description. In answer to the hon. Gentleman's point about making joint consultation statutory, my answer is that I do not believe it can be made compulsory. It depends upon the attitude of mind. One cannot make people Christians, Socialists, or even Conservatives by legislation; they are either one of these things by conviction or not at all. They cannot be made to indulge in the kind of joint consultation in which I believe by legislation; of that I am quite convinced.

I now come to one other thing which is bedevilling our efforts to increase productivity and which is at the back of the minds of many workers and managements. It is the question, of what is the logical result of an increase in productivity in this country? We can get a better understanding between workpeople and managements, but unless we can sell the increased output, the logical result is that somebody becomes redundant. That is in the mind of everybody on the floor of every factory in the country, and we ought to recognise that fact. We must not shove the body under the table; we must face up to this problem.

Broadly speaking, industries can be divided into three categories; industries which are expanding, industries which we can expect to be stable, and industries which are declining. In addition to the new methods we have to adopt, we eventually come up against the necessity of increasing the horsepower per worker. The moment we start doing this, we make the position worse. We must face the fact that improved methods, increased mechanisation and improved productivity are going to cause redundancy. We must be able to move people, to re-train them for new jobs, and we must have the houses to which they can go. We cannot expect a man to go from London to Newcastle if he has to leave his family behind, live in lodgings, and come home perhaps only once a month.

There is also another difficulty. If a man of 40 has spent seven years of his life serving his time in a particular job, and that job is no longer there for him, and he has to be re-trained, how many years has he to spend re-training, who is going to do it, and then, when he has spent one, two, or three years retraining—and I must say this quite frankly to my trade union colleagues—are his fellow trade unionists going to accept him into the new trade union? Those are practical questions, and until they are answered, we shall not get the increase in productivity which we so urgently need.

This is not a problem which managements, workers, or Government alone can tackle; it is a national responsibilty to have a policy to which we all agree, and then to put that policy into operation with great vigour, aided by properly set up joint consultation so that the workpeople know all the facts. Once they know all the facts, they will co-operate. There are still many people in this country who are very suspicious of the whole business, and until we can carry them with us I do not believe we shall be successful.

In 1920, Bertrand Russell wrote his book entitled, "The Theory and Practice of Bolshevism," and he ended by saying that he thought we could only get Socialism in this country by a greater degree of self-government in industry. He said we would never get self-government in industry until we had given our people a greater degree of education in the problems of industry. Joint consultation is a great educative force; it educates not only the managements. During the last two or three years, I have learned a lot from joint consultation of this kind; it educates everybody who takes part in it.

In the few minutes that I have left at my disposal, I wish to ask the President of the Board of Trade a few other practical questions. They are concerned with dollar savers. Is my right hon. Friend satisfied that there is adequate co-ordination between the economic and political branches of our official representatives overseas? Secondly, what is the Commonwealth policy towards exports to the sterling area? How far do those exports take second place? I find that people to whom I speak in industry are not clear on this point.

Then there is the question of dollar export targets. How are we to make sure that these targets have their correct impact on the individual firms? It is not sufficient to say that the big firms know about it, or that the trade associations know about it. Some of the most vehicle small companies of which I know, are companies which will not be in the federation or the trade association, and very often the man that runs them is his own works-manager and sales-manager. He has no time to come here to see the Ministry because he works on his own. How are we to make sure that these people are brought into this great national effort? How can we bring in the small, virile firms and make sure that they play their part in this drive? I must say that paragraph 4 of the statement of the organising committee on this matter is not very reassuring on this point.

Perhaps I may say a word about our commercial attachés overseas. If the commercial attaché knows his job, why does he need a trade adviser? If the new trade consuls in America know their jobs, why do they need commercial advisers? I cannot understand it. It may be that I am a little biased because, before the war, I had some unfortunate experiences with commercial attachés; I found that they were people who had not had a great deal of industrial or commercial experience. I hope my right hon. and learned Friend can tell me that that has now been changed, but I should like some reassurance that these gentlemen who are being appointed overseas to obtain sales have had some business or sales experience. I should like to know whether their terms of reference and their status are quite clear in their own organisation—the Government organisation; and are they quite clear to the customer?

I want to ask my right hon. and learned Friend two more questions. The first concerns dollars for salesmen. From what people tell me I am convinced that there are people going overseas with scarce dollars who have never sold anything in their lives, and they never come back with an order. What steps are we taking to check up so as to see that when a man gets dollars in order that he may spend three months in America and Canada, he goes on a serious business trip and is not, in fact, going on a holiday?; I do not suggest that my comment is true about a large number of people, but it is true about a sufficient number to make the matter, in my view, worth looking at.

Last, may I turn to the question of unrequited exports? We are still making unrequited exports from this country. We do not seem to be receiving anything in return for them. Does my right hon. and learned Friend think that these goods might be more usefully employed on the home market as an incentive? I should be obliged if he would tell us something on that point.

Mr. Walter Fletcher (Bury)

Would the hon. Member explain a little more clearly what he means? The essence of an unrequited export is that you get nothing against it, but those going from this country are the results of agreements made by the Chancellor with other countries. Either the agreements have to be cancelled, or the unrequited exports will go on.

Mr. Cobb

But things do not happen as we expected them to happen over a year ago and I suggest it would perhaps be advisable to look at this point again under present circumstances. I hope that my right hon. and learned Friend will look at some of the points I have raised, particularly that about the consequences of increased productivity and mechanisation, because if we do not meet the fear of the workpeople of the country on this point, I am sure we shall not get the productivity which the country needs.

8.34 p.m.

Mr. Martin Lindsay (Solihull)

I am sure the hon. Member for Elland (Mr. Cobb) will forgive me if I do not follow him in the important subjects he has been discussing, and I shall not take it amiss if he likes to leave the Chamber at once in order to get some supper. It is not often that I have the chance of addressing the Chancellor and I shall, therefore, return to his more important speech.

I want to tell the Chancellor, quite frankly, that I thought his speech was listened to with a great sense of disappointment in all parts of the House and not least on the benches opposite. [HON. MEMBERS: "Speak for yourself."] Certainly, I have never before heard so faint a cheer go up after the leading speaker on a great Parliamentary occasion had spoken from that Box. In my opinion it is not surprising that his speech should have been heard with a feeling of disappointment, because I think it was quite inadequate to the very grave crisis with which the nation is faced.

In a fortnight's time we shall be dispersing for the long Recess and I think few of us will leave this House without the feeling that we are likely to be called together again before the Recess is over, in circumstancs of no little alarm. At any rate we on this side of the House have no confidence that the Chancellor can postpone the coming crisis for very long. We sat down to listen to him today, bracing ourselves for a good deal of bad news and—

Mr. Shurmer (Birmingham, Sparkbrook)

And you did not get it.

Mr. Lindsay

I think it is a great pity that we did not get it. I think that the tragedy is that we did not get the true facts. I hope the hon. Member for Sparkbrook (Mr. Shurmer) will not take advantage of the good feeling which I have for him as a result of his conduct in Birmingham during the blitz.

We were disappointed with the Chancellor's speech this afternoon. The last things we expected were purely negative decisions—and I must say that he himself recognised that they were purely negative decisions—about greater austerity, and the usual platitudes unaccompanied by positive Government action, in order to implement what he held out to be necessary, such as increased production and so forth. Of course we must produce more. There is no need for the Chancellor to lecture to us to any great extent about our costs. Every Member in this House, every thoughtful person in the nation knows about that. But I should have thought it was quite obvious to the Government by this time that it is useless to talk about the necessity of costs being lowered while the Government themselves are taking every step not only to maintain prices but to increase them. I do not want to repeat what has been said so many times in this House; I know it becomes very boring and makes a very dull speech indeed. But if hon. Members opposite will not recognise the economic facts, we must repeat to them that the greatest single factor in keeping up the cost of our exports is the present level of taxation.

In answer to a taunt from this side of the House, the Chancellor said that txation has nothing to do with costs. Frankly, that is a quibble. Every hon. Member who knows anything about business knows that a company seeks to make profits in order to run the cost of its organisation, in order to cover its dividends, and in order to be able to put money on one side for depreciation. Quite obviously, the larger the proportion of those profits that is taken by the Government the larger still must the company increase its profits in order to cover the big slice of taxation which is taken by the Government.

Mr. John Lewis (Bolton)

rose—

Mr. Lindsay

I am sorry I cannot give way because I promised Mr. Deputy-Speaker that I would speak for only ten minutes. Just imagine how, if the present 60 per cent. of profits which is taken by the Chancellor were reduced to 50 per cent., or better still to 40 per cent., what a saving that would make for companies with which they could directly reduce their costs today or indirectly do so tomorrow as the result of increased modernisation of their plant. Thus we see that the very first prescription for lower costs—that is lower taxation—lies in the Government's hands.

Mr. Deputy-Speaker (Mr. Bowles)

The hon. Member must not discuss changes in taxation because that involves legislation.

Mr. Lindsay

With great respect, Sir, and without wishing to challenge your Ruling in any way, it makes it very difficult in an Economic Debate if one cannot deal with the question of taxation, but I shall endeavour to keep my remarks in Order.

Mr. Deputy-Speaker

The hon. Member may refer to taxation, but he cannot suggest any changes because that would involve legislation.

Mr. Lindsay

I am much obliged. I can then only say, in general terms, that it is necessary to lower taxation without showing in which way taxation could be lowered. We were taunted by the hon. Lady the Member for Cannock (Miss Lee) that we have not got any suggestions as to how taxation could be lowered by greater economies, but I shall endeavour to confine my remarks within the rules of Order.

The second way in which the Government must assist industrialists to keep down their costs is by calling a halt to the policy of nationalisation and also of bulk purchasing, because how can our industrialists reduce their costs when their fixed charges such as the prices of fuel, power and transport, as well as of their raw materials, are kept artificially high by Government action? If the Chancellor has his way, as he reminded us this afternoon, we shall have the nationalisation of the steel industry, which will unquestionably—surely no hon. Member can challenge this for a moment—increase the price of steel, not only by bureaucracy, but particularly because of the increased expectations which nationalisation will arouse in the minds of the steelworkers, and which will have to be assuaged by higher wages. The same will no doubt apply to the cement industry.

I come to the next factor which increases our costs—the short working week. I entirely agree with the hon. Member for Ipswich (Mr. Stokes), and I say that no sensible person can expect our costs to compete with manufacturers in overseas countries, where they work 50 hours a week, when we in this country work a 40 or 44-hour week. And within these working hours we are not getting the work done which we used to get before the war.

Mr. C. Poole

It is not true.

Mr. Lindsay

It is. I am sure that many hon. Members were struck with the authoritative assessment, which came out only a fortnight ago that the tea interval in the case of the building trade, results in an increase of £50 in each house, or 9½d. a week in rent. Having said that it is vital that taxation should be reduced, I shall leave the question of the economies that should be made, because otherwise I shall get myself outside the rules of Order.

Mr. Deputy-Speaker

The hon. Gentleman misunderstood what I said. He can suggest economies but not alterations in taxation, which requires legislation.

Mr. Lindsay

I am grateful for that correction. I can follow the hon. Member for Ipswich and say how much I agree with him when he talked about reductions in the cost of the Armed Forces, which in Socialist minds is always a popular field for economies. He referred to the question of conscription, and I can only say that I could not agree more than him that nothing could be more wasteful than our present system of training every man for the Armed Services in spite of the fact that a very large number of them in wartime would be wanted not for the Armed Forces, but in the fields and factories. That implies a modified form of conscription, but it interferes with the prejudices of hon. Members opposite in regard to what they call "fair shares for all," although I prefer the description of my right hon. Friend the Member for Woodford (Mr. Churchill), who calls this form of madness "the universal sharing of misery."

I turn to education, and it is quite apparent to me that there could be, without any loss of efficiency, a considerable saving in this field. School building is far too lavish, I can quote the example of a single high school in Devonshire, where the Ministry insisted that they should build an assembly hall, a dining room and a gymnasium, each at a cost of £10,000, rather than one or perhaps two of these buildings which could be used alternatively for other purposes.

Everywhere one looks one sees extravagance on the part of Government Departments. Only two days before the Chancellor made his grave statement last week we had the announcement of £750,000 to be spent upon a temporary fun-fair in Battersea Park. The day after that, we heard of a huge development scheme for the London underground railways which, like the new towns, one is confident will never be proceeded with in our own lifetime. With the example before us of the Government as the most prodigious and reckless spenders of all time, what can one expect of local authorities? Naturally, one finds that the example of the Government is reflected in council chambers all over England today, resulting in rising costs of administration and vast increases of capital expenditure, leading to increases in assessments.

As we have said on this side of the House, the Government have got their priorities all wrong. The Chancellor told us this afternoon that British production had increased by 10 per cent. He did not tell us by how much American production had increased.

Sir S. Cripps

I said productivity.

Mr. Lindsay

The estimates for America vary and I do not know what the truth is, but 75 per cent. was mentioned in this House today, and other people have mentioned 100 per cent.

Sir S. Cripps

The hon. Gentleman is getting confused between productivity and production. I am sure that the figures he is quoting about America relate to production. The figure of 10 per cent. which I gave was for productivity.

Mr. Lindsay

I apologise to the right hon. and learned Gentleman. The point I was making is that production has increased much more in the United States than in this country because over there the Government have freed their economy and are not nationalising anything. The very opposite is the policy of this Government, who are also anxious to increase production. The wasteful and unnecessary expenditure of which we see examples on all sides in this country, makes much greater difficulty for our manufacturers in the export field, not only because it keeps costs high but because, as my hon. Friend the Member for Chippenham (Mr. Eccles) has reminded us more than once, of its drafts upon the resources of the nation in manpower and raw materials, which are misapplied. If only part of the energy and expenditure which the Government have expended upon the groundnut scheme had been applied to the benefit of our own land, I believe that the result would be very much more beneficial to us.

In his speech today the Chancellor once again said that the greater our import difficulties, the more important is the development of British agriculture. I wish the Government would take that statement to heart. There are, no doubt, tremendous possibilities in this direction, and nothing like the maximum is being done at the present time. One of the most important steps towards defeating the balance of payments problem is to stimulate home agriculture to the maximum extent and thus reduce even further the purchases from the dollar areas which we have been accustomed to making in the last few years. Anybody looking at the bare economic facts with which we are faced might well have cause to despair, and it is only our faith in the people of this country which gives us cause for encouragement—the fact that we have still in these islands the same great people who proved themselves great in 1940.

Today, unfortunately, we are in the extraordinary position of having a Government which is pledged to the welfare State and yet can no longer guarantee the two most important fundamentals of the welfare State, the people's food and employment. This is not as yet apparent to the man in the street, and I fear that it will become no more apparent to him today as a result of the speech of the Chancellor. I do not believe that the truly desperate nature of the economic crisis is apparent to the Government even as late as today. All that the Chancellor said today implied only that the ship of State is sinking but that it will do so with the red flag of Socialism nailed to the mast. Were it not for the fact that an alternative captain and crew are available, the outlook would be grim indeed.

8.42 p.m.

Mr. David Eccles (Chippenham)

Many of us have known for a long time that the day would come when we should have to debate a run on the British gold reserves. Again and again on this side of the House we have warned the country that this kind of crisis was inevitable unless the Government abandoned their insular, unworkable and grossly extravagant policies. The party opposite have done much harm by trying to belittle and smother these warnings, and they have never done more harm than through the chief spokesman from the Front Bench today. They will be held guilty of this concealment of the truth by the electorate, and for the rest of their lives they will be reminded of the four years of Socialist misrule.

It would be very easy for me to spend the time at my disposal going over the discreditable steps by which the Government have led us to this situation, and by quoting extracts from my own speeches I could show how at every stage I have pointed out that the mismanagement and errors of financial policy would sooner or later bring us to a crisis. There will be a time for an examination of that sort, but I believe that the House feels that the purpose of this Debate is to discover whether there is a chance left, however small, to save sterling from a collapse. This is probably the last occasion on which we shall debate the economic situation before we rise for the Recess, and, as the Chancellor himself has told us, during the Recess vital decisions will have to be taken at New York and at other conferences. I make no apology, therefore, for concentrating my remarks upon the immediate future.

I had hoped that the Debate would show that both sides of the House now saw the danger in the same perspective, but all those hopes went overboard when I listened to the speech of the right hon. and learned Gentleman. It was quite clear that he was still intent upon the soft-pedalling of the emergency which is coming up before us. He said, "I am going to cut £100 million. It will not hurt anybody. The housing programme will be continued. We shall get along everywhere the same as before, except in regard to sugar. We are going to cut that by a couple of ounces." Then, I admit largely through seasonal circumstances, he was able to counterbalance that by saying that the British housewife would get a few more ounces of fats,, meat and bacon. There was no urgency there. Yet we are faced by an immediate problem which overrides the long-term difficulty which the Chancellor succeeded in putting in the forefront—[HON. MEMBERS: "Order."] The Chancellor never listens when he is being criticised.

Sir S. Cripps

I can assure the hon. Gentleman that I have heard every word he said.

Mr. Eccles

No doubt the right hon. and learned Gentleman has learned how to talk in order to save time in listening. [An HON. MEMBER: "What does that mean?"] The right hon. and learned Gentleman was talking to his right hon. Friend, which no doubt saves him time in listening.

There is an immediate problem which cries out for solution and I want to put this problem to the House in a way which will make hon. Members believe what I say. It happens that I met a foreigner last week who all his life has been a friend of this country. He described the problem to me in highly significant words. This man is a Scandinavian shipowner whose fleet of vessels earn sterling freights which are paid into his bank in London. He also has two new ships building for him in British shipyards. Until recently he has allowed his freights to accumulate and, from that source, he has made payments on account of the ships under construction. Now, however, the day he receives his freights he takes his pounds away and only brings them back at the last moment before a pro- gress payment falls due. When I saw him he had just been upbraided by his banker for this loss of confidence in sterling. I weighed in on the side of the bank, and then this man gave me his reasons for refusing to hold a sterling balance even for one night. It is those reasons which I commend to the House because they are, as it were, a slice cut from the living flesh of the crisis.

He said that to hold another currency was to invest in the solvency and stability of that country, and the only test by which one could judge of that stability was to look at the reserves behind the currency. That is what he had done and he had seen unmistakably that the British reserves had been allowed to fall far below the safety level. He said we had no reserve of labour, we were fully employed—[HON. MEMBERS: "Ah!"] I am giving the House a fair description of what he said. He said we had no reserve of labour and had not discovered how to persuade men doing unnecessary jobs to go and do more necessary jobs. He said we had no reserve of savings, that the Government's capital expenditure this year would not be covered by a true Budget surplus, and he saw no hope of a revival in personal savings. He said this must be so because Socialist policies had eaten up all the reserves of taxable capacity, and that British Government expenditure was rising rapidly beyond the revenue which any Chancellor could collect.

Then he went on to describe our gold reserves as quite inadequate from whichever way he looked at them. He said that £400 million was too low when compared with the volume of foreign-owned sterling in London; it was too low when measured against the gap in the balance of payments on the United Kingdom alone; above all, it was quite inadequate for the trade and banking requirements of the sterling area. He asked, did I not think it appalling that London, the central banker of the Commonwealth and Empire, should be brought to her knees by a three months' decline in American purchases of raw materials? I took him up on one point—the point which has already struck hon. Gentlemen opposite—and asked him if he was really suggesting that we ought to have a reserve of unemployed labour. He replied that what he had meant was that a fully employed society doing the wrong things would find it exceedingly difficult to change the pattern of employment and do the right things, and that when he saw so many people here employed on non-productive work he set that down as a weakness which we could not afford, all the more so because our other reserves have been robbed to finance the Socialist experiment.

Subject to the point about unemployment, to which I shall return later, I ask the House to agree that my Scandinavian acquaintance put his finger on the central truth of the crisis: that we cannot hold together the financial system of the sterling area unless we begin now to rebuild the reserves of gold, savings and taxable capacity. If we shrink from doing so—indeed, this kind of shrinking was the Chancellor's message today—the sterling area will break up and one by one its members will go to the United States for the credit, the capital and the monetary security which they must have if their individual development and progress are to go forward.

The British public take the sterling area system for granted. They pay no more attention to it than they do to the circulation of their own blood. If sterling could no longer flow unhindered from one member of the area to another, if the primary products of the area could no more be financed and paid for through London, what would that stoppage in the monetary circulation of the Commonwealth mean to all of us? Do the public know how much food would disappear from their dinner tables and how many raw materials would be in short supply in their places of work? Why do not the Government explain these things in simple words and with homely examples to all those people—to all the dockers, for instance; and not only to the dockers, but to all whom for the last four years they have flattered and deceived? There is nothing more degrading than a weak Government using troops instead of telling the truth.

Mr. Harold Davies

Will not the hon. Gentleman agree that the United Nations organisation and other sources say that more information on the real economic position of Britain is being disseminated in understandable and simple language today than ever before in the history of any past Government?

Mr. Eccles

I have said in the House before that the trouble with the information that is disseminated is that it is so selective and that its effect upon the people—[Interruption.] I do not know why hon. Members should be surprised. It seems almost inhuman that any Government should spend millions and millions of the taxpayers' money on an information service not designed to boost their own works.

We have reached a point in the exhaustion of our reserves where the risk is very great and very near that the sterling area will break up. All the members of the sterling area share the responsibility of rescuing the Commonwealth and Empire from financial disintegration; but it is upon the mother country and, by one of the ironies of history, particularly upon this Chancellor, that the responsibility rests overwhelmingly to prevent the liquidation of our most precious inheritance. If we do not make the major contribution to rebuilding tine family's reserves, the other members can play no effective part. London is the centre; the financial machinery is here. The Bank of England, in which it is high time the other Commonwealth nations became shareholders, is the repository of the reserves of the other members. These other members all look to us for credit, for capital and for monetary security. They cannot be expected to bank with a Government which is so overstrained that it gets into difficulties over the normal fluctuations in prices such as we are having today.

It is not surprising, and we ought to face the fact, that there is a growing number of people who do not want to hold a sterling balance. Distrust of this nature, if it continues, for only a year or two, spells ruin for us. It is our duty to see in what way and how quickly we can restore confidence in our money and in our ability to hold the sterling area machinery together. There is only one way in which to rebuild reserves and that is to live within our income and to adopt the right policies to expand that income. I challenge anyone to say that there is any other principle by which it can be done.

Mr. S. Silverman

Was it in fulfilment, or in pursuance, of that principle that the hon. Member, only a week or two ago, proposed to raise the personal incomes of that section of the population which has the most income already, by reducing the standard rate of Income Tax?

Mr. Eccles

Entirely in fulfilment of that principle. [Laughter.] Hon. Members may laugh, but they will find as time goes on that they will be driven to the realities of this world and will find that there are certain policies which produce more goods and others which produce more restrictions. I am for those which produce more goods. I see the processes of cutting down expenditure and expanding output as inseparable parts of one operation. How can we expand output with vigour unless inflationary pressures are removed; and how is there any way of doing that on an effective scale except by reducing the demands of the Government on savings, labour and materials? It is also true that reductions in Government expenditure would not be put up with unless they were seen to lead to a great upsurge in confidence and in production.

Hon. Gentlemen opposite often tell us that no reductions in Government expenditure are tolerable. I wonder why they say that? I think some of them say it as an act of faith in the Socialist experiment. I think all of them say it because they are afraid of unemployment. So am I, but I am much more afraid of unemployment if we go on as we are. Our present full employment rests upon most precarious foundations of the continuing supply of loans and gifts from our friends overseas and it ill becomes, the hon. Lady the Member for Cannock (Miss Lee) to lecture the Americans about their three or four million unemployed, when her own Ministers on the Front Bench below her have said that we would have two million unemployed were it not for American dollars.

Miss Lee

It ill becomes the hon. Member to mislead American public opinion about the fact of our inter-dependency. I think he should make it quite clear that if unemployment comes to this country, it comes to America, and the best way of getting rid of it in both countries is an increase in Marshall Aid and not a decrease.

Mr. Eccles

I would never make anything of the kind clear to America. Unemployment will come to this country if we go on working Socialist economy.

Mr. J. Lewis

There was no Socialist State before the war.

Mr. Eccles

If these American subventions prove incapable of stopping the drain on our gold reserves—and nothing the Chancellor told us this afternoon makes us think that that will not be so—then indeed we shall have unemployment, and we shall have it under the worst possible conditions, because all our hard currencies and our credit will be used up, and there will be no room to manoeuvre in any direction.

Are the party opposite ready to face up to what it is necessary to do to avoid this kind of blind, brutal, massive unemployment? If they are they must strip the economy for action; they must clear the decks of all the superfluous cargo with which the Socialist Party have cluttered up the ship so that it is impossible to handle her even in the light breezes of a mild recession in world trade. The measures to be taken fall into two categories, those which are purely domestic and those which demand international co-operation. At home we need a clear and dramatic objective which can be held up to our people as the hallmark of action to improve our competitive position. It may be that the experts say that there are 50 different things that we ought to do, but from the point of view of people and politics we need to find something dramatic which we can do.

I do not know whether it is true, but I am told that the Government have been thinking of export subsidies. I hope that that is not so. Export subsidies are a very poor instrument, for they do not relieve the inflationary pressures; indeed they make it easier to sell goods which have cost even more than they cost today. The objective to which I would work is the withdrawal of the White Paper on incomes and profits. That is an attempt by exhortation and thinly-veiled threats to freeze the rewards of industry; it suffocates expansion, it kills growth and takes the heart out of the thrusting and ambitious members of our community. How can the Government talk about lowering costs when there are a half-dozen major industries in this country sitting on wage claims which, when considered on their merits, have considerable justification? Do Ministers really believe that they will get a response to their appeals for production as long as this White Paper on incomes acts like a wet blanket upon all and sundry?

Major Bruce (Portsmouth, North)

Will the hon. Gentleman now tell the House whether he is speaking officially on behalf of his party? It would be rather interesting if he would say.

Mr. Eccles

It is not a question to which I intend to give an answer to anyone like the hon. and gallant Member. The essential step is to get rid of this White Paper on incomes which is throttling young people and every ambitious person in this country. We can never expand while we have this great ceiling on top of us. We must reduce demands on our resources to the point where the inflationary pressure no longer exists. When that has been done, then all those whose efforts deserve an increased reward—and there are many—can put forward claims upon their merits and can have them properly considered, which today they cannot do.

Can hon. Gentlemen opposite tell us of any other way by which this White Paper, which does so much damage, can be withdrawn, except by reducing the taxes that press so hardly upon the cost of living? They may say that it should be done by cutting profits, but can it? Let us look at the proposition mathematically. The fact is that the profit margins—a farthing a pint on beer is a good example—are too small to make any great impression on the cost of living. If that is not so, I would be grateful if some hon. Member would prove me wrong in the Debate on Monday. What I think should be even more convincing to hon. Members opposite is that if profits are wiped out, then of course the yield of the Income Tax diminishes, and the Chancellor finds himself compelled to raise more taxes from the wage earners in order to make good the loss of revenue from company profits. There is no escape from that, and there is no means of reducing the cost of living quickly and rapidly other than by reducing the taxes which fall upon the things that people buy and on the costs of production.

I suppose that hon. Gentlemen opposite will retort that such reduction in the taxes must curtail the activities of the welfare State upon which, they say, the British people have set their hearts. They would be right about the consequences of large economies in Government spending; but are they so sure that they are right about the wishes of the people? The wage earners now form the main body of the taxpayers. How many of them are beginning to question the cost of Socialism, which they were led to believe would be paid for by somebody else? All of us go about our constituencies and we notice a change of view upon this point. Hon. Gentlemen opposite notice it as much as I do. The Government have not the courage to interpret this changing point of view. We see them denying that there is among our people today an uneasiness at the burden of taxation which is placed upon them. The Government act as if the present level of their expenditure—which was never once mentioned by the Chancellor in his speech today—were a sort of sacred ark for which everything the housewife buys and everything the family enjoys must be sacrificed ruthlessly and without a murmur of protest.

That is not the way to revive the vigour and spirit of the British people. Nor could it be done by a series of prods and bribes to this or that exporter, or by fixing up more of these paper agreements, in which I have no faith whatsoever when world prices are against us. All those things are subterfuges, and they are no remedy for a country whose existence depends upon trade with the whole world and in competition with the whole world. For us in our narrow and crowded islands it must always be true that either we are equal to the best or we shall fall further than imagination can describe. The Government's inaction and rigidity on all these things has been a great breeder of pessimism. I believe that that pessimism is largely unwarranted if we will look to the true facts about productivity.

I was greatly interested that a number of hon. Members made most interesting contributions on this subject of productivity. There are in this country great reserves of productive power. They are not apparent to an outside observer, like my Scandinavian friend, to whom we appear to be fully employed and incapable of any rapid expansion. But if the House will look at the official statistics they will see a very different picture from the rosy one which Ministers are continually displaying around the country. Take the figures for the total number employed in manufacturing industries in 1938 and compare them with those for 1948. We find that there has been a rise of 12 per cent. in the total number employed. Then compare the index of industrial production over the same period, and we find that the rise is almost exactly the same.

It is possible by choosing one or other of the indices to make out that the output per man over this period of ten years has in fact improved by two or three per cent., but not more than that. In one sense these figures are very disturbing. All the new techniques, all the new machinery, and all the raw materials we have imported free or on loan appear to have been absorbed without giving us any significant increase in output per man. In another sense these figures are very comforting. I should be much more disturbed if the gap in our balance of payments were as big as it is today in spite of a rise of 15 or 20 per cent. in the productivity per man over the last ten years.

These official figures show that we have it in our power to do very much better than we are doing. That is a great and inspiring thought. The Government tell their supporters that the only way in which we can get greater production is by new machinery and improved methods. The hon. Member for Elland (Mr. Cobb) gave us a most interesting view about joint production councils, with which I agreed wholeheartedly; but it is not true that that is the only way in which we can get better production. It would help, but the fact is that greater production could come, and will come, by harder work with the skill and tools we already possess.

The hon. Member for Ipswich (Mr. Stokes) mentioned coal. Surely, the House ought to face up to the coal situation. What has happened to our coal exports? What a tremendous amount of new machinery we have put down the pits, and how we have concentrated incentives upon the coal mines. Yet, we have hardly regained a fraction of our pre-war exports. Those are questions which must be faced. Let us take agriculture. The Government have continually under-rated what British farming can do. Now they are doing the worst of all things. They are shaking the confidence of the industry by all these rumours about the import of horticultural and other fanning products which apparently are to be made to please soft currency debtors. Today we have low productivity because we are doped by false theories, weakened by inflation and depressed by taxation. But all these are handicaps we have given ourselves. If we have the will, we can sweep them all away.

I want to say something about the measures which involve international co-operation. None of these will be any good at all unless we are taking the appropriate domestic action. I assume that we are and that the Government are moving energetically towards the withdrawal of the White Paper on Personal Incomes, Costs and Prices. What should be our commercial policy? First and foremost, the sterling area must make up its mind whether its continued existence is of sufficient importance to warrant new, intimate and permanent co-operation in the economic and financial fields. There can be only one answer. We are in trouble together, and together we must get out of it. I quite see that this would mean an increase in the influence of the younger members, like Malaya, upon the economic and financial policies of the area as a whole, but why not? The old firm badly needs a spring-clean, and a few new faces on the board would be as welcome to the shareholders as we know they would be to the staff. When the sterling area is reorganised, it can feel its way as a unit—it cannot do it in separate parts—both towards co-operating in Western Union and towards multilateral trade. Only then, when it is reorganised, can it take its time.

I admit that the arbiter of the pace will be the United States. If the Americans want multilateral trade, they must set an example, and, to move at all quickly, I think it would be necessary to have a large stabilisation loan, and that it would be necessary for the Americans to take many positive acts to open up their markets to high-quality goods from the rest of the world. I am not pessimistic about high-quality goods in America. I agree with my right hon. Friend the Member for Aldershot (Mr. Lyttelton) that, with mass production, we cannot get into America, but there is a wide market for specialised goods of the kinds we can make. I cannot see the Americans taking action of that kind unless they are first assured that we are putting our own house in order, by which I mean that we and the other members of the sterling area are making an all-out effort to rebuild the reserves of the sterling area, and I mean reserves of gold, savings and taxable capacity. It is no good having the one without the other. The Americans have twice given us dollars upon a false prospectus, and we ought to be ashamed to ask from them a third time until we have made an effort to live within our own income.

I say, in conclusion, that the interests of the United States, of the sterling area and of Western Europe are the same—to expand trade and to extend the democratic liberties. We know what we want, and we know how to get it. Why, then, do the Government persist in their policies of restriction? Why do they not give a lead in the policies of expansion? Why do they not give up their domestic theories and their absurd adherence to the present level of Government expenditure, and go in for the revival of trade here, in the sterling area and in the world? These are the great questions to which we expect answers in the course of this Debate, and it will be upon the answers to those questions that the Government will be judged by the country.

9.19 p.m.

The President of the Board of Trade (Mr. Harold Wilson)

The hon. Member for Chippenham (Mr. Eccles) will forgive me, I know, if I do not immediately follow him on some of the points he raised, because I should like to deal first with some points raised by other hon. Gentlemen before I turn to what the hon. Gentleman has just said. I will just say this about some of his remarks. If anyone were tempted to take the hon. Gentleman seriously, which I know they are not—[Interruption.] Well, then, if they are, and I hope they are not, the effect of his speech will be to attempt to disrupt the whole sterling area, and let me say that we on this side of the House are not prepared to make the sterling area or Commonwealth economic relationships a pawn in party politics.

The hon. Member showed his obvious disappointment that the serious measures which have been announced this afternoon for the purpose of reducing dollar expenditure are not expected to interfere with the housing programme or to in- volve serious hardships on the housewife. He went on to refer to two subjects which I should have thought were the last subjects any Tory would dare to raise in this House—coal and agriculture. Before I deal with the points he made on these, let me first refer to certain things which have been said, particularly by the right hon. Member for Aldershot (Mr. Lyttelton) in an attempt to explain the causes of our problem.

Right hon. and hon. Members opposite have been at pains this afternoon to suggest that the deterioration in the gold and foliar deficit is due to high costs at home, to excessive Government expenditure, and to various other internal factors in our economic situation. The hon. Member for Solihull (Mr. M. Lindsay) advocated a policy like having a groundnuts scheme in Solihull, and he went on to imply that this overseas external payments problem could be dealt with by making school buildings in Devonshire less lavish, which was totally irrelevant to the problem with which we are faced.

Mr. W. Fletcher

Like the right hon. Gentleman's remark about groundnuts.

Mr. Wilson

A number of hon. Members opposite tried to put the whole blame for the present situation on the level of internal costs in this country. Of course, neither my right hon. and learned Friend nor I, nor, indeed, any of us in any part of the House, would deny the need to keep our production costs down to an absolute minimum, and I am not sure that what the hon. Member for Chippenham suggested about the White Paper is going to be the best way of doing that. The figures published, which the House has before it today, showing the causes of this grave increase in the dollar deficit, show that it is not so much exports from the United Kingdom as other and more external factors that have been responsible.

Earnings from exports to the dollar area from the United Kingdom in the first six months of this year are estimated to be turning out at about £88 million against a previous forecast of £100 million—£12 million, or 12 per cent. lower than we had hoped. But surely it is plain to the House that the two major factors have been an increase in the other payments and receipts from the United Kingdom, that is, broadly speaking, a deterioration on invisible account as well as, perhaps, some quicker cashing of American account and other sterling into dollars, and, secondly, a decline in the revenue from the sale of sterling area products in North America. Undoubtedly, that has been the biggest single factor.

Mr. W. Fletcher

Will the right hon. Gentleman explain to the House, as he thinks that is so important, what steps the Government have taken, in spite of the many warnings they have had, to stop the enormous dollar leakage there has been on exactly those raw materials?

Mr. Wilson

My right hon. and learned Friend has dealt with that on a number of occasions.

Mr. Fletcher

Will the right hon. Gentleman do it now? Give us the answer.

Mr. Wilson

The hon. Gentleman should know, if anyone should, the difficulty of dealing with that situation.

Mr. Fletcher

And the slackness there has been in dealing with it.

Mr. Wilson

Compared with the estimated shortfall in earnings from the United Kingdom exports of £12 million, the increase in the deficit of the rest of the sterling area is £22 million—easily the major factor in the situation. As my right hon. and learned Friend explained today, part of the decline in our own exports and re-exports really represents a decline in sterling area shipments routed via this country. How grave has been the decline in the prices of certain sterling area raw materials can be seen from the fact that rubber, which was 13¾d. in the third quarter of 1948, has fallen to 10¼d. in June of this year—a fall of 25 per cent.

Mr. Fletcher

Because the Government have done nothing about it.

Mr. Wilson

The hon. Member always pressed for rubber to be returned to a free market and it has been. Cocoa, which was 44 cents per lb. a year ago, had fallen by June of this year to 19½ cents—a fall of 55 per cent.; and merino wool, which as recently as January stood at 103d. per lb., has fallen to 89d., a fall of 14 per cent.

So the main factor in the situation is not the decline in United Kingdom exports. Indeed, a considerable part of the decline in our combined export and re-export figures is a reflection of what is happening in buyers' market conditions not only to our own exports, not only to sterling area exports, but to the exports of practically every other country in the world. It is certainly true that we were told about being a high-cost country, but it is also certainly a fact that the exports to the dollar areas of Switzerland, Belgium and Italy, which have been held up by the party opposite as efficient low cost countries, have similarly fallen.

My right hon. and learned Friend this afternoon stressed the need for the maximum effort in dollar exports and hon. Members of all parties have re-emphasised what he said. I must say, for my own part, that I reject the idea of the right hon. Member for Aldershot that exports of manufactures to the United States could be regarded as coals to Newcastle. Rather would I take as authority on the subject Mr. Hoffman, who recently said: Here in America is the richest market in the world with an annual income of 200,000 million dollars. Let us assume that Europe does have to find a way within the next few years to increase its exports by three billion dollars annually over the level now contemplated. All that Europe needs to do is to find ways of attracting an additional one per cent. of the American national income for the purchase of her wares and the problem is solved. These are the words of Mr. Hoffman. It will be clear, and it is clear, from the difficulties which our exporters today are meeting in North America that we shall need the very greatest efforts even to maintain and regain the rate of exports we were achieving a month or two ago.

Colonel Dower (Penrith and Cockermouth)

What markets are we to capture?

Mr. Wilson

I will come to that in a moment and deal with it at some length. The judgment I formed following my visit to Canada in May was that while there were enormous possibilities for the development of our exports of engineering equipment to Canada, the most energetic efforts would have to be made even to maintain our rate of exports of certain lines of consumer goods.

I have today received the provisional figures for June of exports to the dollar areas and I believe, even though they are still provisional, the House will probably want me to give them. Before I do so I should remind the House that June, like April, was a short working month, affected by holidays so, as my right hon. and learned Friend said this afternoon, the total exports in the month were down, though the daily rate was higher than in any other post-war month except January of this year. But even when allowance is made for the shorter working month, I have to reveal to the House a still further reduction in exports to the dollar areas.

Exports to the United States, which averaged £5½ million a month in 1948, £5.3 million in the first quarter of this year and had fallen to £3.6 million in May, fell to rather less than £3 million in June—£2,983,000. Exports to Canada also fell from the May figure of £7.6 million to rather more than £6 million in June, which is very slightly below the 1948 average, but an analysis of the figure shows that it is largely exaggerated by erratic movement in the figures of exports of ships, a sudden change in which can make a very big difference from one month to another.

In my speech in the Debate on the Budget in April, I referred to the measures, which could be taken both by Government and industry to encourage dollar exports. Since that time, as the House knows, there has been the meeting of representatives of industry with my right hon. and learned Friend and myself, and following the report of the Baillieu Committee, the Dollar Exports Board under Sir Graham Cunningham, drawing for its members on the experience available in the ranks of industry, commerce, finance and organised labour, has been established. I am sure the whole House will welcome this spontaneous decision taken by the representatives of all the organisations concerned, and wish the Board well in the very difficult task it has ahead of it.

Meanwhile, as the Dollar Exports Board and this House know, the Government stand ready to give the fullest assistance which a Government can give to all those who are willing, whether in the national interest, in their private interests or, as we may hope, in the interests of both, to launch their ships to the dollar area. On 11th April I indicated an eight-point programme for Gov- ernment assistance to dollar earners. I will not take the time of the House this evening by repeating what those eight points were, but I will re-emphasise that within the general system of controls operated by the Government we shall not hesitate to discriminate openly in favour of firms which can increase their exports to the dollar areas.

As it is our policy so to discriminate, it must, I submit, be the policy of private industry itself to discriminate in respect of dollar orders. This means that more and more firms, if they find it necessary in order to remain competitive, must be prepared to take lower prices and lower profits by accepting dollar orders. Quite a number of private firms are already doing it. It is being done by public enterprise as well, and certainly it would be contrary to the highest national interests if firms were to refuse dollar orders which they could get in the interests of getting higher profits in other parts of the world.

Secondly, industry will, I am sure, be prepared to discriminate in terms of delivery dates. We have heard a lot this evening about the alleged high cost of our exports. In Canada I found as the members of the Engineering Mission found that, apart from one or two exceptions, there was no evidence that the price of our engineering exports was higher than those of our rivals, but on delivery dates we had to make bigger efforts in order to compete. This can only be done by open discrimination in favour of dollar orders.

I have said that the Government will do all they can to encourage the export drive, and I want to repeat tonight that the Export Credit Guarantees Department, whose powers were strengthened by this House not long ago for this purpose and others, stands ready to entertain any proposal from any exporter, however unusual, for financial assistance and participation in connection with the special risks associated with the attempts to sell in the North American market.

Mr. Lyttelton

I hope that the right hon. Gentleman will deal with the point about raw materials coming into this country which form part of our exports.

Mr. Wilson

Perhaps I may deal with that as soon as I finish dealing with export credits.

Since 11th April a considerable number of exporters have been to the Department to discuss their problems. Most of these people are anxious to do their part in helping the dollar drive. To do this, they know they will have to make their goods known, maintain representatives in North America and arrange for distributors. Adequate stocks, especially of spare parts, are necessary, particularly in the case of large-scale engineering products. I hope that we are going to participate more and more in the tremendous programme of development which is going on in Canada. For this, surety bonds of substantial amounts will have to be put up.

To assist every reasonable project in connection with such things as advertising and other promotional expenditure, such as the maintenance of stocks and tendering for contracts, the Department stands ready to discuss any proposition which business concerns put forward. It is not only willing but anxious to help to finance the cost of those early years, and to carry any reasonable credit risk. I hope that the House will realise that this is a complete departure from anything which this Department has previously done. I told the right hon. Member for Aldershot, when we debated the Export Credits. (Guarantee) Bill, that I would report to the House any developments in policy.

Mr. Erroll (Altrincham and Sale)

Will this Department be allowed to guarantee dollar risks without at the same time being given the chance to guarantee other area risks as well?

Mr. Wilson

Yes, Sir.

Mr. Erroll

It is an important improvement.

Mr. Wilson

We are making a lot of important improvements.

Mr. Erroll

It is about time, too.

Mr. Wilson

Perhaps I can deal with the point made by the right hon. Member for Aldershot about raw materials. As my right hon. Friend said this afternoon, until September it will not be possible to indicate in any detail what the import programmes for the coming year will be, but I think I can assure the right hon. Gentleman that in the operation of the standstill on new purchases—it was this about which he was asking and not the longer-term programmes—we have taken very good care to see that sufficient raw materials will be imported so as not to prejudice the success of the export drive, particularly to the dollar areas. In the case certainly of the allocation of scarce materials, we shall see that the needs of the exporters to dollar areas are looked after first.

Another point on which there has been considerable discussion is the question of the long-term solution towards which we are working. An increase in dollar exports is at the same time a short-term and a long-term contribution to solving the problem. Hon. Members in all parts of the House have been dealing with the long-term objectives to which we should be working, and which will be in the forefront of the discussion in which my right hon. and learned Friend will be engaged in September. He made it clear, and I should like to repeat it, that in the view of His Majesty's Government our ultimate objective must be the establishment of a system of multilateral trade—a one-world system, not two or three. I think I can say that that view will be fully endorsed by all the other members of the Commonwealth. At the same time, I think it will be recognised by the House that a multilateral world will not be reached simply by wishfully hoping for a return to prewar conditions which made a multilateral system possible.

Before the war not only we in the United Kingdom but the greater part of Europe had a large deficit with the dollar area. Canada had a large surplus with us but a deficit with the United States. The whole of the financial deficits of those countries was met by two things: by the return on dollar investments and the net balance in favour of the sterling area resulting from the sale of sterling area raw materials and foodstuffs. It would be unrealistic not to realise that those two props of our pre-war system have been knocked away by the war. Moreover, the multilateral system depended upon the existence of large and adequate reserves in the sterling area. As my right hon. and learned Friend said this afternoon, that condition no longer applies. The smaller our reserves, the less is the margin for manoeuvre and for taking chances, or even for that dash to freedom to which the hon. Member for Chippenham referred, although it was not very clear what he meant when he said it.

Those props of the multilateral system have been knocked away, and as part of any scheme to re-establish that system, we have to labour for something to take their place. It would not be right tonight, in advance of those September discussions—the more so as the Commonwealth financial meetings are on at the present time—to indicate what the lines of a solution must be, but I am sure the House will agree that to achieve a full multilateral system will require the freest possible movement of trade from debtor to creditor countries, the opening of markets to the fullest possible extent by creditor countries, the removal of tariff barriers by creditor countries, the achievement of the lowest possible costs and prices by debtor countries, and adequate provisions for investment abroad by surplus countries, whether private capital or by public organisation through national and international agencies.

In this country we have had a century's experience of what being a creditor nation involves. Our large surplus of export over imports throughout the nineteenth century was possible and was turned to productive use in the world at large by allowing free access of other countries' exports into our market and by a great volume of overseas investment, most of it risk capital. It is indeed difficult for us to adjust ourselves to the position of being a debtor on international account, and the readjustments called for in the trading policies of every country will be difficult to work out and difficult to apply. There is no doubt that fundamental readjustments will be necessary to achieve the multilateral system which we have in mind.

The right hon. Member for Aldershot referred to bilateral agreements. I was amazed at the vehemence with which he denounced them. He went so far as to say that they intensified and aggravated the dollar deficit. I do not think it is necessary to remind the House that our bilateral agreements of the last two years have been essential for maintaining the supply of food and raw materials to this country. When we recall the position of many countries in Europe only two years ago, countries which—

Mr. Lyttelton

May we hear what the right hon. Gentleman has to say?

Mr. Wilson

Certainly, Sir. There has been so much talking on the Tory Front Bench the last 10 minutes that I thought I had better address the rest of the House. My right hon. and learned Friend had to listen to a sermon from the hon. Member for Chippenham (Mr. Eccles) which I do not think was taken to heart by the right hon. Gentleman.

Mr. Lyttelton

We want to be able to listen to the right hon. Gentleman.

Mr. Wilson

Perhaps the right hon. Gentleman will listen to this—

Mr. Lyttelton

We want to hear the right hon. Gentleman. I am asking him to address some of his remarks to the Chair so that we can hear them, instead of turning his back on the Front Bench and addressing hon. Gentlemen behind him.

Mr. Wilson

Certainly, Sir. I shall ask the right hon. Gentleman to listen to this, and I shall take good care to see that he hears it. I hope he will take it in. It was pretty clear to all of us that in Western Europe at the end of the war the countries with whom we were trading were short of their usual export goods for their own purposes—Denmark was short of food and Scandinavia was short of timber—and would only be likely to put those goods into international trade and deny them to their own people on condition that could expect something in return which they required even more. We, for our own part, short of steel and coal, would only have been prepared to export those things on the scale we did provided that we could get foodstuffs and raw materials in return.

This is the first we have heard of the suggestion that the Tory Party is opposed to bilateral trade agreements. They have already made it clear on a number of occasions that they are not happy about a multilateral policy. What there is left without multilateralism or bilateralism, unless it is unilateralism, I cannot say. I would ask the right hon. Gentleman, do we understand from what he said this afternoon that he is opposed to the Argentine Agreement? [HON. MEMBERS: "Answer."] Because all the arguments he has used suggest that he is opposed to it. [HON. MEMBERS: "Answer."] We are used to not getting answers to the questions we put to the Tory Party. If we are to interpret what the right hon. Gentleman said this afternoon, it is quite clear that the Tory Party can now go to the country on a new slogan—abolish bilateralism and cut the people's meat.

Mr. Eden (Warwick and Leamington)

There is no meat to cut anyway.

Mr. Wilson

Perhaps the right hon. Gentleman has not seen what has been the first effect of the Argentine Agreement?

Mr. Eden

Invisible exports.

Mr. Wilson

To suggest that our bilateral agreements are operating to mollycoddle the economy, to wrap it up in cotton wool, is a proposition that simply will not bear examination. The sterling area itself, and the wider area trading on the basis of sterling, is the greatest multilateral trading area in the world at this time, and the lead and initiative taken by my right hon. Friend in O.E.E.C, proposing a further liberalisation of trade in Western Europe, will have the effect of letting the fresh air of competition through the industries to Western Europe, and I am quite sure that the right hon. Gentleman will applaud it.

Mr. Lyttelton

The right hon. Gentleman is making some remarks in favour of multilateral trade with which I agree. I think it is quite consistent with saying that I believe any extension of the bilateral system to be vicious. I hope that the right hon. Gentleman will now answer my question about a bilateral treaty with Russia.

Mr. Wilson

I am disappointed. I thought the right hon. Gentleman for once was about to answer a question that we put to him. I will answer the question.

Mr. Eden

The Opposition does not answer questions.

Mr. Wilson

Now we have heard a new principle enunciated in public life—the Opposition does not answer questions.

Mr. Eden

That is what you are all there for; you get salaries.

Mr. Wilson

We are here because we do answer questions and say what our policy is.

Mr. Eden

Answer this one.

Mr. Wilson

Certainly I will answer it, but first I should like to deal with the other point made by the right hon. Gentleman. He has called for more competition, more multilateralism. This proposition of O.E.E.C. is designed to do that, and what is the first thing we hear in this House about it? The hon. Member for Chippenham is against it because we are liable to see horticultural imports.

Mr. Eccles

I am delighted to have drawn the right hon. Gentleman. Will he now tell the House what are the commodities which he expects to import under this liberalisation?

Mr. Wilson

Yes, certainly, as soon as the discussions in Paris are a little further advanced.

Hon. Members

Oh!

Mr. Eden

Answer the question.

Mr. Wilson

Does the hon. Gentleman suggest that we should publish the whole of our list before discussions have begun? [An HON. MEMBER: "Just one."] What a suggestion! Perhaps I may now answer the question put by the right hon. Gentleman about the Soviet Union. He asked me if we had concluded a trade agreement with the Soviet Union. Of course he knows we did, on 27th December, 1947. I presume he meant, have we concluded a new one since? The answer to that is, "No." As I have informed the House frequently, discussions are proceeding, but no agreement has been reached between this country and the Soviet Union for a trade agreement, although a provisional grain contract has been initialled which will not take effect until the main agreement is reached.

It is clear from the speeches we have heard today that once again the Opposition have proved themselves quite innocent of any policy which they are prepared to advocate as an alternative method to the one we have followed. The hon. Member for Chippenham has been courageous and suggested scrapping the White Paper on Personal Incomes. I suspect that that is more because he wants to unfreeze profits than to unfreeze wages. He would not answer my hon. and gallant Friend the Member for North Portsmouth (Major Bruce), but perhaps he will answer me: Is that the policy of the Tory Party or is it his own personal suggestion? This is something we ought to know—but I forgot that the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) is present and that the Opposition do not answer questions.

Apart from dark hints about cuts in Government expenditure—and we still have no suggestions apart from school buildings in Devonshire and the groundnuts scheme—the right hon. Member for Aldershot says he thinks that the dollar problem cannot be solved by any conceivable increase in dollar exports. His guess is that the maximum increase, even if tariff barriers were swept away, would be some £40 million or £50 million.

Mr. Eden

Of manufactured goods.

Mr. Wilson

Of manufactured goods, certainly. But if that is his view, that the problem cannot be solved by increasing dollar exports, why do he and his right hon. and hon. Friends come to this House and pretend that the dollar crisis is due to our high costs in this country, to excessive Government expenditure and the level of the social services? It makes some of us think rather that they are advocating these policies not as a means to an end but as an end in themselves.

It is a fact that many of our difficulties today do result from high cost of production. I hope we can say to some of those industries who are still not willing to adopt the new methods which the situation requires that their fears of unemployment—which are based on very real memories; I am thinking of the cotton industry especially—should be set against this background: that there is no danger of general depression due to internal causes; no danger that we shall get back to a situation where a weaver is unemployed because he cannot sell his product and the unemployed miner in the next street cannot afford to buy a shirt.

The big danger of unemployment—and this has been said by hon. and right hon. Gentlemen opposite—in the cotton industry, for instance, results from the danger in our dollar situation that we might not at some future time have enough dollars to buy the raw cotton to avoid unemployment. This has been the theme of speeches and addresses to industry from all of us, I think, on both sides of the House for the last three or four years. By heroic efforts the restric- tion in dollar expenditure which is now being applied can be worked in such a way as not to involve unemployment in Lancashire. But that danger has been only narrowly averted, and Lancashire is truly at the eleventh hour and at the 59th minute in the drive which is necessary to increase production.

The Opposition have not tonight—I hope that on Monday, when, I gather, the Leader of the Opposition may be speaking, they will—put forward a policy. I do not myself subscribe to the dangerous illusion, which is shared, I think, by some of my hon. Friends, that the Tory Party have not got a policy. It is quite clear from their speeches and their Press articles that their policy at this time would be one of chronic deflation and the reversion to a system under which a million or, perhaps, two million would be unemployed.

Mr. Eden

Would not the right hon. Gentleman agree that the reason why we do not have unemployment today is due entirely to American help?

Mr. Wilson

That point has been answered on a number of occasions. I think the House well recognises that the American aid which has been necessary since the war has been the direct result of what this country underwent during the war and the loss of our reserves.

Mr. Eden

I want to be quite clear, because we have to continue this Debate on Monday. Is it not true that Ministers have repeatedly said that the reason why we have not a million or a million and a half employed today is American help? Is that so, or is it not so?

Mr. Wilson

The right answer to the right hon. Gentleman's question is that it is perfectly possible, and is happening in Europe today, and I am certain it would happen under the right hon. Gentleman's party, to have both Marshall Aid and unemployment. Let me remind the Opposition that that question is being put at a time when our unemployment figures have fallen by another 40,000 to just over a quarter of a million; when unemployment in Scotland is down by 8,000 in the four Development Areas by 20,000, and unemployment in Wales is lower than at any time for a quarter of a century, apart from the war and the immediate post-war period.

The Opposition have had an answer to that question often enough and now I am going to ask them a question. Responsible Conservative leaders are advocating large cuts in Government expenditure. They know that nothing would be more inflationary than a slashing cut in food subsidies such as we suspect they have in mind. Will they get up and say that, whatever other items of Government expenditure they would cut—and they are very shy and coy about telling us what they are—they would not cut the social services, or food subsidies, at least until world prices for food come down and, further, that they would not cut the programme of providing factories for the development areas?

When we have an answer to that question we shall have a clearer idea of what their policy is. Responsible Tory papers are advocating cuts in expenditure scarcely less painful than in 1931. We know what that means—cuts in unemployment benefit, intensification of the Means Test—[An HON. MEMBER: "No shoes."] Yes, certainly it did mean that and if some of those hon. Gentlemen opposite who base their sneers on reading inaccurate accounts in the Tory Press will come with me to my constituency, I will introduce them to a thousand people who can produce evidence of children going without shoes. Let the "Daily Telegraph" print that one. People in that constituency, on the basis of the policy referred to by the "Sunday Times," were living on 10s. a week old age pension with a maximum of 2s. 6d. P.A.C. payment. I am talking about Liverpool. [An HON. MEMBER: "The right hon. Gentleman is leaving that."] I am not leaving Liverpool; that is what the Tory Chief Whip is doing. I am not surprised, when unemployment is now less than a quarter of what it was when the Tory Party were in power. I should leave Liverpool if I were Tory Chief Whip now. I want to ask the Opposition if they agree with that policy put forward by one of their leading newspapers?

Mr. Eden

What Tory paper?

Mr. Wilson

The "Sunday Times"; I have the cutting here. Is that the policy they are advocating, or will they rather foreswear this partisan anti-national policy we have heard today and join with us—

It being Ten o'Clock, the Motion for the Adjournment of the House lapsed without Question put.

Following is the document referred to by the Chancellor of the Exchequer [Cols. 676–677]: