ECONOMIC SITUATION

HC Deb 18 July 1949 vol 467 cc975-1101

[SECOND DAY'S DEBATE]

Motion made, and Question proposed. "That this House do now adjourn."—[Mr. Whiteley.]

3.30 p.m.

Mr. Eden (Warwick and Leamington)

. I am glad to be able to begin with at least one comment which I think will be non-controversial, and that is to express the gratitude which the whole House feels towards the six Finance Ministers of the Commonwealth for responding so immediately to the call for a meeting which was issued to them; it was characteristic of the spirit that our sister nations always show when we have to face together the urgent needs of the hour.

On the whole I think it was perhaps fortunate that this Debate was adjourned over the week-end so that we could have a chance, in the interval, to consider last Thursday's Debate and to weigh and confront the stern realities of our national problems. After re-reading that Debate carefully my own reflection remains unchanged: it is that the Minister of Fuel and Power, in his comments ten days ago, seems to have been much nearer the mark than the Chancellor of the Exchequer was last Thursday. The Minister of Fuel and Power at Porthcawl spoke of "this moment of supreme crisis for the Government." I agree with him, and I would add of supreme crisis for the nation, also.

On the other hand, the Chancellor gave me the impression—whether he intended to do so or not I cannot tell; and here I am in agreement with the hon. Member for Ipswich (Mr. Stokes), and not a secret agreement, either—that he was much too optimistic, that he was trying to play down the gravity of the situation. I do not want to play up the gravity of the situation; I want to state the situation exactly as I see it, and as fairly as I can. I think it is too serious to try to tilt the balance either way.

To reduce our imports from the dollar area by a quarter of their total or by £100 million sterling, would at any time be an extremely serious step, but it is much more so when already, over a long period, we have been striving hard to reduce our dollar imports to the very minimum. Yet the whole tenor of the Chancellor's speech seemed to me to minimise the effect of these cuts. The right hon. and learned Gentleman seemed as if he were saying, "You will lose a little here and a little there, but you will not really feel it because we shall make it up somewhere else." I do not believe that to be a true assessment of the situation. Indeed, that mood seems rather contrary to the right hon. and learned Gentleman's own character. I often disagree with him on political issues, but I always thought he was a man who would not hesitate to put the picture, however starkly, before the nation. He has done so before, and has done a service in doing so. [Interruption.] I wish the hon. Member for Nelson and Colne (Mr. S. Silverman) would let me make my speech, instead of interrupting. We are entitled to our opinions, and I am not girding at the Chancellor now. If I were he would say so, but he is beaming.

I believe it is better that we should be given the warning that the nation is going down the slippery slope if, indeed, it is going down the slippery slope. I just do not believe that we can cut £100 million sterling from our dollar imports without the nation feeling it severely. Out of the proposed reduction of 400 million dollars on last year's imports the cut in sugar and the restoration of sweet rationing will save, on the Government's own estimate, less than 20 million dollars—a twentieth part of the whole. As for tobacco, the Chancellor said that we should spend substantially more dollars in the United States this year than we expended on payments for last year's crop. That is rather surprising in the circumstances.

It follows that practically the whole weight of the cuts will fall upon imports of raw materials for industry and American machinery. I do not think that that is disputed. The Chancellor said we should make up these losses by buying elsewhere, but without more evidence I cannot accept that as true, and I am astonished that the Chancellor should suggest it. If there are these alternative supplies available why have not we been using them all this time? Are we to believe that they have become available to us now, at the time when we are in need of them? It all sounds rather like a too fortunate circumstance to be acceptable. We have been buying machinery and raw materials from the dollar area because we could not buy them elsewhere. They will not suddenly become available from other countries because we badly need them today.

May I give one or two figures by way of illustration? In 1948, we obtained from the United States and Canada £34 million worth of timber out of total imports amounting to £93 million and £7.6 million worth of papermaking materials out of a total import of £16.7 million; and £19 million worth of cotton out of a total import of £106 million. This underestimates the importance in terms of volume of these purchases because, in many cases, they were cheaper than the purchases from the sterling area. From America, Canada and Chile came about one-third of our copper, a quarter of our lead and half our zinc. Even if we exclude questions of special qualities and special material, how can these quantities be replaced from elsewhere? Certainly, American price reductions will help, and no doubt that is what the right hon. and learned Gentleman had in mind. But I cannot see how they can eliminate the effect of the 25 per cent. cut, and how it can still fail to be very serious.

I hope the Foreign Secretary, or whoever is to reply to the Debate, will tell us how large a proportion of these cuts will fall on Canada and how much on the United States. I ask this deliberately because we must all feel the greatest reluctance to stop any purchases from Canada. No country in all our history has ever treated us more generously than Canada, or stood more loyally by us, and it must be hateful to have to take any action which must create difficulties for her economy and prosperity.

I know that when I was in Canada—and the President of the Board of Trade will bear this out—manifest good will was shown by Canadians towards this country. They desired to take our goods so far as possible, and it seems all the harder and harsher, therefore, that we should have to inflict cuts on Canada at this time, especially as we have to face the fact that there are some people there who do not feel that we have treated Canada as well as we might have done. I do not say we are right or wrong, but the right hon. and learned Gentleman knows that some bilateral agreements are not very popular in Canada. I did what I could to defend them, as he no doubt knows, but there is that sentiment.

Mr. Stokes (Ipswich)

Can the right hon. Gentleman justify Canada buying something in the order of 560 million dollars worth less goods from us than we are buying from her, and 305 million dollars worth more goods from the United States than the United States is taking from her?

Mr. Eden

The hon. Gentleman knows very well that the whole Canadian position has been queered by the post-war situation. Canadian pre-war trade was largely three-legged, but that has now gone. It is no easy thing for the Canadians with all their adaptations to trade with the United States, to swing from American markets to this one. If I may give one illustration, the contents of the advertisements in the Canadian papers are almost exclusively American, and they have become used to certain lines of goods and to turning to the American market. I do not say that it cannot be changed, but it is going to be a large task to undertake and it is going to cost a great expenditure of dollars to bring it about. That is the short answer to the hon. Member for Ipswich.

There is another aspect of this problem about which I hope we may be given some explanation. It is true that the prices of raw materials we import from the dollar countries are lower than the prices of those from the non-dollar world. It is certainly true of oils and fats. I have here a large number of figures, with which I need not trouble the House, but what is going to be the effect of this action which the Chancellor is compelled to take? It is going to make the gap still wider, because if the payment for raw materials is going to be increased, owing to the price of non-dollar materials being higher, it will raise the price still more in proportion to the dollar raw material.

So I think we are going to have this position, that our industries will have to manufacture from raw materials more expensive than the dollar countries have to pay, and having done that, we shall still have to face competition from the dollar countries. I do not know whether that is true or not, but we should like to know how far that has been considered by the Government, and what reply, if any, they have to it.

I want to give one other example of that. It seems to me that we are in some danger of being involved in a spiral where our industry has got to buy raw materials more expensively than the dollar area, and then to sell our manufactured goods in competition with those of this same dollar area. For example, supposing we have to buy more Egyptian cotton and for that we have to pay higher prices, is it not going to make it even more difficult to sell British cotton goods in Canada, where already price competition is serious? I should say that the effect of the widening gap between the price levels in what are becoming the free world's two main price areas, the dollar area and the sterling area, will hamper and obstruct trade all over the world.

It seems that we have just the same difficulty in respect of machinery. Last year we imported £43 million worth of machinery, and of that we imported £31 million from the United States—a very high proportion indeed. Are the Government going to tell us that that machinery can be replaced from anywhere else or that its loss is not going to be a very serious handicap to our industries in their production for export? "The Times" had a fair comment on that on Friday, when it said: Many would-be exporters have wanted to improve their plant over the last three years and have been held back because the interests of basic industries and development areas have been put first. I am not arguing for the moment whether the policy is right or wrong to put the basic industries and development areas first, but what I am saying is that if we cut dollar imports of machinery now following on the long delays which a large number of exporters have had to suffer, is a very serious blow to them.

As the Chancellor is aware, a great deal of machinery has been exported, though our industries need it very badly themselves in order to earn the maximum foreign exchange at the earliest moment. There again our industries will be under a handicap if deliveries of machinery are to be further delayed. I cannot see how all this can be regarded as other than extremely serious for our national position. Nor, I must add, after studying the chief Government speeches last Thursday, do I yet understand how the immediate standstill is going to be made effective or how the subsequent cuts are going to be worked out.

The Chancellor said there were to be exceptions. I agree there will have to be exceptions, but how are they to be decided upon? If a company shows that it requires a certain raw material that can only be got from a dollar country, will it have to show that the article that is going to be manufactured as a result is going to be exported, or will it have to do more than that? Will it also have to show that it is going to be exported to a dollar area, and if so how much percentage it requires of the dollar raw materials and how much of other raw materials? That seems to me to be the kind of problem that will arise.

Last Thursday the Chancellor said that he wanted to carry through this standstill "in a manner causing the least dislocation." I am sure he does, but I cannot see how it is practicable to do so. Take again the example of machinery. Suppose a company has got some machinery on order from the United States. Will it have to show that that production of that machinery is to be used exclusively for export to the United States, or that a certain percentage will go to the United States? How is this going to be measured and worked out? We have seen enough in the last few years of the immense difficulties of allocating scarce raw materials between the myriad uses of peace-time industry to be pretty reluctant to add any more to the extension of these practices.

What does this arrangement imply? I think we are all agreed that restrictions on the free flow of trade are generally undesirable, but when those restrictions have to be imposed in this sudden manner without any clear explanation of how they are going to work—and I will admit that any such explanation is extremely difficult to make—then there is a most undesirable situation for all British industries. The Chancellor in his speech kept referring to the importance of maintaining full employment. We entirely agree with him about that. [Interruption.] The hon. Gentleman knows that the White Paper on Full Employment was not the work of one party alone, but was put out in the days of the Coalition Government, and in a moment I am going to say a few more words on this subject in relation to full employment.

We entirely agree with the right hon. and learned Gentleman about full employment, but surely he will admit that over and above the assistance we get from Marshall Aid, full employment can be maintained only if we sell our goods in world markets. Again that must depend on the quality as well as the quantity of our products and upon price. I submit that the question of price is going to be further influenced if we have to buy our raw materials in the more expensive markets, and then sell our goods in other markets in competition with those produced from cheaper raw materials.

On this side of the House we have been challenged whether we are in favour of a full employment policy. I have referred to the White Paper, which represents the views of all of us, but what I am concerned about is that this standstill and these cuts are inevitably going to have an effect on our employment, not at once, but over a period, for the reasons I have given. If, to an increasing extent, we have to buy these raw materials in the more expensive areas, and sell them in competition with those who have access to cheaper raw materials, then inevitably our problem is going to increase to large dimensions. That is why I am distressed that these cuts are going to fall so much on raw materials and machinery for industry.

It seems to me extraordinary that more tobacco is to be bought this year than last. Surely, if we accept the stern realities of the cuts, a further cut in tobacco, grim as it is, should come before a reduction of raw materials and machinery, upon which depends our power to keep our people employed. I cannot see how the Chancellor's proposals measure up to our real dangers. On the contrary, it seems to me that their effect must aggravate them. The "Manchester Guardian" summed up the whole matter last Friday in these words: The crisis is not being met. It is bound to get worse. I myself cannot see how there is any escape from the truth of those observations, however reluctant one may be to have to endorse them.

Mr. Harrison (Nottingham, East)

On the question of tobacco, it appears to everyone to be astonishing that the Government should propose to purchase more tobacco this year from the United States than we did last year. But is the right hon. Gentleman aware of the fact that we bought hardly any tobacco from the United States last year?

Mr. Eden

I was quoting actually from the Chancellor's statement. Of course I know that we were largely using up stocks last year. The only argument I am making now is that if we have to make these cuts, they should first come on articles like tobacco rather than upon the raw materials and machinery which our industries so urgently need. That we should be buying more seems to be strange, even though we bought so little last year.

I want to look at the long-term argument. I should like the attention of the Foreign Secretary for a moment, because this is a subject in which I know he is interested. In my view, there is no long-term solution to this problem unless our American friends do, in one form or another, what we did in the 19th century, and that is to make available by overseas investments or by other means, sufficient dollars to other countries that want to buy American goods. I am laying down what seems to me to be the long-term solution. It is true that we are facing a world problem, the lack of balance of trade between the Eastern and Western hemispheres, made worse by the threat of a contraction of world trade.

Further restrictions of any kind tend in the end only to make matters rather worse than better, because they set up a kind of chain reaction—I think that is the correct chemical term—one restriction leading to another. An effective and lasting solution can be found only by more freedom of trade, by moving away from further restrictions and by making it easier for trade and capital to flow from one nation to another. I think we all agree about that. We all wish to see a return to conditions where currencies are freely convertible and where exchange rates reflect the realities of world economic conditions and have sufficient flexibility to reflect changing conditions.

Upon one issue I am in entire agreement with the Chancellor of the Exchequer. I have yet to see any convincing argument for unilateral devaluation of the pound sterling. The whole world has to find some means of escape from the present conditions of inconvertibility of currencies and artificially fixed rates of exchange which breed multiple currency valuations and every kind of complexity and artificiality. The worst of it is that we are just adding to those features by this new arrangement. I realise the immense practical difficulties that are involved in trying to obtain freer convertibility in the face of the lack of trade balance between the Eastern and Western hemispheres.

I feel that our American friends can play some part in helping to find a solution to this problem by providing some underpinning for a freer and more flexible system of world currencies. Many suggestions have been canvassed as to how the Americans could do that—by distributing some of the gold they have got or increasing the dollar price of gold—but the point that I would make to the House is that these decisions, important and interesting as they are, are for the American people to take and not for us. Our job is to match our policy to the stern reality of the hour, so far as it concerns ourselves.

Meanwhile, the Government say, "What would you do about it?" I embark upon this aspect of my task in the conscious knowledge that it is extremely controversial, but I think that certain things need to be said. We should try to arrange this standstill and the cuts so that, as far as possible, the burdens fall upon comparatively luxury imports like tobacco, rather than on the raw materials and machinery which are indispensable for our national recovery. Our further proposals are still more controversial, but they are designed, in our judgment, to tackle the problem of prices and costs, which is fundamental. We should call a halt to all further schemes of nationalisation. We suggest that not only because we have no faith in nationalisation but because, among other things, we are convinced that nationalisation is the most expensive way of producing goods.

I do not know whether on this subject there is any particular challenge. If there is, I have here the percentage figures, taken from the "Board of Trade Journal," of the prices of coal and steel respectively. Taking 100 for 1938 in each case, the figure for 1949 for steel was 185.9, and for coal was 245. Considering that steel is a very large consumer of coal, there seems to be something to explain in those figures. Apart from the particular pleasure which, in the view of the Government, the steel industry feels at being nationalised, I would point out that these are comparative figures. If hon. Gentlemen opposite look at them, they will see the costliness of nationalisation.

Then there is the heavy burden of Government expenditure. We think that one of the best economies the Government could make would be to scrap the Iron and Steel Bill, in view of the evidence which is before us of the rising costs which nationalisation entails. [Laughter.] I knew there would not be agreement on that point.

Mr. Stokes

The right hon. Gentleman is talking of economies. Would he explain how it is possible to effect an economy in something which we have not yet succeeded in implementing?

Mr. Eden

I thought it was clear enough. My warning was that, if the Iron and Steel Bill were put through, the result will be in that industry what it has been in other nationalised industries, rising costs. I do not want to see the spiral of rising costs proceed any further, and therefore I do not want to see the Government proceed with further nationalisation Measures. I should have thought that point was clear enough.

Now I would mention another aspect of our exports to dollar areas. I touch for the moment on a personal matter, because I happen to be a director of an insurance company which does business with the dollar areas. It is going to be difficult in any case greatly to increase our exports of manufactured goods to the dollar countries. We may do something with Canada, but the general trade, and the exchange of manufactured goods between the countries, as United Nations statistics show, do not exhibit much variation, because of the tendency of countries to an increasing extent to build up those industries for strategic or other reasons. I do not think there is great scope there.

There might be some scope in invisible exports such as shipping and insurance services. The earnings of in- surance companies in the dollar areas are not those against which we have to set any bill for the expense of importing raw materials. They are the earnings of the experience of our own country, and of the confidence which is felt in the way that we conduct our business. It seems strange at a time like this, when the dollar position is so serious, that the Socialist Party should still appear to be contemplating the nationalisation of any part of our insurance industry. I know the distinction which will be drawn among the various companies, but the distinction is much easier to draw in this country, where we are used to these issues in the industry of insurance, than it is to people overseas who do business with insurance companies in this country. If the Government want to make one more contribution they should drop any proposal to nationalise any part of the insurance industry. I am trying to be helpful and making constructive suggestions.

I have this to say in conclusion. In our present difficulties we all realise that in some respects these speeches are difficult to make, because no one wants to say anything to weaken sterling, but frankly, I put it to the House, that I do not think it is our speeches that weaken or strengthen sterling particularly or affect confidence. I think it is the action or lack of action by the Government itself which does. If what the Government does is of a nature to inspire confidence in sterling, then the effect of words will not decide the issue.

The published figures of the Chancellor, as indeed his statement on Thursday, have shown that the extent of our increased loss of gold, particularly in the last quarter, has greatly exceeded the anticipations set out in the Government's own Economic Survey published barely four months ago. I admit that that can be attributed, in part at any rate, to the change from a sellers' to a buyers' market, but surely nobody could have been very surprised by that change. Warnings have been given repeatedly by the Government, and indeed by some of us on this side of the House, that that change was inevitable. As "The Times" said so well on Friday: In production this country has a fine record, but so have other countries, especially the U.S. What troubles me about this situation is that the very steps which the Chancellor has felt compelled to take will have the effect of increasing the costs to our own manufacturers, and will, therefore, make it more difficult for them to compete not only in the United States and with the United States but in the markets of the world in general. To that extent, instead of being a measure to meet our difficulties, these proposals are adding a further burden to the heavily laden animal of British industry which is struggling so gallantly up the hill. The Chancellor is rich in exhortations and in imprecations. He cracks the whip but he adds to the burden all the time. Until that practice is reversed and until a start is made with easing the burden which British industry has to bear. [An HON. MEMBER: "Which burdens?"] The hon. Gentleman is scornful. The right hon. and learned Gentleman made the point on Thursday that the taxation of profits was not a burden on industry, but surely all taxation on undistributed profits is a heavy burden on industry, and so is all taxation, because it is only from savings that industry can hope to get its new money. I do not see how the Chancellor or anybody can be complacent in the light of the savings figures which have just been published.

Mr. Parkin (Stroud)

Does the right hon. Gentleman suggest that this is a time when an increase in capital investment by private industry would in some way meet our difficulties?

Mr. Eden

I was dealing with an argument of the Chancellor's the other day, that taxation of profits was not a burden on industry. That would be truer if it were a fact, for instance, that all non-distributed profits were not taxed. There would then be a much stronger case for the argument. We all know that the Chancellor has given some assistance in that respect, but it is true, broadly, that taxation is a burden on industry because it is from industry that all our available finance and wealth resources are ultimately derived.

The Chancellor of the Exchequer (Sir Stafford Cripps)

I believe that the right hon. Gentleman has misquoted me by inadvertence. What I said was that it was not an element in costs, not that it was not a burden on industry.

Mr. Eden

I give the right hon. and learned Gentleman that. That is technically absolutely correct, but it is only technically correct, and if he would look at it in a broader aspect he would see that it is not true, because the more a company is able to use its non-distributed profits for its own purposes the better it will be able to lower its costs. I do not think that is in dispute? Is that right?

Sir S. Cripps

I think the right hon. Gentleman will agree with me that there is no form of cost accountancy in which one is arriving at net cost on an article which would introduce an element of the profit.

Mr. Eden

No, but the right hon. and learned Gentleman must surely admit this. Suppose a company has made £100,000 in profits, and that, after various reserves, it distributes £25,000. If the remainder were not subject to taxation, that would be, in fact, if not arithmetically, something which the company could make use of, knowing that it had that, in making its own cost arrangements—

Sir S. Cripps indicated dissent.

Mr. Eden

I think that is so. I ask the Government and the right hon. and learned Gentleman to consider it. I repeat that I do not see how anybody else can escape the fact that, broadly, the present taxation on industry is a matter which affects costs, if not in detail, over the broad field of industry. It must be so. However, if the right hon. and learned Gentleman does not think so, let us see what we can do about getting the taxation down and then see what the effect is.

To sum up, all these tendencies will simply add further burdens, direct or indirect upon industry. Unless and until the Government reverse that process we shall be getting deeper and deeper into trouble. I have no doubt whatever that that is what the "Manchester Guardian" meant in its summing up the other day. That is what we feel and it is why we view the situation with infinitely more concern than the Chancellor of the Exchequer allowed to appear in his speech last Thursday.

4.7 p.m.

Major Bruce (Portsmouth, North)

We have been listening this afternoon to the more progressive wing of the Conserva- tive Party. On Thursday we were privileged to hear the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) and the hon. Member for Chippenham (Mr. Eccles), and the tenor of their speeches was in singular contrast to the speech which we have had from the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden). I only wish that when he was mentioning—I was extremely pleased that he did so—that he did not desire that there should be any unilateral devaluation of the £, the right hon. Gentleman had been able to see the faces of his supporters behind him.

The speech of the right hon. Gentleman was directed to some very considerable practicalities which during the next few months our manufacturers will undoubtedly have to face. These questions of priorities within industry concerning imports—whether we should import luxuries or such important things as machinery—are of vital significance, and the House is extremely indebted to the right hon. Gentleman for raising these matters, to which no doubt in due course my right hon. Friend will reply.

The whole tenor of the speech of the right hon. Gentleman was in complete contradiction to the speeches of his right hon. and hon. Friends on Thursday and, indeed, to the whole of the campaign which is going on in the country at present in the Conservative Press. My right hon. and learned Friend made it quite clear when he made his announcement last week that the principal causes of the dollar drain on our country, which is responsible for our most immediate distress, were threefold. He said that, first of all, there had been a drop in our own exports to the United States and to the hard currency area generally; there had been a decrease in our shipping revenue; and there had also been a decline in the import by the United States of certain raw material imports from the remainder of the sterling area. These were the immediate problems facing us, and they were expressible in terms of a drain of some £65 million on our gold and dollar reserves.

The right hon. Gentleman this afternoon has made no endeavour to suggest how this immediate problem can be solved. He has not even made any suggestion as to how the ultimate long-term chronic problem can be solved. That, at least, he shared with his right hon. Friend who spoke last week.

Mr. Hugh Fraser (Stone)

And the Chancellor.

Major Bruce

Last Thursday the right hon. Member for Aldershot and his hon. Friend the Member for Chippenham had two solutions which have been well publicised in the Press. The first solution to the immediate problem which they put forward was that there should be a reduction in Government expenditure, and that solution has been propounded in every Tory editorial throughout the United Kingdom. The other suggestion they made towards solving our immediate problem was that we should restore confidence in the pound. Those are the only constructive suggestions, if they can be called that, which we have had so far from the Opposition.

I really think that the Conservative Party ought to give up being coy about this. If there be any virtue in making considerable reductions in Government expenditure, if it can be reasonably shown that such a course would be of lasting benefit to our people and to our nation, surely it is the duty of those who propose it to acclaim it as a virtue and to be able to give us much more detail about it? If a proposal of this kind is made, we ought to have some idea as to the extent of the cut in Government expenditure which the Opposition think would be necessary to restore confidence in the £ or to be able to give taxation concessions to manufacturers to enable them to reduce their prices. What is the amount to be? Speaking for the Opposition the other day, the hon. Member for Chippenham said that some several hundred millions of pounds would have to be taken away from the spending departments. He did not say which spending departments. The right hon. Gentleman the Member for Woodford (Mr. Churchill), speaking at Manchester on 7th December, 1947, was much more specific. There was no fol-de-rol about him. He said that we should reduce Government expenditure by £500 million.

The first question I wish to ask the Opposition—I will give way to the Deputy Leader of the Opposition if he wishes to reply—is whether the figure is still £500 million. Is it to be lower or is it to be higher, or are we to presume that the figure should remain at approximately £500 million? It would be extremely useful if we could have a reply to this question from the Opposition. I will willingly give way to the right hon. Gentleman if he will confirm or deny the figure given by the right hon. Member for Woodford. No, I did not think there would be a reply because, of course, all Conservative Party policy has to await the pronouncements of the Leader, and it is not yet 23rd July which, I understand, is the magic date when, in the ancient town of Wolverhampton, the Leader of the Conservative Party is to make his pronouncement upon policy. It is understandable, therefore, that nobody from the Conservative Front Bench dare make any pronouncement upon policy.

This leaves us with a certain scope for speculation on matters which I submit are of importance. If, indeed, there be virtue in reducing Government expenditure by £500 million and an overall case is made for this, it matters considerably from the economic standpoint just how these cuts are applied. For example, the immediate economic impact of taking, say, £100 million off food subsidies would be of a different type to the immediate economic impact of reducing the Health Services by 100 million. When the Opposition make proposals of this kind, they might take the House and the country into their confidence and give more precise details.

If they are going to save the nation by this tremendous plan then, surely, there is no reason for them to be coy. As it is, we are left—as, indeed, we always are left when considering Conservative Party policy—with nothing but speculation. Where would they be able to make the cuts? There have been several indications. Would it be food subsidies? The right hon. Member for the Scottish Universities (Sir J. Anderson) said not long ago that they should be reduced to the irreducible minimum. He also said in a subsequent Debate that he thought the Government had acted too hastily in introducing family allowances and in raising the old age pensions. Would it be on the family allowances and on the old age pensions that the cut might fall? Indeed I remember that on the Second Reading of the National Insurance Bill the right hon. Member for Saffron Walden (Mr. Butler) said he thought that the National Insurance provisions had been weighted too heavily in favour of the older age groups. This seems to give additional sanction to the notion that perhaps this is where the cut would fall.

Would the cut fall on the health service? The right hon. Member for Woodford announced that the Minister of Health had been guilty of "squandermania." Thereafter he retreated and did not seem able to debate this matter in the House. Yet he is the Leader of the Conservative Party. Is the cut to fall there, or is it to fall on housing? In a letter to "The Times" the other day the hon. Member for Chippenham said: It would be a crime if the Government now maintain their own programme for the construction of amenities when industrial investment is brought to a standstill. This seems to indicate that there is a desire to reduce the expenditure on houses, hospitals and schools. All we ask the Opposition, as I think we are entitled to ask them, is that they should give their plans in greater detail, and we are entitled to demand of the Opposition, if it is in their minds that we should make cuts of £500 million, that they cease this quite dishonest propaganda which suggests to the people that if they were returned to office they would augment the social services.

I say that if this course were carried out it would bring disaster on the country. It would not in any way solve the problem we have before us. The Opposition said last week that it was the high cost of our exports that was responsible for their reduction in the United States. This afternoon the right hon. Gentleman seemed to differ from his colleagues because, whereas the hon. Member for Chippenham referred to high cost, the right hon. Gentleman today was careful to refer to high price. He, of course, well knows that cost is not the only ingredient in the selling price indeed, there is a considerable amount of evidence at present that there is a great market for a considerable amount of our exports in the United States, even at their present prices, if only we endeavoured to penetrate a little further than the Eastern seaboard.

For the last four years some exporters in this country have been content, on an easy market—which hon. Gentlemen opposite have described as the sellers' market—to sell their wares to the merchant importers on the eastern seaboard of the United States, and there is little evidence that any determined effort has yet been made by the exporters of this country to penetrate further into the middle of America or to the western seaboard itself.

Mr. Sidney Shephard (Newark)

Is the hon. and gallant Member not aware that almost every buyer in America, whether from the eastern or the western seaboard, comes to New York to make his purchases?

Major Bruce

I have many and valued friends in the U.S.A., and my information is that that is not so. But even assuming that costs here are too high, and that the prices of our commodities overseas are too high, we have to face the fact that as time passes we must keep our prices competitive in all parts of the world. If that is so, what is wrong with increasing efficiency?

In all their talks about prices, the first impulse of hon. Gentlemen opposite is to moan about taxation, but there is not the same drive in their voices when it comes to talking of efficiency. As everybody knows, a good number of the industries which are now exporting and upon which this country depends are industries which, owing largely to the policies of the party opposite, are extremely obsolete and for whom tax remissions would act merely as a shield and not as any kind of incentive. The policy announced by the Opposition simply has no contact with reality at all, except—

Mr. Walter Fletcher (Bury)

rose—

Major Bruce

Let me finish my sentence—except, of course, within its political context. The reason why the Opposition bring in their cry for the reduction of Government expenditure and of taxation is really very simple: they know it is a popular cry in the country, and they think that by using it, and by introducing this particular solution on this particular problem, they can lay it about in the country that it is the policy of this Government which is responsible for the overall evil and difficulties from which the sterling area and the Commonwealth are suffering.

If the policy of hon. Members opposite has any reality at all, why do they not tell the Australian Government that the reason why the U.S.A. are not buying wool is because the social services of Australia are too high; or tell the Government of India that the reason why the United States are not buying jute is because the social services in India are too high; or that they are too high in Malaya and in West Africa? If there is any meaning in the Opposition's policy of this overall panacea of reducing Government expenditure and it is, in fact, a solution, then they ought to be making these suggestions to the Commonwealth, for it is quite clear that our problem here is one which is shared with the Commonwealth as a whole—whose representatives we are proud to have with us—and also with the rest of the sterling area.

Mr. W. Fletcher

The hon. and gallant Member has twice used the word "reality" in that enormous sentence. Has he ever undergone the reality of risking his capital in any manufacturing or exporting business or tried to sell a single export himself? If so, his words would carry more weight when he is condemning industries.

Major Bruce

Unlike quite a number of hon. Gentlemen, whenever I speak on a matter in which I have a financial interest, I always disclose that financial interest first. Had I any financial interest in any of these transactions, I should immediately have declared it.

I now pass to the second part of the argument which is used by the Opposition and which is concerned with the restoration of confidence. According to the Opposition, the reason why we are in trouble today is, by and large, because the world in general and the United States in particular have no confidence, or very little confidence, or not as much confidence as they ought to have, in the productive capacity of our people and in the organisation of our economy. That is the plea put forward by the Opposition.

From whence springs this lack of confidence, if it exists at all. It certainly cannot exist on a logical examination of the records because, although hon. Gentlemen opposite may not know it, for the year 1948 the output per man in the United Kingdom was higher than that of any other country in Europe responsible for more than one per cent. of the industrial production of Europe, and we had achieved the greatest increase in production per man since 1938 in the whole of Europe. Our output per man figures are today about 8 per cent. above 1938.

Mr. W. Fletcher

That is the unofficial figure.

Major Bruce

Quite clearly, no lack of confidence is revealed by the records. At the end of 1948 our industrial production was 21 per cent. above what we achieved in 1938, and agricultural production was between 15 and 20 per cent. higher; we were employing more workpeople; and by the end of 1948 we had invested some £3,402 million in the great capital industries—housing and all the rest—and had replaced over two-thirds of the damage and loss we sustained during the war. At the same time, we have maintained full employment. Clearly, therefore, if there is any lack of confidence abroad it certainly does not rest on the facts relating to the situation, because this record shows that the nation can be very proud and can hold up her head against any nation in productive endeavours since the end of the war.

If the Opposition deny creating the impression of lack of confidence, from where does that impression come? I can suggest only one thing. If there be any such impression, it is because the world has been listening a little too frequently to the right hon. Member for Woodford (Mr. Churchill). During the war the right hon. Gentleman attained a reputation which no one will begrudge him, a reputation that will ensure his lasting place in history. Therefore, the words he speaks in all parts of the world carry a far greater significance that he, perhaps, apprehends. On 17th April, 1947, the right hon. Gentleman was speaking at a meeting of the Primrose League, and he said: Our country is being driven into ruin and our Empire is being scattered and squandered. At that time production had risen to 5 per cent. above what it was in the year 1946 and 11 per cent. above the same period in the year itself. The number of people employed in the manufacturing industries had never before reached such a height. But that did not seeem to deter the right hon. Gentleman, for on 11th September, 1947, in a message to the Edge Hill by-Election, he said: We are thus falling behind other countries in regaining our prosperity. He returned to the same theme on 29th September, 1947, when he said these words: There is not one single aspect or sphere of British national life that has not undergone a marked deterioration. At that time our production was 16 per cent. above 1946, our exports were 13 per cent. above 1938, and our numbers of unemployed were lower than they had ever been in their recorded history. But even that did not deter the right hon. Member for Woodford. On 29th October, 1947, he said that the Government had broken the mainspring of our production apparatus. And on 12th November, 1947, he said that the Government have paralysed and stifled the whole native life effort of our people. But at that time our production had risen to 21 per cent. above 1946, our exports to 17 per cent. above 1938, and the number of our unemployed still remained at 262,000. Indeed, at the end of that year, when the figures from the Economic Survey for Europe became available, it was found that in 1947, despite all the damage and devastation we had sustained during the war, this country had actually achieved a total of industrial production 8 per cent. above the level of 1938.

On 22nd April, 1948, the right hon. Gentleman was talking of the dismal retrogression in our world position… and on the 1st May he was saying they had squandered the resources of the nation and restricted and hampered its qualities and initiative. On 29th May, at Perth, he said: Every year our plight becomes worse and every year more was squandered of our painfully gathered assets, every year more industries were crippled or hampered. At this particular time production had risen up to 23 per cent. above 1946; our exports had risen to 34 per cent. above 1938 and our unemployed were still under 300,000. So one could go on with the right hon. Gentleman, the really sublime one being on 28th June, 1948, when he referred to the quagmires in which we are now floundering and sinking, being entirely unaware that production had reached 21 per cent. above what it was in 1938 and our export figures were the largest ever.

Can it be that business men in the United States—I do not speak of all people, or of the great United States trade union movement—can have been listening too much to the right hon. Member for Woodford? What would he have said if our production had sunk below what it was in the year 1938? What would he have said if, after six years of war, with the £7,000 million losses we sustained we had not struggled up in 1947 and 1948 to reach our prewar production figures? I venture to suggest that he would probably have burst a blood vessel if that had happened and a Labour Government had been in power.

What did the right hon. Gentleman say in the similar period after the last great war, when the party he supported were in office and when he was in office for quite a considerable time? In 1920 the production of our country stood at 92.6 per cent. of its 1913 production; in 1921, production in Britain had sunk to 55.1 per cent; in 1922, to 73.5 per cent.; in 1923, to 79.1 per cent.; in 1924, to 87.8 per cent.; in 1925, to 86.3 per cent. and in 1926, to 78.8 per cent. Never once during the six years after the first world war did production rise above the 1913 level.

But what was the right hon. Gentleman saying in those days? Was he denouncing and castigating the Government for haggling and hobbling industry? No, on 9th January, 1920 he said: There is no reason whatsoever why the serious financial problems which lie before us should not be properly solved if they are studied with coolness and attention and faced with courage. In fact we are on the highway to recovery from the injuries and retardation of the war; and to consolidate for the lasting benefit of the whole British nation the great position won by the powers of our soldiers in the field.

Mr. Shurmer (Birmingham, Sparkbrook)

Two million unemployed.

Major Bruce

What was the right hon. Gentleman saying in January 1926? Unemployment during this time had never been below a million and production had never gone up to the 1913 level. Yet what was he saying? He was saying: Prosperity, that errant daughter of our house, who went astray in the Great War, is on our threshold. She has raised her hand to the knocker on the door. What shall we do? Shall we let her in, or shall we drive her away? Shall we welcome her once again to our fireside settee, or banish her once more to roam about among the nations of the world? That is the choice that will be before the British nation in the next few anxious months. Just what does that reveal? It reveals that so long as the right hon. Gentleman is not ruling the country the more production, the more prosperity and the more effort put out by our people, the more vituperative the right hon. Gentleman becomes. It also shows what the Tory Party really regard as prosperity, because in those years we had the cuts in Government expenditure. It was in those years when this universal Tory panacea for all ills was applied, and up to 1926 they had not achieved more than 78.8 per cent. of pre-war production. On 30th May, 1949 the right hon. Member for Woodford said: It is pathetic to witness the prostitution of a fine intellect to the desire to retain office and power. The most charitable explanation I can suggest is that Sir Stafford Cripps has a mental blackout every quarter. I say to the right hon. Gentleman, and I have given him notice of the material I was going to use, that it is pathetic to witness the prostitution of a great personality to whom this country and the world owe so much, to the desire to get back to power at any price. I say the right hon. Gentleman over those years has not scrupled for purely petty, sectional and personal reasons to drag the good name of Britain through the gutter. If there is one reason why there may be—I am not saying there is—a lack of confidence by certain sections in the United States it is probably because of the propaganda of the right hon. Gentleman and his Tory cohorts and the newspapers who support them in this country.

I must add to this the little financial foxes who have their holes in Throgmorton Street who have been busy whispering for the last few months about devaluation and who have been enlarging the rumours of it. If there is one thing which has injured the purchase of our goods in the United States it is the people in the United States thinking that devaluation would happen and holding off from buying goods because they thought it might happen. It is high time the Conservative Party disciplined some of these little foxes in Throgmorton Street who have done this country more injury and themselves no good in the process.

We should take very great pride indeed in the achievements of our country since the end of the war. It surely is not being too sentimental or mealy mouthed to be proud of the achievements of one's own country. What one would expect from a responsible Opposition, instead of all this carping denigration directed at the heart of the British people, would be that we might have had some praise. But no, we have had nothing of the kind, simply this denigration.

On this side of the House we believe that the emergency measures adopted by my right hon. and learned Friend will certainly help to ease the immediate position. We have not pretended, and my right hon. and learned Friend did not pretend, that they would not inflict injury because, of course, they must, but we are convinced that our people will bear them in good heart. We also remember that the people of the United States who elected President Truman to office last year on substantially the same kind of programme as this Government came into power in 1945—

Mr. H. Fraser

Nationalisation of everything?

Major Bruce

—are not averse from making that co-operative effort which will be made between the Commonwealth, the sterling area and the United States themselves. All that this conference will do, if it is to be successful, is to put into operation on an international scale the same principles His Majesty's Government have been applynig internally in the United Kingdom. In the last four years our country has made itself a citadel of decency and honesty. It has eliminated some of the worst evils of the hang-over of the pre-war days. I have every confidence that in conjunction with the Commonwealth and our good friends in the United States we shall be able to reach a long-term solution.

4.40 p.m.

Mr. Hurd (Newbury)

The House has listened to a party knockabout turn which we know how to assess at its true value, and which I have no doubt that the electors of North Portsmouth will be able to assess at its true value.

I wish to bring the attention of the House back for a few minutes to the statement which the Chancellor of the Exchequer made last Thursday, and particularly to one vital aspect of that statement which has scarcely yet been touched upon in this Debate. I refer to our food supplies and the effect which these dollar cuts will have on every breakfast table in this country. I do not wish to treat this matter on party lines but to try to bring to bear such knowledge as I have which may possibly be helpful to His Majesty's Ministers, whether of the present complexion or of the different complexion which we may see in the near future

We need to be quite clear as to what the severity of these import cuts will mean, because the Chancellor, in telling us of these stop-gap changes, played down very much their effect on our daily lives. More than half of the Marshall Aid assistance which has come to European countries up to 31st May has been in terms of food. That is very substantial. The United States has been shipping us substantial quantities of cheese and dried eggs as well as wheat. Until recently she was financing our purchases of wheat in Canada. She is no longer doing that. We now have to pay with free dollars or by means of the Canadian credits for the wheat we buy from Canada under our agreement with her. It is important to know that there is quite a long list of surplus products in the United States, such as linseed, lard, cheese, butter, peanuts—our old friend groundnuts—and coarse grains, and for none of these commodities will any E.C.A. dollars be available for offshore purchases.

The Chancellor, and indeed the Government as a whole, take pride in writing down our dependence upon dollar sources. The Minister of Food told us last Thursday that we are to buy only 12 per cent. of our imported food from dollar sources; over 88 per cent. is to come from non-dollar sources, including our own Commonwealth countries, and including increased supplies of vegetables from Western Europe which we could very largely grow for ourselves. We should bear in mind that quite a lot of the 88 per cent. which is to come from non-dollar sources under the new arrangements depends upon raw materials which are purchased with E.C.A. dollars. I am referring to coarse grains and maize which go to the Western European countries.

Our Ministry of Food has a curious belief that it pays us to let the Danes, the French and the Dutch use United States dollars to buy coarse grains and maize and for us to buy the bacon and eggs from them. We can see what has been happening if we look at the numbers of pigs in European countries at the present time. In Denmark the proportion is one to two of the population and in France it is one to six; we have only one pig to every 14 persons.

Mr. Alpass (Thornbury)

The hon. Member will agree that there has been a large increase in the last six months?

Mr. Hurd

I am allowing for that. At present the figure is one to 22 but we hope that it will soon be one to 14. Are we for ever to have a small high cost pig industry and a small high cost poultry industry in this country? That is what we are heading for.

Until now the Government have shown very little gumption in deciding bow best we should spend our E.C.A. dollars in ways which to me, as a producer of food in this country, seem important. I shall list three considerations. The first should be to help to build up our own food producing capacity on the most economic lines. The Chancellor again told us last Thursday that the greater the import difficulties the more important our own agriculture becomes. We have a very limited number of dollars to spend. Let us see that we use them to the best advantage to get the highest possible return from one great industry which is a direct dollar saver—our own agriculture.

The second point is that we must not injure our traditional trade with Canada, which is still a member of the British family of nations, any more than we can help. The third point is that we have to please the Americans in the way in which we set out our shopping list. We must be frank about it. The Americans will naturally enough wish to see some part of the E.C.A. dollars which they are providing used to relieve their home market of surpluses which threaten to become embarrassing. Their crops this year, according to the latest estimate, are 31 per cent. above the pre-war average and have only been exceeded by last year's record harvest.

Looking at what is available and what we need and can afford, I should plump for coarse grains, maize and oil seeds, and put those items near the top of our shopping list. There is plenty available which is going to other countries, but none of it is coming here. The Chancellor has some superhuman qualities, but he has special needs in his diet, and we all hope that those needs will be carefully looked after in the next few weeks so that he will return to us fully restored to health again. His idea of an adequate diet is not what the ordinary man in this country requires if he is to produce to the full. The ordinary man in this country wants more meat.

I wish that the Chancellor had been with me when I was at Brantford in Ontario last month. I went over the Massey Harris foundry. It was amazing to me how hard the men there were working for an eight-hour day. I congratulated the manager and the men, and I was told, "It may seem strange to you but these men will eat a pound of meat a day." That is very different to what our men get even if they have the benefit of a heavy workers' canteen. The output in that foundry exceeds ours to the extent of a quarter to one fifth, according to the estimate I was given.

Mr. Collins (Taunton)

If there is any deficiency in the diet of our own men is it not all the more credit to British farm workers that they are producing more food per man than any other farm workers in the world?

Mr. Hurd

I agree that it is most creditable, especially in view of the miserable attitude which the Ministry of Food takes about extra rations for harvest workers.

The pig is the animal which can give us the quickest increase in home meat production. We have heard in Debates in this House, particularly from my hon. Friend the Member for West Perth (Mr. Snadden) about the great increase which the hills can give us in beef and mutton. I fully agree with what he has told the House: I have seen for myself what he is doing. But I would urge the Government once again to give the "all clear" in regard to pigs for bacon and pork production. We should use E.C.A. dollars, such as we have, to get food for them. Feedingstuff rations are based on little more than one-fifth the pre-war quantities in this country.

We have been buying some feeding-stuffs from Russia, but we cannot rely upon Russia. The President of the Board of Trade had to admit as much on Thursday night, when he wound up the first day's Debate. He has told us that provisional grain contracts have been initialled which will not take effect until the main agreement is signed. It is because we cannot rely on Russia that we still have these miserably low rations for our pigs and poultry. Much of the stuff from the last purchase has been kept in store, but we have never been sure whether we can do another deal with Russia or whether after this harvest they might not suddenly decide to send the coarse grains into China to promote the world revolution, or into India, or somewhere else.

The Minister of Agriculture has been very unfortunate in the treatment he has received from his Cabinet colleagues. In August, 1947, he was led to talk about a rapid expansion in pigs and poultry and set targets for the increased production. But farmers have never been allowed the means to expand to anything like that capacity. We on this side of the House have been taunted that we have no positive policy of our own. I should like in a sentence to draw a contrast. The Conservative policy has been, is still and will be when we are in office, to get overall food production to at least half again as much as pre-war. In the case of meat products, that is pigs and poultry, it will obviously be considerably more than half as much again. It will not be, and should not be, as much as that in the case of wheat.

The Minister of Agriculture has been denied the means to carry out this urgent expansion for pigs and poultry and he has been led, at the behest of the Treasury, into appealing to farmers to grow still more wheat again next year; and to postpone once again the expansion of our vital livestock industry which can give us the best possible return in sustaining food, and also real progress towards getting sound long-term development in our agriculture. Whose advice is he taking? This is not an agricultural expansion programme. It is a makeshift dictated by the Treasury. It will not give us a balanced system of farming on lines that suit this country—[An HON. MEMBER: "Why not?"]—because it is threatening the fertility of the soil. We cannot continue wheat production at anything like the peak, the upper limit, we attained during the war years, when everything was sacrificed to get a high wheat acreage, without seriously prejudicing the future production from the soil.

I hope that neither the county agricultural committees nor the National Farmers' Union will be partners in any extreme measures that the Minister may be forced to take by his Cabinet colleagues if he is to reach this wheat target of 2¾ million acres. We cannot allow the ignorance of the Chancellor of the Exchequer and the Minister of Food to wreck the sound economical development of the one great industry which can certainly give us more food, whatever happens to international trade.

The gloss of a very high price has been put on this demand for extra wheat for the next year or so. The British farmer is offered £28 a ton for wheat for the 1950 harvest, but that will not, I hope, deceive farmers and the many others who realise what British agriculture can contribute economically to the nation's wealth. Economically we can grow 2 to 2¼ million acres of wheat oil suitable land in suitable areas. If we force wheat growing on the hills of Devon again, as we did in the war, our costs will inevitably be high and our production will become quite uneconomical. Apart from the 2 to 2¼ million acres we can grow economically, we should look to Canada, Australia, and if possible to other countries outside the dollar area for our wheat supplies. Any attempt to build up a permanent future wheat production of anything like 2¾ million acres in this country would lead to bad farming and a complete denial of a sensible policy of agricultural expansion.

The Canadians would welcome the assurance that we are not ourselves going crazy about wheat growing, and I would add that we must stand by our wheat agreements with the Canadians. We have treated them shabbily over newsprint and wood pulp. We have left them entirely at the mercy of the Americans while the British Government buys wood pulp and newsprint from Scandinavia at higher prices than they would have paid for rather better material from Canada. That has undoubtedly caused and has placed a heavy burden on our own newspaper industry. The Chancellor says we shall have a further cut of one-third in the newsprint supplies from Canada. I regard that with regret, and if it is not absolutely inevitable I would ask that he look at the matter again. We do not want to force the Canadians into one monoply market for their newsprint and wood pulp if we can possibly provide them with some outlet.

Having been to Canada at the same time as the President of the Board of Trade, I would say that I am sure the Canadians wish to help us all they can. I endorse what the President said that we must take more trouble in catering for the Canadian market. It is no use expecting them to buy British when the prices are 15 to 20 per cent. higher than Canadian and American prices and the quality is no better. I wish I did not have to say this in the House of Commons, but it is the only proper report to bring from Eastern Canada. In many cases, such as leather goods, and textiles, our quality is no better than the products from the Canadian factories, and in too many cases the price is wrong by 15 to 20 per cent. We can say, "Buy British" till we are blue in the face, but Canadians remind us that they have lent or given us 900 million dollars and they wish to go on helping, but they do want to buy on reasonable terms.

Mr. Stokes

Would not the hon. Member agree that the price of capital goods is pretty well right?

Mr. Hurd

Yes, Sir. I went over one or two milk factories and I was glad to find one in process of putting in British equipment. It was big plant, costing £80,000. I think that we are still holding our own pretty well in that direction.

In the export trade our manufacturers are handicapped by the slow pace of production and the high level of taxes in this country. That is the opinion of the Canadians themselves, and they know the several factors which are adding to our costs of production. We have Canadian goodwill. Undoubtedly it is still there, but it will operate fully only if we can offer the right goods at the right price. I am sure that the Canadians will understand if we say frankly that for the present we shall use our free dollars and Canadian credits—such as remain—to buy whole wheat, barley and oats for animal feedingstuffs.

We should not be buying so much Canadian flour, which means that the valuable by-products, middlings and sharps, stay in Canada. As a farmer it gave me the greatest pleasure to handle the meal given to pigs and poultry in Canada. It had substance in it. Any hon. Member who is a farmer—and I see one or two hon. Members from Norfolk opposite—will know what I mean when I say that if we put some of our feedingstuffs in our hand and blow upon it, it is wafted away. The Canadian farmers have good quality feedingstuffs, and I believe that is the reason why they and others can produce more cheaply than we can. We are missing good quality feed to give to pigs and poultry in this country.

Let us face the fact that today we have here high-cost meat production on a limited scale and that involves wasteful expenditure in food subsidies. We are continually being asked by the Government—because they cannot think out these problems for themselves—how we would cut taxation and economise. I would say that if he would let the British farmer and the smallholder have more feedingstuffs of better quality, the Chancellor of the Exchequer could cut the cost of food subsidies by £60 million a year. We have today a high-cost, restricted livestock industry. We are not taking advantage of the foodstuffs that are available in the world. Our people need better food, particularly more meat, and we can and must produce more of it here. Remembering how much of our dollar expenditure has been on food, and bearing in mind the long-term character of the dollar deficit, let us ensure that now—almost too late—we develop to the full our own capacity for economical food production and use E.C.A. dollars, or such other dollars that we have, with that always in mind

5.0 p.m.

Dr. Stephen Taylor (Barnet)

I am afraid that I cannot follow in detail the argument presented by the hon. Member for Newbury (Mr. Hurd). I would merely say that I am very glad to hear that if the Conservative Party should ever be returned to power they will follow a different agricultural policy from that which they followed in the inter-war years inasmuch as they hope to see a high target set for British agriculture rather than a continual drift from the land such as we used to have when they were in power.

We have had from the right hon. Member for Warwick and Leamington (Mr. Eden) quite the most interesting speech delivered from the Front Bench opposite for a very long time. The only point is that I think that the right hon. Gentleman should have faced the other way and delivered it to his supporters. Apart from some rather nasty references to nationalisation, the speech was a well-balanced exposition of the true problems which face the dollar and the non-dollar worlds. It was a great contrast to the speeches delivered on Thursday by hon. and right Gentlemen opposite. Very largely, they cancelled themselves out. For example, there was the plea for bilateral trade by the hon. Member for East Aberdeen (Mr. Boothby), which contrasted with the words of the right hon. Member for Aldershot (Mr. Lyttelton) when he said that bilateralism was mollycoddling British industry with cotton wool and that it was a cushion which should be removed at the earliest possible moment.

I thought I detected a certain amount of disappointment among hon. Gentlemen opposite that the Chancellor was able to balance his cuts with the announcement of the import of food and, to some extent raw materials, from alternative non-dollar sources. This should not be a cause of disappointment: it should be a cause for rejoicing and for great satisfaction that we are able to come through in spite of these difficulties. The right hon. Member for Aldershot said that the only things the welfare State could not provide were food and work. I should have said that those are precisely the things that we have man- aged to provide so far and we intend to continue to provide them. We are very proud that we have managed to do that. But, of course, hon. Gentlemen opposite make gloomy forecasts of what will happen in the future. Then there were arguments that high taxation plus the welfare State were the causes of the dollar deficit. The only item of high taxation which bears directly on the cost of production is the social insurance payments. They are a cost which must be borne, but I have not heard any pleas from hon. Gentlemen opposite that they should be cut.

The right hon. Member for Warwick and Leamington got a little muddled over the question of undistributed profits as a source of capital investment. Surely, hon. Gentlemen opposite are not advocating a further expansion in our capital programmes at the moment, because only if they are will the undistributed profits of industry be of any value at all. The hon. Member for Chippenham (Mr. Eccles) said that if high taxation was cut production would increase. To some extent, he was answered by the right hon. Member for Aldershot when he warned us that no matter how much we increase our production there is a limit to the absorptive capacity for manufactured goods as far as the dollar market is concerned.

The right hon. Gentleman proceeded to argue—and his right hon. Friend the Member for Warwick and Leamington argued similarly—that there is a discouragement to United States and other dollar investment in the Eastern Hemisphere as a result of our nationalisation programme. That is not really a very serious argument. All that is necessary is to spend sixpence on "Labour Believes in Britain" and one can see precisely the extent of the risk. It is not a very serious risk unless one proposes to invest in cement, industrial insurance or water supplies. It is very much smaller than the risk which this country ran when it invested its capital in overseas development in the 19th century and built railways in teritories subject to continuous revolution. Indeed, ultimately we have had to give up those capital assets.

However, it would only postpone the difficulty if the United States invested capital in the Eastern Hemisphere, because the interest on that capital must be paid for by exports to the Western Hemisphere. That means that we should again be faced with the same kind of problem, only spread over a longer period of time.

Mr. Oliver Lyttelton (Aldershot)

That is on the assumption that the capital from the west which is invested in the east does not fructify in any further production.

Dr. Taylor

No, certainly not on that assumption. The difficulty will be in the actual sending of exports to the United States and the dollar world to pay the interest on the invested capital.

Viscount Hinchingbrooke (Dorset, Southern)

Has the hon. Gentleman never heard of the re-investment of the exportable surplus?

Dr. Taylor

Yes. One can go on indefinitely, but sooner or later one must pay in the form of exports in the reverse direction.

The truth is, as the right hon. Member for Warwick and Leamington said, that we are facing a new kind of problem. In the 19th century the world could balance its economy because the greatest creditor country was also the greatest importer. Today the greatest creditor country seems not to need the world's exports. That is essentially the fundamental problem. I do not criticise the United States. I admire their great productive capacity and their great pragmatic capacity for adapting themselves to new situations and working out solutions without a very clear theoretical basis.

But I shall try to describe what I believe to be the situation in the United States, and try to show that our problem is also their problem. Indeed, the crux of the problem is really the capacity of Canada and the United States to absorb two things—first, their total production for their own home market; and, secondly, our exports or the exports of those to whom we export. Only by taking our exports, or the exports of those to whom we export, can they be paid for their exports. There is no alternative way of paying them for their exports. That is the problem put in a simple way.

At the moment, the absorptive capacity, the purchasing power, of the people of the United States is high. But it is not high enough to enable them to absorb their own total production. That is evidenced by the fact that they have 3,750,000 people out of jobs. I think that figure is correct. I hope that they never have any more and that they may soon have less. Those people were mainly engaged in manufacturing industries. The products which those people should be making cannot be bought by the people of the United States because they have not got enough money. Naturally, if that situation obtains, it is not too easy for us to sell our exports there. In fact, it is very difficult to sell them, because the ordinary working people and the manufacturers feel that by buying our products, they are, to that extent, denying themselves the right to work.

In simple Keynesian terms, the solution to this problem is expansion of the purchasing power of the people of the United States and Canada until there is a total take-up of all their own production, plus our exports, so that we can pay for the commodities we import from them. Indeed, I think that is the short-term answer to the world's problem.

Mr. Norman Smith

Social credit?

Dr. Taylor

No, not social credit, because the pumping out of purchasing power must be equated with actual production and the actual available goods. That is the short-term answer, and I think that, judging from President Truman's message, he and his advisers realise that that is their short-term problem; they have to step up their own purchasing power to cope with their own under-consumption, plus their under-consumption of non-dollar exports, in order to pay for their exports.

But, long-term, it is not as simple as that for the people of the United States, because, at the same time as they are struggling to maintain purchasing power, they are having to struggle with a tendency towards high prices and inflation; they have got both factors operating at the same time in the same economy. The truth is that the Keynesian extension of purchasing power in their economy would cure unemployment, but, at the same time, it would be exploited by human nature in the form of raised prices, raised wages and a raised rate of profits. The only long-term answer for the United States is to adopt a combination of the Keynesian full employment policy, plus price control, but I think that is a long way off. I hope very much that the United States will adopt at any rate the first part of this policy in the reasonably near future, but I do not expect them to adopt the second in the near future.

It seems to me that the United States economy is, as it were, wobbling between two alternatives. There are two things which may happen to it in the future, and the first of those possibilities is that this wobbling may continue for an indefinite period. I think this is the likely thing to happen. First, there will be, as there was immediately after the war, a pushing-out of purchasing power in the United States. After the war, the veterans came back with their extra spending power and there was a pushing-out of purchasing power, terrific industrial activity, full employment and a reasonable export absorptive capacity. As inflationary signs developed, there was a reduction of purchasing power, with a consequent mild recession, an increase in unemployment and the rest.

I think we can expect these two to alternate; soon, there will be another expansion of purchasing power, and with that the recession will disappear; then the cycle will again reverse as inflationary signs develop. We shall have these small cycles at a very high level of economic activity—small, man-made cycles going along at a high level. I think that is the likely situation to eventuate. If it does, it will lead to quite considerable problems for the non-dollar world, not the least of which will be a fluctuating market for non-dollar products in the United States. Similarly, there will be inverse fluctuation in the drive for exports from the United States, and both these fluctuations will tend to be reflected in the economies of other people unless they are very careful. Indeed, it will be our duty to be very careful.

But there is a much less pleasing longterm picture which we should face, and that is the possibility that there might be a serious decline in confidence in the United States, with restrictionist measures, which are the worst possible things to apply, with cuts in income, whether profits, wages, or unemployment benefit and the rest, and an under-consumption slump. I hope there will not be. If there is, we and the rest of the world will have a very difficult time, but we should know what we are going to do about it.

If this happens, we shall have to do without our dollar imports, or most of them, because the dollar world will be unable to take any, or almost any, imports from us in return. I am assuming that this situation will happen, although I do not think it will. If it does, we shall have to do without a good deal of Canadian wheat, Canadian timber, raw cotton, petrol and various rare metals and certainly United States tobacco and films.

Viscount Hinchingbrooke

But that will help to make it worse.

Dr. Taylor

Whether we shall make it worse or not, we shall not be able to pay for these goods, and that is all there is to it. We do not want this to happen, because it is the worst thing for all of us, but we should be prepared and ready for it. To maintain full employment will then be painful and difficult, but it can be done by a sort of gigantic redeployment operation to make industry independent of dollar raw materials. It is a most unpleasant plan to contemplate, and I hope we shall never have to do it, but, in case we should have to do it, we should have that plan ready. It would mean a very great extension of the switching over to substitute raw materials. It would mean switching our industry, as we already have done once during the war and a second time after the war, away from, say, cotton mills to building, always assuming that we can find any building alternatives to Canadian timber.

If we could maintain full employment in these circumstances, as I believe we could and would do, it would be of immense importance to the world and to our own people. It would be of tremendous importance in showing the United States people that a controlled economy can cope with this dreadful situation and can maintain full employment in spite of somebody else's slump. It would be of even more importance in showing the people and the rulers of Soviet Russia that their Marxist hypotheses are absolutely wrong; they consist of two points—first, that capitalism produces slumps and leads to alternate booms and slumps—and that part would be proved right if there was a slump in the United States; and, second, that slumps lead to aggressive war.

If we maintain full employment and keep Europe steady through such difficulties for the period of the United States slump until the United States applies the proper remedial action—I should hope that, in those circumstances, there would be great hope of peace for the world. Let nobody suppose that it would not be difficult; it certainly would be. But it would be a most worthwhile job by the people of Britain to show to all the people of the world what they can do for themselves. I do not think a United States slump will come; the likely thing is a United States economy fluctuating at a high level. Under these circumstances, our duty is perfectly plain. It is to do what the Government has done—that is, stop buying what we cannot afford, though very reluctantly; to do without all those things which we cannot buy.

I think that when the Chancellor goes to Washington in September, it will not be that he is in a weakened bargaining position. I hope it will not be a bargaining situation at all. The desire to buy from other people places a country in quite a strong position, and I am sure that he will in fact make full use of that argument. It is useless for us to talk in short-term multilateral terms, if we have no guarantee about the fluctuations in the United States which are going to be reflected in everybody else's economy. We all want to see a multilateral world. But until the United States decides to maintain full employment and to maintain its own purchasing power at such a level that it can absorb its own production, plus the exports of the rest of the world with which to pay for its imports, multilateral trade is simply something which countries that believe in full employment, alas, just cannot do.

5.20 p.m.

Mr. Cuthbert (Rye)

We have listened this afternoon to at least one speech from the other side which almost made me believe that we were living in a wonderful sort of prosperity. The speech was that of the hon. and gallant Member for North Portsmouth (Major Bruce) who cited figure after figure of wonderful production, and so on. That may all be true, but what the ordinary man in the street wants to hear today—and he heard it from the Chancellor of the Exchequer only the other day—is what has caused us to get into this perilous position. We can spout our heads off about all the good things that have happened, but he wants to know what is wrong now, and how we got into this position.

I am going to deal with only one aspect of the situation, and I hope that the suggestion I shall make will be taken to America by the Chancellor when he goes, because the Americans are, to my mind, the only people who can help us out of our difficulties, at any rate in the next year or two. I remember that in 1945 we were all very thankful that the great American nation came to our help with a loan. At the time, I was all for that loan, but, on looking back, I would now be much happier had it been a loan of a different kind. As we all know, we then accepted dollars—Marshall Aid came later—but had we, instead of accepting dollars and now goods, been loaned a similar quantity of gold out of the vast hoard that is frozen in America at the present time, and stabilised, not only our currency, but all the European currencies as well, we should be in a much different position today as far as world trade is concerned.

That is now a thing of the past, but I am wondering if we cannot, perhaps, revive this subject with America. As I see it at the moment, the difficulty is to fill our dollar deficit with America. Some hon. Members have told us that with more production we can certainly meet that deficit. I do not believe that for one moment. I think it was the hon. Member for East Aberdeen (Mr. Boothby) who the other day agreed that we shall never fill the gap from our own production. The gap must be filled, as it always has been, by invisible exports—by which I mean insurance, banking, shipping and so on—first and finally backed by gold. That is the only way in which we shall ever meet that deficit. We can certainly narrow the gap at the present moment, but except by this means we shall never completely fill it.

That brings us back to the problem of where we are to get the gold. I make the suggestion—I hope the Economic Secretary will make a note of it and that when he replies he will tell me whether he does not think it is a good idea—that in our talks with the Americans we should tell them that we require more gold with which to build up our gold reserves in order to stabilise the pound. I have spoken to many Americans on this subject—bankers and business people—and have told them, as I have just told the House, what I imagine we should have done in 1945, that is, have taken gold instead of dollars, and now goods. They have told me, "You are dead right, but it is too late now." I wonder if it is.

We know that at the moment the flight from the pound is extremely serious. I agree with my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) that the more we speak about our difficulty the better. It is much better to let the Americans know that we are worried about the situation than to put our heads in the sand and pretend that everything is rosy. Therefore I would tell the Americans that our small gold reserve is the trouble. Why is it our trouble? Because in trade with other nations we cannot make the pound convertible. It must be obvious to everybody that if the pound is not convertible, it must be very unpopular with a great many nations of the world. They require currency which they can turn into francs and dollars. That is what is meant by convertibility, and without gold, of course, we cannot stand the drain on our reserves at the moment.

How could America help us in this way? We have talked about the devaluation of the pound, and so on, but I am dead against that. What I am in favour of is enhancing the price of gold in the world. If America were to raise the price of her gold in order to bridge the gap between the black market rates in currencies and the ordinary rates, the enhanced value of the frozen gold reserves in America would represent about £2,000 million. I think that those who have studied this particular problem will agree that the difference between the black market rate and the official rate is about 20 per cent. We know that the American reserves at the present moment are something between £7,000 million and £8,000 million. The 20 per cent. would not come from the taxpayers—of which they are always so frightened—but from the enhanced value. They could lend it to us and to Europe in order to stabilise our currencies and to get us back to world free trade and the convertibility of currency. Until that is done, I can see no hope at all.

What are the Government's suggestions? My right hon. Friend the Member for Warwick and Leamington described them very well indeed this afternoon. The Government intend to cut £100 million of American imports to this country. That is only going to mean more misery and more austerity for our people. Indeed, I am not at all sure that if we tried to put more austerity and more cuts on to this great British public, we should not take the heart right out of them and that productivity would not suffer accordingly. I hope the Economic Secretary will reply to my suggestion about the assistance which American gold could give us.

5.28 p.m.

Mr. Norman Smith (Nottingham, South)

The hon. Member for Rye (Mr. Cuthbert), has, of course, got something, but he is singularly ill-informed as to the details, and nothing could have been more egregiously wrong than when he suggested that if, in 1945, we had had gold instead of dollars, it would have made some difference. How could it have made any difference? Under the Bretton Woods Agreement, an ounce of gold is 35 dollars and contrariwise. If we had had gold in 1945, it would have gone as quickly as the dollars went, because gold is dollars and dollars are gold.

Mr. Cuthbert

I think the hon. Member has overlooked my point, that we wanted the gold in order to stabilise our currency first of all. Of course, a certain amount of gold would have gone back, but in stabilising our currency we should have increased the purchasing power of the pound, which would have made all the difference in the world.

Mr. Smith

The hon. Gentleman has only got himself further into the mire. We stabilised our currency under the Bretton Woods Agreement; we agreed that our currency should, except as to a possible 10 per cent.—we have never taken advantage of that—be invariable from the dollar at 4.03. The hon. Member's idea about the revaluation of gold is a good one, provided always that it will be regarded purely and simply as a short-term emergency measure. The hon. Member seems to think that if gold be revalued we can get back to convertible currencies and 19th century free trade. That could not be done, because the revaluing of gold would not in the least remove any but one of the causes of the present hemisphere disequilibrium, and it is therefore only a short-term measure.

I want to make the House a present of a new law. With becoming modesty I am calling it Smith's Law. It arises from what the hon. Member has said. Smith's Law is just as apposite in the sphere of finance as Newton's Laws of motion are apposite in the field of physics. Smith's Law says that so long as gold is accepted as the basis of the monetary system, then for every world war financed by massive credit creation, there must sooner or later be a revaluation of gold in terms of the dollar and, therefore, under Bretton Woods, of all currencies. If one applies Smith's Law to the present condition of things, one sees that it is singularly apposite. There is a widespread superstition that a dollar is always one thirty-fifth of an ounce of gold, but it is not true. That price was fixed not in heaven, but here on earth. I can remember when about 20 dollars went to the ounce of gold, but consequent on the Great War it was necessary—

Mr. W. Fletcher

rose—

Mr. Smith

I shall not give way until I have developed this part of my case, and then the hon. Member can interrupt me. I am only pointing out that because of the circumstances arising out of the 1914 war it was necessary to revalue gold in 1933. That was done by Mr. Roosevelt, just after the abject failure of the World Economic and Monetary Conference which Mr. Ramsay MacDonald staged with singular appropriateness in the Geological Museum. Mr. Roosevelt then had a depression on his hands, just as Mr. Truman today has a recession on his. Mr. Roosevelt offended all the high priests of financial superstition by revaluing gold in terms of the dollar, but the revaluation worked. Just as the 1849 Californian gold discovery stimulated trade throughout the world, so in 1933 the revaluation of gold stimulated trade. It led the way out of the trade depression by which the world at that time was beset.

Since 1933 we have had a second Great War with corresponding massive credit inflation and, therefore, the circumstances today of recession developing in America are entirely favourable for the application of Smith's Law. The time is ripe for a revaluation of gold in terms of dollars, and, therefore, under Bretton Woods in terms of all currencies. I have no doubt that my right hon. and learned Friend the Chancellor of the Exchequer, whose illness we all deplore, when he goes to Washington in September will put this idea of the revaluation of gold to the authorities and he will no doubt get a very sympathetic hearing, provided always that one little trap be avoided. If I may draw on a homely illustration from "David Copperfield," provided always that Mr. Spenlow of the International Monetary Fund does not pass the buck to Mr. Jorkins of the American Treasury.

It is interesting to see what revaluation of gold would do at this time. It is only a short-term measure, but I can see no other quick remedy for the situation that has arisen. Let us look at what it will do. First, it would have an important effect upon our very exiguous gold reserve. Our gold reserve is running out. Revaluation of gold would send up the value of our gold reserve in terms of dollars, so that because any consequential rise in prices arising out of the revaluation would entail a long time lag, we should get a very valuable breathing space.

What my right hon. and learned Friend, however, has to prove to the Americans is how they will get an advantage out of it. Their advantage arises in that their gold reserve, which is 24,244 million dollars, some 15 times our own, would be revalued in such a way as to cover a much larger proportion of the American internal National Debt, making for confidence all round and helping President Truman to combat the recession. But that is not all. The sterling area, being a very large exporter of gold to the United States, would find an immediate benefit in its balance of payments if gold were revalued.

Hon. Members are perfectly well aware that there is in the East a black market in gold—the Bombay bullion market, and, curiously enough, respectable publications like "The Times" and the "Economist" both offend the financial high priests by publishing these bullion prices of gold, though they cover it up by publishing them in terms of rupees and tolas. Not everyone knows of rupees and tolas, but everyone knows of pounds and ounces. The Bretton Woods gold price is £8 12s. 3d. an ounce, but it is interesting to learn what has been the black market price in the last three years, which gives some idea of the immense short-term value of this expedient. We all know that a rupee represents 18d. and a tola is three-eighths of an ounce, so the conversion factor is the reciprocal of five; which means that, one has to divide five into the published price to get pounds an ounce.

If one considers the sterling area output of gold over the three years, 1946, 1947 and 1498, and what was the average free market price, it will be seen how attractive is the Eastern market for gold. Multiplying the difference between the artificial Bretton Woods price and the average Bombay price by what would probably have been the sterling area's output if the price had been more attractive than it actually was, the effect of an arithmetical calculation is simply that in those three years the sterling area loss in balance of payments vis-a-vis the dollar area was no less than £904 million, compared with £1,120 million of eleemosynary dollars which we had from North America in the same period.

The hon. Member for Rye certainly made a very valuable contribution to this Debate when he suggested that there should be a revaluation of gold. I am not suggesting that the revaluation price of gold should reach the level of the Bombay bullion market price, which at the moment is about £23 as against £8 12s. 3d. under Bretton Woods. All I am suggesting is that revaluation would be of immense benefit not only to us but also to the Americans. I put it to my right hon. Friend the Foreign Secretary—that man of massive physique and massive common-sense—that he should bear in mind a speech which he made a couple of years ago at the Trades Union Congress at Southport when he said: America handicaps herself and causes high taxation in her own country by her failure to redistribute the Fort Knox gold. If you found another gold mine in the world, it would assist you; but there is gold which has already been mined and is doing nothing. I am quite sure it is one of the readiest ways there is to assist in increasing the purchasing power of the devastated areas of the world. That is what my right hon. Friend suggested, the sort of eminently commonsense suggestion one would have expected a common-sense man to put up. What he said in effect was, "We have been playing the game for years; all the counters are now in the hands of one player; let us redistribute the counters and start again." That was asking rather a lot of the human nature of the people over in America who control these things. I was not surprised we were given to understand that my right hon. Friend's eminently sensible suggestion had not found favour.

However, I cannot for the life of me see why anyone in America—if hon. Members like, the cosmopolitan controllers of the International Monetary Fund—could possibly disapprove of a revaluation of gold under Smith's Law at a time like this. If they do disapprove, we are bound to come to a very grim and significant conclusion, namely, that it is the intention, not of the American politicians, not of the American Administration, certainly not of the generous-hearted American people, but of the handful of gold standard money controllers in the United States, to apply to the British welfare State—if I may again borrow the Southport words of my right hon. Friend—to apply to us "the old bankers' methods of starvation." Personally, as a cautious man, having been trained in Fleet Street for 30 years, I prefer to reserve judgment. We on this side of the House are not judging anybody in America. We know that the American people are generous-hearted, but we do discriminate between, on the one hand, ordinary Americans and, on the other, those people who control the gold standard financial business located over there.

The extraordinary thing about this Debate today has been the way in which it was opened. It was opened by the right hon. Member for Warwick and Leamington (Mr. Eden), of whom everybody in this House is personally very fond. Nevertheless, it was not quite what we had expected. Where was the Leader of the Opposition? What was the right hon. Member for Woodford (Mr. Churchill) doing? In this great crisis of our country's fortunes, at this time when the House of Commons is engaged on what is the most important Debate it has had since the war, what lead had the Leader of the Conservative Party got to give?

Mr. Ellis Smith (Stoke)

Next Saturday.

Mr. Smith

My hon. Friend says we shall know on Saturday. I have always understood, as a very humble and unimportant back bencher, that if one is an important person and a Member of this House, and has anything to tell the country, he does it in this House. The Leader of the Opposition, as a salaried official of the House—[HON. MEMBERS: "He does not draw his salary."]—I apologise to him. Still, he is an official of the House. One would have expected his wisdom to be distilled in this Chamber and not reserved for Wolverhampton.

So instead we have had the right hon. Member for Warwick and Leamington, who insisted on what we are bound to assume is Conservative policy in this matter. It was the most amazing suppression of relevant facts I have ever heard, because the right hon. Gentleman said that above all things we had to encourage saving—the low state of which he deplored—encourage saving and get taxation down. I cannot think where the party opposite derives its curious idea, which is hopelessly wrong, that saving in this country is at a low ebb. Are they not aware that in the last two years this country has in fact devoted to capital formation—and that is saving: physical saving. I do not care about financial saving, and can distinguish between physical and financial saving, as some of the hon. Members opposite cannot—is the party opposite not aware that in the last two years physical saving in this country, as represented by capital formation, is in fact 20 per cent. of the national income?

They talk about saving. They, of course, mean personal saving. They forget that things have changed since they and I were boys. In this era of the managerial revolution saving proceeds not so much from individuals as from firms' allocations to reserves, from com- panies' undistributed profits, and, to a smaller extent, from Budget surpluses. In virtue of these financial savings we have in the past three years put up net capital formation equivalent financially to five times the dollar aid we have had from America. It represents 20 per cent. of our total national income in a three-year period. A nation that does that is saving on the heroic scale. It is practising Spartan austerity—austerity of which I approve—but it is Spartan austerity, to which I would draw the attention of our good friends in the United States.

When we come to examine the physical implications of this business of reducing taxation we are led to the most appalling conclusion, and I can see why the Leader of the Opposition thought better than to speak in this Debate, if the Opposition have nothing to put up except this business of reducing taxation. Let us look where that leads us financially and physically. Financially, of course, it is very simple. Hon. Gentlemen opposite want to reduce taxation on the class which is traditionally the saving class: they mean, the well-to-do. They can only do it by slashing Government expenditure. That, in fact, means reducing the social services. But let that pass. That has been said over and over again.

Let us consider the physical consequences. They are always telling us we are spending too much. We have only to look across the North Sea into the bankers' paradise of Belgium to see exactly where the Tory policy would land us. We in the last three years have had this massive capital formation which is the physical reflection of the employment of a very substantial proportion of our labour, raw materials and factory capacity on capital expansion, notably in the basic industries. We have had our workers at work improving railways, collieries, electric power stations, and those all important key, basic industries which are the physical capital of the country.

Belgium has done precisely the opposite. Belgium has in the last three years, neglected her capital equipment—as the "Financial Times" very obligingly a fortnight ago today pointed out. Belgium has neglected her capital equipment at the price of having a large army of unemployed. Through a taxation policy generous to the rich, and a social services policy niggardly to the poor, she has filled her shops and restaurants with luxury goods while the great army of unemployed, spending little and, therefore, requiring few imports, has contributed to the soundness of Belgium's gold reserve.

As a "monetary reformer," I have always recognised that, if a country is prosperous by gold standard rules, it is miserable by the rules of human decency. The English-Belgian contrast is very relevant to that. In Belgium the workers have undergone misery in the last few years. Capital equipment has been neglected; but the gold reserve has piled up and Belgium, by bankers' rules, is sound. In England we have had full employment; we have improved tremendously our capital equipment, which has necessitated substantial imports of food and raw materials; because of that, our gold reserve has run down, and, by bankers' rules, England is sick. Is it not quite evident that bankers' rules and the rules of human decency conflict?

Let this House never forget that the position we are in today is the result of the Bretton Woods Agreement of 1945. Bretton Woods gave the world an international gold standard. On that we are working today. That is, indeed, the cause of this crisis. That is why the crisis has arisen. It is the attrition of our gold reserve which has brought this crisis. I do not want to be cock-a-hoop and say, "I told you so." I think, probably, Bretton Woods was imposed on this country. Whatever else is the way out, there is no way out which entails permanent trading in the world on any gold standard basis whatsoever. The whole thing rather reminds me of some lines of doggerel written by Eimar O'Duffy, a very good friend of mine, shortly before he died. He wanted to depict the position we had at a time when the bankers had all their own way and the gold standard was the ruling factor in the situation. These were his lines: The banker in his counting house was counting out his money; The land was overflowing with bread, and milk, and honey; The shops were full of good things, the factories likewise The banker closed his books and said 'We must economise. Sing a song of plenty, a planet full of fools: Everybody starving, by sound financial rules.' That was a very accurate picture indeed of the world in 1930, when the gold standard was bringing us all down. Whatever else we do, we have to avoid that.

In the last few days the people of this country have had a very striking object lesson. There is on the one side bilateral trading—that is, making the best bargain one can with people who are willing to swap goods for goods—and on the other sound financial trading, or dollar trading—that is, trading goods for gold, or goods for debt. What does bilateral trading—which experts say is unsound—do? It gives us more meat, bacon and butter. What does dollar trading—the gold trading which experts say is sound—do? It gives us less tobacco and less sugar. Can it be wondered at that there is a firm belief, I believe on both sides of the House—certainly on this side—that our longterm way out of all these difficulties will be to develop bilateral trading to its logical conclusion. This very practical bilateral trading does give us the stuff, and people who let us have it will take our goods in return, instead of wanting to play this crazy game of gold. Can anybody wonder that there has developed a widespread belief as to what we shall have to do?

Again I should like to recall the sane eloquence of my right hon. Friend the Foreign Secretary at the T.U.C. Conference in 1947 when he said: I hope our Commonwealth, and certainly the Empire, will agree to the possibility of a customs union for the British Commonwealth and Empire"; to which I would add "and of the Western European countries as well." We want a trichotomy in the world. I mean the existence of three great, nearly self-contained trading areas, exchanging with each other their various surpluses: the Communist area, the dollar area, and the Western Europe plus the British Commonwealth and Empire area. That trichotomy would entail much greater safety for the peace of the world than the present dichotomy, in which the Iron Curtain separates two peoples mutually hostile, both animated by the crazy Marxist conviction that sooner or later war to the death is inevitable.

I have attacked the party opposite, and to be fair to them it is necessary to say something else, because I am essentially objective in all these things. First, let this be said, because it is right that it should be. The right hon. Member for Warwick and Leamington made a valuable contribution to this Debate when he said he was resolutely opposed to the devaluation of the £. That is not true of all the party opposite. My hon. and gallant Friend the Member for North Portsmouth (Major Bruce) was quite right there. The "Financial Times" and other papers are running a campaign for devaluation. On that I only want to say a few things, of which our American friends ought to take notice.

If people argue for devaluation, as many Conservative financial writers are arguing today, they must put up the case. Now what is the case? The only honest measuring rod that can be applied is: what will the dollar buy in America and the £ buy here? Even leaving out our food subsidies, it is true to say that the pound in London buys more food—and a good deal more food—than 4.03 dollars will buy in the United States, so that on purchasing power parity there is no case for devaluation. Moreover, if we were to devalue the £ by one-fifth—which is a very popular figure with the financial writers of the Tory persuasion—it would mean that we should have to send abroad to the dollar area one-fifth more by volume of our manufactured goods in order to get, not more but the same amount of dollar food and raw materials.

Now I deem it to be axiomatic that the business lobby in Washington just would not stand for an increase of one-fifth by volume of British goods going into the United States. They would get busy; they would protest, and use American tariffs against "unfair British competition." But supposing that the Americans could be induced to accept the very substantial increase of one-fifth by volume of British imports, what would be the effect over here and over there? The effect over here would be that we should have to divert, either from our capital formation or from our home production, a corresponding amount of labour power, raw materials and factory capacity. If we diverted it from capital production the outcome would be an eventual, and if from home production an immediate, sharp fall in the standard of living; and the only beneficiary of that sharp fall in our standard of living would be the American consumer, who would get British goods more cheaply at the cost of substantial unemployment in his own country. I think that should be put up to them.

Moreover, devaluation would increase substantially the price of all our dollar imports, which would be reflected in the cost of production in this country. Again, as the experience of France ought to have taught the world, devaluation does in fact pro tanto whittle away the savings of the very middle-class people for whom the party opposite and their financial journalists profess such great solicitude.

There is no case whatsoever for devaluation, except the jungle case, which is that the price of the £ in terms of dollars must be determined by the law of supply and demand in a world where dollars are wanted and £s are not. Let us look at that. Here we come back to my old friend the "Financial Times." If I may say so, there are two "Financial Times": there is the day-to-day "Financial Times" which lets a lot of politics creep into it, and there is the occasional "Financial Times Banking Survey"—a very valuable and objective commercial sheet which has no politics at all. I quote from its edition of 25th April of this year: In the 18 months that have passed since the 1947 convertibility debacle, confidence in the £ has been rising. In terms of hard currencies no less than in terms of the weaker European and Asiatic currencies, sterling is today adjudged to have a value more closely approximating the Bretton Wood parity than at any time since the war. That was three months ago, before this denigration by Tory financial writers got going. In the light of that evidence the Chancellor was quite right on Thursday last to say "That is that" to devaluation.

In conclusion I want to say only this: That there is no final positive remedy for this kind of disequilibrium which has arisen in international payments, unless each and every country will first make itself sovereign in monetary matters by taking away from private bankers the right, which they have usurped, to create money. In 1946 this Labour Government nationalised the Bank of England. In doing that, we removed out of our way an internal financial Second Chamber, only to find three years later that we are now confronted with an external financial Second Chamber, namely, the people who run what is called the International Monetary Fund, located geographically on American soil. Already the authority of that international body is being evoked by the less respectable, more cosmopolitan and least patriotic element of the party opposite, who want the veto of that body to be used to strangle at birth the welfare State in this country. The positive way out of all these things is that we should have in the world a financial system that will work, which the present one does not.

The financial system that will work internally is to arrange quite simply, through Budgetary methods, that in any given period the aggregate prices demanded for goods and services on sale internally shall not exceed the collective purchasing power available. Internationally, it will work by arranging that payments across national frontiers shall be made, not in dollars, gold or any international currency, but through a series of exchange clearing houses on a multilateral basis, with exporters being remunerated by their own Governments in local currency and importers paying their own Governments in local currency, with the result that a country like the United States, which wants to sell goods to the world, but not take goods from the world, will have the option of either importing goods or, under statutory limitations, eventually forfeiting any right to be paid for its exports.

But before we can have a system like that we have to exorcise in men's minds, and the minds of economists, the singular superstition that any form of money must necessarily be tickets for goods and must also, like the Bretton Woods gold dollar, be something of intrinsic value which can be stored. So long as that superstition exists, the financial system will not work, and the world will go from one crisis to another, from one slump to another, and from one war to the next; and that, as my right hon. and learned Friend says, will be that.

If there is any Member who is so singularly and childishly naive as to believe that banks do not in fact create money, I will end by quoting the "Financial Times" of last Monday, which in a very interesting book review quoted a remark of Dean Swift at the end of the 18th century, when the Bank of England was formed, that "half of the bank's capital will be real and the other half imaginary"; to which the "Financial Times" reviewer added the comment, which I hope escaped the notice of the right hon. Member for Bournemouth (Mr. Bracken): "I dare not think what Swift would have to say about our bankers today, when nineteen-twentieths of our money is imaginary."

6.3 p.m.

Colonel Houghton (Antrim)

Like many others who have been fortunate enough to be called in this Debate, I find there are many points which have been raised that I should like to take up. I should like to dissect Smith's Law which has been invoked in a very remarkable speech and I should like to go back to last Thursday's Debate, when the Chancellor of the Exchequer exhorted industry to bring their plants and methods up to date. If, as I think, he was considering American methods, I would point out that the elements in America's high output are not only efficiency both in methods and plant, but also high wages and hard work. During this Debate something has been said about hard work as well as efficiency, which is both salutary and good.

But as I have promised to be very brief, I shall turn straight away to a matter of considerable importance, a matter of sufficient importance to lead me, at any rate, to write to the President of the Board of Trade. I told him that I intended to challenge certain things he said at the end of his speech last Thursday, in a rather heated and stormy atmosphere. I am addressing him not as the hon. Member for the Ormskirk Division of Lancashire, but as President of the Board of Trade. In his former capacity, I have no doubt that the things he said were important, but coming from the President of the Board of Trade, the head of a great Department of State, they have to be considered and re-considered. If we turn to the OFFICIAL REPORT, we find that he said this: 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.

Hon. Members

Hear, hear.

Colonel Houghton

I doubt whether Members opposite will applaud just as much when I have finished my speech. He then went on to say: 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."—[OFFICIAL REPORT, 14th July, 1949; Vol. 467, c. 801–2] What I wish to ask the right hon. Gentleman is this: Has the deduction he has drawn from his reading of Tory speeches and articles in the Tory Press convinced him so completely that he, as President of the Board of Trade, really and sincerely holds the view that the deliberate policy of the Conservatives is unemployment and lower wages?

Mr. Crossman (Coventry, East)

Hear, hear.

Colonel Houghton

I am very interested to get that reply from the hon. Member for East Coventry (Mr. Cross-man). If the President of the Board of Trade holds that belief about Conservatives in and out of this House, then what part is he to play in this great drive for increased output? In his capacity as President of the Board of Trade, he will doubtless continue to address meetings throughout the country of textile workers, clothing and furniture manufacturers, and so on. If so, will he preface his remarks on each occasion, knowing that at least 50 per cent. of his audience will be Conservative, by saying, "I have come here to encourage you to produce more and better goods at cheaper prices, but I want you to know that I believe 50 per cent. of this audience who are Conservatives are not going to do anything about it, because they, as business men, are really only concerned with more unemployment and lower wages"? That is the point which has to be met.

I, as a business man, and, incidentally, as a member of the Grand Council of the Federation of British Industries, where I serve with my hon. Friend the Member for Edgbaston (Sir P. Bennett), believe that the President of the Board of Trade intends to continue his co-operation with such bodies throughout the country, but is he going to tell these bodies and associations, "I do not believe in your efforts at all, because I have deduced from the speeches of the Conservatives that you are concerned only with more unemployment and lower wages"?

While it is distasteful in a way to bring in personal matters, it is true that I am giving up politics at the end of this Parliament so as to concentrate once more upon industrial activities. I hope very much—and I do not think it is a pious hope, or a hollow aspiration—to increase employment where it exists and to provide some where it does not. So I am wondering whether, when I come to part company with the President of the Board of Trade as fellow Members of Parliament he will say to me, "I do not wish you good luck, because I do not believe in your intentions. I believe you are really going back to industry to create unemployment and lower wages."

Mr. George Wigg (Dudley)

I should like to ask the hon. and gallant Member this question. Doubtless he is aware that Sir Francis Joseph, a well-known industrialist in North Staffordshire, and Sir Hugh Chance, a well-known industrialist in the Midlands, sent out a confidential circular to businessmen asking them if they would give a proportion of their profits to Tory Party funds. Does he think that that was done to help the workers, or to further the policy of the Tory Party?

6.11 p.m.

Mr. Zilliacus (Gateshead)

The hon. and gallant Member for Antrim (Colonel Haughton), like so many of his party, is beginning to show a little discomfort at being "rumbled." Since he has asked a question of the President of the Board of Trade, I should like to quote a further passage from what the right hon. Gentleman said in last Thursday's Debate: Responsible Conservative leaders are advocating large cuts in Government expenditure. … Will they get up and say that, whatever other items of Government expenditure they would cut … they would not cut the social services, or food subsidies … and that they would not cut the programme of providing factories for the development areas?"—[OFFICIAL REPORT, 14th July, 1949; Vol 467, c. 802.] Could the hon. and gallant Gentleman answer that question?

Colonel Haughton

I have not that particular quotation before me, but I asked the President a straight question: whether he is laying his accusations against Conservatives in this House, the Conservative Party as a whole or Conservatives throughout the country, who represent at least 50 per cent. of those in industry? I do not feel that a counter question helps in any way to answer that question.

Mr. Zilliacus

In other words, as I expected, the hon. and gallant Gentleman has not been able to give an answer to that specific question, and none of us ever will get the answer for the simple reason that the Conservative Party are afraid to tell the country what is their policy. I do not think we shall even hear it at Wolverhampton on Saturday—not this part of it. Their attitude on these matters is one of belief in the law of the jungle tempered by political prudence and electoral hypocrisy. Their social morality mingles the intransigence of the impenitent thief on the cross with the unction of Uriah Heap. That is where they stand on these matters of domestic Government expenditure.

I wish to try to answer a remark made by the hon. Member for Rye (Mr. Cuthbert), who said that what the man in the street wants to know is what is wrong now and how we got into the present crisis. I shall try to answer that question in the light of that passage in the official communiqué which said: The general approach to existing problems must be based upon full recognition of their profound and long-term character. I shall try to situate the causes of this crisis in space and time. In space, it is obvious that the crisis is international, because it affects many countries, not only ours, and, therefore, in so far as the policy of the Government is responsible, they must be primarily responsible for failure to adjust our relations with other countries correctly—that is, responsible in the domain of foreign policy—and for that reason I am glad that the Foreign Secretary is present today to reply to the Debate.

As regards time, I think it is illuminating—and several speakers have already strayed into this field today—to look at the very suggestive parallel with what happened last time. That is where I came in, so to speak, because there is a haunting familiarity about many of the remedies being discussed today and many aspects of this crisis. After the First World War the whole of post-war reconstruction was based on an attempt to restore the prewar social order.

The first item in that programme was the removal of State control and the establishment of conditions favourable to private enterprise. There was also the stabilisation of currencies, the facilitating of international trade and investment, the development of social services and the creation of the League of Nations. The policy also included counter-revolutionary intervention to restore capitalism and a cold war even at the cost of supporting Fascism but masquerading as the defence of democracy against Communism. There was even a Western Union—the Locarno Agreements.

The whole of this policy collapsed in the great slump. Thereupon attempts were made, rather frenzied and incoherent, to apply a double dose of the orthodox remedies for capitalism in crisis. There were swingeing cuts in social services and wages, a vast amount of unemployment and devaluation. But all these remedies did not work. Production never got anywhere near the 1929 level; it lagged far behind. Unemployment remained at a level much higher than before the great slump. Partial recovery, such as it was, was chiefly due to increasing concentration on the armaments race.

The moral of the whole business was drawn by the senior Burgess for Oxford University (Sir A. Salter), who occupied a key post in the reconstruction fight after the First World War as Director of the Economic and Financial Section of the League of Nations Secretariat. He drew the moral in the early 30s in his books, "World Trade and its Future," "Recovery," "The Framework of an Ordered Society," and other works. The right hon. Gentleman's conclusion was that the reconstruction effort failed because it was directed to restoring the prewar social order. It overlooked the fact that the foundations needed renewing, strengthening and enlarging. The right hon. Gentleman went on record, in a broadcast, as saying that the only way out was sweeping advances in public ownership and control of industry and trade. I am sorry he is not here today, as I should have liked to ask him whether he still holds that view. I rather doubt it.

In Britain, the May Committee proposed extremely drastic measures of economy, cutting wages, social services and unemployment benefit. We went off the Gold Standard. But, nevertheless, unemployment rose to nearly three million. Before the First World War the irreducible minimum of unemployment was regarded as 500,000. It rose to one million between the first post-war slump and the great slump, and doubled again and stopped at two million after the great slump. In so far as there was recovery in our case, too, it was largely due to rearmament. Take this passage from the Report, publish on 23rd February, 1937, of the Unemployment Insurance Statutory Committee, of which Lord Beveridge was then Chairman: In view of the defence programme there is practically no prospect of an appreciable recession of employment from the present level for 1937 or for some time thereafter. On the completion of the intensive phase of the programme, however, and in the normal course of the trade cycle we should be prepared for a relatively severe recession. But nothing has happened to justify an assumption that levels of unemployment will be either materially higher or lower than those assumed in the original estimate of 16¼ to 16¾ per cent. That meant around 2,200,000 unemployed. That figure was mentioned by Lord Beveridge in 1936, in a speech in which he forecast that in the next few years unemployment would not go below 1½ million and would be likely to rise to 2,200,000.

On 29th January, 1937, Lord Beveridge said that if the arms race was stopped unemployment would rise again to nearly three million. On the same day the Chancellor of the Exchequer, Mr. Neville Chamberlain, said that unless the expenditure on armaments was reduced it would pull down the standard of living for a generation. In spite of this recovery being so partial, being accompanied by a high degree of unemployment, and itself being tied up with re-armament, we were, in fact, heading for a further slump. There was a race between the next war and the next slump and the next war won by only a short head.

To complete that picture of the past, which casts such an abundance of light on the present, and I hope not on the future, I would quote the following passage from a very remarkable speech on the arms race by the present Leader of the Opposition. In the House of Commons on 23rd April, 1936, he said: The Chancellor of the Exchequer used an argument about how expenditure would rise to a peak, then fall a little and then remain level but at a much greater height than at the present time. That is not the future as I foresee it. I cannot believe that, after armaments in all countries have reached a towering height, they will settle down and continue at a hideous level far above the present level, which is already crushing and that that will be for many years a normal feature of the world's routine. Whatever happens, I do not believe that will. Europe is approaching a climax. … Either there will be a melting of hearts and a joining of hands between great nations which will set out upon realising the glorious age of prosperity and freedom which is now within the grasp of the millions of toiling people, or there will be an explosion and a catastrophe the course of which no imagination can measure, and beyond which no human eye can see."—[OFFICAL REPORT, 23rd April, 1936: Vol. 311, c, 339.] That was what happened last time and how it all ended.

This time post-war reconstruction has again been based on the attempt to restore the pre-war social order. But there are significant differences. Last time the initiative was chiefly British and French and the Americans came in as what I might call half-time voluntary associates. This time the United States are carrying out this policy single-handed and are pressing Britain, Western Europe, Italy and Japan into service as more or less willing auxiliaries and vassals. Last time this policy covered the whole world outside the Soviet Union. This time one-third of humanity has contracted out and is proceeding to lay the foundations of Socialist economies by revolutionary methods. A Labour Britain is a fly in the ointment because we are trying in this country to do the same job gradually by Parliamentary methods.

Last time the workers were demoralised, divided and defeated. This time the position of the working-class is much stronger in Europe and in this country. Their refusal to submit to cuts in wages and cuts in social services is more determined and their will to Socialism is more effective. The most important difference of all is that last time this policy of restoring the pre-war social order was successful for ten years after the war and it was successful without an arms race. By that time it had raised up such powerful forces in the process of restoring capitalisms of counter-revolution and reaction in the shape of Fascism and its Tory accomplices in the West that when the arms race started after the slump it also exacerbated and spread Fascism; and so the arms race took us straight into a Second World War.

This time the whole policy has broken down barely four years after the last war; it has broken down, been deadlocked or defeated in the Far East, the Middle East, Eastern Europe, the Balkans and Germany, and it is failing in Western Europe, in spite of the unprecedented outpouring of material and money from the United States and in spite of an arms race several times bigger than the one that was regarded as crushing and monstrous before the war. These are, in their nature, temporary measures which could not in any case be long continued without some kind of breakdown.

The fact is that it is too late to restore the old order in Europe and Asia. I firmly believe that it is also too early for the diehard defenders of the old order to drag their peoples into a third world war as their last despairing gamble. The final stroke is that the United States, which is the fount and origin of this policy, is itself getting involved in difficulties. I do not want to exaggerate; I do not think there is any reason to be pessimistic and assume that the United States is heading today for a major slump. It is fervently to be hoped that nothing of the sort will happen because the results would be terrible indeed for a large part of humanity, including ourselves. The present beginnings of a recession may level off and pick up.

The United States' reserves of economic strength are very great indeed. The President and his advisers have put forward a number of bold measures which, if they were applied, would probably save the situation. These measures, incidentally, include such measures as increasing the minimum wage from 2s. to 3s. 9d. an hour, strengthening the social services, expanding the housing programme, starting public works, more and cheaper exports, a cut in taxes—and never mind about unbalancing the Budget. On the other hand, it would be foolish to be optimistic, because whereas the President proposes Congress disposes. Congress has already disposed of the social security programme on which the President was elected and is likely to give short shrift to his present proposals. The only part of the proposals that seems to interest Congress is the proposal to cut taxation. The uncomfortable truth is that the majority of Congress belong to the economic stone age, like the Leader of the Opposition, and many of its members are economic Neanderthalers, like the hon. Member for Orpington (Sir W. Smithers).

In the meantime, Marshall plan countries are in such a weak position that even the beginnings of an American slump could create very serious difficulties. The fact has to be faced that the whole of the reconstruction effort based on American aid and leadership is in danger of collapsing, in general because it is directed to restoring the pre-war order and in particular because the United States business community has resisted planning and price controls, social reform and the redistribution of wealth through taxation, and has instead gone in for inflation, massive rearmament and a drive for foreign markets and fields of investment. Congress and the Administration have been unable to check these tendencies, to cope with growing unemployment or to bring down tariffs.

As a result, there is a permanent export surplus and a chronic dollar famine in the world. On top of all that the United States policy of anti-Communist intervention and anti-Soviet power politics has led the world back to the balance of power and has started a new arms race, embodied in the Atlantic Pact, and has imposed an excessive arms burden on Western Europe as well as creating obstacles to trade with Eastern Europe and the Soviet Union.

I think it would be dangerous to rely on the United States to get us out of the mess into which, however good the intentions—and many of the intentions have been very good—they have been very large instrumental in landing Western Europe. If any one has any illusions I would urge them to consult the views of Mr. Snyder as recorded in the Economic Review of the "New York Herald Tribune" of 11 th July. Mr. Snyder is reported as being strongly opposed to the European view that what is wrong is the permanent export surplus of the United States and the failure to cope with unemployment in the United States. He denies that there is any recession and says the problem is solely one of productive efficiency in Western Europe, that competition and a freer world trade will also help Europe greatly and that in no circumstances will any more dollars be forthcoming from the United States than have already been appropriated.

This report further says: Europe has now been warned that the United States will not support, and, in fact, will use her enormous wealth to oppose any measures, national or international, which tend to restrict a growing business among all nations and all currency areas. For Great Britain, this positive renewal of American economic policy … presents the sobering possibility that the sterling area, as now set up, may have to be abolished. It also means: the United States oppose bilateral trade treaties and bulk purchase; pressure for the devaluation of the £; restoration of private enterprise, or at least a full stop to any further measures of Socialisation; cuts in such matters as house building, expenditure on schools and hospitals, social services, food subsidies, and so on. On top of that, it means choking our trade with Eastern Europe and the Soviet Union, and the piling up of arms burdens.

It is no good the Government pleading that they had no alternative to landing us in this situation. I in no way regret that I voted for the Government on the American loan, because I believe there was no alternative at that time. But immediately that loan was acquired the Government should have gone all out to increase trade with Eastern Europe and to cultivate friendly relations with those countries. There was at that time still a vast amount of goodwill towards us. Instead, the Foreign Secretary pursued a policy based upon the same emotional reaction as that of the Leader of the Opposition, a policy of hostility.

Mr. Crossman

The hon. Member says that the Government were not wrong to negotiate the loan but should have followed it by increasing trade with Eastern Europe. Will he say how much production there was in 1945 and 1946 which was available for supplies to this country from Eastern Europe at that time? If there was no likelihood of such supply, will be say what was the good of expecting much trade?

Mr. Zilliacus

I am glad that the hon. Member has raised that point. At that time I had a purely informal talk with the Polish Minister of Industry—I think I may mention his office—and he said: "We have a planned economy and you have a planned economy. Your planners and our planners are perfectly able to sit down and work out, on an ascending scale over a period of years, what we could provide you with, by way of food and raw materials, in exchange for your manufactured goods. The first year it would be a trickle, the second year a stream and in the third and fourth years we should be able to produce very large quantities." We lost our chance of starting then and of getting in on the ground floor. Today we should be reaping benefits if we had done that.

The next step was, having put all our eggs into the basket of American capitalism, a good half of them were smashed. Controls were taken off, prices shot up and we lost nearly half the value of the loan. Hence the necessity for the Marshall plan. Here, for the second time, we missed our chance. I said at the time in the House of Commons what I think is obviously true that we should have insisted upon using the European Economic Commission of the United Nations as the executive organ of that plan. If we had done that we should not have lost Eastern Europe and the Soviet Union from the plan. The whole thing would have taken place on a far sounder foundation, or else we should have been faced with the fact that the rulers of the United States were not genuinely concerned with aiding Europe but were primarily concerned with splitting Europe and preparing Western Europe for war against Eastern Europe.

Having made this initial error and committed ourselves to the United States, it was logical in the period of American boom to go all out to step-up exports to the United States. The Government did in fact achieve a very considerable measure of success in that short-run policy. But it is folly to continue with that policy today, when the problem we are facing is that of an incipient American slump, with the consequent contraction of the American market and growing unwillingness on the part of the United States to buy from abroad. To show how ridiculous that policy is becoming in the present situation, I venture to refer to an interview which appeared in the "Manchester Guardian" of 25th June with the chief British trade adviser in the United States, Mr. Neville Blond. He was reported as follows: He felt optimistic about the chance of increasing British exports to the United States. Among British products which he singled out as selling well in America at competitive prices are: whisky, cocoa preparations, biscuits, chocolate, table waters, pickles and confectionery. There is a Dutch legend about a little boy who stopped a leak in the dyke with his arm until the rescuers came. But I do pot believe that we are going to be saved by a glamorous Blond plugging the dollar gap with pickles and table waters, nor even with biscuits, cocoa preparations, chocolates and whisky.

The truth is that neither the Government nor the Opposition sees a way out of this situation, although the Government have a short-term policy, whereas the Opposition do not appear to have any policy at all. The vision of both of them on this issue is blinded by their obsession about one-third of humanity, and about the working class leadership of France and Italy, which has had the temerity to go through a social revolution and to adopt rough-and-ready methods. I am referring, of course, to the Communist leadership of those countries. The emotional reaction of the Government and of the Opposition leaders to those countries, with which we must do business if we are to get out of this mess, is one of fear and hatred. The Leader of the Opposition has frequently congratulated the Foreign Secretary, the Prime Minister and other Members of the Government, on sharing his emotional attitude to Communism. All I can say is that Members of the Government richly deserve the commendation of the Leader of the Opposition.

I do not mean it offensively, but it is sociologically true that there is a curious parallel between their attitude and that of the late Mr. Hitler and Mr. Goebbels. The Fascists held that all social unrest was due to conspiracies, plots and malevolent action by what they used to call Judeo-Marxists, who were obeying the orders of some mysterious centre acting in pursuance of the Protocols of the Elders of Zion. Today, the idea seems to be that all social unrest is due to Communist conspiracies, plots and agents acting under orders from the Cominform, which itself is presumably acting in pursuance of the Protocols of the Elders of the Kremlin. Every day I expect some honourable and excited Member to pop up and announce that he has seen strike leaders with snow on their boots. In that case I suppose they will have arrived on flying saucers.

The Opposition are at any rate consistent in these curious beliefs. They do not believe that anything very much is wrong with Capitalism, and so naturally anyone who believes in drastically changing the social order must have something wrong with him, and is probably a traitor to his country. I understand that view, which is consistent. It is equally consistent that those who start from those intellectual and moral premises believe as a remedy in more hairs of the dog that bit them last time. Their remedy' boils down to: Back to 1931 in home policy and, in foreign affairs, go all the way with the United States in making, Britain safe for the American investor and the world safe for private enterprise, in stepping up the arms race, in warming up the cold war and in creating the risk of a shooting war.

Unfortunately, the Government are caught in the dilemma of their own schizophrenia. For four years they have been pursuing a Tory foreign policy and a Socialist home policy. The result is that they have landed themselves in a situation, as the hon. Member for East Aberdeen (Mr. Boothby) pointed out last Thursday, in which they are trying Socialism at home and economic Liberalism abroad. As he says, we cannot have a planned Socialist economy at home and international competitive anarchy abroad.

More curious is that no one has been more eloquent than the Prime Minister about the impossibility of separating foreign affairs from domestic policy. He has a very strong passage on that in his book, "The Labour Party in Perspective" which has just been re-issued. He rejects the whole idea of national unity in foreign policy, and says that the Labour Party has no use for that idea. He concludes: There is a deep difference of opinion between the Labour Party and the capitalist parties on foreign as well as on home policies because the two cannot be separated. The foreign policy of the Government is the reflection of its internal policy. Even the election publication, "Labour Believes in Britain," says: Foreign affairs and domestic affairs cannot be separated. That is true. That is why I agreed with the delegate at Blackpool whom I overheard saying, "Stafford is carrying the can for Ernie." We have had a "Winston and water" foreign policy for four years and now we are ending up with a "Coalition and Coca-Cola" home policy. That is why I am very glad that the Minister of Health recently warned against the dire consequences of any attempt to go back to the idea of a Coalition.

As the crisis develops the Government will have to go either to the Right or to the Left. To the Right means back to 1931 at home because we have already gone back to the balance of power and an arms race abroad and are utterly subservient to American foreign policy. Going to the Left means more Socialism at home and it means at long last a break with the Tories in foreign policy and an attempt to carry out the foreign policy on which the Labour Party was elected.

The road back to 1931 is doubly closed. In the first place, if it did not work in 1931 it cannot possibly work today when the rot has gone much further and capitalist society is in far worse case than it was even after the great slump. For instance, are we to compete with Italy, France, Western Germany and Belgium in lowering the standards of living of the workers and creating a pool of unemployment? If so, how can we explain the fact that these countries are much worse off in all these respects than we are but are no better off so far as their trade is concerned? Or are we to compete in de-valuation with those countries, who are several jumps ahead of us already in de-valuation and who will, I am sure, always beat us on this point?

Mr. W. Fletcher

The hon. Gentleman said that these countries were worse off economically than we are. Will he quote a few facts about France to substantiate that?

Mr. Zilliacus

Yes, Sir. The standard of living of the French workers has gone back to 1884. It is half what it was in 1938. That does not matter to the hon. Gentleman as much as it does to those of us on this side of the House. By these methods we would not win the American market but merely present the people in the United States and Canada with irresistible arguments for defending the standards of living of their people against competition by pauperised labour. That is the argument we should find starting up in those countries for taking additional measures of protection. All we should do would be to lose our home market by destroying the consuming power of our people, with no corresponding gain in international trade.

In the second place, the road back to 1931 is closed because the workers are no longer fatalistic and resigned about mass unemployment and cuts in their standard of living and social services. They have got it firmly into their heads that these things can be provided by government and should be provided by government, and if they cannot get them under capitalism, they will try to get them under socialism. The road back to 1931 is so heavily mined by the will to resist of the workers that any government that tries to tread that road will be blown up by the explosion of popular wrath. That has to be remembered by would-be realists in this field.

To get out of this mess, I agree with Sir George Schuster's recent letter in "The Times," that it is not possible to rely on the free play of the price system of private enterprise …. National plans and carefully concerted international arrangements are necessary. I agree also with the somewhat unexpected article I found in the "Wall Street Journal" of 29th June, outlining what they call: A reasonable American policy in the cold war breathing space. I believe that it also outlines a reasonable British policy. It said: On the one hand, abandon the idea of turning Western Europe into an armed camp and thereby permit America and Western Europe the chance to develop economic strength. On the other hand, trade and still more trade. Trade between Eastern and Western Europe (last year it was only 42 per cent. of pre-war); trade between the United States and Eastern Europe as well as Western Europe …. As a very practical matter, it ought to be realised that if trade between Eastern and Western Europe is not revived the Marshall Plan will be a failure and the United States will be expected to support Western Europe until the end of time The importance of reviving and expanding trade with Eastern Europe in this situation can hardly be exaggerated. The industrial Western countries cannot live by taking in each other's washing; they must resume large-scale business with the agrarian economies of Eastern Europe, which are expanding, planned and slump proof economies.

The United Nations European Economic Survey for 1948 has drawn attention to the success of these countries and the extent to which they are advancing from bilateral to triangular agreements. We could enter into agreements with those countries which would be not only bilateral agreements but would eventually be regional multilateral agreements for the exchange of goods on an ascending scale. These are the lines on which trade could be expanded, and which we should look to for a way out of this crisis. At home it means a series of drastic measures, re-planning for maximum export to the sterling area and to the soft currency areas, and for fitting into these multilateral regional agreements as well as mutual tariff preference groups.

This might mean a revival of the Ministry of Production, more controls and measures of nationalisation, and the planning of exports as comprehensively and stringently as we plan imports today. It may mean unpleasant things such as reviving the Essential Works Order, a national wages policy, a capital levy, revision of compensation agreements. It would certainly mean slashing the arms budget and conscription in half, limiting and taxing profits, the workers sharing in the management of nationalised industries and economic planning. Wages would be the first charge on industry; the social services and the stability of prices the first charge on the Budget; full employment and maximum production the first responsibility of government; and "Forward to Socialism," not "Backward to capitalism," the first principle of action.

6.48 p.m.

Mr. Peter Thorneycroft (Monmouth)

The hon. Member for Gateshead (Mr. Zilliacus) said that it was too late to restore the old order. I gather that his solution to our problems was to smash up what was left of our industrial and economic system as quickly as possible, and, I gathered from an intervention, rather quicker than the hon. Member for East Coventry (Mr. Cross-man) was really quite prepared for.

Mr. Crossman

Hear, hear.

Mr. Thorneycroft

The hon. Member for Gateshead took opportunities during his speech, so often taken by hon. Members opposite, of having a quick sneer at the United States. I gathered that he supported the loan and borrowed the money, but he now refers to Congress as belonging to the economic Stone Age. His criticism of the Government was not for borrowing the money from the United States but for not dishonouring all the terms upon which they had borrowed the money as quickly as possible after they had actually got it.

Mr. Harold Davies (Leek)

That was the hon. Member for East Aberdeen (Mr. Boothby).

Mr. Thorneycroft

That suggestion was rather characteristic of the hon. Member for Gateshead.

Mr. Zilliacus

rose—

Mr. Thorneycroft

I have not time to give way. The hon. Member has had 38 minutes and there are other hon. Members who wish to speak. Speaker after speaker from the benches opposite had this as their main theme; "It was not our slump but somebody else's." "Anybody's baby but our own" has been the main cry.

I have listened to almost every speech made in this Debate. I have heard the Americans blamed. Heaven knows, we are indebted to them for a lot, but the number of people who have analysed the American problem and offered to solve it, is nobody's business. The Belgians have been blamed. All the people from whom we have borrowed money have had their whole economy examined in detail on the Floor of the House. The bankers have been blamed. Bretton Woods has been blamed. It has been suggested that Lord Keynes ought to have done something about it in America, that they ought to fix their prices or that we ought to change the price of gold. A hundred and one different cures have been put forward.

Mr. Harold Davies

By the Leader of the Opposition.

Mr. Sydney Silverman (Nelson and Colne)

It was the hon. Member's Leader who said that.

Mr. Thorneycroft

I am saying what has been put forward in this Debate. None of these things has anything to do with the real problem that confronts us, which is that large sections of the population in this country have not the faintest idea that there is a crisis at all. That is the main problem which confronts us at present, and when I listened to, say, the hon. and gallant Member for North Portsmouth (Major Bruce) I begin to understand why. Surely it is time to drop this old stuff about which party will slash the social services or which party will introduce unemployment; surely, in this crisis and at this moment which I should have thought was grave enough, it is about time to cut some of that party clap-trap right out?

Mr. Follick (Loughborough)

Have a Coalition.

Major Bruce

The hon. Gentleman's party raised it in the first instance, and I only referred to what was said by his hon. Friend the Member for Chippenham (Mr. Eccles).

Mr. Thorneycroft

The hon. and gallant Member made many references to the fact that if the Tories were returned, in his view they would introduce unemployment.

Mr. Shurmer (Birmingham, Sparkbrook)

And so they would.

Mr. Thorneycroft

When my hon. and gallant Friend the Member for Antrim (Colonel Haughton) was speaking, the same thing was said about him. Hon. Members know well enough that unemployment may come in this country; quite likely it may, but it will come not through the act of any politician but through the relentless march of events. That is the real danger we are up against, and it is a deception on the British public to pretend that politicians in any party desire to see that sort of thing brought about. Hon. Members opposite talk about a slash in the social services. It may be that there will be a savage reduction in everybody's standard of living. It may well come, but it will not be the deliberate act of a political party that will bring that about. I know perfectly well that no hon. Member opposite in his heart believes that it would be the act of a political party. [An HON. MEMBER: "We lived through it."] We all know that it may come as an outcome of this crisis, but surely we may go—

Mr. S. Silverman

Do not talk such nonsense.

Mr. Thorneycroft

The hon. Member for Nelson and Colne (Mr. S. Silverman) interrupts a lot. Hon. Members on all sides ought to realise that the situation in recent months has changed.

Mr. Silverman

You have not.

Mr. Thorneycroft

We are not now debating who would or would not cut the food subsidies—

Mr. Silverman

Who did?

Earl Winterton (Horsham)

Go outside.

Hon. Members

Order.

Mr. Thorneycroft

If I might have the attention of the hon. Member for even a moment—

Mr. Wigg

rose—

Mr. Nigel Birch (Flint)

Sit down.

Mr. Wigg

Is it in Order, Mr. Speaker, for the noble Lord the Member for Horsham (Earl Winterton) to refer to the race of my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman)? Surely that is a strange thing in the British House of Commons?

Mr. Speaker

I did not hear anything said.

Mr. Thorneycroft

If I might resume my argument, I was saying that the real gravity of the situation we have to face can be summed up in this way, that whereas a few weeks ago, people were debating whether there should be a cut in the food subsidies, we are now facing whether there should be a cut in food, which is a much more realistic thing to be talking about.

I would say this to the right hon. Gentleman the Foreign Secretary who is to reply, because he is well qualified to deal with this aspect of the matter. It seems to me that the measure of the failure of the Government to bring the realities of this situation home to the British people is to be found in the fact that we have a dock strike and a dollar balance problem at one and the same moment. If we are to solve this problem, if we are even to create the conditions in which we could solve it, we have to create those conditions here at home.

I will not make a long speech about the dock strike for we had a Debate about that the other day, but I want to say that I do not believe that it is Communists, or at any rate Communists alone, who are responsible for that strike. I believe that for 25 years men in that industry have been told that work does not matter, that it merely puts money into the pockets of the rich—

Mr. Harold Davies

Do not be so ignorant.

Mr. Thorneycroft

I believe they have been told that exports do not matter. [HON. MEMBERS: "Oh!"] Certainly. That is one of the things that have been said up and down the industrial valleys of South Wales and in my own home in the industrial North. Those statements are made, and if one goes on saying those things long enough to men, then one day they begin to believe them.

Mr. Harold Davies

Would the hon. Member give way one moment? Is he implying that up and down the valleys of South Wales the South Wales miner did not know the value of export coal?

Mr. Thorneycroft

If they did, it was not due to the Minister of Health, for it was he who claimed that exports were something which merely put money into the pockets of the rich, that it was a hobby which the wealthy played at. If one says those things long enough it leads men to believe them.

Let me take one other example. This is a difficult crisis to solve—almost an insoluble one—but most people would agree that some reduction in costs is one of the things which would help us towards creating the conditions necessary for a solution. How do hon. Members opposite do that? The railways at present are losing between £20 and £30 million, and what does the right hon. Gentleman the Minister of Transport do about it? He goes along to the Railway Clerks Association and says it does not matter that that great national monopoly is losing money because we can take the profits from the road section and make up the losses on the railways. Now what does Mr. Figgins do in those circumstances? Mr. Figgins does what a great many other people would do, charged with his job of seeing that the railwaymen get the best possible deal; he puts in a claim for 10s. a week all round. It is difficult to see that that is the right way at a moment of crisis to bring home matters to the men.

The Secretary of State for Foreign Affairs (Mr. Ernest Bevin)

Would the hon. Member mind my calling his attention to the fact that we would not have a transport system in London at all, if the buses had not paid for the tubes for years.

Mr. Thorneycroft

It may be that the right hon. Gentleman the Foreign Secretary and the Minister of Transport think that this is a perfectly good Socialist idea. All I have said is that at this moment, when our costs are vital, it seems an extraordinary way of trying to bring them down.

That brings me to the speech made last Thursday by the Chancellor of the Exchequer. It was a great occasion. The right hon. and learned Gentleman had an opportunity of making a speech which would bring home to everybody in this country, no matter in what jobs they work, just what we are really up against. I, for my part, expected him to do it. What did he say? He said that we would have to cut a little tobacco, but that we could go on smoking over the holiday, probably until the next Election came along. He said we would cut cotton but it would make no difference whatever to employment in Lancashire. He said that we would cut timber but, of course, houses would go up just the same. [HON. MEMBERS: "Hear, hear."] Hon. Members say, "Hear, hear," but how much did all this do—

Mr. Wyatt (Birmingham, Aston)

rose—

Mr. Thorneycroft

Let me finish my sentence. How much did that speech do to bring home the gravity of the problem with which the British people are faced?

Mr. Wyatt

rose—

Mr. Thorneycroft

Just let me finish what I am saying. When they picked up their newspapers the next morning and read that they were to have more meat and an assured supply of lollipops, what did that do really to bring home to them that this country was right up again it?

Mr. Wyatt

Is the hon. Member's real complaint that the crisis is not yet severe enough for the Tories to be able to produce the panic conditions of 1931?

Mr. Thorneycroft

Quite plainly, I made a mistake in allowing the hon. Member to make an intervention of that character, which does not merit even an answer. He should know by this time that what faces the country is quite grave enough without any party wanting to make it worse. If that is the attitude of hon. Members opposite, things will be made worse instead of better. What we must do is to face the position here, in the House of Commons, and in the country. If we fail to do that, we are not likely to get very far. What the party opposite should have been saying is the truth: that they have sold every asset they could lay their hands upon and every gift which has come their way.

Mr. Shurmer

Who to?

Mr. Thorneycroft

They have borrowed all the money they possibly could. That is what they should have said, and they should have added that even so, they were not able to make both ends meet. Let me put it this way. The Socialist Party should have said to their supporters in the country, "Chums, you have had it. We have borrowed money from the neighbours. We have cashed in the savings certificates. Now we have sold the dining room furniture, and still we cannot made a do of it." That is the truth of the situation.

Mr. Shurmer

We have not robbed the Post Office savings yet.

Mr. Thorneycroft

The Chancellor and numerous other hon. Gentlemen opposite have said, "This is something which is due to a deep maladjustment of world affairs."

Mr. Harold Davies

So it is.

Mr. Thorneycroft

That is one of the most dishonest half-truths ever uttered. Of course there is a chronic maladjustment of world affairs. Most of us found that out a long time before we reached the present age and experience of the Chancellor of the Exchequer. We all know that the job of a statesman is to govern in spite of circumstances and not because of them. I will only say this about that chronic maladjustment of world affairs. Hon. Members opposite ought not to try to blame all this upon an American slump. I have spoken recently to quite a number of Americans who have arrived in this country. They had never heard of this slump until they got here.

Miss Jennie Lee (Cannock)

rose—

Mr. Thorneycroft

One moment. The hon. Lady has made a speech about this and before she interrupts I should like to quote what the "Economist" had to say. It said this: The British Government's economic policy is so delicately balanced between contradicting rigidity that it cannot be made to work at all except at the height of a world boom, and then only with the aid of a dollar subsidy. If that is true, and if a slight recession of prices in the United States is inevitably going to produce a crisis here, the sooner we have a change of Government the better.

Miss Lee

I hope the hon. Member realises that the four million unemployed in America are not able to afford to come here. Some of their friends, however, are over here, and one of the important things is that millions of Americans agree entirely with us on the remedies both for their situation and for ours.

Mr. Thorneycroft

I have no doubt that the hon. Lady sincerely believes what she says, but the hard fact is that employment in the United States is now at a peak level and production there is soaring at a tremendous speed. If there has been some recession in prices it really is not a matter for us to complain about.

There has been a great deal of argument about whether we ought to have a multilateral or a bilateral system of trading. My hon. Friend the Member for East Aberdeen (Mr. Boothby) spoke a few days ago in favour of the bilateral system. I believe very much in the merits of a multilateral system. What we shall have, probably, is some mixture of the two. But there is one system which could not conceivably work under any circumstances at all, and that is the system for which the Chancellor of the Exchequer has argued. We could not conceivably have a multilateral system, based on free competition in the markets of the world, at the very moment when the party opposite are pursuing a policy of eliminating competition at home. Of conditions outside this country I say also this: whether we have a multilateral system or a bilateral system, we shall not get out of our difficulties unless in the long run we make what the world wants and when the world wants it, and we produce at a price which the world is, prepared to pay. That ought to be the real lesson of this Debate, and it is the direction in which we ought to be directing our minds.

I want to say what I think is the fundamental factor of our problem here at home. Right hon. and hon. Gentlemen opposite have never troubled to find out the way in which this country managed to keep 40 or 50 million people living in these islands. Despite all their propaganda, 40 or 50 million people have lived here and, by and large, they have lived at a steadily rising standard of living. The conditions under which we lived and the way in which it was done were due to our great natural resources. We had a great coal industry—

Miss Lee

Cheap coal.

Mr. Thorneycroft

—and we had cheap transport. Above all, we had a free competitive system. We could seize an opportunity in every market of the world. If we lost one market we could jump into another. We were flexible. We used our resources quickly. I know it can be said that we paid—and, no doubt, we did pay—a very high price for that system—I am not denying that for a moment.

Mr. Shurmer

We had three million unemployed.

Mr. Thorneycroft

At one moment we had two million unemployed—

Mr. Shurmer

We had three million unemployed.

Mr. Thorneycroft

That was only under the hon. Gentleman's own Government. I hope hon. Members will respect my complete sincerity when I say that we paid a price for that. Of course, we did. Of course, the system could be improved. But if the party opposite set out to smash that system altogether, we shall not be able to keep 40 or 50 million people living here, certainly not at the standard of life which any hon. Member in this House will think of tolerating.

What hon. Members opposite fail to see is that this country's problem is utterly different to the problem which confronts the Soviet Union or the U.S.A. Those are large, different countries. They have much more within their compass. A Government in either of those two countries, if it so wished, could control the producer, the distributor and a great number of consumers. We cannot do that. We can control only a few of the producers. Everybody knows that we cannot control the markets of the world. Systems which are applicable in other countries, therefore, are wholly inapplicable here.

Mr. Crossman

The hon. Member has made a very important point about our not being able to control the markets of the world. Is it, therefore, quite fair for him to forget that it was a sudden recession in American stock prices of Malayan tin and rubber, of Indian jute and of Australian wool which caused four-fifths of the drain on our dollars? It was America, and not we, who were controlling those markets. Therefore, is it so unfair to say that the slump in America has something to do with the situation?

Mr. Thorneycroft

The hon. Member is bearing out exactly what I am saying.

Mr. Crossman

Good!

Mr. Thorneycroft

What I am saying is that this country, however much we would like it—however much the hon. Member would like it—cannot control all the markets of the world. Sometimes people in those markets are buying, and sometimes they are not. We cannot control them over here. Therefore, it really is no good trying to produce or to follow a system which demands, as part of itself, that we control both the producer and the consumer.

What should any Government be trying to do now to get us out of our difficulties? They should be trying to get dollars by every possible means, not because dollars are nice things to look at, but because with them we can buy the food and the raw materials which are vital to our system. That is what the Government should be doing. All party policy, all doctrinaire stuff, should be shelved in order to get the dollars. Dollars have to be earned, but what do the Government do to earn dollars? What are they doing to the insurance companies? I have an interest, but not a nationalisable one, in this industry. Everyone knows that our competitors in insurance used to say, "Do not insure with the British companies because we think they will be nationalised." We indignantly denied that, but now it is to be proved true. Can anyone suggest that that is a way of getting dollars? Quite plainly it is not. It may be good Socialism, but it has absolutely nothing to do with the survival of this country in a moment of really great crisis.

I am not a great economist, but I am convinced that one way of getting dollars is to encourage American investment in the sterling areas. But, if people want their money invested, they want a return on it, and taxation does undoubtedly affect the returns on investments. Above all, they do not want the investments taken over quite arbitrarily, at a moment's notice, by a Socialist Government. That is no inducement to American private interests to come over here. The hon. Member for Barnet (Dr. Taylor) said that that was all right, that it is only cement and sugar. But is it only cement and sugar? I did not know hon. Members were so timid, but thought they wished to go ahead with Socialism, and if I read aright the writings of the hon. Member for Cannock (Miss Lee) in the "Tribune," I think I am right.

Miss Lee

Yes, quite right.

Mr. Thorneycroft

How do hon. Members opposite expect Americans to invest dollars over here merely to have those industries taken over by the hon. Lady's friends? That seems to be the situation which confronts us; the country has not been brought up to the real situation which exists, and the Government in power are soft peddling its arguments and dare not talk of the realities with which we are faced, but take refuge in some talk of the maladjustment of world affairs. If I find myself sinking in the middle of some bog with the earth quaking about me, I might well talk of maladjustment and decide to take a better guide next time, or even not to come that way again, but I would try to get my feet on to something solid and to get out by my own efforts. That is what the Government have to do, and what the people have to do, and the first step towards that is to stop pulling down the economic machinery of this country and to start building it up again.

7.13 p.m.

Mr. Follick (Loughborough)

I have listened to nearly all the speeches in this Debate and I do not think any has really touched on the root of the problem. The hon. Member for Monmouth (Mr. P. Thorneycroft) said it was insoluble.

Mr. P. Thorneycroft indicated dissent.

Mr. Follick

I do not think it is insoluble. I think there is a solution to this problem. But, before going into that, I will analyse how we got into this trouble, because even the Chancellor's explanation of what we are going to do immediately will not get us out of the trouble. It may get us out of the immediate difficulty, but there will be troubles for some long time to come, unless we get at the root of the problem.

We must not forget that this country has been through two major wars. We went into the first major war four days after France and Russia, and remained in long after every other nation. We were the first in, in the Second World War, and the last out. Wars cost money. America came into the First World War in the third year only when she had been forced into it by the killing of American citizens. She came into the Second World War in the third year only after she had been attacked by Japan. There was no indication to the other Allies of America's intention, whether she would come in, or stop out of those wars. But, in the meantime she had taken advantage of the circumstances to invade other people's commercial markets and make herself terrifically prosperous in the markets which she had been able to attain because the other great industrial nations had been engaged in warlike operations.

In neither of the two wars did America go over to fully militarised industry. All the time in both wars she not only maintained her commercial industry, but also advanced her industry in what were formerly other people's markets. The trouble we are having at the moment is over the bilateral agreement with the Argentine and about our taking their market but we are in reality only recovering a market which we formerly held.

That is one reason for the terrific expansion of American industry. That expansion has been at the cost, and remains at the expense, of every other industrial nation in the world. While we were fighting, the Americans were improving their industrial status. When the Second World War broke out, on account of availability of skilled labour in America and her distance from bombing, we developed and implanted industries in America with our overseas investments to supply us with the necessary military equipment for carrying on the war. Those plants which we had to develop and support in America were the nucleus of the military expansion of America when she entered the war. By that expansion of industry, doubtless, we saved hundreds of thousands of American lives.

In one of Roosevelt's fireside talks, in which he spoke of a neighbour's house being on fire, I heard him say, "When your neighbour's house is on fire, you help to put it out by whatever means you can, and when the danger is past you hand back whatever equipment was given to extinguish the fire." What the world is suffering from today is really the death of Roosevelt. He was followed by a very capable man, but one who had not 14 years Presidential experience and 40 years of public life. Roosevelt understood exactly how to handle his people and he handled them rightly.

No matter how skillful Truman might have been, he had not this experience. The result was that almost immediately the war was over, a telegram was sent to the Prime Minister terminating Lend-Lease without any negotiation or previous warning. Had Roosevelt lived, that would never have happened. There would have been proper negotiations about the termination of Lend-Lease which might have extended over a long period. The result of the action taken was that we were immediately forced into a dollar difficulty. We had had no time to re-equip our industry. Our industry had been overworked and partially depleted; it had to change over from being a war-time industry to a peace-time industry.

With a great amount of difficulty we negotiated the American Loan. I voted against that loan. I could not help reflecting that if we were unable to pay the American debt which Baldwin settled on behalf of Bonar Law in 1923, how should we be able to pay, under much worse conditions, 33 million dollars a year from 1951? I could not see that it was possible. If one binds oneself financially to another nation without the hope of being able to repay that nation, then one binds oneself politically, and I did not want this nation to be bound politically to any other nation in the world.

Apart from that, I could see quite clearly that with an over-geared market—and the American market was over-geared and reaching beyond its capacity in 1945 and early in 1946—the throwing of £1,000 million of orders on to that market was bound to force up the price of every class of merchandise. As a result of the convertibility clause and the terrific rise in prices that took place after the granting of the American Loan, I very much doubt if we ever received the value of a quarter of that loan. We are due to start paying back the full loan in 1951.

Some six months elapsed between the application for and the granting of the loan. In that period not only had prices soared but soaring prices forced wages up. That made the loan of little worth to ourselves or to any one else in the world. That is really the cause of the difficulties through which we are now going, and Marshall Aid is only the American recognition that it was a very bad thing—not to use a worse word, it was an unbusinesslike thing—to stop Lend-Lease in the way they did without any negotiation. Marshall Aid is, in fact, only a continuation of Lend-Lease.

I said that I intended to offer a solution to this problem. I have given as briefly as I could an analysis of the cause of the trouble through which we are going. Not only are we going through this struggle, but despite the apparent prosperity of France and Italy, about which I know as much as anyone in the House, there is overhanging those countries the shadow of trouble probably worse than we are experiencing here. In Italy there are 120 Communist Members of Parliament in a gathering of, I think, 550. That is very dangerous, Italy being so close to Austria, where the Russians are still in occupation. To turn to France, I know quite well that I can obtain what I like there by paying for it. But how about the man who cannot pay, who cannot go into a first-class restaurant or stay in a first-class hotel? We have to see that he gets a decent meal also. Both in France and Italy some are getting far too much and some are getting far too little. For that reason there is a very threatening strike of the peasants in Italy. I have never before known the peasants in Italy to strike.

In considering the solution of this problem, one has to look a long way back. In 1900 our population was 42 million, including Ireland. Today it is more than 50 million without Ireland. In 1900 we were at the very apex of our prosperity. We had about 85 per cent. of the oceangoing shipping of the world either under our own or another flag. We transacted about 90 per cent. of the marine insurance of the world. We were bankers for the whole world. London was the sole centre for arbitrage and agiotage; the whole of both was worked from the City of London. In brokerage, whatever deal there was in the world of any importance had to come to London.

Yet the prosperity which this country enjoyed in 1900 could only sustain 42 million people, including Ireland. Today we are trying to sustain, feed and bring happiness to more than 50 million people. When, a few months ago in this House, I spoke about a 50 million population I was laughed at; the official figures today are more than 50 million. Between 1900 and 1914 emigration from this country proceeded at a rate of a quarter of a million a year; that is to say 3,500,000 people emigrated between 1900 and 1914. By this large-scale emigration we populated our Dominions; Canada, Australia and New Zealand were developed by our population.

We provided markets for our produce and our merchandise in those countries, and today if the figures are analysed it will be found that the only reliable markets which we have in the world are in our own Dominions overseas. I know that the Swedish market is important, but it is not reliable. I know that the Swiss market is important, but it is not reliable. When the Polish coal industry is in full production the Swedes will get their coal from Poland. When the Ruhr is working the Swiss will get their coal from there, and so will Italy. Those countries cannot be called reliable markets. Our Commonwealth provides reliable markets for us.

The only solution—there is no other—if we are to feed our people satisfactorily, house them properly, and give them every advantage in happiness and education that we can provide through the social services, is that we must reduce the number of our population to proportions for which we can provide. By this means we shall be populating our sister-nations of the Commonwealth with our own stock, and building up our great markets overseas. Of that we can be sure. If, over a long period of time—because this is not a short term project but it must be started soon—we bring down our population to about 35 million, we shall be able to feed that population with our own basic foods, and we shall be able to provide for the happiness and prosperity of that population, while at the same time we shall have built up in Australia, Canada, New Zealand and other parts of the Commonwealth and Empire markets which we do not at present possess.

What we are doing at present is to export all we can to import the bare necessities of life. We are even bringing in people from other countries to help us to export in order to bring in, not all the food we want, but as much food as we can provide; and they themselves are helping us to eat it. We are chasing something which is impossible to catch, and the more we chase it the less possibility we have of catching it. We should go back to the emigration system which we very wisely carried out in 1900 to 1914, and bring down our population to the size and level we could provide for, and build up sure markets with our sister-nations overseas.

While I was in South Africa recently I spoke to Field-Marshal Smuts and to Dr. Malan. We were rather perturbed here in this country. We were wondering whether it was the intention of Dr. Malan to come out of the Commonwealth. When I spoke about that to Field-Marshal Smuts he said that there was no intention whatever on the part of Dr. Malan to secede from the Commonwealth. When I saw Dr. Malan himself I had a long talk with him. He said, "No, I have no intention at all of trying to take the Union of South Africa out of the Commonwealth; but what I want is a different relationship between ourselves and Britain."

Sir Patrick Hannon (Birmingham, Moseley)

Would the hon. Member state if he discussed with Field-Marshal Smuts and the present leader of the Government in South Africa, how the dollar gap would be bridged in this country?

Mr. Follick

I was speaking to Dr. Malan, the Prime Minister of South Africa. He said he wanted a different—I just cannot think of the word he used—idea of the position between the countries. Instead of being a mother-country with Dominions, we should all be sister-nations. I told him that I thought that was right. I think we should alter the position of mother-country and daughter-nations, and become sister-nations. I spoke to him of this idea I had of immigration and emigration. Our ideas may be rather different on that point, but there is no reason for them to be different with regard to Australia, New Zealand and Canada.

The historical transition is: You start your development with a settlement; you become a colony; the colony develops into a dominion which later becomes a commonwealth. The final goal, which never has yet arisen in the world, is that of the sister nation. If we could bring about that final situation, which has never yet been attained by any great colonising nation, the Romans, the Spaniards or the Portuguese, of setting up the British Commonwealth of Sister Nations and bringing them together as one unit, we should be the greatest entity in the world with the greatest markets in the world. We should be in the same position as the Soviet Union with her republics which form themselves into one entity, or the United States with the different States all forming one block. If we did that we should be as powerful as either of the other great units, not only from a military point of view but from every other point of view.

We have to bind the whole thing together in one last effort, because if we do not, there will be no survival for us. There is hardly any hope of survival for Australia with the approaching difficulties in the East. Australia had enough to fear from Japan alone; goodness only knows what she will have to fear from that terrific Power which will shortly be threatening her existence.

If we adopted this course we should get out of our difficulties. It is our only solution. The only possibility of survival is to spread our population as we used to do over the rest of the Empire and make one large consolidated British Commonwealth. Let there be no difference between the man who goes from London to Edinburgh or from London to Sydney or from Sydney to any other part of the Commonwealth. Let it be one Commonwealth for all the British. In that way we would have a splendid future, and we could be useful to the rest of civilisation as we were in the 19th century. In that way sterling would come back into its own and the dollar gap would only remain as a nightmare of the past.

7.36 p.m.

Sir Patrick Hannon (Birmingham, Moseley)

I find myself in complete agreement with the hon. Member for Loughborough (Mr. Follick) in the reference he made to the co-ordination of our Commonwealth and its constituent parts in giving us a brighter outlook for the future, both with regard to the spread of population and the feeding of our people in these Islands. Let me say at once how glad I was when two years ago the Secretary of State for Foreign Affairs made a remarkable speech on the Empire. I thought at that time that that policy would be developed from day to day; and that the party opposite, following the lead of the Foreign Secretary, would take a much more intensified interest in the economic situation of the Empire, and the political situation as well.

To a very limited extent indeed have hon. Members opposite indicated any desire to bring the Commonwealth and the constituent parts more closely together, and only recently was any real interest taken in the development of the Colonial Empire. I wish that the Foreign Secretary when he made that speech could have induced his party to concentrate more on that possibility, which would have had a beneficial result both to this country and to the world.

I join with my hon. and gallant Friend the Member for Antrim (Colonel Haughton) in censuring speeches made in the country by Ministers in which they charge the Tory Party with every crime under the sun in relation to the economic situation in which this country now finds itself. At a public function the other day I paid my modest tribute to the efficiency, integrity and zeal of the President of the Board of Trade. I said what an admirable Minister he was, and how enthusiastic he was in his intention to discharge the duties of the great office which he held. To my astonishment my hon. and gallant Friend the Member for Antrim called attention this afternoon to a speech by the President of the Board of Trade in which he accused the Tory Party of being responsible for the economic situation of the country. We cannot afford to mix politics and economics in that reckless way and when I see him, I shall apologise to him for paying the tribute which I paid the other day.

I should like to put two questions to the Economic Secretary in the most forcible terms that I can command. Does he seriously say that 40 per cent. of our national income must continue to be paid into the Exchequer without any fixed period being stated when that monumental contribution can be reduced? Does he contend that the two million people employed in the national and municipal services, cannot be reduced substantially if a real examination of the work they perform is carried out?

I cannot imagine that the huge body of public servants—one in every nine of the population—could not be reduced so that some of them could be usefully employed in other work. There are supernumaries in various departments. I am an old civil servant and I know that in many Departments the Civil Service is overloaded and that it is not giving the quality of service which the nation has a right to expect. I suggest that, at the instance of the Treasury, there should be an examination of the work of every Department with the object of reducing the present volume of national expenditure. If the Treasury were to say that public expenditure should be reduced by, say, 10 per cent., and if they informed the various public departments of the reductions they must make in their respective departmental administrations, that would give great satisfaction to the country.

If the Chancellor had told the House that instead of cutting imports by £100 million, he intended to cut public expenditure by that amount, that would have given tremendous stimulus to industrial activity. There is no use in Ministers making exhortations to people to work more and to managements to increase their efficiency. What is really necessary is that we should make the burden upon industrial production as light as possible. With present taxation and all the retrictions and limitations placed upon industry, the struggle of management and workers to maintain efficient production at competitive prices in hard currency markets is becoming more and more impossible.

I happen to have been the President of the National Union of Manufacturers. There are nearly 7,000 manufacturers in the union with which I have the honour to be associated. All these manufacturers work in their respective ways to expand our export trade, to increase production and to make their contribution to the vitalising of our national economy. They consider that something more than mere speeches and appeals to patriotism, chivalry and sense of responsibility, ought to take place.

There ought to be more leadership from the Government Front Bench. An effort should be made to enable people to appreciate the position, to cut costs and increase output and, at the same time, achieve a competitive level which will enable us to enter more fully the markets of Canada and the United States. Nobody knows better than the Economic Secretary to the Treasury how difficult it is to deal with the United States and Canadian markets. The difficulties are increasing from day to day. I say to him that, while there are many difficulties, our national economy has reached a limit, and the burden op industry is one which cannot be carried.

I am very pleased that the President of the Board of Trade has joined us. Before he made his appearance I had been saying pleasant things about him. I say to him in particular that there are many directions in which he can cut national expenditure. He can help by a more active and intensified examination of local expenditure in our municipal and local authorities. Great economies could be brought about. If from the Front Bench we were told that active steps would be taken by the Treasury and the various Ministers responsible to cut expenditure and to save the country what I am bound to assert is a volume of waste in many Government Departments, we should feel that the Government were rendering a real service and giving a lead which would increase our competitive power in hard currency areas.

Today the small manufacturer is faced with many restrictions and difficulties at a time when he is making a hard fight to discharge his obligations in response to Ministerial appeals to increase production. Let us not try to cripple him. The Chancellor says that he cannot reduce taxation. My right hon. Friend the Member for Warwick and Learning-ton (Mr. Eden) referred to the retort he gave that taxation on profits did not interfere with the costs of production. Hon. Members opposite ought to tell that to any manufacturer, and they would see what his response would be. He would say that a substantial reduction of taxation on reserves would enable him to expand his activities, to reduce his costs and to strengthen himself to meet competition in foreign markets.

No one appreciates more than I do the work done by the President of the Board of Trade. I want to say to him, quietly between ourselves, "Do not mix politics with the immense economic services you are rendering to the country." It is no use going to meetings and saying that the wicked Tories brought about this crisis. That kind of comment always invites a retort. The wicked Tories could say some very nasty things about hon. Gentlemen opposite in relation to their contribution to the economic situation. I am glad to have had the opportunity of saying a few nice words to the President of the Board of Trade. I invite him to take an active interest in the reduction of public expenditure. The National Union of Manufacturers have published a brochure which I shall send him. I shall underline certain comments they make in which they outline the way in which industry can recover and the assist- ance which can be given by His Majesty's Government. I shall make him a present of it, and I hope it will give him ideas which, in his practical-minded way, he will introduce into the administration of his Department, and thus substantially help our manufacturing enterprises.

7.48 p.m.

Mr. George Wigg (Dudley)

I hope the Iron. Member for Moseley (Sir P. Hannon) will not be too hasty in withdrawing the compliments he paid to my right hon. Friend the President of the Board of Trade. Perhaps he does not realise it, but my right hon. Friend certainly did not charge the Conservative Party with responsibility for the present difficulties. The hon. Gentleman must have misunderstood his hon. and gallant Friend the Member for Antrim (Colonel Haughton) who, quite properly, was quoting from the speech of the President of the Board of Trade in which he said that hon. Members on this side of the House often said that the Conservative Party had not got a policy. My right hon. Friend described such statements as dangerous illusions, because they have a policy—that of deliberately creating unemployment. I have never doubted that. I have said repeatedly since 1945 that hon. Gentlemen on this side of the House who say that the Conservatives have not got a policy misunderstand completely the nature of politics in this country.

The hon. Member for Moseley said that the President of the Board of Trade should not mix politics with business. If that is good advice for the President of the Board of Trade and Members of the Government, it is perhaps equally good advice for business men. Like the hon. Gentleman, I speak for a Midland constituency and, like him, I have many good friends there, some of whom are Members of the Conservative Party. They sent me copies of Conservative Party publications, some of which are confidential. For example, I am well aware of the methods employed by the friends of the hon. Member for Moseley in raising funds. It is as near political blackmail as anything can be. I have photostatic copies which I can show to any hon. Member.

A book is sent round to manufacturers, and all sub-contractors are invited to place their names in the book, alongside an adequate subscription. If they do not do so, a peremptory note is sent them drawing their attention to the fact. I have got photostatic copies of a subscription list to the Conservative Party in the West Midlands which has been extorted—that is the right word—from business people, irrespective of their political views. They have got to pay, even though many of them, being intelligent men, are members of the Labour Party. They have got to pay; otherwise, they know that their businesses must suffer.

Sir P. Hannon

I apologise for interrupting the hon. Gentleman, but I hope he is not misrepresenting the action taken by certain industrial leaders who desire to promote research in their respective industries and who collect funds for that purpose.

Mr. Wigg

No, I am not making any mistake about research. The photostats of the little book which I have bears the name and address of Conservative Party headquarters, and it contains the names of the firms and their subscriptions. The hon. Member for Moseley must not be disingenuous, because he knows of the circular which was sent out and to which I refer.

I interrupted the hon. and gallant Gentleman the junior Member for Antrim (Colonel Haughton) at the end of his speech, and suggested that Sir Francis Joseph and Sir Hugh Chance, who are well known to us in the Midlands, sent round a confidential circular urging firms to pay. I think the suggestion was that a fraction in the pound, perhaps a few coppers in the pound, on their salaries and wages bills, should be given as a subscription to the party opposite—and they were quite frank about it—in order to kick this Government out of office. Let us have no mistake about it. These boys are in business for what they can get out of it, and I say to the hon. Gentleman—

Sir P. Hannon

May I interrupt the hon. and gallant Gentleman again? Surely the collection of funds for party purposes is the right of every political party in this country, and if they do so there is nothing particularly wrong about it?

Mr. Wigg

I have not the least objection to the party opposite doing so if they will be honest and say, "We stand for unemployment; we will cut the social services." I object to them adopting the methods of conspiracy to bring that about. Great sums are extorted by blackmail from firms who have got to pay or go out of business. Furthermore, the only point about Sir Francis Joseph—

Sir P. Hannon

I think it should not go out from this House that we are casting reflections about leading industrialists in the West Midlands, without my making a protest.

Mr. Wigg

I am not casting reflections on industrialists; I am talking about the methods of the Conservative Party, and I am saying that they are making industrialists subscribe to that policy and making them pay, irrespective of their political views. I am merely pointing out to the hon. Gentleman that he cannot really object when some of us say that we doubt if Sir Francis Joseph is wildly enthusiastic in subscribing to these funds in order to maintain the social services for the workers. Nobody, and certainly not my hon. Friend the Member for Stoke (Mr. Ellis Smith) believes such a thing.

But let me go further. We have heard from the hon. Member for Monmouth (Mr. P. Thorneycroft) a great deal about political clap-trap. My introduction to politics when I came out of the Army was in the by-election when the hon. Member for Monmouth was elected for Stafford. My hon. Friend the Member for Leek (Mr. Harold Davies) also helped in that by-election. We did our best to try to keep the hon. Member out, and we were fighting on grave issues—on the question of the methods to be taken to keep this country out of war. I will not weary the House with the details of that by-election, but before the hon. Gentleman who now sits for Monmouth comes to this House to talk about political clap-trap, he should take another look at his own methods and his own speeches in that by-election, because they had little or nothing at all to do with politics.

Let me now come back to the hon. Member for Moseley and his friends of the Conservative Party, who so easily talk about political clap-trap. I have in my hands a copy of "Birmingham Illustrated" published just before last Christmas by the Tory Party. It is entitled, "We're dreaming of a Bright Christmas," and it describes presumably the kind of Christmas which the workers of this country are to get if they vote for the Tory Party: Turkeys, Ready for Oven, 8s. 9d. each. Just like the old Christmases we knew in the good old (pre-Socialist) days! Christmas spirit in abundance at only 12s. 6d. a bottle. Hams galore at 1s. 2d. per lb. Mixed nuts at 6d. per lb. This publication was scattered widely over the Midlands with the intention no doubt of showing what the Tories would do if only they got the chance. If anybody asks me to deny that that is possible, I do not deny it. I say, Yes, you vote for the Tory Party and you can have all that in three months. The Tories would abolish all queues except one and the price you will pay will be two million unemployed." All over Europe the shops are full, but the queues of the unemployed are very long. Therefore, I hope the hon. Member for Moseley and the hon. and gallant Member for Antrim will agree that we have every right to say to the Conservative Party that, if it told the truth, it certainly stands for one thing, and that is the creation of the conditions which make possible the return of the queues outside the labour exchanges.

Sir P. Hannon

I am very much obliged to the hon. and gallant Gentleman for giving way again. I only want to say that, since he has mentioned their names, Sir Francis Joseph and Sir Hugh Chance are both gentlemen of the highest personal character in the Midlands, and, in collecting funds for their party, they were acting in an entirely legitimate way.

Mr. Wigg

I do not doubt that for a moment, and I am making no personal reflections on them. All I am saying is that they are collecting money for the Conservative Party and not for the good of the working classes.

Again, may I return to the question of political clap-trap. I have listened to almost every speech in the Debate, and I listened with very great interest to the speech of the right hon. Member for Aldershot (Mr. Lyttelton) who criticised the Chancellor's policy, and used as one of his arguments that we must cut down some of the expenditure on Ministerial limousines. That is the contribution of one of the bright boys of the Conservative Party to the deliberations of this House. I want to say a word or two about limousines, because there was another occasion when the same subject was raised. On the 7th March, the hon. Member for Altrincham and Sale (Mr. Errol]) asked a question about the use of Government cars, on which I asked a supplementary: Can my hon. Friend say how many cars were used by the Leader of the Opposition and how much expense was incurred during the 1945 General Election?"—[OFFICIAL REPORT, 7th March, 1949; Vol. 462, c. 783.] I only draw the attention of the House to this subject of limousines because I want to give the right hon. Member for Aldershot and the Deputy Leader of the Opposition a little advice and it is this. Those who go around the country in trains at election times paid for at the public expense should be very careful before attacking Members of the Government for using cars—[AN HON. MEMBER: "Who had the trains?"]—I will leave that to the Conservative Party.

Now may I turn to the subject of dollar shortages? Listening to the hon. Member for Monmouth, to the right hon. Member for Aldershot and to the hon. Member for East Aberdeen, one would suppose that the economic difficulties of this country were the creation of the present Government. Indeed, the hon. Member for East Aberdeen helped his country's cause by calling us "spongers," and the right hon. Member for Aldershot said that Socialism will not work.

Mr. H. Fraser

Hear, hear.

Mr. Wigg

I am glad to have the approbation of the hon. Member. They think that Socialism will not work, and that the dollar shortage is due to this Government. I take it that is the view of the hon. Member for Stone? No reply. One can always find something if one goes to the works and speeches of the right hon. Member for Woodford. I am one of those who have a considerable admiration for the Leader of the Opposition, and I read his works and buy his works. I only wish that all members of the Tory Party would read his works, and particularly the first volume of his "History of the War," because I believe that no intelligent man of integrity can read that book and still remain a member of the Conservative Party, so damning is their record in the years between the wars.

What does the right hon. Member for Woodford say about the dollar crisis in that book? If we turn to page 491, we find that he says that we entered the war with £4,500 million in dollars or gold, or in securities, and that by November, 1940, we had reached the point where, unless something were done, we might have had to give in because of the dollar shortage. We had disposed of all the marketable securities we possessed; we had got rid of all our gold reserves and the additional gold that we received from South Africa. In his book the right hon. Gentleman reprints a letter he wrote to the President of the United States putting the facts before him and making it plain that, from an economic point of view, this country was flat on its back, and that surrender was staring us in the face. Therefore, for hon. Members opposite to blame the Government for the dollar shortage is nothing more than bare-faced hypocrisy or—I am charitable—the most flagrant stupidity. That is what I always think about the Tory—that he is stupid and not a knave.

It is very important that the fact of our position at that time should be driven home. What a great thing it would be if hon. Members opposite would only tell their constituents that the dollar position in this country arises directly from the fact that for 16 months we fought on with no hope of relief, and that it was only the great generosity and the great wisdom of the President of the United States which enabled us to carry on. I want to pursue this theme a little further because it seems to me to be very important and to go right to the heart of our difficulties.

I was greatly impressed by some correspondence which appeared in "The Times" in August, 1947. I do not wish to steal another man's ideas without acknowledgement, and therefore I will give the name of the writer of the letter. He was a Mr. J. L. Gibson who, I have also discovered, wrote other very able letters on the dollar shortage in August, 1945. He pointed out that it was a principle laid down by Mr. Roosevelt that the economic burden of the war should be borne equally by all countries. He quoted Mr. Roosevelt as saying that each country should devote roughly the same fraction of its national productions to war so that the financial burden of war is distributed equally among the United Nations in accordance with their ability to pay. Mr. Gibson argued on the basis of figures which he claimed to be authentic, but which I have been unable to check, that this country had borne a very much greater burden than it should have done. He assessed the total income for the United Kingdom for 1939–45 at £47,719 million. He pointed out that our due, on the basis of the Roosevelt formula, was £18,088 million, but that in actual fact our contribution to the war had been £30,000 million, that is to say, we have paid, on the basis of the Roosevelt formula, £12,000 million more than we should have done. On the other hand, the United States, whose total income was £216,600 million, and whose due was £82,103 million, only paid £70,000 million, roughly about the same less than we had in fact paid more.

Mr. Gibson worked it out not only for the United Kingdom, but for Russia, Canada, New Zealand, Australia and the United States. He showed that the Soviet Union, Canada and New Zealand had broken square, and that Australia had paid about £500 million less than she should. It cannot be too often said that this country bled itself white in two wars. It bled itself white of its young men in the first world war, but thank goodness we were spared that tragedy in the second world war. Nevertheless it must not be forgotten that in the last war we broke our economic back.

Nothing that the right hon. Member for Woodford can do can ever wipe out the debt of gratitude I feel towards him for his leadership during the war, and it causes me great pain to see him descend from the heights of a great national leader—speaking, as he did, for every man, woman and child who loved their country—to the depths of the worst form of political partisanship, and to see his name dragged in the mud in order that he can return to power. The harm he is doing is, I am afraid, going to outlive the great service he rendered during the war because he is managing to persuade a considerable section in the United States that we are, in fact, spongers.

How maddening it must be for one of the four million unemployed men in the United States, whose family is in need of the basic things of life, to read the statement of the right hon. Gentleman, perhaps reprinted in the Middle or Far West, and perhaps even distorted, to the effect that we are a nation of spongers, and that that man would have a higher standard of life if things were not exported to this country. The truth is, of course, the very opposite. The United States with its vast economic potential can never hope to have a stabilised economy unless it adopts the same measures as we ourselves have adopted.

There is another aspect to which I think some attention should be paid. I was very glad when my hon. Friend the Member for East Coventry (Mr. Cross-man) interrupted the hon. Member for Monmouth to point out that the basis of the present short-term difficulties arises from a cessation of buying of colonial primary products by the United States. What is the good of sending our young men out to Malaya to maintain law and order there if the United States, as the result of its economic policy, is in fact creating more havoc? We are acting as a world policeman in a situation which is bound, ultimately, to get out of control. There has got to be a balanced long-term approach to the economic problem disposing of primary products such as the tin and rubber of Malaya, and the cocoa of West Africa, unless those countries are to descend to chaos.

I heard the speech of the hon. Member for Chippenham (Mr. Eccles). If that is the doctrine of the Conservative Party, if that is the doctrine on which they are to fight the election, heaven help this country if they come to power, because, in fact, what he was saying was, "Each for himself and the devil take the hindmost." This country cannot live by itself alone and, in the ultimate, I do not believe any country in the world can live by itself alone. It took us a Second World War to learn the simple truth that peace is indivisible. I pray it will not take a third world war, and that we shall learn by easier ways, that there is another truth, that no country can prosper at the expense of the misery of another.

8.11 p.m.

Mr. Pickthorn (Cambridge University)

I have at least the strongest reasons for endeavouring to be short because I can hardly remember the time when I last had something to eat. I know we are on the Adjournment, and I hope I may be forgiven if I try to return to the topic which I thought was meant to be our main topic in this Debate—that is to say, the economic situation and what, if anything, can be done about it—incompetent as I very sincerely feel for that task. I am very glad, indeed, very gratified—although, of course, not flattered, because I am sure it is accidental—that the Chancellor of the Exchequer should be here at this moment and I will try to save time by not making what I think could be a continuous argument but rather by making comments and asking questions on two or three of his sentences and one or two sentences of the President of the Board of Trade.

When I first knew about the pound sterling I did not know much about it and I did not often see one, but then it was a lump of gold, as you remember, Sir, in the now fairly distant past, and then I thought I understood the first steps in the theory and the practice of international exchange. When it ceased to be a lump of gold I rather gave up hope of understanding. That did not altogether shake my confidence in my own intellectual capacity for other tasks, because I observed that almost all those who did pose or were taken as experts very frequently failed to make themselves understood to each other and quite often failed to understand themselves.

But one thing I think is fairly clear about the pound that is not a gold pound—that its value for exchange purposes depends almost more upon what people think about it than actually upon what it is, if anything. It has been said today, I have forgotten by which hon. Member from the other side of the House, that if you look at the internal buying capacity of a pound, it is worth here a good deal more than four dollars is worth in New York, and he said that that really was what ought to settle the exchange relations between the two. But it is not a question of "ought" in that kind of quasi moral sense, and though, of course, no doubt the internal buying-power of the pound has something to say to the question of what it is worth, not only here but elsewhere, still more important is what people think about it, especially, outside, what foreigners think.

If I may, I want to ask the Chancellor of the Exchequer some questions. It is possible that there might be time for somebody to answer these questions later on. He began by saying that he wanted to be factual and objective and then he told us that production was now up over 1938 by about 25 per cent. and productivity was up by about 10 per cent. Surely the most important thing this Debate can do, if it can do anything, is to try to get into the heads of people in our country and elsewhere what the most authorised persons regard as the facts, and what they think about the facts. I fully admit that I am not very competent in this statistical technique, but surely most people everywhere do not know, and the more people are told the better, what production means in that sense and what productivity means in that sense, the more the better, and it would be a good thing to get the definitions in HANSARD.

I think I know what production means, but does productivity mean production divided by the number of man-hours or by the total labour force, or what does it mean? In any case, is it fair for the right hon. and learned Gentleman in charge of our financial and economic affairs to use these figures in comparison with 1938 when he knows perfectly well that there is a considerable element of guess-work in these figures and that the people who invented and developed them during the last five or six years have always said that these figures could not be used for comparison with the years before they were started, the years before the war. That has always been said by the experts who invented this calculus and if, now, something is known which makes a comparison possible and useful in spite of what they have always said, then we should be told; and if something new is not known which makes that comparison possible, then the use of words like "factual and objective" in the exordium of the right hon. and learned Gentleman's speech seems to me to be seriously misleading.

The second point to which I come in his speech is where he talked about this trouble not being new. He had a horrible phrase about "high-lighting a deep-seated maladjustment." Let no hon. Member think that that kind of literary horror is irrelevant to the question of whether the thinking involved should be accepted or not. There has never been a horse with a grotesquely illiterate name that has won the Derby. He told us that we must not think that that maladjustment has happened just now, but that it was the result of decades of unfavourable balance with the United States and Canada. He and the President of the Board of Trade, afterwards, told us how it was that this unfavourable balance in the past did not seem to matter, apparently. But now, they said, it does matter. They explained why that was so. The gap was made up in the past with invisible earnings, colonial materials, and with dividends on capital, especially risk capital, sent abroad. I think both right hon. Gentlemen took that line and told us that was how it happened. One, indeed, talked about these things being the props of the multilateral system and about these props having now been knocked away.

But, really, right hon. Gentlemen opposite should not talk on these topics without first saying a good deal by way of confession; because who knocked these props away? Has not the whole campaign which has brought these men who are now the masters to their greatness, has not the whole of that campaign been built upon condemning the habit of foreign investing, of condemning the habit of teaching Malays and Tamils to grow rubber and then seeking a profit by sending the rubber to New York or Houston, Texas, or wherever it may be? Has not that been regularly condemned as something both morally wicked and economically, in the long run, likely to do more harm than good?

How can people now begin to have confidence in a managed pound sterling the props of which have not only been knocked away by what almost seems to be regarded as the perversity of Mr. Roosevelt in dying when right hon. Gentlemen opposite were still finding him useful—[Interruption.] Certainly that has been the burden of more than one speech this afternoon, that if only he could have lived a little longer everything would have been all right. Had not hon. Members heard about mortality before they undertook to make everything on earth come right in 14 days?

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

Since the hon. Member does not understand English I shall put it into Latin next time. No doubt he will understand that. The facts simply' are that our raw materials no longer earn the same proportion as they did before the war and secondly, there was the decline of investments. There was no reference in that passage or any other part of my speech to Mr. Roosevelt or anything to do with him.

Mr. Pickthorn

But, really, the right hon. Gentleman, who kindly looks in on our Debates now and then, must not suppose—[Interruption.] Wait a minute.

Mr. Harold Davies

On a point of Order. Is there any protection against this misrepresentation about the attendance of Ministers, that comes constantly from the other side of the House?

Mr. Deputy-Speaker (Major Milner)

The House is well able to judge of the accuracy or otherwise of what the hon. Gentleman says.

Mr. Pickthorn

What I said was, no doubt, rather sharp, and may have been too sharp. If it was too sharp, I apologise to hon. and right hon. Gentlemen. However, I should not have said what I did say if the right hon. and learned Gentleman had not presumed to assume that something which I said had been said could not have been said, because he had not said it. I quoted the right hon. and learned Gentleman with complete accuracy, but other speakers on that side of the House did use the argument about Mr. Roosevelt.

Mr. Kenneth Lindsay (Combined English Universities)

Leave him out of it, for goodness sake.

Mr. Pickthorn

Why should I? Death is a thing that happens to everyone, and while there is death there is hope. There is no disrespect to any man in saying that he is dead.

Mr. Benn Levy (Eton and Slough)

It is a question of taste, but the hon. Member does not understand that.

Mr. Pickthorn

The next question I would put is the question of the figures of the deficit during the first six months of this year—the gold deficit of £239 million. The Economic Survey guessed it would be £195 million. In the first quarter it was £82 million; in the second £157 million. That is to say, at the moment of the Economic Survey the rate of loss was doubling. Well, that is very nearly arithmetically accurate. And the rate was increasing, according to speeches from the other side in this Debate, because of the lack of confidence more than because of any true trading change. That seems to me to throw a very odd light upon the whole business of planning. An extremely distinguished economist of my acquaintance has taken the trouble to compare the Economic Surveys of each of the last four years with Old Moore's Almanac and he assures me that each year Old Moore's Almanac has been—not very much, but notably—more accurate than the Economic Survey; which is highly creditable to Old Moore, when hon. Gentlemen remember that he comes out six months before the Economic Survey.

But now we are told it is no good remaking the programme of imports until we are in a position to make a reasonable judgment of the position for a year ahead. What position is it that we have to judge a year ahead before we can remake our programme? Presumably we have got to be able to judge the course of prices a year ahead, of employment, and of activity, especially in the United States. When are we going to be able to do these things without which, we are told by the Chancellor of the Exchequer, it is no use trying to remake our import programme?

I thought that when it came to the question of devaluation the right hon. and learned Gentleman was really less than fair to himself and to the House. He read out a sentence about devaluation not being mentioned, and said: And that, Mr. Speaker, I hope is that"—[OFFICIAL REPORT, 14th July, 1949; Vol. 467, c. 688.] There has really been—if I may use Latin, as the right hon. Gentleman just now threatened to—there has been no such "Sic volo, sic jubeo"—saving your presence, Mr. Deputy-Speaker, and at the risk of blasphemy—almost since God said "Let there be light." Where is the good of saying that because three or four eminent gentlemen on a particular occasion did not mention devaluation—"that, I hope, is that"?

We have got devaluation. When buyers who have pounds sterling are told or influenced or commanded by the Government to go to markets where things are dearer than they are elsewhere, when sellers are directed or compelled by the Government to go into markets to get less money than they could get elsewhere—when these things are done, when there are 32 different pounds sterling—the right hon. Gentleman will correct me if I am misleading the House, but I am told by experts that there are, in fact, at this moment 32 different pounds sterling, which may be used on this condition or that, 32 different categories—it may be exaggeration, I do not know—

Mr. H. Wilson

I do not know how many black market rates the hon. Gentleman has knowledge of, but I must correct his previous statement, that exporters have been compelled or directed to export to particular markets. We are using no such compulsion or direction.

Mr. Pickthorn

I shall return to that matter in a minute, if I may; because if it is so, I must have wholly misunderstood the right hon. and learned Gentleman's speech on Thursday: I must wholly have misunderstood him. We were told discrimination was to be used, that "we should not hesitate" to use discrimination. One of the things I am coming to in a minute is, to ask if the House may be told what is the technical machinery by which this is being done. That, at least, we have the constitutional right and duty to demand to know. I say that so long as pounds may not be spent by British subjects as those British subjects choose, but as directed by the Government, so long there is devaluation, and, what is more, a kind of devaluation which necessarily raises the prices of our imports and lowers the value of our exports. I say to right hon. Gentlemen opposite that I do not believe they will find an English economist who is not a practising member of the Socialist Party to deny that, and I do not believe they will find any foreign economist at all who will deny that.

Mr. Stokes

It is all the fault of the International Monetary Fund.

Mr. Pickthorn

I could not welcome that more. It is always somebody else's fault, and generally some system's fault. But the fact is there.

I apologise for putting my question disjointedly, and for not coming to any peroration. The last question I have to ask is in respect of the President of the Board of Trade. He said we should not hesitate to discriminate openly in favour of firms which can increase their exports to the dollar areas and elsewhere. He said the same thing the other way round, that we must be prepared to take lower profits by accepting dollar orders; and that is being done by public enterprise as well, he said. It is fair, I think, that the House should ask—and the House ought to ask—what the public enterprise is that is doing that. I think the House ought to ask what is the machinery by which this discrimination is being used. He has just said that there is no discrimination.

Mr. H. Wilson

No.

Mr. Pickthom

I thought so. The right hon. Gentleman interrupted to say so. I am in the recollection of the House. The House ought to know what the machinery of discrimination is. Hon. and right hon. Gentlemen opposite pride themselves on being what they call Social Democrats. Here there is to be planning, control, economic compulsion, but yet at the same time democracy, freedom and political liberty. Some of us think that that is quite impossible, and we have at any rate the majority of our ancestors, their ancestors, and everybody else's ancestors with us. They may prove to be right. At any rate that is their claim.

Now I think they would all agree with me about this, that if there is one single foundation of political liberty in that sense in this country it is the control of taxation, this House's control of finance, and especially of taxation. I ask them: Is it or is it not taxation when Government says to people, "Unless you keep out of markets which you have quite a legal right to go into but which we do not want you to go into, unless you go into markets which you have a perfectly legal right to keep out of because you could make better profits elsewhere but which we tell you to go into, unless you go into markets where you will make smaller profits when you are selling and into markets where you will pay larger prices when you are buying, we will in some way or another make things impossible for you. We will not hesitate to discriminate against you."? When Government says that, is it or is it not taxation without representation? I think that ought to be considered. I am quite sure myself that in a general, moral, historical and political sense the answer is "Yes." But whether or not it is technically taxation is, I think, open to question, and to answer that question we ought to know the details of the machinery by which this is being done.

Those are the questions which I desired to ask. I only say this one last thing. One thing on which I agree with the Chancellor of the Exchequer is that I do not think that this is a crisis. I think that we had the crisis long ago. The crisis was when we were still hanging on to the edge of the precipice. Once we had gone over, the crisis was over. What is now coming is the bump; we are beginning to see the world come up to hit us. I wish this were a crisis, but I think it is something much worse than that, and something which will last much longer. Still less is this "a problem," as some people call it; I am sure that there is no answer at the back of the book. This thing cannot be settled. What I ask hon. and right hon. Gentlemen opposite to consider in their consciences, if they will, in the stilly watches of the night is this: Can men who have reached the positions in which they now find themselves by saying that the search for profit was a bad thing, and that overseas investment was a bad thing—

Mr. Harold Davies

We never said that.

Mr. Pickthorn

Oh yes—that exports were a will-o'-the-wisp—

Mr. Davies

That is not true.

Mr. Pickthorn

Can people who say those things possibly deal with it—crisis or problem or what not? And will any foreigner think they can possibly deal With it?

Mr. Mitchison (Kettering)

rose—

Mr. Pickthorn

I cannot give way now. I am just finishing. Will any foreigner think that they can possibly deal with it? Will they ask themselves that question first, and secondly this question: Is it really decent to go on with this stuff about the Tories wishing to see unemployment?

Mr. Stokes

They cannot help it.

Mr. Pickthorn

I will be honest with the hon. Gentleman. I think it is very likely that the Tories would not be able to help unemployment. I think it is even more likely that hon. and right hon. Gentlemen opposite, if they stay in office, will not be able to avoid unemployment. But that is not the only test. They may find all sorts of things which are "intolerable" but which they have to live through if they can. How are they to hold an immovable currency and an immovable standard of living, and yet somehow insist on foreigners from all over the world sending them the things they must have if they are not to have unemployment? How they are to do those things not one of the hon. or right hon. Gentlemen opposite has yet begun to try to explain. I ask them to consider in their consciences whether, unless they can explain that, they had not better lay off this nonsense of pretending that the Tories want to use unemployment and misery.

8.34 p.m.

Mr. Edelman (Coventry, West)

I will not speak of the hon. Gentleman's reference to the death of President Roosevelt, except to say that it fell below the standard which we expect, and usually receive from the hon. Gentleman.

Mr. Pickthorn

Since I have already been rebuked about three times for this, I really should like to have it explained what it is that I am supposed to have said that is in any way unkind or disrespectful about Mr. Roosevelt. I said that hon. Gentlemen opposite had produced all sorts of reasons why they are in a mess, one of them being the death of Mr. Roosevelt. They really ought not to reckon on one foreign statesman being immortal.

Mr. Edelman

I am quite sure that on reading his speech tomorrow the hon. Member will recognise why his reference to the late President Roosevelt was in the most execrable taste. I listened very carefully at this time of grave national crisis for some glimmer in the hon. Member's speech of a constructive suggestion for dealing with it; but all we heard was a prolonged dribble of political recrimination.

I cannot help feeling that what is required is not the sort of carping speech which the hon. Member made, but some suggestion as to what should be done at this grave hour to get the nation out of its difficulties. I observe that many Tory commentators are continually seeking to find some Jonah to throw out of the boat, and the Jonah the Tory Party point to is what was called yesterday by one of the lesser Tory columnists the "pampered proletariat." However much Members opposite may say they do not want to see cuts in the social services or in consumption, the fact is that the economists who speak the underlying thoughts of the Conservative Party are precisely in favour of these two things.

The crisis which we are experiencing is not something that has arisen suddenly, but is a chronic crisis which has been going on since 1945 as a result of Britain's impoverishment by the war. It is the crisis of our adverse balance of payments, and what we are facing is an acute manifestation of that crisis. If we are to survive we have to apply a twofold solution, the first a short-term one, and the second, a long-term one, which will ultimately make us independent of foreign aid.

As far as the short-term solution is concerned, it is quite clear that there can be only one answer to our present difficulties, and that is the continuation of American aid. If the Americans want to make a reality of the Atlantic Pact, and if they want us to sustain our part in it, they must continue to give us the aid they have been giving us since 1945.

Mr. Pickthorn

Is this the constructive suggestion?

Mr. Edelman

If the hon. Member will allow me to develop my argument, I hope that the constructive ideas will be clear even to him. As far as aid from America is concerned, it was always envisaged by the Americans, as much as by ourselves, that we should receive from the United States help until at least 1952. It was in pursuance of this idea that the countries who constituted the Marshall Aid group were invited by the United States to put forward plans for their ultimate release from American dependence by 1952, and it is of these plans that I particularly want to speak today, because I believe it is only by the co-ordination of these plans that we can and our economic salvation.

One thing that impressed me, when these plans were first submitted in the interim report of O.E.E.C. last December, was the fact that there was an internal contradiction in the plans themselves. Each country was occupied with increasing its exports and cutting down imports in order to have a favourable balance of trade. Quite clearly, with each of the countries concerned occupied with that task, it was obvious that certain countries would not be able to fulfil their plans.

In addition, there were contradictions between the various Marshall aid countries in their plans for capital investment. In certain cases, as in the case of engineering and textiles, their programmes for capital investment were duplicated, and the effect of that duplication is likely to be two-fold. In the first place, excessive capital investment clearly sets up an inflationary process by withdrawing goods and resources from general consumption, and, in the second place, an excessive programme of capital investment creates great and illusory hopes about the prospects of full employment which are only destroyed when the capital investment projects are finally fulfilled.

The most striking example of that is in the case of the tractor industry. We in this country have a tractor industry which is more than capable of supplying both our needs and a substantial quantity of exports. The French under their four-year plan are laying down tractor plants and engaging in a heavy capital investment in agricultural machinery. The result is that the total capacity of both countries for the production of tractors is far higher than either we or the French or any of the countries in Western Europe at present require either in the home market or for export.

While I welcome American investment in Europe, it is quite obvious that if on top of that we are to invite the Americans, in an entirely unplanned way, to engage in capital investment in such plants, we may inflate productive capacity to a point where there will be a vast amount of wasteful competition, with resultant hardship both to the industrialists and to the workers concerned. If the contradiction in the plans of the Marshall aid countries were limited to one or two industries, then one might say that the situation was tolerable, and that out of that competition something constructive and useful for Western Europe might emerge as a by-product. But in fact the conflict which exists in a typical industry like the tractor industry is present in many other industries, one of the principal of which is the engineering industry.

In our country we enlarged our engineering industry during the war and now rely for a considerable proportion of our exports on engineering products, but the French under their four-year plan propose to expand their engineering production by approximately 40 per cent. And not only do they want to expand their engineering production for their domestic market but also in order to enter into the field of world competition. If that happens in the case of France, Italy and ourselves, it is quite clear that all our hopes, and the hopes of our neighbours in Western Europe will not be fulfilled. We are trying to compete in markets where we are seeking to undercut each other in price, where we are duplicating the products we are trying to sell, where we have to meet the major fact of American competition, and where our potential customers have considerably diminished.

Instead of the flow of trade between the East and West which existed before the war, we now have to direct the great bulk of our exports towards the Western Hemisphere and Western Europe. At the same time we have had the further dilemma that, in order to save ourselves from the necessity of paying for the sustenance of Western Germany, and in order to make Western Germany viable, we have had to build up Western Germany in conjunction with our American friends into potentially a most dangerous competitor; for whereas before the war there was a natural movement of products from Western Germany to the Balkans and Eastern Europe in exchange for agricultural products, today the whole tendency of exports from Western Germany will be towards the Western Hemisphere and Western Europe.

To summarise, we who hope to save ourselves by increasing our exports and cutting down our imports find ourselves in the very grave dilemma that our associates within the Marshall Plan are trying to do the same, and that our plans are incompatible with each other. Unless we find some means of harmonising and co-ordinating our projects, the end will be bankruptcy for all or a continued and increasing dependence on American charity.

I do not need to add, even in parenthesis, that the help we are getting from America is part of America's contribution to the total effort of the Western democracies in peace as it was in war.

Mr. Ellis Smith

In gratitude for our war effort.

Mr. Edelman

Each of us during the war gave according to our means and our ability and it is only proper that today in our common task we should receive from America all the help that the Americans are capable of giving us. At the same time, our national dignity and the standard of life of the people of Britain and the countries of Western Europe depends upon our ability to stand ultimately on our own feet. While I would gladly accept from America the help in dollars by which alone we can solve the problem that arises from the fact that the Americans, the world's greatest producers, are anxious to sell, and not to buy, at the same time it is quite clear that we in Western Europe must find our own solution by means of co-operation.

In this connection I refer my right hon. Friends on the Front Bench to the interim report of the O.E.E.C., which I mentioned at the beginning of my remarks. I am surprised that they appear, at any rate, to have overlooked to such an extent the recommendations put forward in that report. One of its major recommendations is that there should be specialisation in production as between the countries of Western Europe. Obviously, it is farcical that we in Britain should concentrate on the production of certain types of machine tools while the French and Italians devote a great deal of their resources and energies to the production of the identical tools, at a time when all three countries have to import from America alternative machine tools which are not manufactured in Europe. From a technical point of view we are perfectly capable of producing the tools which today we import from America.

Clearly, one of our first measures must be to increase the extent of specialisation so that in the case of motor cars, for example, we in Britain may make a medium horsepower car, while France may make smaller cars and Italy, perhaps, cars of higher horsepower. That is the form of specialisation which will result in lower prices, in the abolition of some of the wasteful competition now taking place, and which will also bring about the result that in Europe, instead of producing blindly, as it were, in the hope of competitively capturing export markets, we will produce what is needed both by ourselves and by our potential customers and direct agreed production to agreed markets.

Then there is the question of standardisation to which reference has often been made. Only by standardisation and creating "long runs" of production in Western Europe, shall we be able to compete with the Americans in price. A lot has been said about price and I do not believe the American market, even if our prices were forced down very severely, would secure us an export market such as hon. Members opposite appear to believe. Nevertheless, I believe there are important dollar markets to be won if by co-operating in productive techniques Western Europe can cheapen its costs, and revert to the pre-war position when its export of manufactures was two and a half times those of the U.S.A.

I am sorry that the hon. Member for Cambridge University has forgotten his customary courtesy, and, having invited me to put forward certain suggestions, has left the Chamber before I advanced them. The agency we must employ in Western Europe, if we are to achieve the results of co-operation, specialisation and standardisation must be an agency based on planning by consent. We have not yet reached the stage in which some central authority can give instruction to the industrialists and workers in Britain, of Italy, France and the other countries of Western Europe—a sovereign economic authority which can instruct them as to what they can and should do.

For that reason, we must rely on planning by consent and the only way in which we can do that is by joint consultations between the industrialists, the technicians, the trade unions and, above all, the Governments of the Marshall Aid countries. That should be done industry by industry. We should have consultations in the steel industry, the coal industry, the cement industry, the agricultural machinery industry, the textile industry and so on. Only in that way will we be able to safeguard what I would describe as the legitimate vested interests of the industrialists and workers in each country. Only if we can achieve a harmony between the production of all the Marshall Aid countries and establish a master plan under O.E.E.C. can our crisis in the long-term be brought to an end and individually and collectively can we escape from our dependence on American aid by 1952 and achieve the solvency, by which alone our national dignity can be maintained.

8.54 p.m.

Mr. E. L. Gandar Dower (Caithness and Sutherland)

I am glad to have caught your eye even at this late hour. I feel rather weary after sitting through the whole Debate—

Mr. Ellis Smith

The hon. Member is not the only one.

Mr. Dower

—but it is always the fate of the last speaker to fear that he may be rather dull. I expect many hon. Members are awaiting the valuable remarks we shall receive from the right hon. Member for Saffron Walden (Mr. R. A. Butler) and the Foreign Secretary in his new rôle, so I shall not detain the House longer than I can help. Back benchers regret, however, that the average length of speeches on Thursday was 34 minutes and today it has been 27 minutes, and, although no one wishes to apply four wheel brakes to our deliberations, perhaps speeches have been a little long.

If I may relieve the tedium, I would like to high-light the deep-seated gloom into which we have sunk. The perfect economy was described by Gonzalo in "The Tempest." He said: No kind of traffic Would I admit; … … riches, poverty, And use of service, none; … No occupation; all men idle, … all, All things in common nature should produce Without sweat or endeavour. Would that not be a delightful easement of our problems today? I have omitted one line: "And all the women innocent and pure," because I thought it scarcely appropriate to an economic Debate. [Laughter.] Some Members of the House may have more experience than I have. But seriously, would those conditions bring content? It is well known that happiness is only appreciated by knowing sorrow and for the real enjoyment of rest, one needs a body weary with toil.

I wish to ask why we have reached this fragile dollar condition. I do not ascribe the crisis to the Socialist Government. [HON. MEMBERS: "Hear, hear."] Hon. Members must not cheer too soon, for I believe that their procedure has tended to aggravate the crisis. [Interruption.] So that I may finish in reasonable time I beg hon. Members to stomach the distasteful things which I may say. In 1945 this nation was heavily in debt, exhausted after a titanic struggle which had lasted nearly six years. It needed a united effort to sort out that chaos. I am very sorry that the control of this country passed to party government. It was unfortunate that the Socialist Government came into full power and were obliged to implement a programme which they had been offering to their supporters for many years. It was unfortunate, because this programme meant class legislation, and experiments in State ownership and an endeavour to pass in four to five years legislation which really required from 10 to fifteen years for the country to assimilate.

I am a simple soul and I shall not reach the highlights of the economic experts on both sides of the House whom we have heard. When the hon. Member for South Nottingham (Mr. Norman Smith) spoke I almost left the Chamber, feeling that he was so much in advance of my economics that I had better keep quiet and go away. But I have, for the last two and a half years, been saying on platforms throughout my constituency, "We must work harder. We must work longer, we must take less, we must take advantage of vast areas which have received no goods for nearly six years. By selling as much as we can we shall regain prosperity. Later we shall be up against competition. The sellers' market will give place to a buyers' market." I do not wish to suggest that the workers should be the only people to suffer but we have to be realists in relation to our economy. We can no longer afford to be Right wing or Left wing.

The policy of the Government has been to approve shorter hours of work and to increase wages. They continued also the high rate of taxation which, although it may have relieved wealth from the upper classes, if any are left, has discouraged the weekly wage earner from working overtime. Please do not think that I wish to deliver a party speech. I am at present an Ishmaelite, or Wandering Jew. I have no party. There is a good deal of discontent among all wage earners—

Mr. Ellis Smith

There may well be.

Mr. Gandar Dower

If the hon. Member would give me a chance to continue, I would like to suggest that this is due to the Government allowing the cost of living to rise, making the increase in wage packets very largely illusory.

Then we have the unofficial strikes which are spreading throughout the country. Unofficial strikes can destroy the trade unions and the Socialist Party. I think it would be most unfortunate for the workers—or the weekly wage earners as I prefer to call them, because surely we all work—if they lost what they have gained through years of organisation and discipline. Why do these unofficial strikes take place, and have the effect they do on the economy of the country? Surely it is because the trade union leaders and officials have grown away from the rank and file. In the ranks of the weekly wage earners a leader arises with some gift of verbosity, and he leads the troops on a wild goose chase. It is not my belief that Communism is at the bottom of it. It may take advantage of the situation, but it is discontent which provides the opportunity.

The statement is frequently made by the Government that this country is making a wholehearted effort towards recovery. I cannot accept that. I ask hon. Members to believe that I am sincere and not a feudal member when I say that, in my view, there is not throughout the country the same keenness to work which existed in 1938 and 1939. There is not the same keenness while at work, and there is a desire to regard work merely as a mode of earning a wage. It is my view, and I am certain it is the view of members of the Government, that while labour produces a wage, it also produces something more wonderful—a sense of self respect and pride in a job well done.

I beg this House, irrespective of party, to try to put that feeling back in the mind of the weekly wage earner, and get him to regard his weekly effort not as something for the benefit of himself or of any party, but for the good of the nation. The aftermath of war always produces slackness. I feel that the youth of the country has insufficient interest in the amount of toil it does and that the middle-aged are carrying an unfair burden today.

All parties in this House are pledged to the gospel of full employment. It carries a great responsibility. I ask hon. Members to regard full employment as a game of "musical chairs." If there were chairs for everyone, where would be the keenness? If there is one chair short, then the people in the circle enjoy the game. In that simple way I would point out that if full employment means slackness through no fear of unemployment, it is a gospel which will fail.

We have a universal franchise, but I fear that the average elector is not interested in international trade. I suggest that the average elector does not realise that we have borrowed 4,000 million dollars from America since victory in the East. He does not realise what the sterling bloc means. I am speaking tonight because I voted against the American Loan and Marshall Aid. I did it because I felt that the recovery of this country depended upon tightening our belts, working harder and taking less. I felt also that these loans could never be repaid. I recall that after 1914–18 we were challenged by the Americans because we did not meet our war debts.

I should like to stress that if we borrow consistently from America, we shall create a piper who can call a tune. I believe that America has studiously avoided doing this so far, but hon. Members will have noted that a few days ago the Senate just failed to approve a motion that no financial assistance should be given to any country which nationalises industry. I am dead against nationalisation, but I should not like to be dictated to by America. In conclusion, I appeal to the Government to give us the opportunity to work as hard as we like, to work as long as we like, and to earn as much as we can, but not to take it away by taxation. I ask hon. Members to remember that, if risk is taken, it deserves a reward.

Mr. Deputy-Speaker (Mr. Bowles)

Mr. Butler.

Mr. Ellis Smith

Mr. Deputy-Speaker, I cannot rise on a point of Order, but I want to rise on a point of procedure. I have sat here for two days. I should like to know upon what basis the speakers in this Debate have been selected.

Mr. Deputy-Speaker

That is a matter purely for the occupant of the Chair.

Mr. Stokes

Further to that point of Order. Is it not without precedent in the history of Parliament that three Parliamentary Private Secretaries have been called.

Mr. Deputy-Speaker

The same applies to that remark.

Mr. Ellis Smith

Six Front Bench men have spoken in this Debate.

Mr. Deputy-Speaker

I cannot allow any further criticism of the Chair. I shall not allow it.

Mr. Ellis Smith

No, but I am asking on what basis—

Mr. Deputy-Speaker

Order. I am on my feet. I cannot allow the hon. Gentleman to proceed with this questioning. Mr. Butler.

Mr. Ellis Smith

I am asking on what basis speakers have been selected in this Debate.

Mr. Deputy-Speaker

The hon. Gentleman will now resume his seat and not rise again.

Mr. Ellis Smith

Well, I shall rise.

Mr. Deputy-Speaker

I do not want to ask the hon. Gentleman to withdraw. It will be quite unnecessary, I hope.

Mr. Ellis Smith

rose—

Mr. Deputy-Speaker

I am sorry, but I must ask the hon. Gentleman to withdraw unless he now resumes his seat for good.

Mr. Ellis Smith

rose—

Mr. Deputy-Speaker

I now order the hon. Gentleman to withdraw from the Chamber.

Mr. Stokes

rose—

Mr. Deputy-Speaker

Order. I am on my feet. The hon. Gentleman will now kindly withdraw from the Chamber The hon. Gentleman must really be sensible and withdraw from the Chamber; otherwise, I shall take further steps.

Mr. Ellis Smith

I am sufficiently well-known—

Mr. Deputy-Speaker

There can be no conversation about this. The hon. Gentleman must withdraw.

Mr. Ellis Smith

rose—

Mr. Deputy-Speaker

Order. I shall name the hon. Gentleman in one second unless he does withdraw. I am sorry, but I must suspend the sitting, while Mr. Speaker is called for.

Mr. SPEAKER

resumed the Chair.

Mr. Deputy-Speaker

I am sorry, Sir, to have to ask you to come. The hon. Member for Stoke (Mr. Ellis Smith), I very much regret to say, repeatedly refuses to obey the Chair. He raised a point of Order repeatedly about the selection of speakers during the Debate. I asked him, I think four or five times, to withdraw that remark and resume his seat. He refused to do so. I asked him twice or three times to withdraw from the Chamber, and he persisted in his refusal. I had no alternative, Sir, but to ask you to come.

Mr. Speaker

Do I understand that the hon. Gentleman named the hon. Member?

Mr. Deputy-Speaker

I asked the hon. Member for Stoke to leave the Chamber. I did not name him.

Mr. Speaker

If the hon. Member for Stoke has disobeyed the order of the Chair I must now, I am afraid, direct him to leave the Chamber at once. The hon. Member refuses. Then I have no option whatsoever. He must understand that. I name the hon. Member for Stoke.

The Lord President of the Council (Mr. Herbert Morrison)

I beg to move, "That Mr. Ellis Smith be suspended from the service of the House."

Mr. Stokes (Ipswich)

rose—

Mr. Speaker

This cannot be debated; it is not debatable at all.

Question put, and agreed to.

Original Question again proposed.

9.24 p.m.

Mr. R. A. Butler (Saffron Walden)

I almost hesitate to intervene in the Debate at this late hour, and I shall, in the circumstances, attempt to cover the subject as rapidly as I reasonably can, and give an opportunity to the right hon. Gentleman the Foreign Secretary to take part in the Debate. As we see it, it is the task of the Opposition to spur the Government on to adopt right measures, and if they will not do so, to turn them out. I should like to say at the outset that no Government handling the present crisis are in any way to be envied, and it is certainly not in the spirit of seeking responsibility for the sake of power, that we on this side of the House put forward our criticisms tonight. We are deeply anxious about the situation, and, faced with that situation as I shall attempt to describe it, we shall put forward our constructive suggestions, and criticise the Government where we think they are wrong.

I do not think that any man has borne a greater share of physical strain than the Chancellor himself. I have had no opportunity myself of mentioning this matter, and I hope he will have the most expensive treatment in the most expensive way, and return to us not unduly impressed by the Calvinistic gloom of Zurich and Zwingli. I hope, too, that as a result of the diet as advertised in the newspapers, and as a result of those melodious bells which I know so well in Zurich—and in spite of the hospitality of the population—we may expect his return fully restored to health.

What I think has been the least useful, as well as a most unfortunate, feature of this Debate has been the travesty by the Government of the motives of the Opposition, and, if I may so describe it, the unfortunate cacophony of the President of the Board of Trade, who himself made the most unconvincing contribution of all. This may have been the only unfinished symphony or cacophony to which we have listened, for the hon. Member for Caithness and Sutherland (Mr. Gandar Dower) who preceded me did, in the end, conclude his address. But, apart from that, we have had many variations on the theme, and the theme of the Debate on the side of the Government and those who support the Government, has been that this is all someone else's fault.

If we look back over the chequered story of the last four years, we see that one crisis has succeeded another. At one time the Government blamed American high prices. They are now blaming American low prices. The Lord President, speaking in 1947 of the cuts at that date, said: Are these import cuts leading to others still worse? Will they really see us through? Look at what we have today. He went on: It does not rest with us to answer that. The case of the Opposition is that the Government have blamed other countries' courses far too much. They and their supporters have paid too little attention to their own policies, which could have helped to put things right at an earlier date. There have been too many expedients and too few long-term constructive policies, and this pursuit of expedients seems to us to be at the root of the trouble. The Government must, in our view, have seen that the post-war conditions through which we have been passing would change. It should have been clear that the sellers' market would change to a buyers' market, and that sterling would come into a very difficult position.

Abroad it seems to us that they have not yet brought economic collaboration with the Western Hemisphere in line with the political and strategic developments which they have undertaken, following the advice we have consistently given to the right hon. Gentleman in foreign affairs Debates. At home they have further restricted our economy. They have imposed a dead weight of taxation and expenditure, and have upset our industry by nationalisation. The real credit for the great drive in the export trade, which has resulted in such remarkable results, is due primarily to the efforts of private enterprise, despite all the terrible difficulties which have been imposed on it by the Government. I had intended to describe in rather more detailed terms some of the financial conditions with which we are faced, but I understand that it is impossible to proceed after ten o'clock. Therefore, if we may, we will take that portion of my speech—no doubt much to the satisfaction of hon. Members—as read. I am unable, however, to circulate it in the OFFICIAL REPORT.

In the last few minutes available to me I will come at once to the two spheres of the front upon which I think there ought to be far more pronounced Government action. The first is the international and the second the domestic front. Now what are our objectives on the international front? We have the I.T.O. Charter, we have much lip service to the word "multilateral," we have evident bilateral pacts, we have attempts to make trade more frequent between Eastern Europe and ourselves, and we are attempting to organise Western European union. At the same time, some of us like to think that it would be a fine thing to develop Commonwealth trade.

It seems to me that on a Sunday, or when a notice is issued from Chequers, the Government are in their best multilateral mood. On the next day they come here with a bilateral pact. A little later they appease some hon. Gentlemen opposite with the view that there must be closer trade with Eastern Europe. It seems to me that their whole policy in the international field is summed up in the words "multi-coloured appeasement." They seem to try to meet everybody at once and to have no definite line upon which to go.

In this connection I should like to ask the right hon. Gentleman: What is the position about non-discrimination?—because, frankly, it will be impossible to build up a trade with Western Europe if we have to stick too closely to what is evidently an undertaking given on that point. I do not want to go into further detail, but it is not only impossible to build up Western Europe and for the Lord President to proceed to Strasbourg and say something constructive unless there is an understanding of what is meant by "non-discrimination," but it will let down the Commonwealth, quite apart from the question of Imperial Preference.

I should like further to ask whether the right hon. Gentleman could supple- ment the somewhat meagre answers given by the President of the Board of Trade on the subject of freeing European trade. As far as we can see, no single country and no single commodity has been mentioned by him as being advanced by his own proposal, and all that those of us who sit for agricultural districts can understand is that it is possible that horticultural products will flood this country and undermine the horticultural industry, which has already been insufficiently protected by this Government.

The broad appeal I want to make to the right hon. Gentleman is to take the next stage of our relations with the American Continent and the dollar area into a more imaginative and fruitful region. We have passed through the period of a direct loan; we have gone through part, or a great deal, of Marshall Aid to Europe; and we are now apparently approaching this problem from the standpoint of the sterling area. I have spent a great deal of my life concerned with the Indian question, and I should like to ask the right hon. Gentleman whether in the imaginative approach which we should like to press on him, as we have done in all matters of foreign policy, he is taking into account the need for widening the interdependence of the American Continent and the dollar area with the sterling area, thus relieving us of many of our grave problems.

But what is the truth of this matter? We shall never get Congress to help us unless we help ourselves. It is, therefore, particularly healthy that we should talk frankly in Parliament, just as they talk frankly in Congress. We must prove to the Americans in Congress and in the administration that we can compete, that we have a resilient and elastic economy, and that we are prepared to lower our costs. Our outlook can be summarised—and this comes from a quotation of the 19th Report of the Bank of International Settlement—as follows: If, then, a country is in disequilibrium because its budget expenditure is too high, or its investments are too ample, or costs are maintained at an uneconomic level, or the exchange rates have got out of line with reality, with the result that an untoward deficit has arisen in the balance of payments; if, in such a state of affairs, the country concerned obstinately refuses to make any alteration either in its budget or credit policy, or in its control of prices or exchanges, there is no reason to assume that the lack of equilibrium will not continue.

Mr. Stokes

What does that mean?

Mr. Butler

The hon. Member knows quite well that I have only 13 minutes to spend on my argument, otherwise I could explain it to him. What it means is, as it says, that despite the obvious difficulties here of a high taxation system and an expenditure higher than we have ever known, the Government obstinately refuse to remove the rigidity from our economics. We believe that this rigid taxation, rigid expenditure and rigid costs, with rigidity of the bargaining machine for labour through the joint negotiating machinery—which is practically not operating owing to the extreme rigidity of our economic system—we believe that this rigidity is the cause of the troubles affecting the working men and women, the financiers and the industrialists.

In short, our case is that until we can restore to the individual some freedom of choice, and until we can restore some elasticity of manoeuvre to our economy, we shall not be able to deal with the problem of the balance of payments. The inflationary tendencies which we see at home are, we believe, at the basis of many of our troubles in foreign fields. It is for this reason that we see a grave risk to the standard of living, a grave danger of unemployment and a grave danger of the value of social benefits collapsing. That is our answer to Members opposite who taunt us with objectives which are in no way ours.

There is no one who has taken part in this Debate from this side of the House who does not stand for the social services, and it is because—[Laughter.] After all, many of us have dealt with the framing and preparing of these social services, which is more than can be said in the case of some Members opposite. We have helped to frame and prepare them and we know that if the present state of our economy is allowed to persist, and the cuts in our raw materials are allowed to continue, the threat of all these grave matters to the standard of living of our country comes from Members opposite. We therefore ask the right hon. Gentleman to give us some indication of his imaginative approach to this subject, some indication that the Government will at last acknowledge, that the situation in our internal economy is vital, if we are to solve our balance of payment problem.

9.38 p.m.

The Secretary of State for Foreign Affairs (Mr. Ernest Bevin)

I do not approach this discussion in any spirit of recriminations. Nor do I wish to answer in a party sense the points that have been put. This is a critical period in which we are living, and it was bound to be critical. I think that the right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler), in his remarks on rigidity, really had in mind deflation. Deflation is a way of dealing with this problem which has grave consequences politically. I gave some figures in the House when the White Paper on full employment was published in 1944, and I think they will bear quotation in regard to what we did in times of deflation from 1922 to 1938.

I am not putting this in any party sense; it is purely historic. We tried that business. We lost 250 million working days in strikes and lockouts. We tried to solve the problems which the employers and the workmen could not solve. It was beyond them. We had an average of 1,700,000 unemployed during the period. We paid £1,290 million in unemployment pay in the same period. That was an experiment in trying to deal with the problem without control, by the non-rigid system, by mere manipulation, by endeavouring to get this balance of exchanges working. It had such terrible consequences for this country that the Government cannot approach the problem in the same way today.

Then from the point of view of what is called the welfare State and social services, I beg this House and everybody concerned not to drag this business into a kind of partisan warfare. I shall give hon. Members my reason although I have not many minutes. This so-called welfare State has developed everywhere. The United States is as much a welfare State as we are only in a different form. One of our troubles in the balance of payments today is the fact that the United States, in carrying out its welfare policy, has given basic prices to its agriculture, I do not object to it. I think it is right. But, on our side, where our raw materials are concerned, we have not yet worked out the basic price for commodities.

America has unemployment insurance, far higher, just three times what we pay to our unemployed. America's sick pay is growing and she is discussing the question on a great medical service. So the answer to the hon. Member for Chippenham (Mr. Eccles) is that I wish he would tell his friend the shipowner from Scandinavia, who has far higher social services than we have, that he must look it up when he gets home. The automatic operation of unemployment and deflation was dealt its death blow when Mr. Lloyd George and the present Leader of the Opposition introduced the social services in 1910, 1911 and 1912. The system advocated by the last speaker can only work if starvation operates quickly; if unemployment and other things operate quickly. Immediately the social services were introduced into the world, resistance became stronger, the system would not operate, and has never worked since. Therefore I cannot recommend the House to adopt it.

It is said that we have been inconsistent. May I suggest that the problem itself has been a little inconsistent? The rises and falls have been exceedingly difficult to cope with as a result of the war. I remember so well in the Coalition days that we said to one another, "Unless America comes forward with far more than she has come forward with yet, it will be a bad time for Europe and the rest of the world." I am not revealing any secrets when I say that time and time again from the days of Lend-Lease, when we discussed, from 1942, right up to the end of that Coalition, the problem of how to pull the world round, we realised that without a tremendous amount of American aid it was beyond the contemplation of the minds responsible at that time. Therefore I do not apologise for taking American aid.

America has tried different methods of dealing with the situation. The first was the loan—we are grateful for that. The second was the Marshall Plan. I do not want this House or the country or America to belittle the Marshall Plan merely because its results are at the moment over-shadowed by the problem of the sterling area and the dollar. The Marshall Plan has helped to organise Europe. The organisation which has been built up as a result of that Marshall Plan must not be belittled; it must not be allowed to run down; it must be carried on till European unity and co-operation are secured.

But the fact remains, that the other problem exists and it must be met by different methods. When we saw the problem—I will not call it a "recession "; because the use of slogans is dangerous—what were we to do? Were we to get in a panic and run back and start cutting the standard of living of the British people? Nothing of the sort. We had to face it as we have to face every political problem that arises. One of the difficulties of handling this problem hitherto has, been that it has been dealt with very largely in isolation from political considerations. It is essential, if a solution is to be found, to take the political aspects into account. The Brussels Pact, the Atlantic Pact and the other political developments have helped to create stability; but we have not yet carried this co-operation into the field of exchanges as we must now do.

When the purchases by America fell off and economic difficulties were again arising, naturally we discussed it with our American friends. Mr. Snyder and his assistants came here. The House must agree that that was a very wise step, far better than accusing each other of doing this or that, or not doing this or that. Speaking for myself I have said to my American friends over and over again, "This mechanism of exchange is so delicate, it is of such tremendous importance to the stability of the world and peace itself, that the talk of devaluation, or the use of slogans which affects the question of either currency, is one of the biggest dangers that can happen to peace in the world. Therefore, we must deal with the matter on a higher plane and in a different environment."

The Chancellor felt that it was essential to call the Commonwealth together. The Commonwealth has met and the communique is issued tonight. I have not time tonight to describe it, but let me draw attention to this fact: this conference of the Commonwealth has not been constitution-making; it has not been doing anything in that sphere. What it has been doing is examining a problem, conscious, I think more conscious than ever they have been before, that we are the banker for the Commonwealth. Instead of placing the liability on the bank to save the clients, the conference showed itself conscious of the fact that there must be a common effort to save each other for the time being. This necessitates a different approach to the question of purchases of goods from the dollar area and a very close study and examination of the problem to bring about and devise—I am quite frank, we have not the answer yet—the right kind of mechanism to deal with the dollar problem of the Commonwealth as a whole.

What is this sterling area? It represents 600 million people. It also exerts its influence on other people not strictly within it. In all, that must affect about 800 million. Within that area there is a vast, teeming, population which is the biggest market for American and British craftsmanship and ingenuity in the world. In fact if we could bring the dollar area and the sterling area together and produce the right co-operation then we could make Truman's fourth point a living reality in helping to lift up the standard of life throughout the whole of that great area.

India has been mentioned. I am told that India must have dollars to buy food. What India must get to help her vast population is capital goods of all kinds. Pakistan's resources must also be developed. All these great areas must be developed to a point at which the dollar earnings from India can go to buy capital goods and not food, she having provided her own requirements. In that way the standard of life of these millions can be raised.

The aim of the Government is this: They put forward these short-term cuts because they must. It would be absolutely stupid to go on buying and buying and letting the reserves run away. We have to reduce purchases and to reduce them in such a way as to have the minimum effect upon our economy. We must search around and buy wherever purchases do not involve dollars. America understands that. In our discussions Canada and the United States have come together representing the dollar area and Canada has been of enormous assistance. Moreover, Canada, a dollar country, is nevertheless part of the Commonwealth and, acting in those two capacities, she has been a great bridge between the two which will ultimately help us to discuss all our common problems and bring both sides together in a common endeavour.

There is a great consciousness in the Commonwealth that there is a vital problem to solve. I was asked with what imaginative concept we had approached this problem. I do not want to paint the lily. All I can say is that I am absolutely convinced that it is not by constant debating of this or that loan that we shall get the final answer. I am conscious that the loans which have been given and the Marshall Aid which has been voted have helped to save Europe from a terrible tragedy. I think every penny America has spent on it will return to her as the years go on, fourfold.

Our conception is to sit down with our American and Canadian friends—the representatives of the dollar area sitting down with the representatives of the sterling area—to examine the problem in all its aspects. They will probably have to compromise a little to find the right answer; we shall have to compromise a little too. We shall, in this sphere, have to do just as we have done in the political arena in order to arrive at agreement. In that sense the Chancellor and I will go to Washington at the end of August or the beginning of September and try with our friends to find a solution to the problem. If we succeed, it will be one of the greatest achievements in which this country has taken part and to which it has contributed.

I have been asked about negotiations with Russia. I sometimes hear hon. Members opposite being facetious on the subject. I am often called upon in Foreign Affairs Debates to try to find a solution to the great Russian problem. It will have to be found some day, but refusal to trade is not the best contribution which we can make towards it. I shall not be a party to creating another Iron Curtain. We did not build the one which is there now, and as I have said before, I would rather break through it. I do not want to see the world divided into three systems, as one hon. Member suggested to me this afternoon. His proposal was that there should be a sterling area and Western Europe, a dollar area—

Viscount Hinchingbrooke

That was suggested by the hon. Member for South Nottingham (Mr. Norman Smith).

Mr. Bevin

I trust that the House will forgive me; I do not remember who it was. The suggestion was that there should be the Russian autarky, our system, including Western Europe, and the dollar area. The best contribution which we can make to the world is to reduce the number at least to two, because if we try to develop the three, I can see one of the most terrible conflicts arising. I confess that I have been tempted in that direction. When one feels baffled by one's problems, one has to examine every possible solution. I have examined that one on more than one occasion, but I could not fail to see, as I have already indicated, all the political repercussions that could flow from it.

I do not believe that the talk about this country having one system and somebody else having some other system has anything to do with the matter. It has nothing whatever to do with it. I do not intend to encourage one side of the House to blame the other. What I am out for, and what my colleagues in the Government are out for, is to solve this problem. We must do so because of the consequences of failure, because of the dangers inherent in the political situation, if it remains unsolved, and because peace is imperative to the world for many generations to come.

The Parliamentary Secretary to the Treasury (Mr. Whiteley)

I beg to ask leave to withdraw the Motion.

Motion, by leave, withdrawn.