ECONOMIC SITUATION (GOVERNMENT PROPOSALS)

HC Deb 26 October 1949 vol 468 cc1329-474

3.31 p.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

I beg to move, That this House approves the lines of action to deal with the present economic difficulties as outlined in the Prime Minister's statement made on 24th October. Since I last addressed the House on economic affairs some three weeks ago, the Prime Minister has made a statement dealing with the various measures which are necessary if full advantage is to be taken of the devaluation of the pound. In his statement, the Prime Minister was naturally only able to deal in very general terms with the necessities of the present economic situation, against which must be judged the adequacy of the various steps proposed. I will today, with the House's permission, say something further on that topic and I will also give some greater detail of the measures proposed.

In these economic Debates we tend very often to concentrate upon one or other particular aspect of our economic situation, with the result that we are liable to forget what is the prime purpose of our whole economic policy. That purpose is, of course, to obtain the highest and most fairly distributed standard of living that is possible for all our people. How far we succeed depends primarily upon what we can ourselves produce and whether we can export sufficient of those products to obtain our essential needs from abroad. So that at the root of our success or failure lies our own capacity to produce.

I point this out because I think it is essential that the country should appreciate that the only real solution for our difficulties is more, and more efficient, production. The cutting down of imports, the reduction of expenditure upon our capital investment and upon other things we should like to have if we could afford them, is an essential condition for our success, but cannot of itself bring that success. We want to be able to afford all those things, not through the charity of some friendly people but because we can and do produce enough currently to supply all our own wants. That is what we mean by our economic independence.

To earn that independence we must be able to pay for our own wants from the rest of the world by the foreign exchange that we ourselves earn. Though we have admittedly progressed well in our general export policy, there has always been since the end of the war the stubborn problem of our dollar balance which has long vexed us and which has a long history. It is in this sterling-dollar economic area that our situation has changed most profoundly since before the war. The House will remember that in pre-war days we were able to finance by the dollar earnings of the sterling area not only our direct visible trade with the United States but also three-quarters of the Canadian dollar deficit and most of the requirements of the Continent of Europe for extra dollars above their own direct earnings. Indeed, the whole system of multilateral trade in the world centred upon this earning by the sterling area of a large dollar surplus.

But the war has changed all that, so that both our own circumstances and those of other sterling area countries are now completely different and far less favourable. That is why the most acute of our own and the world's post-war economic problems has been that of the dollar-sterling trade. The deficit of the sterling area, including the United Kingdom, has been such that it was only possible to secure our essential imports from the dollar area, first by large loans and then by Marshall Aid. We still have a gap which is being filled by Marshall Aid and, up till the date of devaluation, it was also being filled by very large and heavy drains on our reserves.

What is to happen when Marshall Aid comes to an end? [HON. MEMBERS: "Ah."] How then are we to get the cotton, the non-ferrous metals, and other raw materials and foodstuffs without which much of our production must stop? Clearly we can draw no more from our already attenuated reserves. There is absolutely nothing there to spare. Indeed, the smallness of our reserves already lays us open to great disturbance and dislocation from even minor fluctuations in world trade. Before the war, between 1937 and 1938 for instance, the sterling area's dollar income was suddenly halved, and the reserves fell by $1,500 million. There was no crisis, for our reserves were ample to stand a fluctuation of that size.

But now the case is completely different. Yet within little more than two years we have to replace the Marshall Aid income by earned dollars, unless we are to cut our imports below even the present programme, and that is barely sufficient to give us the minimum necessary raw materials for our production. Ever since 1945 we have been struggling to correct that great unbalance in our dollar payments which has replaced the balanced condition that was destroyed by the war.

There is no short cut to this filling of our dollar payments gap. There is only one thing that can do it, with the full help of our American and Canadian friends on their side of the Atlantic, and that is our own effort, and by that I mean the individual effort of every person in our country. But if that sum of individual efforts is to be effective, the Government must as far as it can produce conditions favourable for its success.

In recent Budgets we have sought to create such a disinflationary condition in our economy as would diminish the pressure of home demand and so release goods for export and would prevent inflation in the home market, with its consequent rise in prices and rigidity of industrial conditions, both of which militate so seriously against the adjustment of our economy to the changing needs of our overseas customers. A country with so large a proportion of overseas trade as our own in these days of dynamic development throughout the world needs an especial degree of flexibility and not of rigidity in its industries.

We have to do our best to prevent goods from being kept out of the export field by the pressure of home demand, and we must, therefore, keep down that demand whether in respect of personal consumption, capital goods or Government expenditure. In other words, we must keep demand within the limits of what we can supply without creating inflationary pressures or frustrating our production and export policies. Now, these are the essential conditions to make our dollar earning efforts successful, and this was, I think, proved by the results of the 1948 Budget and the favourable conditions for exports which we had at the beginning of this year when the volume rose to 156 per cent. of 1938 in the first quarter.

But since then the situation has deteriorated again, though since devaluation a new vista of export possibilities has opened up, particularly to the difficult hard currency areas. To take advantage of this new opportunity we must continue or re-create circumstances in which the export efforts of our manufacturers may have the best chance of being fully effective. We rely upon them for a new and most intensive export drive into the hard currency areas and the Government have therefore had to re-examine the situation to see whether the present financial and economic conditions are antagonistic to that new drive.

In the 1949 Budget I stated that our objective was to preserve the degree of disinflation which we had at that time accomplished, and for that purpose we planned a revenue surplus on the Budget of just under £500 million. That is a very large surplus, and we estimated that this, together with the anticipated private savings, should be sufficient to finance our capital investment programme without inflation, while at the same time our level of production would enable us to continue with a volume of exports equal to that which we had attained in the first quarter of the year. Had this turned out to be the case we should still have been left with the problem of selling those exports in the hard currency markets to the extent necessary to balance our gold and dollar payments.

It now seems clear, however, that, owing to increased expenditure, the Budget will not produce as large a surplus as we considered necessary. We cannot as yet tell exactly how great that extra expenditure will be. I have already stated that we expect an increase in Defence expenditure, due primarily to the Western Union arrangements, and that further expenditure will arise in connection with the improved conditions of service in the Health Services, and that some Departments, who have to carry stocks of materials and foodstuffs, will require more money to carry the same stocks owing to devaluation, or will, in fact, be carrying larger stocks. There will be some reductions to offset these increases so that though we shall still have a large revenue surplus on the Budget, it will be considerably less than we expected.

At the same time, our exports, for reasons which have already been gone into on the occasion of the earlier Debate, have fallen away from 156 per cent. of 1938 in the first quarter, to 141 per cent. in the third quarter, and during that period imports have actually increased so that there is not at present an overall balance of payments. Production, however, has kept up well. The official index of production shows an increase over the last 12 months of between 6 per cent. and 7 per cent., which is a good deal more than we expected when we got out the last Economic Survey.

The volume of goods available in the home market has thus been considerably larger than we expected—more production and imports and less exports—and yet there has been no difficulty in consuming all these goods and practically no unemployment arising from lack of markets. Unemployment is actually lower than last year, and is pretty well down to an absolute minimum. Prices have kept pretty steady on the whole, and there has certainly been no such fall in prices as would come from an overstocked market.

This state of affairs certainly tends to show that the inflationary pressure has again increased within our economy. So far as the investment programme is concerned, that is running at about the planned level, but there is evidence that some of the personal savings we had counted on to meet part of this programme have been diverted into the purchase of consumption goods. For instance, disinvestment of small savings has been heavier than we expected. We hoped that now savings might not be far from balancing the withdrawals, but so far in this financial year there is a total net withdrawal of over £40 million. This would mean, of course, that personal consumption has risen above the estimate that was made.

To get back to the disinflationary situation, which we sought to maintain in the last Budget, and to re-create the circumstances favourable to our export drive, we must take fresh measures to reduce the domestic pressure of demand in all three spheres of expenditure that I have mentioned. But there is one further factor which must be dealt with at the same time. We have, by devaluation, altered the terms of trade against ourselves, so that to obtain the same total volume of imports we shall need to export more, and we must be quite certain that we do not prevent goods from being exported owing to the excessive drag upon them of the home market.

Some of these extra exports will, we hope, come from those "unrequited exports" that we have been sending abroad, and as to which I will say another word presently. On the other hand we must remember that, as part of the dollar economy campaign for the sterling area as a whole, and, indeed, in O.E.E.C. as well, we have urged others to economise in dollar imports by switching over to sterling or other soft currency sources of supply; to supply these extra exports we shall have to cut down the supplies of goods in the home market until such time as we can get a further considerable increase of production. We must, therefore, do better than return to the 1949 Budgetary situation of disinflation. We must add a further factor of reduction in domestic demand to counter the fall off in supplies in the home market due to the necessity for the increased exports that I have mentioned.

There is one other factor that we must never forget. Our reserves in the sterling area have fallen to a point where even quite minor fluctuations in world trade are liable to cause us the very gravest concern as I have already stated. We must, therefore, slowly, and perhaps painfully, build those reserves up again to a safe and reasonable figure. That is a long-term objective but it must never be lost sight of.

It is in the light of these considerations that I have put before the House that the Government had decided that they must for their part make economies—that is, reduce demand in the sectors of the economy over which they have some control, capital investment and Government expenditure. It will be no less necessary for the private individual to exercise a control too, or all the good that can be done by the Government economies would be countered and negatived by the action of private individuals. As to how large these economies should be, it is impossible to state with any certainty. No one has ever imagined that the degree of inflation in our economy could be calculated or measured with mathematical accuracy. It is much more a matter of broad judgment than of calculation, and that is why different economists, looking at the problem from different angles, arrive at the most widely differing results.

We have made the best general review of the whole situation that was possible with all the information at our disposal, and, as a result, we have arrived at the body of economies that has been announced by the Prime Minister. We believe that they can produce the conditions that we need for our renewed export drive. There will, however, be an opportunity to review the whole matter before very long, at the time of the next Budget, when further fiscal and other measures can, if necessary, be taken.

Much of the comment which has been made on the Prime Minister's statement asserts, as do the Opposition Amendments, that the proposed reductions are not big enough; some also suggest that they will not in fact be made, or that they will be put into operation too slowly. On the last two points, I need only say that they will be carried into full operation at the earliest possible moment, though reductions must necessarily, some of them, take time before their full effect is felt.

As to the total volume of the reductions, we have made the best objective assessment that we could and we think it is about right. It is not our policy to produce a severe deflation. We believe that the practical damage that this would do to our production would more than offset any theoretical benefit. There is one factor which seems to have been overlooked by some of the critics at any rate and that is the rise in import prices, which is, of course, one expression of the change in the terms of trade, and is itself a disinflationary factor in the home market. We aim, therefore, at recreating the conditions of last year, which enabled us to achieve an overall balance of payment; and that is what we believe by these economies we have done.

The economies must be looked at as a whole, because, individually, of course, nearly every one of them can be objected to. No doubt everybody approves, in theory at least, of simple administrative economies; but the truth is, as I have frequently pointed out to the House, that there is no large area of administrative economies that can be made without cutting out or reducing specific services, which have been inaugurated because of the public demand for them and which are in themselves useful, though not perhaps so essential or vital as some others.

We have been doing in Government service what we have asked the community generally to do, that is, by many devices continuously to improve efficiency and productivity. As a result, in the main civilian Departments—leaving out of account the Post Office, which is treated as a trading concern—we have reduced non-industrial staffs by over 5 per cent. in the last 15 months. Now this process of steady improvement in efficiency in Government service will go on and will yield further economies, quite apart from those special economies which will follow from the decisions to cut out and reduce specific services.

I will deal first with the economies in capital investment. It is, of course, too late now to affect capital expenditure in 1949. The question is, therefore, how should we adjust our programme for 1950. Total gross investment in 1948 was running at £2,000 million a year, and this year it looks as if it might approach £2,100 million. There is every reason why we should have so large a programme, and, indeed, our needs would suggest a much larger one, but we must, nevertheless, limit it in accordance with our means.

We have come to the conclusion, as the Prime Minister stated, that we ought to reduce this programme by somewhere about £140 million, and we have given instructions that for 1950 the programme must be reduced by that amount, divided roughly over a number of groups of items. Within this total we must protect those elements of investment which are the most important to our future progress. But there are other factors which come into consideration—such as supplies of raw materials and the demand of the export market, which must also have an influence on the distribution of our capital investment effort.

As our recovery so largely depends on our capacity to improve our productivity, and this is to a large extent bound up with new capital development, we do not propose to look for any large contribution by way of economy from manufacturing industry, iron and steel or agriculture. The aggregate reductions over all these should not amount to more than 4 or 5 per cent. of the current level of investment. In this field there will have to be some limitation of new building work, and in the case of plant and machinery we must take the fullest advantage afforded by devaluation to enter the hard currency markets with our engineering goods. That means some curtailment of our use of those goods in the home market and the removal of some pressure of demand. We shall try to see that any such deductions do not affect improvements which will yield a high dividend either in increased efficiency or in dollar earnings.

Our main economies therefore, must come from other groups. The Fuel and Power investment programmes provisionally approved by the Government for 1950 involved a total expenditure of £237 million. The Government have decided that it is necessary to cut this total by some £25 million. The larger part of this cut will come from a reduction in capital expenditure on electricity development in 1950. The electricity programme is by far the heaviest of all the fuel and power industry investment plans, accounting for more than half the total. Capital expenditure on gas will also have to be reduced in about the same proportion. Some small reductions will have to be made in the plans to expand the oil refining industry and in certain plans of the National Coal Board.

The cut to be made in the capital expenditure of the electricity industry in 1950 will fall mainly in the sphere of distribution. We cannot afford to provide new supplies of electricity as rapidly as we would have liked, and some check must be imposed on the rate at which new connections are made and schemes of rural electrification are implemented. With the present shortage of generating plant it is in any case undesirable for the industry to take on heavier and heavier consumption loads which are bound to aggravate the problem of closing the gap between demand and capacity.

The effect of the cut to be made in the gas industry will be to postpone large measures of integrating gas supply planned to improve efficiency and reduce costs which the Gas Boards expected to be able to start next year, following the integration of ownership by nationalisation this year. These schemes, however, would not in any case have matured for some time.

Generally speaking, investment in oil refining brings us a quick and substantial saving in dollars and other hard currencies. The cut here will be comparatively small, though it will have the effect of slowing down part of the refinery expansion programme and some of the more distant and marginal projects will have to be delayed. The Government, of course, recognise the very great importance of colliery reorganisation and development as a means of getting more and cheaper coal, and, as with the oil refinery expansion programme, the cut in the coal investment programme will be relatively small and will be designed to affect as little as possible the prospects of increasing coal supplies and reducing costs.

Capital investment in the transport group is already so restricted that the scope for further curtailment is very limited, but, nevertheless, some additional contribution must be made by this group. In the case of railways, this will involve some reduction in the standard of maintenance and the restriction of some much needed new development works. In ports, also, it may be necessary to reduce maintenance and to postpone works of rehabilitation and development.

Contributions will also have to be found from civil aviation and from the Post Office. Over the whole field of transport and communications there should be an aggregate saving of at least £10 million. Moreover, in addition, one of the main tasks in this sector will be to divert to exports the large number of goods vehicles and public service vehicles now entering the home market above the levels that were contemplated in the 1949 Economic Survey or that we can afford.

Despite the provision of over a million new homes since the end of the war, including nearly 600,000 new permanent houses, there are still many families who need a separate home and many who would like a better home. Current expenditure on housing does, however, occupy so large a place in the total building operations that we are obliged, however reluctantly, to look to this programme for a large contribution to the reduction in our aggregate investment. It has also become necessary to limit the amount of dollar expenditure on the purchase of timber, and the quantity of timber which can be secured from non-dollar sources is uncertain. The proposed modification in the housing programme, combined with other economies which we shall have to make in the use of timber, will thus help to ease the pressure on our scarce dollar resources.

The reduction of £35 million a year under this head mentioned by the Prime Minister will mean during the course of next year a reduction in the current level of construction from about 200,000 houses a year to about 175,000 houses a year. Adjustments will be made in accordance with a proper balance of priorities within the programme. The Government consider that in these circumstances the programmes of the local authorities for the building of houses to let should have priority over the erection of houses by private persons under licence. The number of houses for which licences can be issued under present circumstances will, therefore, be reduced so as to enable the local authority programme for the building of houses for letting to proceed without substantial reduction.

As regards education, where we are proposing to secure a saving of £7½ million, every endeavour will be made to continue with the provision of the school places needed to meet the increased birthrate of the years immediately after the war and those required on new housing estates. The extension of facilities for technical education will also continue. The necessary savings will arise from a postponement of the further expansion of the school meals scheme, by deferring a number of minor projects and by building schools of good quality, but more simply than at present.

The Government will curtail building work under their own direct control, including the programmes of building for defence and for the Government's own occupation. From the other smaller programmes which I have not specifically mentioned, such as those, for instance, sponsored by the Home Office, appropriate contributions to the aggregate reduction will be made, including a saving of £1 million on the retardation of the university building programme.

Finally, there is the substantial field of miscellaneous investments, including a large section of building and civil engineering work. The bulk of this work is on maintenance and repairs. A great deal is not at present subject to building control because it is below the exemption limits. But as we are taking steps to restrict and restrain investment in important programmes such as housing, we must prevent resources being diverted indiscriminately into the miscellaneous field of less essential work.

Within this category of miscellaneous investment in both building and plant there will, therefore, have to be substantial reduction, put by the Prime Minister in his statement at some £35 million. To ensure that the volume of miscellaneous building work is kept within bounds the building controls will be tightened and the exemption limit of licensing will be lowered.

If is essential that these cuts should be rigorously enforced and that the total investment should be kept below the reduced level. Apart from these measures by the Government, private firms and individuals will also, I hope, help to ease the pressure of investment demand by postponing works of a less essential character to a later date.

We shall seek to make these reductions effective as quickly as possible, but in doing so we must, of course, avoid action which would dislocate works already in progress or seriously upset the balance of our resources. In some cases it will be necessary to reduce gradually over a period of months—as, for instance, in housing construction. In other cases, where entirely new projects are being postponed, the effects of the cuts should be immediate. Early results should also be obtained in those cases where machinery and vehicles of standard types are being diverted to the export market.

It will thus be seen that in some cases materials and machinery may have to be switched over to make different products within the same factory, while in others there will have to be a change over in jobs, since we, as a nation, cannot afford to go on using so much of our resources for home investment as we have been doing over the past few years.

It cannot be repeated too often that a planned full employment programme entails, as an essential part of the full employment guarantee, that though sufficient overall employment can be found to occupy everyone, no individual can be guaranteed continuance in his particular job or even in his particular trade. To insist upon the rigid maintenance of the present pattern of employment would be to destroy all hope of full employment.

Let me now pass to Government expenditure and let me remind the House of the figures of our Civil expenditure. It amounts on this year's original Estimates to £2,021 million, £1,000 million of which is for social services. The Ministry of Food Estimate is £410 million, largely subsidies. Some dozen large services, such as agriculture, supply, works, tax collection, imperial and foreign services, and so on, account for some £370 million. Some diminishing services arising out of the war and other analogous services account for £85 million, and we are left with a balance of £156 million covering a wide range of activities of Government spread over a very large number of small Votes.

We have examined this whole field and decided that short of slashing some major social service, which we do not propose to do, our economies must consist of a large number of relatively small items from the wide range of miscellaneous activities, with relatively few larger items. In our consideration of the larger items, we deliberately decided not to adopt measures which would injure the main scope of the social services nor to embark on any major reduction of the food subsidies because of the inevitable reaction upon the White Paper policy of restraint on personal incomes.

The programme of cuts, therefore, in Government expenditure falls into two main parts. First, economies in administration and curtailment of services not essential to major Government policy. These measures yield savings of between £40 and £45 million a year. Second the further measures that must be taken in order to bring up the savings to the total required. Those measures together yield £53 million.

Against these we must allow for the cost of new services next year—Bills have been passed which will come into operation—amounting to some £5½ million, but against that we can, of course, take into account the yield of the new Profits Tax. Taking these points together, the net result is the saving of over £90 million in a full year, and the benefit to next year's Budget, when the increase in the Profits Tax takes effect, should be well over £100 million.

I propose to give the House some of the more important items in the two groups. Taking first administrative and staff economies, our object has been to save administrative manpower wherever possible. The largest savings of this kind will be in the Ministry of Supply and the Ministry of Food. The Ministry of Supply will save £6 million. The main reductions are in the strengths of the Royal Ordnance Factories and in the administration of certain technical establishments. But the total figure is the result of a search for special administrative economies throughout the whole field covered by this widely-spreading Ministry. The administrative saving of £1¾ million by the Ministry of Food is, again, the result of a comprehensive review of the whole field of its activities. The sources of savings are, firstly, regional reorganisation and concentration; secondly, dropping some detailed requirements of control; and thirdly, savings in overheads and other administrative items of general application to the Ministry's work.

Other Departments with considerable contributions to staff saving are the Ministry of National Insurance, £300,000; and the Ministry of Civil Aviation, reduction in salaries and economies in transport, light and similar administrative services, nearly £250,000. The Ministry of Works has progressively reduced its staff in the last two years by some 13 per cent. already, and will now make further reductions producing a saving of £400,000. The Ministry of Fuel and Power will save nearly £250,000 by reductions in staff and over £100,000 savings in the services of local fuel overseers. The Board of Trade estimate further staff economies which, together with reduced payments to agency bodies working control schemes, will save nearly £750,000.

These total savings of which I have given illustrations are to be reckoned not only in terms of money, but also in terms of manpower. A rough estimate is that these proposals will lead to a further total reduction in Civil Departments of not less than 10,000 by the end of 1950.

The results of these economies in administration must involve hardship to some civil servants and some alterations both in the services which Government Departments have been able to give hitherto to the public and to the trading community and, in some cases, in the relationships between Government Departments and local and other public authorities. These, however, are sheer necessities which cannot be avoided if we are to take effective measures in dealing with our economic situation.

The other source from which we get our savings in the first part of the programme consists in the curtailment of services not essential to major Government policy. Here, again, the whole field has been reviewed. By definition the results cannot be spectacular, though the aggregate is considerable. I have again selected certain examples to show the way in which this section of the programme is made up:

Education: The charge on the Exchequer will be reduced by about £5 million owing to a variety of measures which include an increase in the charge for school meals by 1d.—that is, from 5d. to 6d., the meals costing 1s. 2d.—and reduced transport facilities for pupils.

Agriculture: A number of items of public expenditure will be cut; the main items are raising the minimum qualifying acreage in England and Wales for potato acreage payments and the slowing down of the acquisition of farm land, yielding about £6 million.

Register of Electors: This will be revised only once instead of twice a year, saving £800,000. The revision next October will be cut out.

Information: Economies in the Information Services and the British Council will yield about £1 million.

Ministry of Labour: Curtailment of expenditure on hostels, vocational training and further education and training schemes, under the Ministry of Labour will produce a saving of over £500,000.

Ministry of Transport: Slowing down abnormal road expenditure, and the acquisition of tolls, the saving of nearly £1¼ million.

Civil Aviation: Net reduction in grants, contributions and works expenditure a third of a million pounds.

Ministry of Works: Here we have sought the maximum economy in the rate of expenditure on new Government building, especially office building. This programme is linked with the Government policy on de-requisitioning. For the Ministry of Works must build or otherwise provide accommodation to take the place of buildings now occupied by requisitioning but due to be surrendered within the next three years. The Government have decided that in the present economic situation the completion of de-requisitioning must be deferred. The total annual saving on the Vote of the Ministry of Works is £3¾ million.

The Exchequer may also expect to save money as a result of the curtailment or postponement of services by local authorities following from certain items in the economy programme, such as those in education that I have mentioned. At the present stage it is not possible to quantify this item in terms of an annual saving to the Exchequer, and so we have not taken it into account in the figures. But I hope nevertheless to get a benefit from this source for next year's Budget.

As I have said, the total saving resulting from staff economies and curtailment of services not essential to major Government policy is between £40 and £45 million; from that there must be deducted the sum of £5½ million, representing the net cost of the new services that will start next year after the deferment of the introduction of certain parts of the Legal Aid scheme and reduction of the cost of the Festival of Britain by £1 million.

The further measures required to bring the total savings to the figure we think necessary were given and explained by the Prime Minister but for convenience I will repeat them now without further explanation: the charge for prescriptions under the National Health Service, yielding £10 million economies; adjustments in the price of some less essential foods—increases in the prices of dried and frozen eggs and raisins and removal of the fish subsidy, yielding £7 million; elimination of the Exchequer subsidy on animal feedingstuffs, yielding £36 million.

In the nature of things it is not possible to be precise about the date by which these savings will be in full operation. Some can be put into effect at once. Others will come in later, because they apply to services that are now starting or developing. Others again cannot be operated till certain administrative arrangements have been completed or the necessary negotiations conducted with the local authorities or other parties concerned.

It will be our aim to give effect to these savings at the earliest moment, and Departments are being instructed to act in that sense. We cannot of course expect this programme of economies to come into full effect in the current financial year, but it will be fully effective in the next financial year. To some extent, this year's Budget out-turn is bound to benefit; it is, however, impossible to say by exactly how much. What is certain is that the full annual saving will not be realised this year.

So far I have dealt only with Civil expenditure. I now come to the economies in the Defence field. As the Prime Minister said on Monday, it would be wholly wrong to use this occasion for making any major change in Defence policy apart from a full consideration of the merits of such a change. The Government propose to give full consideration to the inter-Service review by the Chiefs of Staff dealing with the future structure of the Armed Forces, which the Prime Minister mentioned, before arriving at any decisions. I cannot say what the consequences of that review may be in terms of the money allotted to Defence in next year's Budget.

All I can say is what special economies we can find in Defence for this year. As I have already forecast, there will have to be supplementary provision over and above the £760 million of the original Defence Estimates for 1949. But thanks to the recommendations for economies made in the course of the inter-Service review and other savings, we can see economies which, despite the effect of the change in the exchange rate, will produce savings at an annual rate of £30 million a year, amounting that is to £12½ million during the remainder of the current financial year.

This will be the cumulative result of a number of separate measures in each Service Department. Precise estimates cannot be given of the effect for the rest of this financial year of each of these economies, but the larger savings will accrue in the following fields:

First, a substantial reduction in headquarters staffs;

Secondly, a reduction in the training, maintenance and administrative establishments;

Thirdly, owing to the foregoing measures and the reduction in the intake of recruits, there will be a more rapid run-down in uniformed manpower. The strength of the Armed Forces at 1st April, 1950, will be more than 20,000 below the figure of 750,000 given for that date in the Statement relating to Defence 1949. Lastly, there will be economies in works programmes, particularly overseas—but no cuts are being made in the programmes for the building of married quarters.

Before passing from this general and Governmental policy side of our problem I must add a word about two matters, remembering of course that the main purpose of these economies in expenditure is to create favourable conditions for our export drive to hard currency areas. I have already indicated the immediate effect upon our balance of payments of devaluation and the urgent need for stepping up our hard currency exports, but I would like to emphasise our need to step up many of our other exports as well.

But to this generality there is one very clear exception. In these new circumstances we cannot afford to export largely without getting anything by way of return. It follows, therefore, that we cannot afford to give further loans or credits to other countries except in very special cases, as for instance where it will lead to a rapid increase of production and a quick return in goods for ourselves. Nor can we continue repaying sterling debts to the same extent as hitherto. Such credits or releases of course add to the inflationary pressure in this country just as do our own internal expenditures.

But we must in this matter retain a sense of proportion and of responsibility. Though we are anxious as to our own position we are also most anxious as to the general world situation and particularly that of some of the large less developed areas which should be able to contribute much more than they do to their own support and to the general pool of world supplies from which we too could benefit. For this reason Colonial development and investment must obviously be continued both because of our duties to the inhabitants of those territories as well as because of our own interests.

When we come to the rest of the sterling area, the very nature of the system is that its members should be able to draw on the reserves which they keep with us in sterling when they are in need. It is a necessary consequence of their being willing to allow their balances at some time to rise that we should be willing to allow them at other times to draw on those balances. Special considerations, however, arise in the case of the war-time sterling balances, and the extent to which drawing is permitted upon these is and has been limited by agreements which we have with the several countries. The reduction of those sterling liabilities however is, like the granting of new loans or credits, a matter of degree, and clearly in our present situation we cannot afford to employ so much of our resources for this purpose as has hitherto been desirable in our own long-term interests, and in the interests of world development.

In financial terms that means that in order to keep sterling strong we must not over-provide sterling to other countries, either in the form of new credits or in the form of releases of accumulated sterling balances. Our past policy has enabled us to give most essential help in the restoration of the economies of Europe and Asia. Had a different policy been adopted both we and the world would have been worse off. But we must now go slower, whether we like it or not.

Our diversion of exports to the dollar market is not the only way of saving dollars. It is equally important to supply the other countries of the sterling area with their dollar saving requirements and so to help them to carry through the dollar saving upon which we are all agreed. There are also those hard currency countries to whom we lose gold if we are not in balance of trade with them: of which I would like to mention particularly Iran, who have not devalued their currency and to whom we shall have to export a great deal more if we are to reduce their drawings upon us for dollars.

These efforts to expand and direct rightly our export trade are much the most important factor in bringing about a state of equilibrium between the sterling and dollar areas, but nevertheless, as the Washington communiqué pointed out, there is also the unpleasant necessity of cutting down our dollar imports, a course which both the United States and Canadian representatives recognised as imperative. The Prime Minister stated on Monday that we had adopted a dollar import programme for 1950 at the rate of $1,200 million a year—compared to the rate of $1,650 million for the first half of 1949.

We had hoped to get down to this rate more quickly, as I indicated when I made my statement in the House in July last. But we have found that despite the standstill, the rate of expenditure has not fallen as fast as we had hoped. This is largely due to the fact that a substantial volume of supplies which we expected to be paid for in the second quarter actually had to be paid for in the third quarter of this year. In the result, while we should be down to $600 million in the first six months of 1950, the actual total of our dollar imports in 1949–50 will be considerably more than twice that sum. The total should be rather under $1,400 million, that is just about half-way between the old $1,600 million rate and the new much reduced rate of $1,200 million down to which we are now working.

We have arranged this programme so as to provide the raw materials necessary for our anticipated production, but on the basis of the greatest economy in their use and the elimination of all waste. It is of vital importance that we should do everything we can to preserve dollar raw materials for our export trade and we should use as little of them as possible for supplies to the home market where any other substitutes may be used.

The main reductions by which we have arrived at the new programme have been made possible by the continuing substitution of non-dollar for dollar sources of supply and by a cut back in certain hoped for increases. The chief reductions are in food—other than wheat and sugar—in tobacco and in raw materials of various kinds due to diversions of purchases to other areas and greater economy in use.

In putting our dollar import programme as high as $1,200 million we are deliberately taking a risk on the building up of our dollar exports and upon the success of the dollar saving efforts of the whole of the sterling area, because we realise how vital it is not only to ourselves, but to the rest of the sterling area that our manufacturers should have adequate raw material supplies, which they could not have with a smaller dollar import programme.

How grave and difficult our situation is will be realised when it is appreciated that even this reduced programme, which barely supplies our raw material needs, is only possible with the assistance of E.R.P. and the Canadian dollar loan, and that both those forms of special assistance must before long disappear. Were we to be obliged to go down below the $1,200 million level we should certainly be unable to maintain the flow of raw materials necessary for full employment and full production. And that, I think, emphasises how directly dollar earnings are connected with full employment.

I now turn for a few moments to deal with the other aspects of our problem which concern more particularly private enterprise and the private citizen. Perhaps I may first dispose of the subject matter of the Profits Tax. As I have explained already to the House and elsewhere, we propose to increase the tax on distributed profits by one-fifth, from 25 per cent. to 30 per cent.

This small contribution from the profit earner which will yield in a full year a net amount of £13 million, will be a contribution to the disinflationary programme. It has met with a certain amount of criticism in circles which will be primarily affected on the basis that it will act as a disincentive to the export drive. This is of course a fallacy, since it will fall equally upon all profits and will not detract from the differential advantage that devaluation will bring to exporters to hard currency areas.

The Government, as the House will realise, have renewed their request to all wage and salary earners to limit their demands for increases to a narrow area of very low paid workers. At the same time, in some industries devaluation will lead to much larger profits. It could hardly be expected, if the main burden of devaluation is to fall on the worker, that he would not rightly and fairly expect some of the burden to be borne by the profit earner. I have tried to be very modest in meeting that just demand.

But there is here another aspect of this question. At this time I, as Chancellor of the Exchequer, should much prefer to see a reduction in prices and so smaller profits than any increase in revenue from an increase in Profits Tax. I do therefore ask all managements, whether industrial or commercial, to consider anxiously whether at this critical time they cannot help our national economy by a sustained policy of lower prices rather than by the maintenance of a high level of profits.

Nothing is more capable of adversely affecting public opinion at the present time than announcements of the capitalisation of huge profits and their distribution as bonus shares to shareholders. I have felt it necessary, therefore, in order to avoid the danger of the recurrence of such announcements to ask the Capital Issues Committee to hold up for the present all further applications for the issue of bonus shares.

Many people are concerned on the question of the credit policy that is now being followed and the possibility that the whole of our policies of disinflation may be frustrated by inflationary credit. I have carefully considered both the question of short-term money rates and the policy of advances by the clearing banks. I have reached the conclusion that in present circumstances, and on the balance of considerations, there is no advantage to be gained by raising the short-term money rates.

With the rise in costs, the increase in production, and the increased export drive by many smaller firms, it is natural that there should be a rise in advances made by the banks to their clients compared to the period before the war. More money is needed to keep the wheels of industry and trade moving. But inflationary -pressure can set up a chain-reaction. In a seller's market anything which leads to higher prices can be passed on, all down the line, and there is always the danger that advances, justifiable though they may be on the credit-worthiness of the client, may create the conditions which themselves sustain a general upward pressure.

The banks, whose co-operation I have had throughout, are fully aware of this danger. But in order to make sure that everything is done to avoid inflationary credit, I have discussed the matter with the Governor of the Bank of England, the Chairman and Deputy Chairman of the Clearing Banks Committee. As a result, I have written to the Governor asking him to inform the banks and accepting houses of the importance of their co-operation and requesting them, in their credit policy, to use every endeavour to ensure that inflationary pressures are held in check. The text of that letter is being released for publication tonight.

The Opposition express the view in their Amendment that a greater incentive should be provided for production. The question of wage and salary incentives is not one to be decided by the Government. The rates of wages and conditions of employment have been left, by common agreement, to the voluntary decision of the two sides of industry. There is nothing to prevent all industry having incentive schemes of any kind they like, as indeed many of them have today, and we have always welcomed and encouraged schemes of payment that are related to the volume of production.

If the Opposition refers, on the other hand, to greater profit incentives for employers, then there can, in our view, be no question of now increasing the amount paid out by way of profits whether or not some or any of it might have an incentive effect. It will be sufficiently hard to maintain a disinflationary balance in our Budgets without contemplating a remission of taxation on profits which at this time would be most inflationary in its effect. It is no good talking generally of incentives unless the financial and fiscal measures intended can be particularised, and we shall await with interest to hear what precisely is proposed by the Opposition, both by way of increase of Governmental incentives and by way of increased economies in capital or Government expenditure.

This programme that I have sketched is the minimum that is absolutely necessary to prevent the frustration of our new export drive and of our efforts to obtain increased production. It is, I believe, enough, but no more than enough, to create a favourable climate in which we can work. It will cause difficulties and hardships in many quarters but we have done our best while preserving the necessary volume of cuts to make them as little painful as possible.

These economies, like devaluation, are not in themselves any remedy for our difficulties. The two factors of devaluation and of the reduction in our internal consumption can together, we are convinced, create conditions favourable to the success of our renewed dollar drive. But they are not and cannot be the drive itself. They are the passive conditions and not the dynamic energy that must win through the difficulties.

The real and essential task of providing the greater flow of the right goods and selling them in the right markets remains a job to be done by the men and women in our industries and our great national services such as those of fuel and power, agriculture and transport. I sympathise completely with those in industry—on both sides—who are doing all they can and who say they are fed up with the constant exhortations to produce more. So many in industry have done and are doing a first rate job which calls for our praise rather than for our further exhortations.

But we must face the fact that however completely some firms and industries are devoting themselves to the national effort, there are many—unfortunately, very many—which are not pulling their weight. And this failure to make a full contribution, whether on the part of management or workers, is looked upon as most unfair by others who are going all out to help in this tremendous task of survival that our nation is facing.

Let me make it absolutely clear. No devaluation, no economies, no Governmental action of any kind can in fact save our present social and living standards unless we all collectively and severally play our full part. That is not a rhetorical statement or a flight of the imagination. It is the stark fact. I do not want and do not intend to exhort anyone to do anything, but I do ask every person in the country to face that simple fact and pay full heed to it.

We can express our present situation, robbed of all its technical surroundings and explanations, in quite simple terms. Unless we can all quickly produce more and get our costs down, we shall suffer a tragic fall in our standard of living accompanied by all the demoralising insecurity of widespread unemployment.

We are not out to fight one another to see who can get most; we are all fighting together as a team for the survival of a way of life and a form of free Government that we are determined to maintain, for benefits of social services that we have earned after long years of waiting, indeed for everything that is good and hopeful in our British civilisation. In that battle, each one of us knows in his heart that he can make a real and effective contribution if he will.

These economies, like devaluation, are a prelude and no more to a new surge forward to conquer the hard currency markets without which our industries, our standards of living, indeed, our civilisation itself, must fade and wither away. Mr. Speaker, we dare not fail in our efforts.

4.46 p.m.

Mr. Eden (Warwick and Leamington)

I beg to move, in line 1, to leave out from "House," to the end of the Question, and to add: regrets that in the National Emergency to which we have been brought, His Majesty's Government, while taking no sufficient measures to prevent the ever-increasing dangers of inflation at home and the consequent rise in the cost of living, or to restore the national credit abroad, at the same time make no positive proposals to stimulate production by the necessary incentives to individual effort throughout the nation. As I listened to the closing passages of the right hon. and learned Gentleman's speech, not one syllable of which I can personally challenge, and to the very grim tone in which he referred to our national outlook, I thought what a severe indictment it was of his administration and of these proposals which we are now discussing. To use words introduced by the Chancellor of the Duchy of Lancaster, nothing could have been more completely out of phase than the right hon. and learned Gentleman's concluding passage and the actual proposals we are now examining.

The whole of the first half hour of the right hon. and learned Gentleman's speech—and I never complain however long his speeches are because I realise the difficulties—if I may tell him so, was a complete justification of my demand that a White Paper should have been laid last Monday. What he did was to itemise, and I am very glad he did it, article by article the detailed economies that have been effected. That is just what the House would have liked an opportunity to study before this Debate began. I still do not in the least understand why the Government could not have put that down in a White Paper.

For the rest, the first half hour merely consisted in a series of pious exhortations which were extremely welcome and which, as far as I am concerned, are completely indisputable and might serve very well as mottoes to be drawn out of a Christmas cracker. But, unfortunately, that is not the situation to which the Chancellor applied himself in the closing words of his speech.

My right hon. Friend the Leader of the Opposition has made it plain more than once that, in recognition of what we regard as the gravity of the present situation, we would ourselves support the Government in all measures which we considered necessary to restore the national finances and our economy, however unpopular those measures might be. That undertaking, I say at the outset, of course, stands. Therefore, while I and my hon. and right hon. Friends on this side of the House will have detailed criticisms to make on a number of items, some of them important, there is from us no challenge as to their broad necessity now. That is not what concerns us today so deeply.

The problem we have to consider is whether these proposals detailed by the Chancellor of the Exchequer today, some of them still so sketchy and indefinite, most of them only effective in the distant future, all of them adding up to a sum which is very small when compared with our vast expenditure, have in fact any relation at all to the needs of the hour. It is our submission that they have not.

Two years ago, as the Chancellor reminded us just now, we were confronted with another crisis. They have been so numerous that it has been difficult to keep a tally. During the major one two years ago, which we may recall, the Prime Minister announced a series of cuts. Let the House look for a moment at the contrast between our position then and our position now, because of its influence upon the magnitude of the Government's present decision. At that time, two years ago, our reserves stood at about 4,000 million dollars, including the then unexpended portion of the American Loan. Today, I suppose, these reserves stand at about one-third of that amount—perhaps 1,400 million dollars—or maybe less. So I say that, with the utmost goodwill, it is impossible to match the Government's proposals with the realities of the hour.

I cannot understand the Government's view of our national psychology. For some time past they have been emphasising the seriousness of the situation and they have been telling us of the formidable nature of the cuts that would have to be imposed. [An HON. MEMBER: "The Press."] An hon. Gentleman says it was the Press. Well, what do we spend on public information services? If the Government thought that the Press was exaggerating the formidable nature of the cuts, was anything said by these information officers who are scattered all over Government Departments? Not as far as I know. [Interruption.] Well, hon. Members cannot have it all ways. Either this situation is one of the desperate seriousness which the Chancellor has told us about in the last few words of his speech, or it is not. If it is of that desperate seriousness, the Government of today have the right and justification to meet that challenge, and we cannot complain if the Press uses language as grave as the closing sentences of the Chancellor's speech today.

Let us have a quotation. The President of the Board of Trade last Saturday went to Harrogate, and I am not criticising him for it, but congratulating him upon it, and, in that spa atmosphere, what did he say? The right hon. Gentleman said this: This is Lancashire's last chance, and it is Britain's last chance. What is the good of hon. Gentlemen opposite complaining that the Press has been exaggerating? It is always everybody else's fault. Everything that happens in the world is the fault of everybody except hon. Gentlemen opposite. Believe me, that is against the law of averages. If Ministers really intended to rally the nation, and if it was their purpose to create a new awareness of the critical state of our whole economy, here, so it seems to me, was a matchless opportunity pitifully missed. I can remember no occasion on which a statement by the head of a Government has fallen so far below public expectations and the nation's needs.

I will admit this. If the proposals of the Chancellor, as he has explained them in detail this afternoon, had been introduced to the House before devaluation, they would have made a certain contribution. Today, I fear—why does the right hon. Gentleman frown in pained surprise? I should have thought it was clear to everybody that if these proposals had been introduced before devaluation, their consequences would have been much more healthy than they will be now. [Interruption.] If the hon. Gentleman does not agree with that, perhaps some Minister will explain the process of reasoning by which—[An HON. MEMBER: "Why?"] I will explain why.

Economies made in advance are an indication of a determination before we take a certain step which the lack of reserves compels us to take. Every economy which is delayed makes that economy not only more painful but less effective. Let me give the Minister of Food an illustration. We all like putting off disagreeable things, like going to the dentist, yet the more we put off doing such things the more painful in the result do they become. Yes, but in this case the delay is the Government's and the pain is the nation's. I do not know if the Minister of Food would like any more illustrations; if so, I will be glad to give them to him in due course.

The Prime Minister told us last Monday night in his broadcast that we must find a way to stand on our own feet. I agree with him, and also when he added "and that very soon." Does he, and do his colleagues, really believe that these proposals can possibly enable the nation to do that? The Ministers themselves contradict each other on this very point. We had the Economic Secretary to the Treasury speaking in the House during the summer, when we were saying that the Government could make administrative reductions and economies of the order of £50 million or thereabouts, which we have urged several times. The hon. Gentleman said: The idea that tens of millions of pounds can be saved by administrative economies without changes in policy is sheer moonshine."—[OFFICIAL REPORT, 23rd June, 1949; Vol. 466; c. 520–521.] But what have we got now? We have got sheer moonshine from the Prime Minister, although it is very rude to talk like that. The Prime Minister said so on Monday, when he said this: … between £40 million and £45 million a year can be saved by curtailment of services which are not essential to major Government policy, and by drastic economies in the administration of other services which must be retained."—[OFFICIAL REPORT, 24th October, 1949; Vol. 468; c. 1020.] What is that but a completely flat contradiction? The Economic Secretary says that there could be no economies of tens of millions in administration, but the Prime Minister says that between £40 million and £45 million can be saved in administration. If that is not a contradiction, I do not know what it is. Incidentally, it is a complete vindication of what was said by my right hon. Friend at the time—that something between £50 million and £100 million could be saved in administration. Now the Government have done it, and the Prime Minister has said that they have done it.

The Prime Minister (Mr. Attlee)

I never suggested in any statement or broadcast that £40 million or so a year could be saved solely by administrative cuts. I said there was to be a postponement of certain services and there are alterations, not of major policy but of minor policy, with administrative economies, and there are others, but I never suggested for a moment that tens of millions of pounds could be saved by purely administrative cuts.

Mr. Eden

The right hon. Gentleman did say that between £40 million and £45 million could be saved by two things. [Interruption.] Well, let us break down the figures. First, the Prime Minister mentioned the curtailment of non-essential services, and secondly administrative economies. I say that those are the things which we have been urging upon him for a very long time.

Mr. Cecil Poole (Lichfield)

rose—

Mr. Eden

I am sorry, but I cannot give way, as I have many other things to say and there are many hon. Members who wish to speak.

I would submit this consideration. It is unhappily true that the cuts which have been successively imposed have always been chasing the events and never in advance of them. As to the programme which has been put before us, it seems to me that the Government's approach to the problem as it has been stated by the Chancellor today has been wrongly founded. I submit that the Government should have said to themselves: "What is the minimum reduction of expenditure which we must make if we are to halt the growing danger of inflation, restore confidence and enable us to bridge the gap?" Having fixed that figure, the Government ought then to have made up their minds how the cuts were to fall under the various headings of national expenditure.

Mr. Warbey (Luton)

Will the right hon. Gentleman give way?

Mr. Eden

No, I cannot; I want to pursue this argument. If it is a serious interruption, I will accept it, but I think that the House generally would like to get on with the Debate.

Mr. Warbey

Before the right hon. Gentleman leaves that point, will he say what is the total size of the cuts that he thinks the Government ought to have made?

Mr. Eden

I am coming to what we are proposing to do, and that interruption is simply wasting the time of the House. [Interruption.] It is not for the hon. Member to make my speech. We have listened for one and a half hours without interrupting the Chancellor, and I think I can now make my speech.

The truth is that there has been no plan and no order in the Government's proposals. Instead of preparing their proposals, as they could and should have done either in July or earlier when they saw that devaluation was inevitable, as they now tell us, they have just scratched them together in the last fortnight, and they represent the maximum that can be agreed without Cabinet resignation. That is about all.

What are these savings? What do they amount to? I reckon £90 million on next year's Budget and £140 million on next year's capital expenditure. As for this year—the Chancellor was frank about it—would I be wrong if I said that they could not amount to as much as £75 million in the next six months? I see that the "Manchester Guardian" puts it at £50 million. It is the next six months which are going to be the vital period It is only if we can restore the national economy and confidence in ourselves within that time that the later economies are going to have the chance to bear fruit at all. Otherwise, all the grim forecasts of the Chancellor are going to come into effect before his economies. It seems to me that the Government ought to have two, purposes in mind: first, to combat the rising tide of inflation, with all that this must entail for our standard of life and for the level of employment, and, secondly, to give a spur of real encouragement to increase production, particularly in respect of the export trade.

We feel that the Government's proposals are insufficient on the first count and non-existent on the second. What are the realities? The hon. Member for Wednesbury (Mr. S. N. Evans) speaking last Saturday put them. I thought, admirably. He said: We British people face the greatest peacetime challenge ever to confront a free people, and not all fully understand the magnitude of the task we are set. I agree with that. On the admission of Ministers themselves, national expenditure has been outstripping national output. Our gold reserves have continued to decline, until today they are at a figure which we would have regarded with the greatest alarm two years ago. The devaluation of the pound has necessitated our selling more to dollar countries to earn even as much as we could earn before devaluation. A buyer's market is confronting us with more vigorous competition all over the world, and, finally, within a year or two we shall have to do without Marshall Aid which today makes a difference between life and death for our industry.

It is in that context that we have to look at what the Government propose. Let us take the capital expenditure programme first. The Government have allowed this year for an increase of £100 million compared with last year. That increase is to be wiped out, not in this calendar year, but in the next, and £40 million of further economies are to be made. In respect of their own expendi- ture, there are economies of the order of £90 million, the greater part of which will not become effective until the next financial year. This reduction, as I understand it—and here I would like it corrected if I am wrong—is not on the Government's Estimates as they were given to us on the Budget in April, but on the revised Government expenditure, including the Supplementary Estimates, which show a formidable increase—how formidable we do not yet know and which the Chancellor told us he could not say—in respect of these Estimates.

All this despite the fact that the Chancellor told us in the spring that there would be no Supplementary Estimates. In other words, when all this turmoil has subsided, if the Government take no further steps, I suggest that we shall find ourselves at the end of this financial year spending, I would guess, just about what the Government estimated we would spend last April. That is the net result of all this so-called drastic economy.

It is very difficult to follow Ministers' views on the subject of our national production because, here again, they contradict each other so frequently. We had yet one further version from the Chancellor this afternoon. Last Sunday night we had the version from the Minister of Transport. He said: I do not think the men of this country have played the game since the end of the war. Contrast that with the Chancellor's speech in September, 1948, which it almost seemed he had forgotten this afternoon, when he said to the House—and I remember the resounding cheers with which it was greeted—that he wanted to deny specifically that any part or section of our people was not working well.

That did not quite fit in with what he said this afternoon. This afternoon we were told that several parts were not working well. I wonder what the Government really do think. I, personally, do not agree with the Minister of Transport; I do not think it is the kind of thing that a Minister of the Crown ought to say, unless it is based on some reasoning with which we have never been presented. I think it is certainly true, no doubt, of some sections of some industries, but it is certainly not true of the nation as a whole.

If it is true of some industries, are not the Government, perhaps, themselves partly to blame? Have they forgotten all those past preachings, how propaganda was issued denying the need for increased output? Is it not just conceivable, for instance, that the Minister of Food's picture of a Socialist Britain is still being read somewhere in some dark corner under a shaded lamp? Is it not just possible that the Minister of Health's remarks about exports are still being believed in some factories in some parts of Britain? The Government cannot escape responsibility for all that. One of the Government's difficulties is really that they are now trying to act in a way which nullifies so much of what they preached for so many years. Perhaps that is why their actions, when they do take them, are so much less than half measures and so feebly applied as to be virtually useless.

Now I must make a comment on the subject of Defence in respect of which the Chancellor gave us some details, which I repeat that I regret we were not given on Monday in a White Paper which would have facilitated our discussions a little. The Chancellor spoke of a saving of £12,500,000, and he gave some details as to how that was effected. I should like us to be told which Services are contributing, and in what amount, to that saving. I think we ought to know that. I asked the Minister of Defence the other day if he could tell us what was the effect of devaluation on the figures of Defence. He said he could not tell us that. I presume that the Government have now worked that out. They must have, as otherwise they could not make a saving of £12,500,000 on all heads, excluding the cost of devaluation. Could we be told what is the extra cost of Defence owing to devaluation, because then we can see how far-reaching these economies really are, if, indeed, they be far-reaching at all?

It is astounding that at this stage in our affairs the Prime Minister should come before the House and put prominently among the objects for which an inter-Services committee has been set up only this year, that of ensuring that we shall get full value for the money spent on Defence. That is what has been troubling some of us not only on this side but on the opposite side of the House for a great many years past.

We have no personal hostility to the Minister of Defence—many of us were colleagues of his during the war—but we must declare that after the orders, counter-orders and disorders which have marked the Government's administration of Defence methods, we cannot have any confidence in his administration at all. I am not urging the Government to cancel any of their commitments, particularly their commitments in the Far East. Least of all am I urging them to make any reduction in our Forces in Hong Kong, Certainly not. Failure to discharge responsibilities there would be fatal not only to our own but to far wider interests. At the same time, it is necessary to examine every method by which economies can be made, and this applies to overseas commitments as well as to other aspects of Defence.

Is not there still room for justifiable and urgent economy in the staff of the High Commission in Germany? I notice that the figures given by the Under-Secretary of State for Foreign Affairs in May this year showed that this staff numbered 12,600. On the other hand, I understand that the United States High Commissioner, Mr. McCloy, is planning for a much smaller number of American personnel, something in the region of 1,500 in the reorganisation that is taking place giving more responsibility to the Germans. If that is right, if the Americans can get down to a figure of 1,500, why do we need anything like 12,000? I think we should have some explanation of that, and I suggest that this is a field for economy. I know that the Foreign Secretary is bringing the numbers down, but the comparative figures which I have given indicate a field where the Government could occupy themselves with economy.

In many of these matters of Defence I have a feeling that we are not getting a satisfactory return for the unparalleled peace-time expenditure which this country is called upon to meet. Take the proposed comprehensive review, for example. The Prime Minister tells us that it has been put into force to get value for money. Suppose that it had been put into force two years ago, or three or four years ago. Would not the Prime Minister now perhaps be in a position to come down to the House and announce economies in our Defence schemes which, far from impairing the general structure of our defences, might have been the occasion for their modernisation and improvement? We cannot be satisfied with that situation.

I will tell the House another aspect of the Government's proposals which disturbs me and to which the Chancellor referred this afternoon. It is this question of the capital equipment for industry. I am glad of the measure of assurance which he has given, but I think he will agree that this new demand for the export of still more capital equipment from this country to meet our present trouble can only result in many companies in this country having to wait still longer for the essential equipment for which they have been waiting only too long. Unfortunately, that is not the full tale. The Government pronounced last July cuts in our dollar import programme which must inevitably fall upon machinery for which industry has long been waiting in order to modernise its plant.

I am sorry to weary the House with this reiteration, but I feel that this is the gravest of all subjects which we have to discuss, because if we put off the re-equipment of our industry, however excellent our purpose, we are mortgaging the present for the future. I beg the Government to review this matter once again, and see whether they have to make these cuts in respect of machinery for mines or machinery for oil refinery—there is no better dollar saver than that—and whether we cannot avoid these drastic reductions.

I must say one word about the general position. In our judgment—and this to me is the view of what we ourselves would do—the truth is that while the Government have travelled and have shown the way that must be travelled, they have not travelled far enough. They have imposed cuts over a very wide range of expenditure, including social services and food subsidies. For a long time past we have urged that widespread economies could be made to produce a substantial total saving. That advice has now in part been taken, but because it has been taken so late the cuts must necessarily be far heavier than they need have been. One million pounds has been knocked off Government Information Services. Is this really all that can be achieved in that direction? One-and-three-quarter million pounds are to be saved by a reduction in the administrative expenditure of the Ministry of Food. Could not this possibly be increased? Could not these "refinements of control"—let me get the phrase correct—which have now disappeared, conceivably have disappeared earlier, and perhaps in some other Departments of the Government where, no doubt, they still exist? I do not suppose that refinements of control are unique to the Ministry of Food.

Then the Government have taken the hard, and I think the necessary, decision to impose a charge on prescriptions. But that is only part of the story. The purpose of the charge, the Prime Minister has told us, was to avoid abuses, but is it only on prescriptions that waste and abuses have arisen? I notice, if the figures are right, that the estimated expenditure on prescriptions is something like £21 million this year. It is on that that the 1s. will fall. The estimates for optical and dental services are over £45 million. It is clear, therefore, that a similar treatment of spectacles and false teeth, and, indeed, on wigs, would result in a larger saving than the Government will achieve by the present suggested method. Should not that be looked at too? If the Government are doing one, what is the principle on which they do not do the other? That is what I should like to have explained to me.

Mr. Shurmer (Birmingham, Sparkbrook)

A man does not get false teeth or spectacles when he does not need them.

Mr. Eden

A man may be in greater need of a prescription for medicine than he may be of a pair of spectacles. That is conceivable.

Let us look at the question of houses. The Government's proposals are going to mean virtually an end of house building on private account. In future virtually all houses built will be for the municipal authorities. I have here the Girdwood Report which makes it clear that that is the slowest and, therefore, the least economical form of house building.

Mr. Shurmer

Why should it be?

Mr. Eden

I was just reading this Report of a Government Committee, and here is a quotation: There is nevertheless some evidence that private enterprise has achieved a faster rate of building than local authorities since the war. Therefore, I say that what the Government are doing is to get rid of what the Girdwood Committee call the faster rate of building. There is nothing to argue about.

Mr. Diamond (Manchester, Blackley)

The right hon. Gentleman was good enough to read out that it was faster. Would he be good enough to read out where it says it is more economical? Faster, yes—but where does it say "more economical"?

Mr. Eden

If the hon. Gentleman tells me that to build faster at the present day does not mean to build more economically, that will be very interesting indeed. If that is the basis of the defence of this action, we shall be very glad indeed to have it.

Mr. Scollan (Renfrew, Western)

A "bookie" works faster, but he is not more economical.

Mr. Eden

As a result of this, it means that everybody, even the private person who would otherwise hope to buy a house, will receive—if he enters a house at all—a council house and will receive a subsidy from the rates and taxes. In many cases that subsidy will be paid by people who are less well-to-do, perhaps, than he is—people who in many cases cannot themselves afford to enter a new house even at the subsidised rate. We regret the elimination of the one-in-five private building. I regret it very much because I think the speed of that private building was of itself an assistance to our housing programme. Surely it must have been or the Minister of Health would not have left it there for so long.

Now I come to the question of food subsidies. We have issued many warnings, on the subject of food subsidies, about the danger to our financial stability represented by the immense and increasing cost of these subsidies. The Government hesitated while the total cost of the food subsidies was rising and rising every month. At last they were forced to do something about it. Now for the second time they are imposing a cut in the food subsidies. That, I think, is not disputed. I suggest that the time has now come for a thorough review of the whole food subsidy situation. [HON. MEMBERS: "Why?"] I will tell hon. Members why in a minute.

I suggest that it is a fact that in many cases these payments are not subsidising food at all but are subsidising other things. A number of recipients of food subsidies have no need of them in order to buy their food. I ask the House—and I would not do this if it were not a pretty serious situation—to consider these figures. I think they are right, and I shall be glad to have them challenged if they are wrong. The food subsidies—and I exclude milk in schools and all other welfare foods—are worth 3s. 2d. a week to each individual in the country. Yet the average individual weekly expenditure on alcohol and tobacco is 11s. 6d. a week. These figures ought to make all of us think, in whatever part of the House we happen to sit.

Surely, in these circumstances, it is clear that some of the money that is being dispensed in food subsidies is not in fact carrying out its real purpose but is subsidising the purchase of tobacco and alcohol. Has not the time arrived when we must, as a nation, recognise that the principle of the social services ought to be that the strong should help the weak—it is important to my argument that you accept that—and not to try to aid everybody alike indiscriminately? That is the whole basis on which I want the examination of this problem.

There is a very strong argument for a progressive reduction of the food subsidies accompanied by selective payments to people who will as a result be in danger of suffering genuine need—people with large families, pensioners of all kinds, the sick and the injured, and so on. [An HON. MEMBER: "How much would that cost?"] That is a very fair question which I am asked. That is something which it is impossible for me to work out when the figures are not available to me. I am giving what seem to me to be the two material figures—how much we are spending today on tobacco and drink and how much the food subsidies represent as income to each person.

Mrs. Middleton (Plymouth, Sutton)

Will the right hon. Gentleman tell me whether he would apply the same statement to the payment of family allowances?

Mr. Eden

On the contrary; exactly the reverse. I have said that, of course, I would not recommend touching the social services and the welfare services, such as milk in schools; and there would be a case for dealing with family allowances in an increasing way rather than otherwise. What we have to look at—and I really think the House has to look at them, even though elections may be in the offing—are these figures. If they are correct they are pretty grim figures, and I think the House should see where they are leading us in a situation which the Chancellor of the Exchequer so correctly described in his closing sentences. I have not quite finished my suggestions; I am sorry for being rather long. I believe that on this issue, if my figures are right, this is a situation which should be examined, and if it is true the nation will prefer to be told the blunt truth and to face the consequences.

Turning to national savings, I agree with the Chancellor that this is one of the most serious aspects of our present situation. One of the Ministers, talking the other day, thought that net savings were still increasing. They are not; they are going down. It is deplorable. We all deplore it. We should all try to get that trend reversed. [An HON. MEMBER: "What about the noble Lord the Member for Southern Dorset (Viscount Hinchingbrooke)?"] This is a free country, and the two main parties take the view I have just expressed.

We cannot entirely divorce national savings from the general position of national credit. When Government stock was issued three years ago at 100 and that fact was trumpeted all round the country, as was done, and that stock now stands at whatever it is, something under 70—[HON. MEMBERS: "68."] That means that all the investors have lost one-third of what they put into the stock. That is one Government stock. Of course, I admit that it has also happened to other Government stocks. In the public mind we cannot divorce an event of that kind from the general sentiments about savings. What we have to do is to try to explain to people that national savings are not connected directly with the financial policy of any Socialist Chancellor of the Exchequer. None the less we must get more money into savings. At any rate, we shall do our best if the Chancellor will give us the necessary licence in that direction. Incidentally, there is one form of savings which the Chancellor will have noticed has been maintained throughout, and that is insurance premiums. May I suggest to him and his colleagues that that is one of the good reasons for not being so foolish as to nationalise insurance at the present time?

Turning to agriculture, I must say that the right hon. and learned Gentleman did not add very much to our information on that count. We on this side of the House were surprised that there was no reference to the 11th Report of the Select Committee on Estimates which exposed very substantial losses incurred by the county committees in their trading activities. Hon. Members will see how helpful I am being with suggestions. I should have thought that here again was a field where Government economies would be possible. I think the House would also like to have a clearer and more definite explanation of the Government's intentions about subsidies and prices. One thing is quite certain: we must not do anything at this moment to cause anxieties in the minds of the food-producing community. Whatever is certain about devaluation—and in my view, if I may give an amateur one, almost everything is uncertain about the effects of devaluation—it is clear that we shall have more than ever an urgent need for every morsel of food that we can produce from our own soil.

I must say one or two words in reply to what the right hon. and learned Gentleman said about labour. Where exactly are we on this topic? Is it not true that there are today a number of industries—for example, the potteries, as the hon. Member for Stoke (Mr. Ellis Smith) could tell us, and boots and shoes and several others—which cannot increase their exports because they simply have not the labour force to do it? Is that so? If it is so, what do the Government propose to do about it? The right hon. and learned Gentleman today gave all sorts of advice. Is that the limit of what can be done? The Home Secretary last night made a speech on the subject, a report of which I read in "The Times," this morning, and he made what appeared to me to be one of those mumbled menaces, for as far as I could see the speech was directed, not at the matter of getting labour into these industries, but at the industrialists turning their efforts to other markets. One would like to know very much more of what is in the Government's mind about this. Unless the labour force can be found for those industries that can command the dollar markets and that have opportunities in those markets, then all this eloquence is indeed completely wasted.

Mr. Yates (Birmingham, Ladywood)

Why would the right hon. Gentleman keep conscription?

Mr. Eden

Does the hon. Gentleman really think that the answer is to end conscription? Of course it is not. It is a much deeper one than that, and I am asking the Chancellor what his suggestion in answer to the problem may be.

I was glad to hear one thing in the Chancellor's speech, and that was the reference to sterling balances. It would appear that at long last—at desperately long last—the Government are to take a firm stand on this. I would have supported the Chancellor in a stand before, and we are glad to learn of the stand he is to take. I wish he had taken it a couple of years ago. Could he not say to some of those countries that are still expecting this flow of unrequited exports, "It is no good asking Britain to go on with this policy, because if she does she will end by crashing herself, and as Britain is the heart and centre of the sterling area, of which you are members, you will be ruined, too." [Interruption.] He has said it already? I wish to God he had said it before. He has left it terribly late.

Now let me wind up. The Economic Secretary told us the other day that this dollar problem is going to be with us all our lives. I do not take quite such a gloomy view as he does. After all, I have some hope of a change of Government some day. But anyhow, I will give him this: whichever Government is in power this is a long-term problem. One of the most exasperating features of the Government's present policy is that there is nothing in it in the way of constructive suggestions as to what is to be done.

I should like to make such a suggestion. I suggested on the last occasion when we debated this subject that the Government might call a conference of the sterling countries and of others affected by devaluation—a conference separate from the ordinary regular meetings—to see whether we could not work out plans for two things: to deal with rising prices, which are inevitable as a result of the fact that we have devalued, and to work out arrangements for further mutual trade between ourselves which would eliminate to a large extent the need for dollar purchases. I still consider that that was a sound suggestion, and I still ask the Government whether they cannot give it consideration.

Mr. Kirkwood (Dumbarton Burghs)

It would offend America.

Mr. Eden

It would not offend America at all. The United States are wise enough to know that the salvation of the world depends on the sterling area setting its house in order, and that is why they have treated us with such marked generosity.

I end as I began. I fear that the Government's failure to measure up to the very real peril of our situation is a calamity for the nation. If the Government had made up their mind to make the best possible use of the national mood at this time, they would first have laid down the minimum reductions necessary, and then they would have proceeded to try to add to those savings a little more, and they would have used that little more to create additional incentives.

If the right hon. and learned Gentleman wants an explanation of what I mean, I would ask him if he has considered further extending the reduced rate reliefs for Income Tax. At present a married man with one child starts paying tax at 6s. in the £ when his income rises above £360 a year, or £7 a week. The average weekly earnings of a man in industry are, I think, about £7 a week. If the range of the 3s. reduced rate were extended, it would mean an additional loss of revenue, I admit; but would it not be compensated by increased production arising from greater effort and from overtime? At any rate, it would be an incentive, and that is what we sorely lack in the Government's proposals as they are now before us.

I ask the House to remember that reductions in tax are not inflationary if they are accompanied by reductions in Government expenditure. On the contrary, they can be positively disinflationary if they result in greater production of goods. Indeed, I think they are the only way of getting out of this calamitous vicious circle of taxation, inflation, more taxation, and more inflation. To me this seems to be the most lamentable shortcoming in the Government's proposals. I have no doubt that when the historians come to write of this Government's project, they will write it down as an opportunity sadly missed.

I believe that if the country could express its temper, it would say, "We would rather make one supreme endeavour, however unpleasant, to get over all this than continue this piecemeal nibbling every few months. When the Prime Minister sat down on Monday I felt that here was nothing—nothing at all—that was going to inspire the nation in any way. On the contrary, it was just one more expedient leading to one more crisis, as the Chancellor so aptly phrased the Government's earlier policy. I regret that after hearing the Government's proposals, I feel that another of these crises is not many months away.

5.36 p.m.

Mr. Frank Byers (Dorset, Northern)

I have listened carefully to the two speeches which have just been made, and I am still considerably puzzled, but I think there can be no doubt whatever in the Prime Minister's mind that he has missed a great opportunity. The nation was keyed up for a D-day landing, and has got a minor commando raid. I cannot reconcile the Chancellor's remarkable and impressive peroration with the programme which the Government have set before the House. Monday's measures were inadequate; they were unimaginative; they were cuts without encouragement, austerity without incentive. The whole feeling that people got was, this was a policy of abandoned hope. That is quite different from the Chancellor's statement, "We dare not fail," and it is on those lines that I want to tackle this problem tonight.

I say that if that is the Government's contribution to the solution of the economic problem, then this country is going to face mass unemployment and even starvation. I speak as one who has supported every programme or policy for social betterment which has been put forward in this Parliament. I belong to a party which pioneered social services and social reforms in the teeth of Tory opposition before I was born. I want to preserve the welfare State, it is quite true; but I say that through lack of courage the nation's present leaders will unwittingly destroy the possibility of preserving that welfare State.

The British people will accept austerity unflinchingly provided they can know how long it is going to last, and know that, having endured it, it will really do the trick. In the statement which we have had there has been no suggestion as to how long this austerity is going to last, and there is no guarantee whatsoever that it really is going to solve the problem. The Chancellor in his speech said it was a bare minimum that the Government had gone in for. Well, I cannot understand it. I should have thought that if the Government had come down with a two-year programme of recovery, if they had made bigger cuts than have been suggested, the nation would have been only too delighted, because they would at last have had a guarantee that they would get out of the difficulty, instead of having a crisis every year and every quarter. [An HON. MEMBER: "Every month."] We have got to the law of increasing returns of crises.

The problem is quite simple. It has been stated time and time again. We have to produce more; we have to export more to the hard currency areas; and until we can balance our payments we have to reduce home demands. It is against these three things that the Government's policy has to be judged. These are the tests: first, are the cuts adequate? Adequate for what? Adequate to restore the Budget surplus. The Chancellor says "Yes." I agree with the right hon. Member for Warwick and Leamington (Mr. Eden) that we cannot stop there. We are balanced on a sort of precipice. We have to have something more up our sleeve either to reduce inflation or to increase incentives. I cannot understand why the Chancellor of the Exchequer sneers at incentives. I am not sure that sneering at incentives is not the root cause of our present difficulties. I believe that the word "incentive" is quite outside his vocabulary. It is something in which he just does not believe.

I say about these cuts: let us accept them. There are many I dislike intensely, but let us accept all or at least all the larger cuts. Let us accept them without reservation, because we are not in the realm of the desirable but of the inevitable. It is easy to say that we object to this or that cut. I am not convinced that the Government in making some of these cuts have avoided some of the hardships which they could have done. We have our reservation about the charge for prescriptions. If we are to accept a charge for prescriptions, I cannot see how we are to avoid giving the same relief which is given to old age pensioners to those on sick benefit and the unemployed. I think that if we are to look at this question, we ought also to look at the question of spectacles and false teeth.

Now I come to the economies in the Government Departments. We were told that it was not possible to make economies to the tune of £40 million or £50 million. We have been hoodwinked by the Government. Having got that far, is it the maximum? I do not believe that for a moment. What about the Ministry of Civil Aviation? Is it necessary to have a Ministry of Civil Aviation? Why could not that work be done today by a small department of the Ministry of Transport? Has that been looked into? If so, what are the grounds on which it has been rejected? I go further: Is it necessary to have a Ministry of Supply? Can we afford a Ministry of Supply? I very much doubt it.

Mr. Cove (Aberavon)

How much will it save?

Mr. Byers

I do not know, but the net spending there is a £120 million. I am not suggesting that we may save more than £20 million of that, because a good deal of it is in respect of grants for research, and so on; but £20 million is £20 million, and twice as much as we get by charging 1s. for each prescription. I would like the Government to look into the question not of cutting down the Ministry of Supply, but of cutting it out. I should also like to see the merging of the Ministries of Food and Agriculture. Why not? This is not just economy but efficiency which is being demanded. In getting efficiency we get economy.

Mr. C. Poole

rose—

Mr. Byers

I am sorry that I cannot give way. I usually give way when inter- rupted, but I have learned my lesson with that particular hon. Member, and it is not to give way.

Now I turn to the question of capital investment and the building problem. Houses must be regarded as a factor in production because of the necessity of the mobility of labour. I do not believe that we can afford to reduce the number of dwellings, certainly not the dwellings to let. I dislike what I am about to propose intensely, but if it is only to be for two years, I do suggest seriously that we should consider reducing the standard, but only for two years. [Interruption.] There is no pleasure for me in suggesting a thing like that. Hon. Gentlemen are really suggesting that we must keep everything at the same standard today because of what the Tories did between the wars. I do not like what the Tories did between the wars any more than they do.

Mr. Follick (Loughborough)

What about the cuts?

Mr. Byers

Does the hon. Gentleman believe in the Chancellor's peroration or does he not? I say that if this will help to get us out of our economic difficulties, let us for a short period accept a reduced standard and get more houses. My constituents want somewhere to live. They do not mind if the houses have not got all the trappings. I suggest that as soon as we get out of our economic difficulties we should raise the standards higher than they are today.

Mr. Alpass (Thornbury)

What would you cut out?

Mr. Byers

There are certain places where we could reduce three-bedroomed houses to two-bedroomed houses. I do not like it; but it is another dwelling. I am not putting it forward as a major policy, but it is a contribution when people as asking: "What can you do; what will you do?"

Mr. Ronald Chamberlain (Norwood)

We are doing that already.

Mr. Byers

There are a number of other things in which the standard could be reduced. [Interruption.] I have a long speech to make. What about curtailing expenditure on Government buildings and Embassies abroad? If the Minister will look into the estimate, he will see that there is a £100,000 here and a £100,000 there—Cairo, Ankara and Paris. There we have £2 million to £3 million. What about this licence to Lewis's in Liverpool? How many other licences for £1 million have been given? I expect that the Co-op have had some too. That licence had nothing to do with production; it was a licence for a retail shop. If that is the way in which the Government are carrying on, no wonder we are in this mess. How many more licences like Lewis's have been granted, and can we have a guarantee that further licences will be stopped?

I should like to look at the whole of the capital investment programme to see how every item over £500,000 is made up. Then I think that we could tell if we were progressing in the right direction. I think that it is possible to get a much bigger reduction of expenditure in connection with hospitals, education and productive effort.

I turn now to Defence. In 1947, I warned the Government, as did my colleagues, that they must put our Defence Forces on an efficient footing. We have waited until 1949 to do it. At the time the first Act ran out, the Government were saved by the Conservative Party. There was a conspiracy between the two Front Benches. [Interruption.] The hon. Gentleman must not rush to the support of the Conservative Party like that.

Mr. Alpass

We should like a nicer word.

Mr. Byers

There was a conspiracy between the two Front Benches, and there is a conspiracy today. Even the right hon. Member for Woodford (Mr. Churchill) took the opportunity, which I very much regret, at a non-party reunion like that of El Alamein to make a frankly party speech.

Mr. Brendan Bracken (Bournemouth)

The hon. Gentleman means patriotic.

Mr. Byers

No, I do not. If the right hon. Member for Bournemouth (Mr. Bracken) wants to argue the merits of it, I shall prove, I hope, that it was unpatriotic because it was against the best interests of the country.

I say that we are forced into a position where we have to discuss Defence not on a basis of efficiency but in an economic Debate, and it is quite wrong that discussions on Defence should take place in this atmosphere of economy, because our fate and that of our allies in Western Union and elsewhere will be extremely difficult indeed. The reason is, they do not understand that in this country there can be a desire to have an efficient Army on the basis of something different from conscription. The French are wedded to conscription, and it may be right to France.

I want to see the whole question of our future Defence force discussed on the basis of efficiency and not of economy. Once it is discussed on the basis of efficiency it will be found that the saving is automatic, and extremely large indeed. [HON. MEMBERS: "How?"] If the test is efficiency a great deal of the money spent on the Army today is being wasted. There are 400,000 men in the Army, more than half of them under 21, yet we cannot put into the field more than three efficient fighting divisions. We could put more than that into the field in 1938–39. Is that efficiency? Can anybody say that we are getting value for money? The reason for the ineffectiveness of our Forces is that more than one-third of our Regular Army is fully employed acting as nursemaids to over half the Army—to the conscripts.

The Parliamentary Secretary to the Ministry of Transport (Mr. James Callaghan)

Shame!

Mr. Byers

It is a shame. It is a growing shame. It is a scandal. Over half the Army is either training or being trained.

Mr. Callaghan

Nonsense.

Mr. Edgar Granville (Eye)

Why does the hon. Gentleman not sit on the Government Front Bench, where he belongs?

Mr. Byers

He may not be there much longer.

What is the purpose of all this? The purpose of all this is to build up a fully trained reserve, yet over three million fully trained men have left the Army in the last four years. That is a bigger reserve than could be handled in the first 12 months of a war; they could not be dealt with. What is now wanted is a Regular volunteer force of 300,000. These men could be got if the pay and allowances were increased and if a proper status were given to Regular officers and men. That reduction of 100,000 men would not reduce the fighting strength of the force: it would increase it, because at the moment 65,000 men are acting as trainers, instructors and administrators for the conscripts.

Mr. Callaghan

They are not nursemaids.

Mr. Byers

I am trying to put forward the principle of the thing. If that is the mentality of the hon. Gentleman, he has no right to have a Ministerial appointment. In fact, I am not sure whether he has.

This decrease in the Regular forces required for training would release those men to be effective fighting units in an efficient armed force. I believe that 30,000 men should be provided by our partners in the Commonwealth and the Dominions to help us with our overseas and Imperial garrisons. Why not? There would be an immediate increase in the fighting efficiency of the Armed Forces, and at the same time we could get rid of conscription. It cannot be done overnight, but at least the plans could now be made for moving out the conscripts and for building up the Regular Army from the present 184,000 to 300,000.

The cost of a National Service man is anything between £500 and £800 a year. There would thus be an immediate saving of £50–£80 million by cutting out the 100,000 National Service men. Some people, including those very high up in the Army, put the net saving of getting rid of conscription in the Army at £100–£110 million. That is in addition to the £30 million cut that has already been announced. A saving of £50–£80 million, with increased fighting strength—that is the point—seems to me to be a policy which the Government must adopt. From this figure must be deducted £20–£30 million for increased pay and allowances for the Regular element of the Armed Forces, giving 20–30 per cent. increase in pay—quite a lot—and the net saving might well be £50–£60 million. There is both efficiency and economy.

At the present time there are 400,000 men in the Army, more than half of them under 21 years of age. They are going through every 18 months, so that the Regular soldiers cannot get on with their own job of making themselves efficient for war. I believe that it is a scandal, and that the right hon. Member for Woodford must take his responsibility for the ineffectiveness of our Armed Forces at the present time. One healthy growl from the Front Opposition Bench at any time from 1947 onwards would have given us our Armed Forces on an efficient basis. It has not been forthcoming. I am sorry that a great man, who was so right from 1935 to 1939, should have become misinformed on this—because that is what I believe he is.

Mr. Daines (East Ham, North)

Before leaving conscription, would the hon. Gentleman deal with this? He has mentioned Europe. Would he address himself to the question of what would be the effect on other nations of Western Union if this country were to abolish conscription, recognising his own argument that they have conscription in those countries?

Mr. Byers

Let me put this to the hon. Gentleman. If he knew that our own system was totally inefficient and would prevent us from carrying out our obligations to our partners in Western Union, would he go on with it?

Mr. Daines

I do not accept the view than our present system is inefficient. I repeat: what would be the effect upon the other nations of Western Union, recognising that they are nations with conscription?

Mr. Byers

The hon. Gentleman has evaded my point. The French, the Belgians and others must be told that we are overhauling our Armed Forces in order to get increased efficiency—the only thing that matters. What they want to see today is an efficient Army. If the French are prepared to argue on this, I say that I would rather have an Army based on voluntary recruitment—as ours was in 1939—than the conscript Army the French put into the field, and which disappeared, in 1940.

Mr. Eden

Ours was very small.

Mr. Byers

Ours was a very small Army, but we had more divisions in 1939 than we can put in the field today.

Mr. Eden

What about our overseas commitments?

Mr. Byers

The question of garrisons overseas is wholly irrelevant. More than half the Army today is in the United Kingdom.

Mr. Eden

We have large overseas commitments.

Mr. Byers

It is no use saying that our commitments overseas are for 400,000 men. They are not. I think the right hon. Gentleman appreciates my point. We have overseas commitments which we have to carry out, and they can be carried out more efficiently by a voluntary armed force than by tying up our Regulars in this country and in Germany training conscripts who are coming in and going out every 18 months.

Now let me turn to production. I shall not be too long on this. If the Chancellor wants more production he must remove the obstacles to it, and at the present time there are plenty of obstacles to increased production. It means that all restrictive practices must end, by both employers and employees. Very little has been done on that by the Government. It is no use the Chancellor saying that there is nothing the Government can do. There is a great deal the Government can do, and the Chancellor would have the support of all good employers and all good workers if he were to take the initiative in a matter of that sort. There are in existence at the moment plenty of price maintenance schemes which are keeping up prices. It is no good the Chancellor just exhorting people to reduce prices. We are up against this system, and Government action must be taken to break those price maintenance systems. I think all of us would be prepared to help any Government to do it, if only they showed that they were anxious to do it.

But it means more than that. The Government must get away from this Socialist Alice-in-Wonderland complex; they must recognise human nature for what it is. Most people need incentives. It is all very well for Socialists to say "But they should not": the point is they do. People work for gain; they work for profit; and we must face it. Socialists may say that it is wrong, but people do work for gain and for profit. In my view, at a time like this it is the duty of the Government to see that the self-interest of the individual coincides with the national interest; but at the present time they are not doing so.

I have no objection to profits made under conditions of free competition, but I object, and so do my colleagues, to profits made under monopolistic conditions, or where competition has been restricted which makes it easy for people to earn more profits. The thing to do is to get rid of monopoly and restore competition. The truth of the matter is that the Government have made profits easy to earn but have made it terribly difficult to retain them, which means there is no incentive. Where there is a real incentive is where profits are difficult to make but can be kept once they have been made. That is the key to the situation. It is a far better system than theoretical and academic Socialism which does not understand what it is about.

Let me give one example—the psychological approach of the Chancellor of the Exchequer with his increased Profits Tax. The Chancellor of the Exchequer comes to the House and makes a long speech about America moving west and how we must go into the dollar markets, but then says that the Government are going to increase the Profits Tax. In other words, what he is saying to those who respond to his exhortations is that he is increasing the taxation on the efforts they make to help us. I do not mind about the £13 million; it is the psychological effect. It is using the Profits Tax as a sort of class discriminatory weapon. We can all see how it works. The Chancellor of the Exchequer sees the T.U.C. the night before he makes his statement. He tells them the Government are going to ask them to keep wages down, and immediately he is told that he must put more tax on profits. What an entirely different psychological approach it would have been if the Chancellor of the Exchequer and the T.U.C. had said, "Go out and make your profits, and we shall see that you share them with your workers. You are all on the job together. You will make the profits together, and you will share them."

Mr. Leslie Hale (Oldham)

Can the hon. Member tell us precisely how the Chancellor of the Exchequer can make private enterprise share its profits?

Mr. Byers

It could be done by taxation relief. It could be done by saying that the profits will not be taxed if an agreed percentage goes to the workers. The percentage could be agreed upon by the representatives of organised labour. I would be willing to see profits being made if a certain percentage were made available to the workers. What I am trying to say is that we should get partnership in industry in the spirit of "Let us make the profits together and share them," instead of going on with the present system whereby the Government say to management that if it makes profits they will see that it does not keep them, but at the same time they will not allow the workers to increase their wage demands.

Another point I want to make—and here again the Chancellor of the Exchequer can do something in the matter—is in connection with the marginal rate of Income Tax on overtime. Are we really to expect people to go on working longer hours when the more they earn, the higher the marginal rate of tax they have to pay? This is the sort of thing which is happening, and workers are asking themselves why they should go on doing the work. We have put forward a fairly complicated programme for the revision of the taxation system, which includes a flat-rate taxation proposal for overtime work. If the Government will not work our scheme, then let them work out one for themselves. The Chancellor should at least overhaul the whole system, because unless we can give incentives to the workers, we shall not get the overtime and longer hours we require.

I agree with collective bargaining, but let us look at what is happening. The Labour Party have been put into power by the trade unions who believe in collective bargaining, but having got into power they say that they must resist all mass demands for wage increases because of inflation. I agree with that, because mass increases give a good worker the same amount of money as the slacker, which is something I do not want to see. Look at the position the Government have got into with this collective bargaining system. They have a mass wage demand and they then say that there are to be no more increases in personal incomes, which is sitting on a safety valve. What they must do is to show the workers the alternative. In this connection, I want to see the trade union workers demanding payments by results and demanding that efficiency be rewarded. I do not say that collective bargaining is wrong, but that it is not having the right effect at the present time. Mass wage increases give the same amount to the inefficient as to the efficient, such as when we have a 10s. claim put in for a group of workers.

Mr. Harrison (Nottingham, East)

A demand for 10s. in an industry working on piece-rates does not mean that all get the increase—some may get 15s. and some may not even get 10s.

Mr. Byers

We must relate individual effort to individual gain, and when a man works harder he should be paid more, which is the direction towards which the trade union leaders should be working today. The trade union leaders should not be going in for mass wage demands, but should be checking up in factories to see that the right system is being employed. I only wish that the trade union leaders of today were of as high a standard as they were in previous days. I do not think they are accepting their responsibilities at the present time.

I want to turn now to exports to the dollar markets. There is no incentive today to get into the dollar markets, for the simple reason that by their bilateral trading policy the Government have made it easier for people to sell in the soft currency areas. Are we to have a guarantee that there will be no more canalisation of British exports into the soft currency areas? When the Government make an agreement with a country to sell them things they do not particularly want, in return for things they want to get rid of, they are canalising trade and making it easier to sell to the soft currency areas, and it is no use their saying to British industry that they ought to sell only for dollars. Let a percentage of the dollar earnings be used by individual firms in the States for their own purposes, as is being done by France, Belgium and Holland. Let the workers see some direct result for their dollar earnings; I do not mind whether it is nylons in the works canteen or extra payment for what they have done in the dollar market. There is a great field of incentives in respect of which the Chancellor has a prime responsibility. I shall have no hesitation in voting against the Government and in condemning them.

6.9 p.m.

Mr. Pannell (Leeds, West)

I find it very difficult, in following the two previous speakers, to observe what is, I believe, considered to be the custom of this House in making a maiden speech. Nevertheless, I must ask for the indulgence of the House in the comments I have to make and for that tolerance which, I think, is extended to those who find themselves in my position. I only wish that I had been given the opportunity to speak on the Local Government Boundary Commission (Dissolution) Bill. To that subject I could have brought long experience of local government. In this matter I will state my qualifications straight away. First, I have come to this House fresh from a by-election—the 34th which the Government have victoriously defended since they took office. That is a mandate which no Member on the other side has enjoyed. The future is dark and misty for Members opposite, while for me, during the next six months or so, it is fairly firm and clear.

I have delighted in statistics for many years and for the comfort of hon. Members opposite I will give them one or two about West Leeds. It is imagined that there is some sort of resurgence of Conservative faith, if it can be called faith. In my division the Labour Party had a bare majority of 27 at the municipal elections, but in the by-election we had a 4,000 majority, which indicates that the stock of the Government is on the upgrade. My second qualification is rather more important. The speech of the hon. Member for Northern Dorset (Mr. Byers) showed that he has had little industrial experience. I come here as one who, until he was elected to this House, worked in a factory, doing the job, using the tools and earning the rate as an engine fitter. If we must produce, then in the most recent sense I represent the producers who will be called upon to do the hard work rather than the talking. I believe that to be no inconsiderable qualification for intervening in this Debate. I would add that my wife has been used to receiving the sort of wage to which Members on both sides have so eloquently referred.

During the Debate on the devaluation of the pound there was much clamour from the benches opposite for a General Election. In view of the West Leeds result I consider that the Government's plain duty is to stay in office and ride the storm. It would be an act of cowardice on their part to pass the ball back to the country at this time. The hon. Member for Rugby (Mr. W. J. Brown), who is not in his place, charged the then Government, in 1929—I heard him from the Public Gallery—the MacDonald Government, with not having the guts to govern or the grace to get out. I maintain that it is the job of Governments to have the guts to govern at a time like this irrespective of the consequences. At the moment the electoral consequences are of second-rate importance, either to us or to Members opposite.

Bearing in mind all that has been said, I thought it ill became the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) to charge us with reducing the amount of money available for capital investment in the future, when the present state of much of industry—the fact that it needs retooling and is not up to its job—is a result of the Opposition's neglect in the inter-war years. "Lloyds Bank Review" has charged hon. Members opposite with being equal with us in promising anything to the electorate. I go further and say that every time the Government have wished to be cautious, and have reminded the country of the danger and pitfalls into which we were wandering, the Opposition have thrown discretion to the winds. The Bexley by-election, in a constituency near to where I live, was fought on bread rationing. Two-thirds of our wheat imports come from dollar countries, but the Conservative election address in that by-election said there was no need for bread rationing at all even though there was then a dollar crisis.

Then, at the Gravesend by-election there was the question of potato rationing, when the idea that this step was necessary was completely derided by the Opposition. I also remember the Conservative Party putting out election literature in the municipal elections, saying that there was no need to cut the basic petrol ration. At every turn, when the Government have preached caution, we have been told that we were taking a too despondent view of the situation. Indeed, the Leader of the Opposition threw out to the Chancellor the gibe that he would reach strength through misery. The whole record of the Conservative Opposition has been one of complete irresponsibility. "The Right Road for Britain," which has been discarded by the other side, if one is to judge from the constitutional position of their Leader, has promised increased social services with reduced taxation, in spite of what we hear today.

What do the Opposition really want? Do they really want another 1931? I do not wish to intrude any subjective matter of biographical detail, but my memory of 1931 is of a year's unemployment in the first two and a half years of my married life. It is a full memory. I have studied this matter not from the academic point of view, not in the way the Liberals have studied it, but from the point of view of one who was on the job or, rather, out of a job. I remember those who were turned aside as not genuinely seeking work, and how public indignation at the unemployment regulations forced the resignation of one of the Opposition's Front Benchers. The difference between the situation then and now is that this time, there has not been the drama occasioned by the cuts and the betrayals from this side.

I can imagine the right hon. Gentleman the Member for Woodford (Mr. Churchill) announcing cuts with an alliterative phrase such as "Slashing the body politic from helm to breastplate with one stroke of surging steel." The right hon. Gentleman the Member for Woodford has a record in this matter. It is revealed in Lord Snowden's memoirs that when he took over the Chancellorship in 1929 he met the right hon. Gentleman coming out of the Chamber and said, "I have not left a penny in the till." Yet the right hon. Gentleman the Member for Woodford said in the devaluation Debate that we were met in a strange and new situation. Do the Opposition want 10 or 15 per cent. wage cuts, such as we had then? Do they want to harm the social services, as was done at that time? Do they want to see the break-up of the noble fabric of family life by another means test? If there has been no drama from this side as a result of these cuts at least there has been no blind step in the dark.

In this speech I do not want to go too deeply into the general policy of the Opposition. If I did, it would be difficult to preserve that cool and considered calm that ought to characterise the utterances of an hon. Member making his maiden speech. I want to refer very briefly to what was said by the hon. Member for Northern Dorset speaking for the Liberal Party. It never occurred to him that a local authority, in planning a housing estate, ever provided any one or two bedroomed houses. He seemed to think they were all three bedroomed. It may astonish him to know that occasionally they build four and five bed-roomed houses.

In regard to the shilling on National Health prescriptions, I welcome it. The weakness of some of my hon. Friends on this side of the House is that they do not realise that much of their propaganda—and it may be some of the legislation—springs from the time when we were dispossessed instead of being the ruling classes as we are at the present time. As a decent standard of life by means of full employment is built up over the years, a certain sturdy spirit of independence is created, which turns aside from public assistance and even from the welfare State. The National Health Service is threatened with ruin by elements which everyone in this House will despise. If it is a fact that certain prescriptions have cost a lot of money, then this tax will keep the expenditure down. I hope, if necessary, even something more will be done, because if we have to build this thing properly we shall have to face up to the position.

In conclusion, I want to say that if it had been necessary to inflict more severe cuts on the social services, which I have spent a life time to promote, especially in local government, I should have been in favour of them if they preserved full employment. I am one of those who believe that full employment today is no accident. Further, I believe that if we on this side are charged with some responsibility for the losses, equally, we must have some responsibility for full employment, because it is part of our social system. I am glad to see it here. Hon. Members on the other side of the House have not shared the type of experience that has been my lot, nor can they imagine for one moment what unemployment really means to the tradesmen, the man on the bench, the man who earns the wages.

I sometimes think that hon. Gentlemen opposite think that we take this matter rather too seriously, but we do not. Full employment means a regular wage at the end of the week, which is a contribution in itself to human dignity. But it can mean something more than the regular paying of the wife at the end of the week, or a reasonably stocked cupboard maintaining an existence even though it is not luxury. It means more, too, than clothes and footwear for the children, rather than such things as funds like "Boots for the Bairns," over which I presided, and from which we supplied school children with boots. If full employment only meant these things I would not be impressed, because they could be achieved under something else than a democracy, and it would not be of first-class importance.

Full employment means something more. It means that the great bulk of the self respecting working classes, especially the trade unionist, of whom hon. Gentlemen opposite know so little, can stand on their feet in the full stature of manhood and be men on their feet rather than toadies on their knees. It means that a workman can face up to the foreman, the manager in the workshop and the employer in the sure and certain knowledge that there is not a crowd of unemployed men outside ready to take his job and batter down his standard of living.

In effect, full employment means that respect for the individual personality, about which hon. Gentlemen opposite so often prate but of which they know very little. The other day I listened to the hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) speaking about parcels sent abroad which were franked, and he somehow thought that that was an affront to our pride. I appreciated his sentiment, and I sympathised a good deal with his expressions, but the real pride of a people is not expressed in franking an envelope here and there or in protestations in this House, but it is how we care for their future. What really emerges from this Debate today is the security of the standard of life of our people. That sort of dignity and pride will be far better expressed in doing all we can to maintain a policy of full employment, which the great bulk of our people deserve.

6.28 p.m.

Mr. Peter Thorneycroft (Monmouth)

I have the pleasure of congratulating the hon. Member for West Leeds (Mr. Pannell) upon his maiden speech. Those of us who have made our maiden speeches know that it is a nerve-racking experience. It will be cold comfort to the hon. Gentleman to know that it never gets less nerve-racking as we go on. The hon. Gentleman recently was engaged upon the actual process of production, and therefore was well qualified to contribute to our Debate. He represents a constituency which has made a great contribution to our efforts, and that was a very good reason why he should intervene. He spoke with great sincerity, and if at times there was not that quiet moderation that one sometimes finds in maiden speeches, he can be excused because he had to switch his remarks from the Local Government Boundary Commission to the economic situation at rather short notice. His concluding remarks on full employment expressed the object of the whole House, and indeed the Chancellor of the Exchequer himself has said that that is the whole object of all political parties.

I want to say one other thing before getting on with my speech; it is to make an apology to the House. I have an engagement to speak outside this evening, and those who are waiting to speak in this Debate tonight will be pleased to know that my remarks will be brief. At the conclusion of my speech, however, I shall be compelled without wishing any discourtesy to leave the House, and I hope the House will grant me that indulgence.

Three weeks ago we were debating the question of devaluation. Today we are debating what purports to be a policy which is complementary to that devaluation. It is some measure of the Government's failure in this matter that the Debates could not take place at the same time. It is wholly wrong that devaluation and the complementary policy should be separated by such a space of time. I want to say one or two things about devaluation and something about the action or inaction of the Government which preceded devaluation and followed it; and, finally, about the kind of measures which are proposed and the kind of measures which are needed.

With regard to devaluation, I want to make one assertion and to ask one question. The assertion is that it is time that the Government stopped pretending that devaluation was, so to speak, an act of statesmanship on their part. The Chancellor of the Exchequer does not fix the value of the pound sterling. The world fixes that value. The world decides whether that value is going up or down. The decision which it has recently come to is that the pound sterling is worth a great deal less after four years of Socialism than it was to start with. All that the Chancellor of the Exchequer did was rather belatedly and reluctantly to agree that the world was right.

The question that I want to ask is: What is the ultimate objective which the Government have in view in this matter of currency policy? I know all the difficulties about attaining a free rate, a floating pound and all the rest of it, but what do the Government want to achieve? Do they want to have a free currency and a convertible pound, or not? I think that people are entitled to have an answer. I should have thought that a free pound or a floating pound and a convertible currency was the last thing that the Socialist Party would like to have. It would mean that day by day, week by week, and month by month the value of our currency and our actions in this country would be submitted to the judgment of people outside this country. They would be deciding whether we were making a real effort to stand on our own feet or not. Capitalists, hard-headed unsentimental capitalists, throughout the world would be making those decisions.

Mr. Shurmer

They make them now.

Mr. Thorneycroft

The hon. Gentleman is quite right. That is why the Chancellor of the Exchequer was so misleading when he said: "I will fix the value of the pound"—at 2.8 or 4.3 or anything else. It means that the movement was more sudden and savage than it might otherwise be. If the value of the pound is fixed by men outside, how on earth is it to be preserved at this or at any other rate in respect of a Government pledged to destroy the capitalist system? In fact, inevitably the value of the pound will, under Socialism, continue to go down. In no circumstances that I can foresee would any Socialist Government ever succeed in making our currency convertible. A closed economy is as essential to Socialist government in this country as it is inimical to the interests of this country. Socialism is national Socialism or it is nothing.

On the question of the action or the inaction of the Government, I would point out that in June, July and August of this year our assets were running out. The gold and dollar reserves of the sterling area seeped away to the extent of some £60 million. What were the Government doing at that time? Were they working out some policy of retrenchment at home? If not, why not? What happened was that a large number of members of the Government were away on holiday. What rate of drain would they have regarded as sufficiently serious to keep them at home to work out in detail a policy of retrenchment such as would be required? They apparently worked out no such policy.

In August, they decided to devalue. Did they work out any corollary policy when they decided to devalue? Why did not they take such a policy to Washington? If they had gone to Washington with devaluation in their pocket, I should have thought they might also have gone to the Americans and spoken like this: "We are asking you to do quite a lot of things for us, but we are prepared to make some sacrifices ourselves. We are prepared to make certain retrenchments in the social services." [Interruption.] Did the hon. Gentleman wish to intervene?

Mr. Kenneth Lindsay (Combined English Universities)

I did say something under my breath, but I would now point out to the hon. Gentleman that when we go to a foreign country we do not usually give them a preview of our domestic policy.

Mr. Thorneycroft

That shows an astonishing view of the behaviour of nations in these circumstances. Here was the British Government going along and asking for, and in fact receiving, generous concessions from the United States, very great and generous concessions. It would not have been unfitting that at the same time we might have been prepared to say that we were ready to make some sacrifices ourselves.

Then the Chancellor of the Exchequer came home and made his celebrated broadcast to the nation. It was perfectly plain at that time that the Government had no intention whatsoever of producing much in the way of a corollary policy. The right hon. and learned Gentleman said that the value of the pound internally would not be altered. That statement was intended to mean, and was taken to mean, that the people of this country would be able to go on buying just as much in the future as they had done in the past. He said that at the most there would be a one-point rise in the cost of living and that even that might be offset by other reductions in prices. Surely that statement was plainly intended to mean that nothing really serious was likely to happen.

On 27th September, the Chancellor made a speech in this House. What he said at that time about Government expenditure is well worth studying. He did not promise any large, comprehensive policy. All that he suggested was that there would be a routine investigation such as always took place. A few economies would be made, and all those matters would be brought together and could be considered when the time came to review them at the end of the financial year. That was all he said. We were entitled to assume that those words meant what they said. One has to proceed upon some such assumption in order to make any sense of them at all. It was plain at that time that no policy had been worked out. That was on 27th September. Subsequently there were discussions, we understand, in the Cabinet, which decided that they would not have an Election; but even a fortnight ago the Minister of Health was saying that only over his dead body would anybody touch the National Health Service. We can therefore take it that a fortnight ago no clear conception had been come to of what was the corollary policy to devaluation, a policy which ought to have been worked out last August.

The House of Commons came back on Tuesday of last week. One would have thought, if a policy had been worked out, that that would be the time to announce it. What were we told by the Lord President of the Council? We were told, even at that late hour, that the Government were still making inquiries from the various Government Departments to see whether they could come to some arrangements about these complicated matters. This policy looks what it is. It is a make-shift arrangement got together somehow by some harassed men who have been overtaken by the march of events. If ever there was a body of men caught by the blind force of economic circumstances, it is the Government of this country at the present time. I mention those things because I think it is right for this purpose. This country will have to pay a very heavy price indeed for the delay that has taken place.

Now I come to the measures themselves. In my judgment—I do not appear to be alone in this—these measures are woefully inadequate. The Minister of Transport has been attacked for a speech he made recently, and, I think, rightly attacked for the taunt that he levelled at the working people of this country. However, he said one thing in his speech which I believe was quite right. He said: Tomorrow the Prime Minister will reveal the Government's emergency programme to take us through the immediate crisis. This will not be a solution. The Minister of Transport was quite right. This is only another of those expedients to deal with a particular crisis to which the Chancellor of the Exchequer has referred upon other occasions. It is the buying of a few months more of very precious time; no more than that. Even the Government's own back benchers are reported in the newspapers, even in the "Daily Mirror," which is not exactly a Tory paper, as saying that the Government have missed a great opportunity.

These measures were meant to deal with the inflation caused by the dollar import cuts, meaning that we would have fewer dollar goods in this country, by the lack of goods due to increased exports and also by the Government-created inflation which has arisen by extra spending since last April. A large part of the measures proposed by the right hon. and learned Gentleman and the Government will not take effect until 1950, or the second half of 1950. The right hon. and learned Gentleman need not worry about 1950. We shall be looking after that. The right hon. and learned Gentleman must deal with the crisis which he has on his hands at the present time.

I asked the Prime Minister the other day, when the cuts were announced, what the effect would be on this year's Budget surplus. I think that is a relevant question and that some attempt ought to be made in the course of this Debate to answer it. After all, if we are to make these changes which affect the budgetary position and if we are to claim that they are adequate to deal with the situation, we ought to know what their net effect will be. This is not only to satisfy our curiosity in the House of Commons; all over the world people are looking to see whether what is happening here is sufficient to deal with the crisis which confronts us at this moment. The right hon. and learned Gentleman admitted in his speech that the estimated Budget surplus is already much reduced. How, then, can he pretend that these savings are net savings? In all probability they will just about balance out the inflation which has already been created since the last Budget, or may not even do that.

I suppose that the Opposition will be asked what we would do. That seems to be a popular question now. I am amazed at the effrontery of right hon. Gentlemen opposite. After all, the Socialist Party no longer pretends to have an answer to this problem. No Socialist gets up and says, "If only we had had a lot more Socialism, everything would have been all right." Nobody says, "If only we had nationalised a little faster, we should have got out of the wood a little faster."

Mr. Mitchison (Kettering)

May I point out—

Mr. Thorneycroft

I am afraid that I have not enough time to give way. I agree that we have the exhortations of the Chancellor of the Exchequer and the veiled threats of the Home Secretary, but they do not really amount to a policy. Nevertheless, we are asked what we would do. We look round and we see the chaos which hon. and right hon. Gentlemen opposite have created—prices out of all relation to costs, men in the wrong jobs making the wrong things, profits far too easy to make and no incentive because they are all taken away, wages with a dead stop put on them, incentives working against the national interest right the way through the whole economy. Then we are asked what we would do to put it all right. It is as though someone let loose a pack of baboons in a power-house and they were pulling up the wires and climbing all over the place, and then we were asked what should be done about it. The first thing is to get rid of the baboons.

It is my belief that these cuts are inadequate. To be adequate they not only have to deal with the existing inflationary position—I do not believe they deal with it—but have to be sufficiently adequate to allow certain reductions in taxation in order to encourage incentives. Unless we get that, I do not believe we shall ever get the men into the right jobs or achieve the production we require.

Dr. Morgan (Rochdale)

What incentives does the hon. Gentleman mean?

Mr. Thorneycroft

Therefore, if we are to have a cut of sufficient character, it will have to be very much larger than the present one.

Mr. Sydney Silverman (Nelson and Colne)

How much and where?

Mr. Thorneycroft

The longer the Government stay in office, the larger it will have to be. I have no doubt whatever that the food subsidies, and no doubt the social services, are involved in any cut of that character. I have this to say about the food subsidies. The food subsidies, at least, are not claimed by hon. Gentlemen opposite to be sacrosanct. They have already broached them. The Chancellor of the Exchequer has put his foot into these icy waters and has retired shivering until 1950, amid the girlish screams of his supporters. But at least he made some attempt to tackle some of them. The only difference between the Chancellor of the Exchequer and some hon. Gentlemen on this side of the House is that we have made suggestions for dealing with the cases of hardship and he has not. I agreed with what was said by my right hon. Friend the Member for Warrington and Leamington (Mr. Eden) on that subject. I believe that in many cases we are paying subsidies to people who in no circumstances whatever require them.

With regard to the social services, I am a little tired of the sneers of the Socialists that we are against the social services. I remember spending a lot of time last Session, in co-operation with some hon. Members opposite, fighting for a certain social service, analgesia in childbirth, and I know who fought that Bill tooth and nail from start to finish, and that was the Minister of Health. Am I to be told that he is particularly in favour of social services? If he spent less money giving false teeth to Frenchmen and more money on relieving pain, we should have a much better health service. The truth about the social services—it can be put shortly and bluntly—is that the British people will get the social services which they themselves earn and not one farthing more.

I do not wish to detain the House longer, except to say that the right hon. and learned Gentleman and his associates are concerned, so far as I can see, with cuts; they make practically no contribution whatever to the constructive side. They make no suggestion as to how people should be either directed into jobs or encouraged into jobs. They just let them stay in the wrong place. The figures are worth looking at. The target for 1948 in coal, agriculture and textiles was an increase of 195,000. Less than half the target was achieved. The revised estimate for 1949 was a further increase of 44,000. Of that, only 18,000 has been achieved. In coal there was an actual fall of 4,000. These targets are complete and utter non-sense. Nothing whatever is being done under this Government to put that matter right.

What I suggest is this: the objective of the Government today ought to be not Socialism but the earning of more dollars. That ought to be the test of their action in these matters. What, in fact, do they do? Does the Chancellor of the Exchequer really think that the nationalisation of insurance is the way to earn more dollars? Everybody knows it is not. Everybody knows that by that threat we are losing dollars and will lose dollars in the future. Everybody knows it.

Then the right hon. and learned Gentleman comes back from Washington with the Washington Agreement. What is point one in the Washington Agreement? Everybody agrees that one of the ways of closing this gap is to persuade private American citizens to invest in the sterling area. What does a man look for when he invests? He looks first to see that his investment is safe and, secondly, to see that he gets a profit. What safety is there in an investment which, under a Socialist administration, may be appropriated at any time? What hope is there of profit under a Chancellor of the Exchequer who regards profit as an evil thing in itself? It is hypocrisy to talk about trying to encourage American investors against a background of that kind.

Instead of doing this kind of thing, why do we not encourage men by incentives to get on with the job and allow people to produce things and get some return for them? The whole of Western Europe, the whole of the British Commonwealth, indeed the United States of America as well, are looking to this country for a lead at the present time and we could give it if we had the right men in charge. Instead of that, we are an isolated Socialist outpost. That is all we are. The whole of Western Europe is waking up to the light. We shall soon be about the only outpost of Marxist Socialism left. We are living on the capitalists—

Mr. Scollan (Renfrew, Western)

You are living on the workers.

Mr. Thorneycroft

The Socialist Government itself is subsisting on the loans it gets from private enterprise profits on the other side of the Atlantic. I think it is a sad thing to see a great people such as ours reduced to the level of pensioners, however friendly may be the people who are helping us to subsist. My belief is that the longer the right hon. and learned Gentleman and his friends remain in office, the harder it will be to make the recovery which has to be made to put this country on its feet.

6.55 p.m.

Mr. Ronald Chamberlain (Norwood)

I am sorry that the hon. Member for Monmouth (Mr. P. Thorneycroft) has to leave, although I appreciate the reasons he has given. The hon. Member has made the typical, tub-thumping and wild speech which we have learned to expect from him, with little substance in it and still less concrete and useful suggestions. Although I did not interrupt him, some of the statements he has made are so wild that I hope he may wait to hear them refuted. For instance, the hon. Member said the Government claimed that devaluation was an act of statesmanship on their part. They have never claimed any such thing. The Front Bench, and every fair-minded person in the House, will bear me out when I say that the Government realised that this was a disagreeable necessity and expedient, and there has never been any suggestion that it was an act of statesmanship. Then the hon. Member said that the Government are pledged to destroy capitalism. So far from that, they have made it clear again and again that whereas a certain proportion of our economy is to be nationalised, yet the major part of it will remain the province of private capital enterprise, and surely nobody suggests that we should wish to destroy that large part of our economy which is recognised as an essential and important section.

The hon. Member also suggested that it was effrontery for us to ask the Opposition what they would do. When the Opposition constantly charge us with doing the wrong thing, or doing insufficient things, surely it is only reasonable to ask them what their own advice would be? One of the few things I have been able to discover in the way of advice given is in regard to food subsidies. There I think the hon. Member was in agreement with the views expressed earlier by the Deputy-Leader of the Opposition, which were ill-founded and "phoney" views, linked this time with the idea that there is an average expenditure of 11s. 6d. a week on tobacco and liquor. How that should make a subsidy for the basic elements of food unnecessary I do not see, because everyone knows perfectly well that even if the average works out at something like that figure, the scale of expenditure on tobacco and liquor varies tremendously according to the social level or sphere in which the person lives, and it is still a fact that expenditure on these things by those with the lowest incomes is extremely small. That argument of the Deputy-Leader of the Opposition, therefore, will not hold water.

The hon. Member for Monmouth and possibly the Deputy-Leader of the Opposition may get some small satisfaction when I say that I agree with one thing voiced by the Opposition, namely, that the cuts are not extensive enough. As I say, that may give some small gratification to the other side, but certainly they will wish to part company with me immediately, when I say where the deeper cuts should be made.

I and some others on these benches are grievously disappointed at the extent of the proposed cuts in the Armed Forces. We think that a cut at the rate of £30 million a year is derisory, and still more derisory is the cut which is to be made in the current year at this time of emergency, of £12½ million. I cannot accept the suggestion that nothing further can be done in the meantime "because the matter is subject to review and investigation." Surely the subject is under constant review and investigation? What have we a Minister of Defence for—[HON. MEMBERS: "We do not know."]—if he is not reviewing and supervising and investigating these things constantly? Surely it is not necessary to say to us that an investigation has now been put on foot? I am well aware of the constant pressure upon the Defence Minister and other Service Ministers by the Chiefs of Staff against cuts. I know that is inevitable. I am also aware of the pressure which must come from Washington, and last and, I hope, least, the pressure which comes from the Leader of the Opposition in regard to this whole matter.

My view—and I know it is shared by others on these benches—is that what is, in fact, being done by economies and cuts is that we are stopping up a large number of little pin-holes in the reservoir, while there is a great yawning gap through which our reserves and virtually our economic life-blood are flowing. We are making little economies in the transport and meals of school children. We are making other economies in housing, and certain economies which are good things—administrative improvements, tightening up and so on—but many of the other economies are small, irritating and unnecessary. We press on with cuts of half a million, £2 million and £5 million, yet we let £800 million—it may well be more—run through this gap of our reservoir without doing more about it than to economise to the tune of £12½ million. It is regrettable, and, I am bound to say, wrong. The country will also think that it is very wrong.

I am well aware of our obligations and that we cannot merely throw them overboard, but I want to put this proposition to the Minister of Defence, and I question whether anybody can conscientiously oppose it. I say that to talk about armed strength and at the same time to have an unsafe or shaky economic fabric is a contradiction in terms. No country can have strong forces or strong defences whose economic fabric is broken or endangered. It is quite absurd, therefore, at a time when we all agree that our economic fabric is in some danger and shows considerable cracks, to try to retain anything like full armed strength.

The Prime Minister spoke of a worthy contribution to Western Union and the Atlantic Pact. I do not question whether or not it is a desirable thing to make that worthy contribution, but in his own private affairs a man might very well like to make "a worthy contribution" to a benevolent institution. If, however, he does not possess the means to do so, he simply has to forgo that objective. It is absurd, therefore, to talk about making a worthy contribution to Western Union and the Atlantic Pact when the proposition I have just put forward holds good. We simply cannot afford these things. I am not going into the question of conscription, which was raised by the hon. Member for Northern Dorset (Mr. Byers), except to say I have always agreed with him that conscription is expensive, wasteful and uneconomic.

All excessive expenditure on the armed Forces of men, materials and money is doubly wasteful for the reason that money is being poured out unproductively and greater production prevented. If, instead of being engaged on work which is unproductive and wasteful, those men could be brought into industry, we should be preventing unnecessary expenditure and at the same time ensuring a productive benefit for the country.

The Minister of Defence (Mr. A. V. Alexander)

The hon. Member might remember in the future study, which I am sure he will give to this matter, that we shall not achieve final economic recovery unless we can maintain security for those working for us in the areas of the world upon which we depend for our economic recovery.

Mr. Chamberlain

I quite agree that we need security—I have never taken the pacifist view—but from my own observations in various parts of the world I consider that the general set-up is grossly wasteful. I cannot vouch for the suggestion of the state of affairs in Germany which was made by the Deputy-Leader of the Opposition. I agree that we must have defence, but is it necessary that defence should cost us £800 million, or eight times as much as before the war?

Mr. Alexander

We are not spending today any higher percentage of the national income than in 1938, when we were also borrowing largely for our re-armament programme.

Mr. Chamberlain

Even if we are spending at exactly the same rate, we cannot possibly afford it. If it breaks our economic fabric, what would be the position of the country and its defences? In talking of obligations, the primary obligation is to examine whether our economic background and basis are jeopardised. It is a great disappointment to me and other hon. Members that such a derisory suggestion of reduction in expenditure on the Armed Forces has been made.

The Chiefs of Staff are naturally not very ready to make reductions. It is no use whatever—I speak as a layman—asking them what reductions they can make in their various departments. As I see it, the only way to deal with the problem is to tell them all that reductions of £100 or £200 million are to be made, and that they must work out the details, between themselves and the Service Ministers, although perhaps not literally in this exact manner. Unless action of this kind is taken we shall certainly never get economies from Service Departments and Chiefs of Staff.

The other matter about which I want to speak is quite different but equally important—that is, the question of capital gains and the neglect of the Government to take any steps for their taxation or prevention. I am delighted that the Chancellor has now seen the light in the matter of bonus issues. He has done the right thing, although he has done it far too late. The stable door is now being shut, with most of the most valuable horses gone and lost to us. I refer to the £6 million bonus issue of Vickers, the £7½ million bonus issue by the Distillers Company and, most recent of all, the Woolworth bonus issue of £7½ million. The 5s. shares, in which denomination the Woolworth bonus shares have been issued, are today quoted at 84s. 9d. There may, of course, be some variation or drop in that figure, but if 5s. shares are quoted today at 84s. 9d., it means that the recipients are getting far more in purchasing power even than £7½ million. The financial pundits will say that this is a legitimate operation of finance. According to their organisation or machinery that may be so, but what concerns people throughout the country is the extent of the additional purchasing power which is being put into the hands of these shareholders. [Interruption.] Oh, yes, a very large number of them immediately market their shares. No one can possibly deny that a very great deal of money or potential money—and, indeed, inflationary money—has been handed out to these fortunate recipients, as, I have no doubt, they consider themselves to be.

Lieut.-Colonel Sir Walter Smiles (Down)

Under the proposed capital gains tax which the hon. Member advocates, would not the fortunate holder of Woolworth shares be able to set off against his profits in Woolworth's the losses he might have incurred in the Dalton issue, which stands at 66 today?

Mr. Chamberlain

I am quite sure that in the whole commercial and capitalist world, one is all the time dealing with and balancing gains and losses. But anyone who knows anything about industries and profits knows that the last few years the increases in profits in the great majority of industries and businesses have climbed far above any fences which the Chancellor has erected for them. That has been going on and is still going on, and the rise of 5 per cent. in the tax on distributed profits is no more than a token rise, which will very soon be submerged and circumvented, as all these increases have been.

I would ask the Chancellor to go a little further along the very right road which he has now tardily taken. It is no use merely doing sums and working out gaps and balances in the seclusion of this House. The people and the workers are watching these things. It is no use calling upon them to work harder and longer hours, a six-day week and so on, when they see such things as the Woolworth bonus issue and these other bonus issues taking place, and when they see these company reconstructions taking place, about which I have asked the Chancellor again and again to do something. He knows that it is happening—he has acknowledged this in correspondence I have had with him in regard to the matter. His view has always been that this is not the sort of thing in which he can usefully intervene.

I called attention a little while ago to 100 cases which I had examined, in which the nominal capital of the original companies was £15½ million, whereas the new issued capital in the reconstructed companies was £34 million, the market value of that £34 million being no less than £97 million. That was only one sample of 100 cases. That kind of thing has been and is still going on. The Capital Issues Committee certainly need to be given some further instructions in regard to that matter. The number of cases in which they have agreed to bonus issues is surprising—they have agreed to no fewer than 317 applications in regard to bonus issues out of 331–96 per cent. of the cases put to them, while the total amount involved was 98 per cent. of the potential amount in regard to which applications had been made. These matters surely must be looked into.

The workers also note the huge fees which are being paid to directors. It does not seem equitable that out of industry should come not only great profits, but great fees for directors. For example, the nine directors of British Celanese receive £81,000 a year. It is true that they have to pay quite heavy taxation, but I believe that the amount which each of these directors receives after the deduction of tax works out at £3,443. There is also £15,000 a year put into their pension fund and I have no doubt that they receive expenses as well. The directors of Lewis's, about which we have heard quite a lot, receive £20,000 a year each.

It is not only that this kind of thing is inequitable and that the producers and workers, including the £5 a week men and those getting less than that, are noticing all these things; it is not only that they cannot be expected to put forward their best efforts when there is no equity in the matter. It is also the case that these things are all adding heavily to the cost of the finished goods. I venture to say that if the Chancellor had cut down on many of these items earlier, if he had prevented the inflation of capital in these many industries—because it extends right through the whole range of industry—he would have been able to secure that our exports went abroad at far lower prices; and one of the troubles and one of the factors which has forced devaluation or revaluation upon us, has been the excessive cost of our export goods.

The matters I have mentioned, directors' fees, over-capitalisation and the reconstruction of companies with vastly inflated capital are bound vitally to affect the final price of the goods. Much trouble and even possibly the heavy degree of devaluation might have been avoided if the Chancellor had taken the measures which I and others have pressed upon him for the past two years.

What we need in the country at the moment is not any kind of wishy-washy Liberalism or any kind of laissez faire of the old type. The people are ready for and are looking for strong Socialist measures, because it is only through such measures that equity in treatment and in the fortunes of one person and another can be ensured. I use "fortunes" not in the monetary sense but in reference to the way of life and the way of living of the people. If we are to reach any equitable solution, indeed, if we are to reach any successful conclusion in closing the gap and getting our finances on an even keel, these are two things which certainly must be seen to. There must be an immediate deep cut in the expenditure on the Armed Forces, and the Government must bring themselves to this vital matter of a tax on capital gains.

7.18 p.m.

Colonel Crosthwaite-Eyre (New Forest and Christchurch)

The hon. Member for Norwood (Mr. Chamberlain) has made the same speech on many occasions. I do not think that he has added anything to it tonight which we have not heard before. He has adduced no argument which has not been answered previously not only by the Minister of Defence but also by Members on this side of the House. I feel, however, that there is one thing which cannot, even at the expense of repetition, be left to go unchallenged tonight. Whatever may be our personal views, we agree that we are in a very difficult situation economically, and I do not think that we can allow the age-old misrepresentations voiced by the hon. Member for Norwood about industry, particularly about directors' salaries and bonus issues, to stand without some word again of common sense on the subject.

The hon. Member has been told, not only by the Chancellor of the Exchequer but in many Debates, and the Economic Secretary to the Treasury told him on the last occasion, which I had hoped might have convinced him, that there is no inflationary pressure whatever in the making of a bonus issue unless the total amount distributed to shareholders is increased. All that happens is that a sum which has been put to capital reserve for development in that industry, a sum also which has been spent, is transferred from one part of the balance sheet to another and made logical by the issue of shares so as to make the actual capital of the company equal to the nominal capital. No one secures a penny unless there is additional total distribution of dividends, and the Chancellor of the Exchequer made it clear that, so far as the beneficiaries of these shares have been concerned, no such distribution, with a few exceptions, which I think he agreed were minor ones, has taken place.

Mr. Chamberlain

If amounts are taken from reserve and issued to shareholders as bonus issues, and they can then market them, as they usually do, at great premiums, does the hon. and gallant Member still say that that does not have an inflationary tendency? I know the hon. and gallant Member thinks that he has a monopoly of common sense—he has told me so before—but can he answer that?

Colonel Crosthwaite-Eyre

I do not want to spend too much time on this matter because I wish to make a speech of my own. I carefully said "from capital reserve," which is the only reserve from which bonus issues can be made. The hon. Member knows that capital reserve means money already spent. There is no question of taking money out of the company. It is recognised that the money concerned has been spent by that company and is now being rightly translated into shares.

I would say only one other word to the hon. Member and that is that there can be few more dangerous things than to suggest that anyone in this country at the moment is not prepared to make a worthy contribution to Western European defence and the Atlantic Pact. He said that he spoke for himself and an unknown number of Members on that side of the House who viewed such a contribution as not necessary and a thing we could not afford to do. Those were his words.

Mr. Chamberlain

I wish to make it clear that personally—I speak now only for myself—I think the policy of the Atlantic Pact was wrong and I said so at the time. But apart from that, the point I am making now is that we cannot afford these things and it is no use having things we cannot afford.

Colonel Crosthwaite-Eyre

Really, if the hon. Member wishes to interrupt I wish he would not merely reiterate what I said was his statement. So far as my hon. and right hon. Friends on this side of the House are concerned, we think that such a statement is about the most dangerous statement that could be made.

Now may I come to the main question of the Chancellor's speech. Again, rather like the speech of the hon. Member for Norwood, it is a speech which I have heard eleven times before—[HON. MEMBERS: "It is a good one."] Oh yes, it is a good one. He repeats it nearly as fluently as the hon. Member for Norwood repeats his speech. But it is a speech which on each occasion seems to try to go back even more into the past for some justification of what is happening today. It is a speech which ignores all the actions or judgments of the Government and strives to go further and further back in time to find some sort of excuse for the problems with which the Government find themselves faced at the moment.

I looked up what the Prime Minister said back in 1945, and this is the only quotation I wish to make. In an address that was moved to the Gracious Speech, he said: Sooner or later, we have to face the fact that we can only buy abroad if we can pay for imports in goods and services."—[OFFICIAL REPORT, 16th August, 1945; Vol. 413, c. 109.] That is what the Prime Minister said in 1945 and it is a complete criticism of the Government, because ever since 1945 they have never tried to face up to that simple proposition—[Interruption.]—hon. Members opposite may say they did, but if so, what were the two main things they had to do? The first was to make the pound valid abroad. It had to become an international currency. The Prime Minister in a speech which he made before convertibility collapsed, in August, 1947, made that very point.

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

How does the hon. and gallant Member reconcile this accusation that the Government have not tried to deal with the dollar problem with the fact that at the time of the petrol shortage the Conservative Party were using that shortage electorally against Labour candidates for the local authorities, who had nothing to do with it?

Colonel Crosthwaite-Eyre

With great respect to the right hon. Gentleman, I was not dealing with any particular point, but if he likes I will answer, and I agree we could have a very good, if repetitive, argument on that particular point. I would answer him by saying that I am still not convinced about the dollar element in the petrol that was involved in that matter. The Chancellor of the Exchequer and the Minister of Fuel and Power have been asked time and time again to give us the exact figures of the dollar position in regard to petrol. They have failed to do so. If they had done so we might well have agreed with them.

If I may return to my broad point, our criticism against the Government is that they have not dealt with the overall question of the dollar position. The Lord President of the Council has tackled me, and I would ask him one or two specific things. Even if the Government were sincere, why have they not tackled the sterling balances? Why have they done nothing about them at all? The right hon. and learned Gentleman and the Chancellor of the Exchequer and the Economic Secretary have time and again stood at the Despatch Box and said, "We believe that we must scale down these balances. We believe that we must make a just apportionment so that there may be a fair distribution of the burden of wartime debts between ourselves and such countries as India or Egypt." But they have never done anything—

Major Bruce (Portsmouth, North)

rose—

Colonel Crosthwaite-Eyre

Please let me finish. Today, as a result of our releases to India and Pakistan, the Indians and Pakistans have not only been able to get unrequited exports but they have been able to spend at a dollar rate of at least three times as much as they spent in 1938. We have cut our own dollar purchases down. But due to our policy of not scaling down these balances, others have increased their expenditure.

Major Bruce

Would the hon. and gallant Gentleman say what conditions were attached to these sterling balances by the right hon. Member for Woodford (Mr. Churchill) at the time that the obligations were originally incurred?

Colonel Crosthwaite-Eyre

Yes, Sir, certainly I can. There was only one obligation and that was that they would be subject to review at the end of the war and would be scaled down to give a just balance between this country and the other countries concerned. My right hon. Friend has said that standing at the Despatch Box.

Mr. John Wilmot (Deptford)

May I ask the hon. and gallant Member to give us the authority for that statement?

Colonel Crosthwaite-Eyre

I have just given it. The right hon. Gentleman made it clear in this House—[HON. MEMBERS: "Oh."] I have not the date but I think that hon. Members will find it was about a year ago. I would not for obvious reasons make a statement like that unless I felt pretty certain that I was right.

What have these releases from sterling balances done? I ask the Lord President to listen. He has challenged me about the position. Does he realise that, as a result of these releases from sterling balances, everyone engaged in the export industries is today working one day a week to provide free goods for other countries? There is something like £300 million a year of our exports going abroad for which we receive no return whatsoever. Surely to every hon. Member of this House that is a formidable matter. I think I am right in saying that our exports run now at a rate of about 1½ thousand millions and very nearly a fifth of those are not providing any single return by way of goods or services for this country.

This afternoon I heard the Chancellor say that we must allow, for humanitarian purposes or possibly for purposes of building up economically other countries and for supporting them defensively in their need—and many other things with which I totally agree—certain minor amounts of unrequited exports. But when one finds that the countries which have benefited, India and Pakistan, spending dollars at three times the pre-war rate, when one sees the list of what the Egyptians have been importing from America in cars and other luxuries, one realises that half our dollar trouble is due to our Government and their policy of releases from these balances.

Mr. George Wigg (Dudley)

Would the hon. and gallant Gentleman allow me—

Colonel Crosthwaite-Eyre

No, I must go on. Another point is the bilateral agreements. We have so hedged round our economy that it is hardly possible for sterling and the currency of any foreign country with whom we trade to be passed on for the use of a third country. Not only have we crippled sterling as an international currency because of the way in which we have used what is almost a barter system, but we have gone still further. When the Chancellor of the Exchequer said this afternoon that he wished to see a great increase of engineering products go to America, had he thought of what has been the effect of the Russian Trade Agreement and the Andes Pact, by which we have traded the very cream of our products probably for five years hence against the meat and coarse grain that we have already consumed?

I hope that the right hon. Gentleman will bear this in mind. I hope hon. Members opposite when they come to the House and when they make speeches in the country, and say it is easy to shift our exports, will remember that they have already traded the most readily transferable of the exports of this country for raw materials which we have already received and consumed. We have still to pay for them.

That is the sombre picture. It is not one that can be changed overnight. But the industries of this country have to bear the frightful burden of sending unrequited exports abroad against wartime sterling balances that in reality have never been earned by the countries concerned and, at the same time, the frightful burden of meeting the demands of other countries who have supplied us with meat or coarse grain and can now make demands upon our productivity. That is the picture we must face. Can it be any wonder that sterling is not an international currency as a result?

Perhaps the most illuminating point is that, as I understood it, the Government said that by devaluation to two dollars 80 cents a final step had been taken and no further devaluation was possible. In their statements in this House the Government said that they were satisfied that, if anything, they had over-devalued and that sterling would tend to rise. Yet, if one takes the dollar premium stocks in America, sterling is already again at a discount. I am very happy to tell the House that, whereas before the Prime Minister made his statement about cuts, sterling had fallen on these dollar stocks to two dollars 47 cents, since that statement it has risen to two dollars 65 cents. It has made up about one-half of what it had fallen below the official rate. But even if we can take some comfort from that, it is equally a measure of what the Americans think of the effectiveness of these cuts and the trust that they think can be put in sterling, that even after these few weeks sterling should be at a 5 per cent. discount over there already.

I should also like to draw the attention of the House to the value of the pound at home. We have heard a lot of arguments this afternoon about what is its real value, but in fact there is no value to the pound at home. There is hardly any single transaction in which anybody indulges from day to day in which subsidies, Purchase Tax, levies or some other consideration do not make the value of the pound in relation to that transaction completely spurious. I think that is shown very well by the present overall situation. Never have there been so many inflationary deposits in the banks. Never have Government securities fallen so far. Never has the Government rate of interest, set arbitrarily, differed so widely from the real rate as shown by market quotations. Wherever one looks, one can see that the pound, instead of being the proper and natural basis on which life can be led and transactions conducted, is now looked upon as a purely arbitrary symbol in the arbitrary hands of the Government.

Much has been said about food subsidies and incentives, but surely until the Government release the pound to the extent of doing away with what I call all these "phoney" concomitants of trying to erect a false economy, and until they bring back the pound to mean something in the hands of the wage earner and every other section of the community, we will never get any further in building up confidence and defeating inflation.

The Government have had four years in office. They were full partners during the war. They knew all the circumstances and all the difficulties. In 1945 there was no factor of the post-war difficulties in which they stood in any more ignorance than Members on this side of the House. They have produced one economic crisis after the other. They have tried to shift the blame recklessly according to whatever might be thought possible—that it was the hardest winter; that this was the longest time since the Chancellor of the Exchequer had had a crisis; that never had there been such a demand for dollars. All these factors were foreseen and should have been known by anyone.

A Government, if they are worthy, are masters of events which surround them. It is only when they come down constantly to the House of Commons and have to say that, far from being master, once again they wish to shelve their responsibilities, that they show their true futility. The Government in their wisdom have said that they will not test the opinion of the country. They may go on for a further eight months, but if in that time they do not strive to produce an answer that is worthy of the country, if they do not strive to see that at least those fundamentals of the making of the pound worth something abroad and at home are fulfilled, then they will stand condemned, if not now, then certainly in the verdict of time.

7.35 p.m.

Mr. Parkin (Stroud)

The hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) has told us how important it is that the pound should be an internationally valued currency, but I do not think that he has done anything in his speech to increase confidence in the pound in other parts of the world by injecting these vague suggestions that what we ought to do about sterling balances is to repudiate them.

Colonel Crosthwaite-Eyre

I do not think that I used the word "repudiate." If the hon. Gentleman would look up what I said, he will find that I used the words, "scale down to a true balance."

Mr. Parkin

What the hon. and gallant Gentleman has just quoted is what he said that somebody else had said on some unspecified occasion. I have listened very carefully tonight to try to make out what his policy was on the subject of sterling balances. I am sure that people in other parts of the world will also study with great care what he said in order to find out whether or not he can be relied on, if he gets into power, to pay his debts and to meet his obligations. I really think that we are entitled to a little more support from hon. Gentlemen opposite for their own ideal of a pound which is internationally respected.

Further, the hon. and gallant Gentleman stood for a moment almost in reverent silence before he rebuked my hon. Friend the Member for Norwood (Mr. Chamberlain) for making remarks about Western Union, but then he continued to make the suggestion, that we ought not to have given any economic help to our Allies in Western Union and that we ought not to help India and Pakistan, as far as we can, with their economic problems. Of course, our economic relationship with our Allies and with those countries where the sterling balances are owed must change from time to time in accordance with our own capacity to help, but we certainly do not want to repudiate our desire to help them along the way to economic reconstruction and to work together as far as possible in getting the whole of Western Union on to its feet at the same time. I do not think that the speech of the hon. and gallant Gentleman has done anything to contribute towards that end.

I have listened most carefully today to all the speeches from the opposite side of the House and I have tried to find out the alternative policy. All we have had, until the hon. and gallant Gentleman injected this doubt about the pound sterling, was the repetition of the notion that they would abolish the food subsidies and substitute some form of what I gathered was a soup kitchen for the deserving poor—getting patronage back into the picture. I do not want to develop that point very much.

I did not know that the food subsidies were intended to be a social service. I thought that they were part of an agreement with the wage earners of this country that they would not press for increased wages if the cost of living was kept down by subsidising the cost of food. If that promise was suddenly to be broken I think that there would be very little hope of the people who broke it getting the confidence of the wage earner who, had it not been for the food subsidies, would have got wage rates very much greater than they are now by the ordinary process of negotiation. The most interesting point on the food subsidies was put by no less a person than the Deputy-Leader of the Opposition, when he used words to the effect that no word must be said to cause despondency and alarm to the agricultural community. This suggestion about the abolition of the food subsidies is the most sinister threat to the agricultural community of this country, and will cause more dismay among the ranks of the farmers than any speech made about agriculture since the calamitous utterance of Prime Minister Chamberlain at Kettering in 1938.

Mr. Oliver Poole (Oswestry)

Surely, the consumer gets the food subsidies?

Mr. Parkin

I did not think it would be necessary for me to deal with that one. Of course, the subsidy goes to the price of the food to the consumer, but cannot the hon. Gentleman and his party see that, if we are going to alter the whole pattern of food prices, we shall alter the pattern of the demand for the goods produced by home farmers? The position at present in the case of meat, for instance, is that nearly the whole of the subsidy goes on home produced beef, not on imported beef. I am not complaining about it or suggesting that it is a subsidy to the farmer. It is an arrangement which we made to try to restore balanced farming in this country and to increase livestock production, but it does depend on the pattern of buying and of demand, as a result of which home produced beef will be bought from the shops by ordinary people in the quantities and at the price at which the farmers will be able to produce it. Hon. Members opposite have not protested against the removal of the feedingstuffs subsidy. They have got to think that one out as well, and it may produce some headaches.

Major Legge-Bourke (Isle of Ely)

Does not the hon. Gentleman see that there is a difference between the position today and that before the war? The difference in this context is that before the war there was cheap food to be bought, whereas, today, where is it?

Mr. Parkin

Really, the hon. and gallant Gentleman must think this out for himself. I am not making a party point for the sake of doing so; I think it is important in regard to the agricultural community, because it will upset the pattern of demand for food if the subsidy was removed.

I will pass from that to the main object of our discussion, which ought to concern the question how far the Government's proposals are adequate to meet the threat of inflation arising from the simple fact that we have to send more goods abroad and there are less to buy at home. The Government have told us what their proposals are, and the Opposition are very upset indeed to discover that it has been possible to reach so large a total without fundamentally attacking any broad issue of policy. I would like to ask the Government one or two questions about the claims in regard to reduced expenditure which is disinflationary in effect.

For instance, on capital expenditure in the projects for the development of the supply of electricity, I want to ask whether the Government are smuggling into this plan an economy which they would have had to make in any case, because, in fact, the money will not be spent because the boilers will not be there and the generators are not going up according to schedule. How far is that an economy which has been forced upon them anyway, and how far does it really represent a recasting of the plan? I would also like to ask the Lord President, as he is here, whether or not his contribution from the Festival of Britain is due to the fact that the buildings are not going up fast enough anyway, and because he cannot get the money spent by 1951, so that he got away with that by throwing that one into the kitty.

There is a more important point arising from this principle in connection with housing. I would like to know from the Government whether the proposed cuts in housing are conditioned by the probable amount of dollar timber which we can buy. There is at the moment great indignation about the cuts in housing, and I saw with amazement that someone has forecast a large number of builders being unemployed. The difficulty in my own part of the world is that houses are not being built to the extent of the allocations. The difficulty is that builders will not build in the area. At the Employment Exchanges in the Stroud area there are over 1,000 registered builders, and the local trades council endeavoured to find out just how many are building houses. The fact is that there are only just over 200 actually building houses, and many of these are brought in by outside firms which have the contracts. It does not seem to me that that is likely to precipitate unemployment, but the Government should have a look at this matter to see how building labour and materials are being frittered away on other things than houses.

As for the suggestion that the cutting down of private licences is a hardship, the largest urban district in my constituency actually had to readvertise because it had not got enough applicants to build houses under private licence, and now the edified citizens may see where a house is going up to be occupied by a gentleman who is already adequately housed and who will be able to sell his own house with vacant possession when the new one is ready. Further, we have the point that nine-tenths of the building operatives are doing something else.

I do not wish to say very much on Defence, although I think it is fair to the Government that those of us to hold these views should utter them here. I voted for conscription because I felt that I could not oppose the principle of National Service, but I am not one of those who are satisfied that it is working out right technically. We have got hold of a system which has turned out to be wasteful, and I hope the Government will be able to have another look at it, in spite of all that is said at reunion dinners and the assurances given from the other side. I hope the Government will see whether some alternative cannot be found in combination with voluntary work, in order to reduce this burden which we are placing upon the Regular Army of half training lots of people, numbers of whom would be in reserved occupations anyway if an emergency occurred.

I do not wish to say any more than was said by my hon. Friend the Member for Norwood on the subject of inflationary pressure from capital gains, but I want to say to the Government and to the hon. and gallant Member for New Forest and Christchurch that this is a continuous irritant to the people of this country, who are getting rather tired of seeing increased profits increasing the value of shares. Hon. Members opposite tell us that there are very few people in the country with more than £1,000 a year to spend, and I think they have got them down to a few dozen now. When we move through the West End of London, it really does not look that way at all, and there must be some other explanation for the standard of living of a good many people in this country. I am not saying that it is necessarily tremendously inflationary, though it is slightly so, but I do say that it acts as a most unjustifiable irritant upon the rest of the population, because the ostentation of a small section of the people is very harmful socially, and for this reason. I think that to be attacking the high profits is to start at the wrong end; I think that we and the trade union movement ought to be gunning for the firms who are not making any profits. That is our problem in connection with prices, and one which arises out of our success at achieving full employment. We are protecting the inefficient. The big gap of prices is the one which has to be closed, and, therefore, we ought to gun for the fellow not making profits.

One thing that has been mentioned, of course, as contributing to the increase in productivity, is an increase in hours. I think that great harm is done by generalisations on the subject of the length of hours. That, too, acts as an irritant. It must be remembered that in many industries, decreases in the number of hours worked were decided on the initiative of managements for technical reasons connected with efficiency. The five-day week was sometimes decided on by managements on the grounds of technical efficiency, sometimes with the proviso that there should be an increase of hours during the five days if the half-day on Saturday was to be free.

I hope that hon. Members opposite realise the tremendous importance that working people attach to what they have achieved after a very long period of struggle in the way of restriction of hours. I was talking only the other day to a group of engineers in my constituency. They were willing to discuss sacrifices and extra hours of work, but when the Saturday morning was mentioned the most alarming language was used. They did not say, "No, never." They said, "Not until the management have done this, this, and this"—a list of all the improvements in organisation which they wanted to see carried out in their own factory. Traditionally, the withholding of labour has up to now been the worker's only way of forcing improved conditions and improved equipment upon his employer. It has been his traditional weapon for a century to force the manufacturer to make himself up-to-date. Sometimes it has been done by the passing of legislation, for instance, in the withholding of child labour from the factories in order to force people to design machinery for which children were not needed to go underneath.

In later days it has been the weapon of the working-class to achieve greater efficiency. Hon. Members opposite may, from time to time, have heard the song called "The Red Flag," and they may have smiled about the reference to the martyred dead. It may interest them to know that the martyred dead in question were shot by policemen when demonstrating for an eight-hour day. That was always the method until the workers received political power to force managements to use more efficient methods of production. I hope that both the Government and the Opposition will recognise this fact, and that it will be used as a strong bargaining counter for getting this increase of efficiency which we want to see forced upon the least efficient firms.

The hon. Member for Monmouth (Mr. P. Thorneycroft) said that all the parties in this country were agreed in desiring full employment, but the real unbridgeable gulf of difference between those on this side of the House and hon. Members opposite on the subject we are discussing today is that by tradition and training they are not yet convinced of the success of a policy of full mobilisation of all the resources of the country. That is why they are worried about full employment. It is not altogether emotional. Our devotion to it, as was clearly seen this afternoon from the maiden speech of the hon. Member for West Leeds (Mr. Pannell), and our attitude towards it are based on bitter experience and also on fundamental, rational and Socialist grounds. We believe in the full exploitation of the resources of the country, and that means having a crack at the inefficient units and not closing them down, which is the first instinct of accountant-minded people.

Hon. Members opposite have already conceded this point by their support of the agricultural policy of this Government. It is the agricultural policy of this country because it is on the Statute Book, and no one has the right to neglect any piece of land, however poor and however inadequate the return may be. The farmer is obliged to get out of it all he can produce, and if he is visited by county agricultural executive committee representatives and criticised for neglecting one of his fields, it is no good his saying, "I have made a handsome profit out of the other fields." Their answer would be, "We have not come here to see your figures; we have come to see your fields." If that will do for agriculture, I think that, on principle, it will do for private industry.

In areas like mine, there are directors of industrial firms who are also gentlemen farmers. As farmers, they go to meetings and applaud the principle of the full mobilisation of production from the land at almost any financial cost knowing as they do, of course, that the nation is none the poorer because a bad farmer will be helped through by his stronger brethren in the industry and by scientific and technical assistance. In the same way, the nation should be the richer if we can tackle this problem of getting the minimum return from industry. I wish that the same gentlemen who applaud the policy of the farmers would go to their board meetings and say, "Let us see if we cannot get the same spirit in industry as that which exists in agriculture and the most efficient people to give assistance to their weaker brethren." Let us see if we cannot get a real plan of re-equipment throughout our industry and have another look at the idea of a development council. An increase of productivity by the weaker unit will reduce the cost margin between the best and the worst, thereby reducing the gross profits made by those who cannot help making them and reducing prices to the consumer whether here or overseas, and, at the same time, satisfying both sides that each can expect the best out of the other.

7.58 p.m.

Sir Stanley Holmes (Harwich)

History has a habit of repeating itself. There was the Second World War 21 years after the first, and the second economic crisis has come 18 years after the first in 1931. The first economic crisis came after a Labour Government had been in office for three years, and the second has come after a Labour Government has been in office for four years. The National Government of 1931 asked for very severe cuts in wages, salaries, and profits; and everybody agreed. The nation, realising the condition in which the country stood, accepted the cuts, and gradually things were effectively pulled round. The present Government, like the Labour Government of 1931, has also reduced this country to a state of bankruptcy. They have far less excuse for doing so because, unlike the Labour Government of 1929–31, they have had the advantage of loans amounting to £2,000 million from America and Canada, and I am including in that gifts from one or two of the Dominions and Marshall Aid.

Mr. H. Hynd (Hackney, Central)

We have had a war.

Mr. Harold Davies (Leek)

rose—

Sir S. Holmes

The hon. Gentleman must listen to what I have to say, and then I will see whether I shall give way. Although the economic position of the country today is as bad as it was in 1931, the remedies suggested by the Prime Minister on Monday are totally inadequate. The reason is that in 1931 the cuts which were suggested were decided upon by a united Cabinet. They had agreed amongst themselves. They put the suggestion as a body to the nation, and it was accepted. The remedies put to us on Monday obviously came from a divided Cabinet. The result is that we have a weak compromise which is quite inadequate to pull the country together again.

I want to remind the House that one of the things that happened in 1931 was that everybody who worked—that is, everybody who came under Schedule E Income Tax—was asked to accept a 10 per cent. cut in salary. That included directors of companies, managers, shop stewards and all wage and salary earners. It also applied to Members of Parliament who took a 10 per cent. cut; they received £360 instead of £400. Ministers and junior Ministers all took a 10 per cent. cut.

Would it not have been a very fine gesture if Ministers and Members in this Parliament had all said that, in view of the present position in which the country stands, they were all prepared to accept a cut in their salaries? It must be remembered that when this Parliament assembled in 1945 the salary was £600 a year. Notwithstanding that the country has been going downhill, Members have voted to themselves £1,000 a year, and it was never put before the electorate. It was not in "Let us Face the Future." We have done it ourselves. In addition, we have given ourselves extra free railway travel, and meals at under cost price, and thousands of pounds a year are being paid as a subsidy by the Treasury. I agree that it is only a few thousand pounds as compared with millions, but I think we might make a gesture and say that we will pay for our own meals instead of putting this burden on the taxpayer. Example is better than precept.

Mr. Reeves (Greenwich)

On a point of Order. Is it in Order for an hon. Member to suggest that hon. Members do not pay for their meals?

Mr. Deputy-Speaker (Major Milner)

The hon. Member raised a point of Order. The hon. Member who is addressing the House must, of course, take full responsibility for what he says. I cannot intervene on a question of fact.

Mr. Yates

I should like to ask the hon. Gentleman what good an all-round cut in wages did in 1931. If the country was put on its feet, why is it that in no year between 1931 and 1939 were there seldom less than two million unemployed?

Sir S. Holmes

That is a very long thing to argue. There may not have been sufficient employment, but financially the country got right, so much so that the £400 a year was restored to Members of Parliament.

Mr. McGovern (Glasgow, Shettleston)

I am not attacking the hon. Member for advocating a reduction, but I should like to ask him whether he thinks that such a suggestion comes fairly from a person who may be a director of a number of companies and drawing very substantial emoluments, to whom a Parliamentary salary means little or nothing compared with others who have to draw it because they have given up full-time jobs in order to be Members of Parliament.

Sir S. Holmes

I think it may be said that I am honest. I first came to this House 31 years ago, and no one has accused me of being dishonest. I have said perfectly frankly that I think this is a gesture that we might like to make.

There are two ways in which the crisis can be met. Great cuts are required in both capital and revenue expenditure. Also a great increase is required in our export trade, and I want to discuss the means by which this may be accomplished. I should like to quote a question which was put to the Prime Minister by the hon. Lady the Member for the Exchange Division of Liverpool (Mrs. Braddock) on Monday last. She said: Is my right hon. Friend aware that there will be a sense of disappointment and frustration in the minds of productive workers who are being called upon to produce more, that no mention has been made at all of some method of taking the extra profit from those who will get it as a result of increased production?"—[OFFICIAL REPORT, 24th October, 1949; Vol. 468, c. 1029.] The Prime Minister made no reply to that question, but I venture to answer the question by saying that if we are to obtain the necessary sales to bridge the dollar gap, there will be no additional profits for anybody, apart from very exceptional cases.

Let me refer to the American market where we are particularly anxious to sell our goods. There we have to compete against the products of all other nations—Russia, France, Holland, Belgium, the Scandinavian countries, and the Latin American countries. There are two deciding factors as to whether one can export or not. One factor is quality and the other is price. This country has always done well with regard to quality, but we often fail from the point of view of price, and the reason for that is the greatly increased cost of producing our goods. In most cases the costs of raw materials have gone up, and in every case wages and salaries have risen in the last four years. In addition, the nationalisation Measures which have been passed in this present Parliament have meant increased costs to industry.

Mr. Reeves

No.

Sir S. Holmes

The hon. Gentleman should not say "No" before he has heard what I have to say. They have meant increased costs to industry as well as to each individual citizen. The coal mines were nationalised and the price of coal went up. The railways passed into public ownership and the fares and freight charges went up.

Mr. Edward Porter (Warrington)

They have not gone up since nationalisation.

Sir S. Holmes

Of course they have. Electricity and gas were nationalised and the cost of both went up. If a factory has to pay more for the coal it uses, for the transport of its goods and its personnel, for the cost of the electricity or gas that it uses, then all that adds to the cost of the finished article and therefore causes—

Mr. H. Hynd

Is the hon. Member suggesting that if coal, gas and electricity had not been nationalised, the prices would have been the same as before?

Sir S. Holmes

I do not say the same as before. I am quite sure, however, that if all these things had remained under private ownership the cost would not have risen by so much as the amount by which it has risen. [Interruption.] It is relative, but it means that the cost of goods made in every factory is greater as a result of nationalisation.

Mr. E. Porter

rose—

Sir S. Holmes

I cannot give way again. This is causing great difficulty in the matter of competing in price in the American and other markets. There are other difficulties which our industries are having at the present time in their export trade. Other nations, who have been competing with us in America and elsewhere, are in some cases paying less for raw materials and in nearly every case are paying lower wages and salaries and less for overhead charges in respect of the things I have mentioned—coal, electricity, gas and transport. In addition, may I add, most of them are working harder than we are.

On Monday the Prime Minister said that the Government have been pressing forward the drive for production but neither he nor the Chancellor of the Exchequer—nor, indeed, the Lord President of the Council—has ever really hit the nail right on the head with regard to the necessity for increased production. What they should have done, and what they should do today, is to ask every worker in the country to put a little extra effort into each hour of work and not—

Mr. Logan (Liverpool, Scotland Division)

I read here in Dod's Parliamentary Companion—

Sir S. Holmes

—and not take any less or any more of anything.

Mr. Logan

The hon. Member ought to be ashamed. I have a copy of Dod in my hand. Will he tell us what he receives in salaries?

Sir S. Holmes

I do not grasp what the hon. Member is saying, and I have not given way.

Mr. Derek Walker-Smith (Hertford)

On a point of Order. How long are these sedentary squawks to be tolerated from hon. Members opposite?

Mr. Deputy-Speaker

The hon. Member must certainly be permitted to make his speech in his own way without undue interruption.

Mr. Logan

Why should we have to listen to this?

Sir S. Holmes

I am a firm believer that when a Member is called by the Chair he should make his own speech and say what he thinks. I shall say something further which will offend the hon. Member opposite. Not merely is it desirable that each worker in the country should put in just a little extra effort into every hour of work, but I will also say that on the average the amount of work done in each hour is not as much as it was before the war.

That is the extra effort which will get the export drive through, but no Minister so far has had the courage to say that this is the only way in which the extra production to help the export drive can be obtained. They talk about wanting more production, but they have not had the courage to say that. I am bearing in mind what the hon. Lady the Member for the Exchange Division of Liverpool asked in her Question, and I will say that if a manufacturer increased his business to enable him to sell more goods overseas by reason of the fact that his workers gave increased production per hour without extra pay, then there would be more profit for the manufacturer, but world competition today is so severe and the dollar gap is so wide that in my opinion the manufacturer will in nearly every case have still further to reduce his price and his profit and even giving up part of his present profit in order to serve his country and to save all of us in this critical time. It would be very wrong if the workers were encouraged to feel a sense of disappointment and frustration by an erroneous statement about extra profits.

Nevertheless, there is a sense of disappointment and frustration throughout the whole country. On Monday last everybody in the land was anxious and waiting to hear what the Prime Minister had to say. It was known that the country was nearly bankrupt, it was believed that great sacrifices had to be made by everybody, and any proposals, however severe, would have been accepted in the same way and in the same spirit as they were accepted in 1931. The nation expected a, drastic and courageous pronouncement and all it got was a poor half-hearted statement from the Prime Minister which showed most palably that the Government were divided as to what should be done and that the statement represented a weak compromise which was totally inadequate. The nation knows that the Government's proposals will not solve the problem of this bankruptcy crisis, and there is, therefore, a sense of disappointment and frustration everywhere today except on the Socialist benches in this House.

8.17 p.m.

Mr. Frank McLeavy (Bradford, East)

In view of the limited time at my disposal, I intend to refer to only one part of the speech of the hon. Member for Harwich (Sir S. Holmes). It is in connection with his suggestion that there should be a cut in Parliamentary salaries. I think the hon. Member for Harwich is the last Member of this House who should have risen and posed as a person anxious to make a public-spirited sacrifice so far as his Parliamentary salary is concerned, for he knows perfectly well that by making that pose he is deliberately misleading the House and the public into believing that he would, in point of fact, be making any substantial sacrifice at all.

According to Dod's Parliamentary Companion the hon. Member has something like three residences, he has a number of directorships which, as far as I can see, run into something like 32, and he is apparently drawing from these directorships a very considerable annual income. In any case, therefore, even if Parliament decided to pay £2,000 a year to its Members, I question whether the hon. Member for Harwich would receive any substantial benefit from it. As a matter of fact he is connected with Beecham's Pills. I suppose the hon. Gentleman is so accustomed to the familiar advertisements of Beecham's Pills that he thinks he can put over the same kind of stuff on the question of the reduction of Parliamentary salaries. Here I have a statement that 11 directors of Beecham's last year received £79,755 between them, or about £7,250 each.

Sir S. Holmes

That represents the directors' fees paid in over 100 companies throughout the world.

Mr. McLeavy

I am grateful to the hon. Gentleman. If I understand his intervention correctly, it is that I have not underestimated his financial interests so far as directorships are concerned. I personally—and I am speaking as an individual Member of this House—I personally would be prepared, if hon. Members on the opposite side of the House were, to say, "We are prepared, as good patriotic citizens, to give to the nation all above our Parliamentary salaries that we receive, and we are prepared to live on our Parliamentary salaries." That would be, at least, an honest position to adopt—prepared to live on our Parliamentary salaries. I say to hon. Members opposite that if they will apply some political honesty to the matter, I am prepared to accept a reduction in my Parliamentary salary—any amount of reduction they may suggest is suitable for the occasion. But we do want, at least, some equality in this matter.

Our democratic system of government has given to the electors of the country the right to elect the persons who in their opinion are most qualified to serve them in the House of Commons. Let us not sneer because some Members on this side of the House have to live only on their Parliamentary salaries. I believe that in the past history of this House much more advantageous legislation would have been passed, beneficial to the nation as a whole, if too many of our Members had not been tied up with directorships and influences from outside. I am not going to accept the view, and no common-sense person in this country accepts the view, that a person can be a director of interests which are vitally affected by legislation and not be influenced in his attitude towards that legislation when it comes before the House. Whatever differences of opinion may exist between the two sides of the House, let us, at least, so far as the electors of this country are concerned, put to them fairly and honestly the facts of the case. When the hon. Gentleman poses here almost like a saint, saying he is prepared to make a great gesture to the nation, a gesture regarding a reduction of Parliamentary salaries, the general public, in view of the revelations which have been made, will not regard the hon. Gentleman's offer as generous, or even as fair, having regard to the circumstances.

I have been a little longer about this question than I thought I should be, and I have not got to my own speech at all. I do ask the indulgence of the Chair in view of the exceptional circumstances. Now I want to turn—

Sir S. Holmes

May I ask the hon. Gentleman one thing? Has he finished with me, and may I go to have some dinner?

Mr. McLeavy

The hon. Gentleman asks me if I have finished with him. I imagine that if his electors have any democratic principle or spirit they will have finished with him also.

I want to deal with the Amendment of the Opposition to the Government's Motion, and particularly the words … the National Emergency to which we have been brought … That seems to imply that, for some reason or another, the Government have been responsible for our present financial position. I am sure that if the general public will look at the events during the period of the war they will be satisfied that the circumstances which have caused this financial difficulty arise from our great sacrifice in the war. I do feel that it is unfortunate that attempts are made to misrepresent the true position in which this country is placed.

I believe that this nation can win through the present financial difficulties. I believe that by the determined efforts of every section of the community we can win through. I believe the Government have taken fair and reasonable steps, having regard to the temporary difficulty. I am entirely in agreement with their claim that this is not the time for a Geddes "axe." This is the time when we should try to preserve the whole of our social services. This is a time to hold those things which have brought considerable benefit to the mass of our people. The Government need have no fear at all about what the attitude of the country will be towards the proposals which are made.

I believe that the country will accept the policy and the proposals put forward by the Government. I believe that they will say that this Government has at least tried to solve the financial difficulty without causing undue financial hardship for the mass of the people. Therefore, we can go forward to the next Election with the satisfaction of knowing that the mass of the people in this country will send back this Government for a further term of office.

8.30 p.m.

Mr. Oliver Poole (Oswestry)

I hope that the hon. Member for East Bradford (Mr. McLeavy) will forgive me if I do not follow him too closely in his remarks. This Debate has been very wide, but there are some points which I should like to make. In case, however, that he should accuse me of dishonesty, I have the idea that the few companies of which I am a director are not listed in Dod's manual. I am proud and honoured to be a director of those companies, and it is contact with them that has given me some qualification to speak in this Debate. I should be delighted for any hon. Member opposite to accompany me at any date convenient to himself to any of those companies, because I resent the suggestion that directors and managers are not playing their part in the life of this country.

Mr. Scollan

Would the hon. Gentleman agree that there are such things as directors and guinea-pig directors who draw quite a lot? You can sack them but you cannot sack the guinea pigs.

Mr. Poole

I would remind the hon. Gentleman that there are also a large number of people working in the factories and shops who do not normally do their full day's work. It cuts both ways.

I am glad to have had an opportunity to take part in this Debate because I was unfortunately abroad during the Debate on the Government's decision to devalue the pound. This decision came as no surprise to anyone who was aware of the financial position of this country. It was a surprise, I think, to most of us that this decision was not made earlier. Looking back over events this summer, there is no doubt that the delay in the announcement of the devaluation of the pound caused a great deal of unnecessary rumour and speculation abroad and dislocation of our export trade. That was exemplified by the Chancellor of the Exchequer in his statement this afternoon, when he said that many payments which were expected in the second quarter of the year had in fact been made in the third and fourth quarters.

Major Bruce

Would the hon. Gentleman mind saying when he thinks the pound ought to have been devalued?

Mr. Poole

Yes. Broadly speaking, in May or June. That was the date I had in mind. Obviously, I have not the same sources of information as the Government. It so happened that I was in Johannesburg on 18th September, and I listened to the Chancellor's speech on the wireless that night in that city. It was not an uninteresting place to be in on that occasion. I must say that sitting in a Dominion country I was amazed and horrified to hear the right hon. Gentleman create, as it seemed to me and to others there, the impression that devaluation was some new device suddenly thought of by the Labour Government to maintain Socialist policy, full employment and a high standard of living in this country.

I think that it should be stated quite clearly that it is the opinion of myself and of many other people; that devaluation, although absolutely essential, is a major disaster for the British people. I think that it might have been turned to greater temporary advantage if the Government had deflated before they devalued. Hon. Members opposite prefer to talk about disinflation. I do not know what that word means or how it differs from deflation. If they had deflated before devaluation instead of afterwards, it would have been a great advantage to the country. We know that they have taken the exact opposite course. They have waited a month before any action and now many of the steps taken, although they appear to us to be inadequate, will not take effect until late next year when it may be too late to deal with the present situation.

On Monday last, when we heard the Prime Minister's statement, my right hon. Friend the Member for Woodford (Mr. Churchill) asked "Are these proposals adequate?" Before we can answer that we should apply three tests. First, if they had been adequate they would have been sufficient to arrest the immediate inflation caused by the increase of Government expenditure not anticipated in the Budget and by the withdrawal of savings, and now the increase in exports and the cut in dollar imports; secondly, they would give industry opportunities and facilities to develop efficiency and to produce at lower costs—which is what both the Prime Minister and the Chancellor have asked them to do; and thirdly—and this is not unimportant—they would restore confidence in the £ abroad.

With regard to the first test, it is hard to tell from the Prime Minister's statement how much or how little effect these proposals will have. That they are woefully inadequate appears to be agreed by most people in the country. My right hon. Friend the Member for Warwick and Leamington (Mr. Eden) and other of my hon. Friends have already commented on that. The third test—achieving confidence abroad—can be realised only if the proposals have been boldly conceived, and if the Government show themselves determined to carry them out.

It is with the second test—that is to say, increasing the productivity and efficiency of industry—that I want to concern myself for a few moments tonight, because it is in this section of our problems, and not in any cuts or austerity which may help the situation temporarily, that the solution lies. I agreed with the Chancellor this afternoon when he was referring to the sort of atmosphere that should be created for industry to work in, from which an increase in dollar exports could be gained—which. I think, is the real problem. But his only approach to it is in the rather meagre cuts of a miscellaneous nature, announced by the Prime Minister on Monday, to which announcement the Chancellor was unable to add. Of course, I agree with him, that it is the first duty of the Government to create the circumstances in which industry can really work well. The only thing the Chancellor said today which added to the Prime Minister's statement on Monday, and which I agree is a positive help in this direction, was Empire and Colonial development, not in creating a few groundnut schemes but in giving both private enterprise and the Colonial Governments abroad every opportunity to work.

There was nothing in the Prime Minister's statement except vague exhortations, except the suggestion that joint consultation should be developed on all levels and that longer hours should be worked in certain industries in certain circumstances. Surely, hon. and right hon. Gentlemen opposite have realised by now that exhortations, even though they are made by a Labour Prime Minister, and even though they are directed only to trade union members, are really of no avail. As the Chancellor said, the real duty of the Government today is to create conditions in which industry can develop. Since the war, private enterprise—and right hon. Gentlemen opposite make statements saying how much has been done—have developed in practically every case, in spite of the difficulties, restrictions and controls imposed upon them by the Socialist Government. There has long been a sort of resistance movement against the situation that has been created. Actions not exhortations are now required.

I wish, if I may, to make certain general suggestions as to what I think the position is, and then to illustrate with three examples from businesses with which I am slightly associated. I agree with my hon. Friend the Member for Monmouth (Mr. P. Thorneycroft)—and I was astonished that his remarks were greeted with jeers from hon. Members opposite—that many industries are finding it far too easy to make profits today. Those industries which are making too great a profit are also finding it impossible to increase production and to lower costs. The reason for that is that the rigid system now imposed upon industry, the controlled prices laid down from above, the fixed allocations of raw materials based on out-of-date and very often pre-war statistics, and inadequate allowances for depreciation, all tend to keep inefficient producers solvent and in production and allow the efficient to make too easy profits.

Mr. John Hynd (Sheffield, Attercliffe)

If these firms are making these easy profits, what is to prevent them from putting them to depreciation?

Mr. Poole

In point of fact, apart from the statutory allowances, a large proportion is taken in taxation.

Mr. Hynd

Not if they plough them back into the industry or give them in wages.

Mr. Poole

If it is in wages it is not towards depreciation. It is a very important point. Depreciation allowances are allowed by the Inland Revenue, based on historical costs, and the 1939 replacement figures are totally inadequate, although I do not want to go into that point. If the net profits are held in reserve, admittedly they are not distributed to shareholders. I can produce a considerable number of instances apart from the normal allowances by the Inland Revenue, when profits are subject to Income Tax and Profits Tax, a large number of firms do carry additional reserves for replacement purposes.

Keeping the inefficient producer solvent and letting the efficient producer make too large profits is keeping prices high. I should like to see the cold wind of competition blow away the cobwebs in the factories and offices. I can assure Members opposite that this would not be popular in a great many circles, but I believe it is absolutely essential. The same also applies to the workers in the factories. The present wage structures and the results of the present method of negotiations tend to protect the inefficient and lazy worker. Many trade unionists will agree that the differential between the highest and lowest skilled worker is insufficient. We also have the point, which has been already made today, about P.A.Y.E. on overtime, which is undoubtedly a great deterrent. Anyone who goes on the floor of a factory knows that to be true, although whether it is justified or not is another point.

There is one other point I should like to make before I come to my examples. I implore the Government to realise that to trade in any new market, particularly in a hard currency market, is not an easy matter. South American countries have put up tariff barriers which make it practically impossible to get into those markets. If we are to sell goods in Canada or America, it needs a tremendous sales organisation. It needs more than a visit by the President of the Board of Trade to Canada to make a few speeches to Canadian businessmen. What is much more serious—and this is why people are reluctant to go into new dollar territories—it means giving up old-established markets. It means going into a new venture with a new organisation against increasing sales resistance, and it means that if successful the Government take all the profits, and if unsuccessful the Government give no assistance at all. It must also be remembered that not only the management but also the worker is prejudiced if the business goes bankrupt.

I should like to give three concrete examples of the sort of action the Government ought to take to help industry, which is the sort of thing the Prime Minister might have concerned himself about on Monday instead of merely giving exhortations. I should like the Government to consider the position of many concerns subsidiary to the steel industry, such as those which make component parts for motor cars and frigidaires for export such as the nut and bolt industry. Although every factory connected with that industry is getting totally inadequate supplies of raw materials. They are also subject to rigidly controlled prices. What is the good of saying to workers or managers, "Increase your production; work longer hours" when there is nothing for them to work with? How can the efficiency of a factory, which everyone knows is working inefficiently, be increased if it is only being employed at two-thirds of its capacity? It would be far more economical if controls and regulations were relaxed, and if factories were allowed to compete for what material was available so that the efficient ones increased their production while the others went by the board. If this was done there would be a considerable reduction in the prices of the goods produced.

Secondly, I wish to refer to the pottery industry, which was mentioned by my right hon. Friend the Member for Warwick and Leamington earlier today. Much of this industry's output is already going to the dollar areas, but there is a hold-up through shortage of labour, particularly in one section of the industry. For some reason known only to themselves the Government introduced a number of light industries into North Staffordshire, many of which are not suitable for the export trade—they are producing only for the home market—and which are competing for female labour in the area. The hon. Member for Stoke (Mr. Ellis Smith) knows much more about this than I do. It is no use saying to pottery manufacturers, "You must produce more and sell to the dollar areas." They could produce considerably more if they could get a balanced labour force. Much technical and capital development has taken place in the industry since the war, and more could be done if a few thousand more people were available to work in this section of the industry.

Mr. A. Edward Davies (Burslem)

Is the hon. Gentleman aware that the question of providing the decorators who are wanted in the industry has been the subject of discussion for some time with the Ministry of Labour, and that a scheme which will bring us in some thousands of dollars is in the process of materialisation?

Mr. Poole

I am much obliged to the hon. Gentleman; I know he is qualified to speak with authority on this subject. My complaint is based on the fact that the conversations have been going on for a long time, but that the decorators have not been produced. If the labour position had been left more flexible and light industries had not been directed into the area this position would not have arisen.

Mr. Davies

Skilled decorators for the pottery industry are not produced in five minutes. They have to be trained. The number of light industries which have been directed into the area is negligible.

Mr. Poole

I have examined this question with considerable care. The type of decorative work which is required in the majority of cases where labour is shortest can be done by the least skilled section of works. People can be trained to do it quickly. For instance, Wedgwoods are producing high class ware and I believe are not particularly short of highly skilled labour. It is the less skilled labour which is required.

I would like now to refer to the insurance business, one of our largest dollar earners. What do the Government do for that industry? Threaten to nationalise a large section of it. Just the action which would give the greatest confidence to American or Canadian businessmen pondering on where to place their insurance. From my own experience I know that nothing has done more harm to the placing of American and Canadian insurance in England in the last six months than the statement made during the summer that the Government intended to nationalise, or were likely to nationalise, a section of the insurance business.

Miss Jennie Lee (Cannock)

Has the hon. Gentleman any vested interest in this subject?

Mr. Poole

Yes. I said at the start of the three examples I was giving that they were taken from industries with which I was associated. I feel I would be totally unqualified to give details from industries with which I am not concerned.

The Government in this particular direction have presented a programme which is entirely negative. They have given us increased austerity, exhortations and soft soap, or abuse and complaints both of managers and labour as personalities and circumstances demanded. It is no use talking about efficiency and deliberately creating conditions where the results of efficiency are penalised and the inefficient protected.

The Government have made every possible mistake. They devalued before they deflated, and their programme of cuts will take too long to come into effect. The result of their actions must have the effect of cutting the value of the people's savings, and reducing the standard of their own social service programme which will bring it into disrepute.

I say in all seriousness that even now I do not believe it is too late. I do not believe there is any need for the attitude of hopeless despair showed by the Prime Minister on Monday in his speech and in his broadcast. The Government must revise their attitude, first, towards profits. They should make it more difficult for the inefficient to earn them, and allow the efficient to retain their share of them. Whether and how they are distributed afterwards can be dealt with in the Budget of that time. The Government must alter their attitude towards the rigidity of controls of a kind which only tend to create inefficiency and stagnation. They must alter their attitude towards wage differentials. They must not restrict the industrial worker in his effort to work harder and longer and at the same time must leave him sufficient to save. If the Government do these things, I believe British industry, whether in office or in factory, will do the great job, which is needed at the present time.

Viscount Hinchingbrooke (Dorset, Southern)

On a point of Order. Mr. Deputy-Speaker, would you accept a Motion, to report Progress and ask leave to sit again? A number of very important speeches have been made in the last half hour or so, and points of considerable substance have been raised. My right hon. Friend the Member for North Leeds (Mr. Peake) is due to rise shortly, and there has not been for some time now a Cabinet Minister on the Front Bench to listen to the points raised and to answer them. Would you accept such a Motion in order that a message could be sent to the Prime Minister or to the Lord President of the Council, both of whom are speaking in the Debate tomorrow, so that they can attend our discussion?

Mr. Deputy-Speaker

In reply to the noble Lord, I could not accept such a Motion. In the first place, it would not be the appropriate Motion; and in the second place the grounds are not in my view adequate. Moreover, the Chancellor of the Exchequer has to my knowledge been on the Front Bench up to a very few moments ago.

Mr. Molson (The High Peak)

Further to that point of Order. The Chancellor of the Exchequer has the assistance both of a Financial Secretary to the Treasury and an Economic Secretary to the Treasury. It is really a most extraordinary thing when a Motion of this importance has been put down by the Government themselves and is under discussion, that after the Chancellor of the Exchequer has made his speech and before the Prime Minister speaks, there is no Minister connected with the Treasury sitting on the Front Bench opposite.

Mr. K. Lindsay

I have been complaining for some time that it is high time that the Front Benches listened more to the back benches. We have had a number of extremely important speeches from both sides of the House this afternoon—

Mr. Deputy-Speaker

I cannot allow any discussion on a question of this sort. The matter has been raised quite properly, if I may say so, and I have given my decision and there I am afraid the matter must rest.

8.55 p.m.

Mr. Arthur Allen (Bosworth)

A great deal of public interest has been aroused in this problem of devaluation. Like other hon. Members, I have been doing my best to answer the questions which were inevitably present in the minds of my electors with regard to its significance. The finest answer I could give to those questions was one which I gleaned from an observation made by a speaker from the Front Opposition Bench, the right hon. Member for West Bristol (Mr. Stanley). He gave the most illuminating answer I have come across with regard to the effect of devaluation. In the three days' Debate which we had a few weeks ago, when we considered devaluation, this is what he said: In some ways … the devaluation makes our task … very much bigger. On the other hand … it makes our task at the same time considerably easier."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 40.] After I had given that observation about the effect of devaluation, the minds of my constituents were put at rest because they felt that the Front Opposition Bench had decided that devaluation meant very little at all.

Recently it has been my good fortune to be in Denmark and in Finland. I found people there ready to see the pound devalued. I do not suggest that the method or the amount of devaluation would meet entirely with their approval, but they said that, in their estimation, devaluation was inevitable. They felt that we were holding out against devaluation out of considerations of national pride and esteem. My own attitude towards devaluation and my reluctance to accept it arises from the fact that I happen to be a trade union official. It is only by accident that I became a Member of this House. I am no politician. My reluctance to accept devaluation arises out of the fact that it would inevitably increase the inflationary pressure which is ever present in the conditions of full employment and because of that it would inevitably make the task of trade union officials more difficult. If there had in fact been from 10 to 15 per cent. of unemployment, devaluation is something I should have prayed for.

One had to recognise that the official rate of 4.03 dollars to the pound had become unreal. In face of a dollar scarcity, devaluation could not be held back. The rate of 4.03 was fixed after the war, when people were making a guess at the relationship between the dollar and the pound. That guess could not hold good when the peace-time production of this country was begun by the conversion of our war-time production, and when the influences in the outside world began to come into play. To have tried to hold the pound at the official rate would have meant that we should have to resort to an impossibly stringent degree of deflation. We should have been pursuing exactly the same task as was pursued after the First World War. Then, the British people were made the victims of a threat. Infinite harm was done by that phrase to the effect that the pound must look the dollar in the face. It prejudiced financial policy for generations.

The initial mistake after the First World War was the taking off of all controls immediately upon the conclusion of the war. The inevitable result was inflation. Wholesale prices in this country rose to 307 as compared with 100 in 1913, and deflation had to be resorted to because we had permitted uncontrolled inflation to take place. Almost overnight, in consequence of that, we had an unemployment problem amounting to 1,792,000, which in a few months became an unemployment problem of nearly three million. [An HON. MEMBER: "Was that under the Labour Government?"] This was within three years of the conclusion of the First World War, and it is the kind of thing I do not want to see take place again. The wages of miners and agricultural workers were slashed by nearly one-half.

I want to refer to an article which appeared in the "News Chronicle" about the position three years after the conclusion of the last war. I think it is fair that we should make comparisons between what has happened under this Government and what happened under a Tory-dominated Coalition Government three years after the First World War. This article was written by the industrial correspondent of the "News Chronicle"—not the "Daily Herald" but the "News Chronicle"—and he naturally went to the files of the "Daily News" of those days to see what was taking place in this country three years after the first world war. This is what he found the headlines of that newspaper revealed. He said: Here, for instance, are some the 'Daily News' headlines for that month. 'Hunger at the Cenotaph.' 'The shivering poor.' 'Mayors invade Downing Street.' 'Shipbuilding slump.' 'Millions for relief.' 'Wage cuts.' That was the picture of Britain three years after the First World War, and it arose entirely from the fact that the party opposite were so incompetent that they permitted uncontrolled inflation to take place and then tried to cure it by stringent deflation. Now they want the people of this country to suffer the same kind of thing by reverting to the same kind of methods. The writer in the "News Chronicle" also said: The leading article on the Cenotaph ceremony accused the Government of leaving 'the profiteers to go on profiteering and the workers to starve on the dole.' This was no leader writer's fantasy. There were then over three million workers unemployed. Nearly two million were wholly idle, 268,148 were on short time, and, most tragic of all, a million were on poor law relief. It may be thought by hon. Gentlemen opposite that the industrial correspondent of the "News Chronicle" is not an altogether reliable authority on what took place then. I accept that, and, in consequence of their attitude, I should like to refer them to a more respectable witness as to what took place, and I can think of no more respectable witness than the chairman of the Tory Party itself, Lord Woolton. I want to refer to a speech he made at Leicester when he was Minister for Reconstruction. On 14th April, 1944, at the Corn Exchange, Leicester, he said: During recent months I have spent much time meeting men in trade and commerce in this country.… We have talked about the sort of place Britain is going to be for the ordinary people to live in.… These are the questions I put to you today.… The same questions came to the minds of many of us 25 years ago. I well remember the mood of that time; the war left us in a state of great elation, with a new wealthy class to which the war had brought considerable financial gain and which determined on the development of its expended industrial capacity. Materialism was in the saddle.… Prosperity was followed by industrial strikes of considerable bitterness, and in the end our dreams of a better Britain faded into disappointment. Our commercial prosperity declined; we lost our balance of trade abroad, and, by hundreds of thousands, able-bodied men walked the streets of this country vainly seeking the means of earning a living. It was a desperate and humiliating disillusionment. That happened while the party opposite were in control of the administration of this country. He said further: I think of the people who lived and brought up their children in mean streets, in houses that lacked both sunlight and the conveniences of decent living. Yet these children brought up in such conditions have shown in their sacrifices in the field of battle the love for Britain that was in their hearts; we think now of these things. We still do.

Now I want to draw attention to the significance of the next sentence of Lord Woolton: Then we lacked the will but not the means to provide houses that could be worthy homes in which to rear our race. In a world of plenty, and in a period when England was amazingly wealthy, no less than one-third of our children were suffering from malnutrition.… I think of those two and a half million people whose labour we could not employ in times of peace, but whom we needed so badly in war. Personally I still think of them. I think of what this Government have saved the people of this country from. Practically all of this came from the stupid deflationary policy followed by successive Governments during the inter-war years. There were, I well remember, two voices raised against it—those of Maynard Keynes and Reginald McKenna. But still we went on with this stupid policy of deflation. Persistently during the inter-war years we over-valued the pound. In the process we destroyed our export industry.

I want to bring that fact home to this House. By our policy of deflation, which the people opposite want us to pursue again, we destroyed the very industries which had been the backbone of Britain's prosperity before 1913. In large measure we destroyed the coal industry, the shipbuilding industry and the cotton industry and we are still anxious to get people back into the coalmining industry and into the cotton industry—the industries which they left in thousands in the inter-war years because of the mistaken policy pursued by the party opposite.

By 1921, three years after the conclusion of the First World War, our exports were down by 50 per cent. as compared with 1913. These are significant figures, for they indicate what took place in industry under the administration of the party opposite in the immediate period following the First World War. By 1921, 50 per cent. of our foreign trade had gone as compared with 1913.

Production was down by 45 per cent. as compared with 1913. I am not arguing that what we are doing today is by any means sufficient, but we are entitled to say, "Look on that picture and on this." Instead of our exports today being down by 50 per cent., they are up by 50, per cent. as compared with 1938. Instead of production being down by 45 per cent., it is up by more than 30 per cent. That, at any rate, is to be held to the credit of the administration of the Front Bench on this side of the House. Judged by Lord Woolton's standards, we are doing amazingly well, but I admit not nearly well enough. It was not possible to do well enough to keep the price of sterling at something over four dollars to the £, but we can, and we must, do better than we are doing now.

Primarily, the problem is one for industry, not for politicians. That is why I say I am not a politician. The trade union movement of this country is the greatest working-class organisation in the world. In this post-war period they have shown wonderful restraint, but restraint is not enough. The future happiness and wellbeing of the British community is largely in their hands—the hands of the workers of this country and not the hands of the politicians.

We have, as I see it, a rendezvous with destiny. [Interruption.] After all, the right hon. Member for Woodford (Mr. Churchill) has no monopoly of fine phrases. We have to think now less of what we can get and more of what we can give. We want a different spirit in the country, particularly among manufacturers. As an indication of my meaning let me refer to the National Union of Manufacturers who said that the speech of the Prime Minister on devaluation was lacking in the inspiration, incentive and leadership which the country so desperately needs. [HON. MEMBERS: "Hear, hear."] They are like babes crying in the night. They are the people to whom we are told to look to save the nation; they are the enterprisers—the people who are crying out for leadership. I cannot see how we are to get leadership from the men who drew this country into the depths of degradation, who created unemployment and who introduced misery. It is the party opposite whom they want brought back into the saddle again. Those hon. Gentlemen are the last people in the world I want to see back, and although I am no politician, I shall do my level best at the General Election to ensure that the people on the Front Bench on this side of the House are returned to continue their administration, for they have done such an amazingly good job as compared with the miserable job that was done by the party opposite immediately after the First World War.

Mr. Stokes (Ipswich)

On a point of Order. While the Lord President is in his place, may I put this to him, through you, Mr. Deputy-Speaker? It is quite evident that the Debate could go on quite usefully all night. May I ask him whether, in view of the fact that so many hon. Members still want to speak, he will put a Motion on the Order Paper tomorrow to enable the Debate to be continued beyond 10 o'clock?

Mr. Deputy-Speaker

That is not a point of Order, nor do I think that this is an appropriate occasion on which to raise the matter.

Mr. Stokes

Further to my point—

Mr. Deputy-Speaker

As there is clearly no point of Order there cannot be any further point.

Mr. Stokes

On a point of guidance. Will you please instruct me, Mr. Deputy-Speaker, how at this stage in the proceedings I can represent to the Lord President that we should like to have more time for the Debate tomorrow?

Mr. Deputy-Speaker

I know of no official means by which the hon. Member can do so.

9.16 p.m.

Mr. Kenneth Lindsay (Combined English Universities)

I am very glad to have been called at this particular moment because I should like to join officially in the unofficial protest of my hon. Friend the Member for Ipswich (Mr. Stokes). I feel that I am a lucky person to be called at this moment. I am much more conscious of the contributions which are to be made, or which I am afraid will not be made, by a great many other back benchers. I wish to say to the Lord President, because in a moment I propose to support him on another matter, that on this point I shall say exactly what I think. I intend to speak subsequently of what a number of other people think, but on this point I am expressing a personal opinion. I think that the Lord President has completely under-estimated what this democratic Chamber has to contribute to the crisis at the present moment. He made a speech before our previous Debate in which he hoped—a hope which I strongly endorsed—that we should be a Council of State.

Mr. H. Morrison

I never used that phrase.

Mr. Lindsay

The phrase was quoted as having been used by the Lord President.

Mr. Morrison

It was not.

Mr. Lindsay

I am sure that the right hon. Gentleman would have said it had he meant it.

It will be generally agreed that during the last Debate on our economic position very little was said which added much to public education on this subject. One of the functions of this House, apart from ventilating grievances and controlling the Budget, is to be a public forum on great subjects of the day. It would have been most difficult for people had they been forced to go to a General Election this autumn on the strength of that Debate. I congratulate the Prime Minister on resisting both those outside—obviously it is the business of the Opposition to press for an Election—and those elsewhere who tried to press an Election upon the country. From my experience of the people, with whom I mix a great deal, I consider that a large number of people in this country would not in that event have voted at all.

We have today had speeches, for example, from the hon. Member for Oswestry (Mr. O. Poole) and the hon. Member for Stroud (Mr. Parkin), in which things were said that very often cut across normal party controversy. Each made constructive suggestions to the Debate, and it would have been possible for a Minister who was listening carefully to the Debate—

Mr. Boyd-Carpenter (Kingston-upon-Thames)

There were none.

Mr. Lindsay

—to collect the general opinion of the House. It is the only possible excuse for having a Debate at this moment. If we go on with this interminable pre-Election contest in the House of Commons—I know there has to be a certain amount of party knockabout—it does not seem to me that, if there is nothing but that, with references to prewar and the '20's and '30's, we shall get any nearer to a constructive solution.

There have been questions raised about incentives and about the profit motive, and speeches made by hon. Members with very long experience in the trade unions—speeches to which I, personally, enjoy listening. When we, on this side of the House—if I may say I am on any particular side at the moment—talk about freedom, hon. Members very often think of freedom to travel, freedom to purchase books, freedom in various forms of enterprise. When hon. Members opposite talk about freedom they are often thinking of the freedom of the miner to sell his labour in a sellers' market, which perhaps gives to him a greater security than anything else he knows, and is something which we can understand.

I, therefore, ask that we should not go on with what the right hon. Member for Woodford (Mr. Churchill) said or did not say at Wolverhampton; or what the Minister of Health has been saying in various parts of the country; or what the hon. Member for Chippenham (Mr. Eccles) said at Strasbourg; or, if I may say so, the speech to which we listened from the hon. Member for Monmouth (Mr. P. Thorneycroft), who came in and went out again—I know he had something else to do—but who, in my opinion, contributed very little new. There are a great many points I could take up in that speech of the hon. Member for Monmouth, but there is no time now.

When the right hon. Member for Warwick and Leamington (Mr. Eden), who was speaking officially for his party opened the Debate, one took very careful note of what he said, but apart from the question of 12,000 people employed in headquarters in Germany, at Hamburg or somewhere else, and apart from one or two interesting points which he made about the effect of subsidies, I have not detected in any speech from this side of the House—short of a major decision in policy, and I will give an example of that from the May Committee—any particular cuts suggested which would make a real difference to the present unbalance and difficulties with which we are faced.

This is what happened in the May Committee when the Budget deficit was £120 million—and I quote: We fear that a tendency has developed to regard expenditure on education as good in itself … since the standard of education, elementary and secondary, that is being given to the child of poor parents is already in very many cases superior to that which the middle-class parent is providing for his own child. We do find that attitude from the Government today. What has been done? I have been through the Education Estimates, which I know fairly intimately, as carefully as possible. There is no major economy to make unless we cut the salaries of teachers, because they are 75 per cent. of the cost of education. We could not cut the teachers' salaries today; some of us are going round the country deploring the salaries of graduate teachers. The graduate teacher is earning less than the average docker in this country.

Mr. Keenan (Liverpool, Kirkdale)

He does not work as hard.

Mr. Lindsay

Never mind about discussing that. The point is that we could not cut the cost of the salaries of the teachers in this country; there would be a revolution if we tried to do it. Therefore, anything comparable with the Geddes Axe or the 1931 economies is out of the question.

The Chancellor of the Exchequer has put the position before us in two very careful and lucid speeches, so far as I could understand the position in detail today. I support the Deputy-Leader of the Opposition; I think there is a case for a White Paper and I think there will have to be a White Paper in some form or other, because the whole position is still unclear. I rang up one or two people this morning and asked them whether they could make out from the Prime Minister's broadcast and the previous statement in this House just what was the financial position, the pros and cons; what were the actual figures and how they would add up in this year and next year? That is a point which has been raised by several hon. Members this afternoon. Those were business men, and they said they found it extremely difficult to understand the new proposals.

Now, I agree with the Government's attempt to squeeze out all the obvious inflationary pressure that there is in the existing situation, and, as I understand it, to preserve the social structure and necessary capital expenditure. I understand that the present cuts in capital investment do very faithfully and very punctually carry out the Chancellor's dictum of the other day in the previous Debate: It is not new and spectacular deeds of an unusual or unaccustomed kind that are necessary."—[OFFICIAL REPORT, 27th September, 1949; Vol. 468, c. 32.] I, personally, think he is right. I think the Deputy-Leader of the Opposition today was wrong. At any rate, I should like to know what he meant when he said, "What we need is one big surgical operation to get the thing over."

Mr. Collins (Taunton)

Cut our throats.

Mr. Lindsay

Does he mean, short of having an Election, we make very considerable cuts right through salaries? Does he mean we put back the school-leaving age to 14? Does he mean we restore fees in secondary schools? What does he mean? Does he mean we make a complete reversal in any of the social services? Obviously, as the hon. Member for Northern Dorset (Mr. Byers) said today, there is room for cuts if we go in for the very big changes in policy that he was suggesting. I do not know whether he was right or wrong, but it was an interesting suggestion—to cut out the Ministry of Civil Aviation, to cut out, possibly, the Ministry of Supply. I do not know. Those are changes put forward by a Liberal for his party, and they do need consideration, therefore. But if we are to go in for ordinary administrative cuts, I doubt very much whether the Government can go much further than they presently have gone.

The Opposition may well say that the problem of devaluation might never have occurred if four or five things, or many others, had not been done. But even Professor Robbins admits that nationalisation, apart from, possibly, that of the Liverpool Cotton Exchange, and of course, steel, is not fundamentally relevant to the present situation. I am not saying that he is always right, but at any rate he admits that. Also I think the Opposition have under-estimated what any Government would have had to face in this post-war situation. There, again, the more balanced opinion among economists and outside persons tries to put those matters in perspective.

On the credit side, I remember the years very well when I came back from the First World War. I remember those years of which the hon. Member was speaking—the first year of unemploy- ment, the second year of unemployment, the third year of unemployment, when I was at the university, the years which drove many of us, for that and other reasons, into the Labour Party at that time. But the point was this, that in those years there was a very different situation with regard, for instance, to the relations between labour and capital. I believe there is much more harmony in industry; and I think the under-pinning of the social security services is an incentive itself; there is a courageous attempt to build a new relationship between industry and the State, which many hon. Members talked about in the 'thirties, and when my right hon. Friend the senior Burgess for Oxford University (Sir A. Salter) and others were writing about this question in books.

A better balance of the burden-sharing, I think, has taken place. I am not disposed to criticise, for instance, the only Department of which I know anything from the inside, apart from the Admiralty—I am not disposed to criticize the administration of my right hon. Friend the Minister of Education. I doubt whether anybody else would have done anything basically different. There are individual items there which we can all criticise. On the other hand, I wish the Minister of Health would take a holiday from his rhetorical speeches, because I believe he understands the problem, and I am told he is a good administrator; but really there is a pretty sloppy administration in the Ministry of Health at the present moment. Those of us who have sat on the Estimates Committee know only too well of bad administration with regard to the dentistry and optician services. It is not a question of just one reform that needs to be made now.

There has been criticism of the Prime Minister's speech. I do not want the Prime Minister to make an electrifying speech. I do not think that he is the type of man who will ever make an electrifying speech. There are different kinds of appeal. I was taking the chair last night for a very distinguished old member of the Labour Party, Professor Tawney, and he and many other people to whom I have spoken happen to prefer the rather sober style of the Prime Minister on these occasions to that of other speakers. I do not think that we ought to overdo that criticism. I agree also with what the Chancellor of the Exchequer said this afternoon. It was almost a change in policy. I think that over-centralised planning is the worst mistake that has been made by this Government. I wish they would decentralise a lot more. The Chancellor of the Exchequer said that we were trying to create a climate and conditions in which millions of people could take individual decisions which would be for the benefit of the country. That is the kind of planning and, I think, the only kind of plan, which has any real meaning.

I agree with the Lord President on one point. I happen to be on the Council of the Festival of Britain. I speak not only for myself but for the junior Burgess for Oxford University (Sir A. Herbert), who would have spoken today had he not been out of the country, when I say that this Festival is to some of us a great nation-wide effort to tell the world something about our accomplishments in science, technology and the arts. Some 300 local authorities are already enlisted in a very wide variety of schemes which cost the Exchequer nothing. There are also scores of voluntary organisations which are associated with the Festival and who are lending their services. For five months in 1951, Britain is to be, as it were, "at home" to the whole world. If this is not to proceed as an all-party effort, obviously it cannot go on. There are people who are working very hard for the Festival. There are all sorts of schemes now in hand, including big engineering and other plans, which cannot suddenly be put back. I should be grateful to the right hon. Member for North Leeds (Mr. Peake) if he could give an assurance on behalf of his party that there has been no change in their general support of the Festival.

I appreciate that conditions have changed, but the South Bank exhibition, which is the central site, is only a part of the Festival. Nearly every big city and many others all over Scotland, Wales and Northern Ireland are designated for activities to take place. But for the limited area on the South Bank, everything would have taken place on one site. Searches have gone on all over London for a site and none has quite fitted. Therefore the South Bank is the central site but Battersea Park is an integral part of the scheme; it is a caricature to call it a vast fun fair.

London will be pretty crowded in 1951, and although there will be a drawing off of people to provincial centres where there are to be other activities, as well as to Scotland, Ireland and Wales, there will be thousands of people who, having seen the exhibition on the South side, the Science Exhibition at South Kensington and the other activities, will have long summer evenings to spend in London. But where? London has one supreme attraction greater than that of any other city in the country, and that is its parks. To the eternal credit of George Lansbury, many people can now go for a swim in the park; but they cannot do that all the time; and Battersea Park, with its open-air cafés, its places of recreation, places for mothers and children, with organised fun fair activities, together with the concert hall and places for every kind of cultural activity, will be only part of a very much bigger total enterprise.

It is high time that public or private enterprise—in this case it will be both—did something for the millions of people who will come to London and who live in London. Some hon. Gentlemen on the Conservative benches seemed to think that this is very amusing. If only they knew the years of struggle that we had to get even Robert Atkins and his Shakespeare productions in Regent's Park. At last it is allowed. Even now there is simply nowhere in the parks, except the one place in Hyde Park, where people can get a cup of tea. If only people knew the struggle my friend Jimmy Mallon had in the East End of London to get a children's theatre. In London there really is a great shortage of provision for ordinary people. That is one of the reasons why Battersea Park will have these facilities, because with the increased number of tourists and people coming from other parts of England and from Scotland there will be a great need for them; they cannot be all the time milling round in the centre of London; they will want to be able to enjoy themselves elsewhere.

I say this in conclusion, because I think that to some extent it dovetails in with one further point that I wish to make. In this Debate there has been a considerable amount of talk about incentives; in fact, it is included in both the Conservative and the Liberal amendments. I should like to know very much more from Opposition speakers and those who follow along the lines of the hon. Member for North Dorset—who I thought made a very interesting speech—precisely what they mean by these incentives. There has been a lot of talk about the moral equivalent of war. I always think that is a dangerous statement. I do not believe that in peacetime we can reproduce the same kind of emotions or drive that we get when, say, Hitler is at the door, or whatever the outside danger may be. I am not aware that under the White Paper on Personal Incomes, Costs and Prices, there could be very much increase—indeed the Chancellor expressly goes the other way—in financial emoluments, whether for wage earners, salary earners, or anybody else.

There must, therefore, be brought into this country something which I, and I think a great many people, believe is lacking at the moment. I do not know that anybody outside those who have a great faith in some religion have put forward any suggestion. Incidentally, that cannot be made exactly a national issue. What the Festival of Britain people have told me is that they are astonished at the tremendous amount of civic spirit that there is in the country. In the inevitable, as I think, taking away of a great many functions—mostly public utility functions—from local authorities, there is left a great reservoir of energy in the social services and things like the Festival of Britain to which an appeal can be made. I therefore say that, whether it is in the local areas or through a nation-wide drive, I believe it is possible to make an appeal about the things for which we in this country care.

To my definite knowledge, having been in Europe a great deal during the last two years, many other countries are looking to us for a lead, as some of us know, due not to any Government but to people like Miss Ninette de Valois and other people in the past. For example, we have made a complete conquest of New York in some of the arts. These are things, these imponderables, that will matter. I hope the Government are going on with this Festival, not only because I think it will bring in extra dollars, but because it will be something to help this country, not only to get on its feet, but will he something which it can look forward to with pride in the future; this is at least one practical contribution to our national effort.

9.40 p.m.

Mr. Solley (Thurrock)

The hon. Member for the Combined English Universities (Mr. K. Lindsay) is probably the only Member opposite who has not put the entire blame for the present crisis on the Government. The hon. Member for Monmouth (Mr. P. Thorneycroft), for example, charged the Government with hypocrisy. I should have thought it was a classic example of hypocrisy and political chicanery on the part of the Conservative Party to suggest that they have no share in the responsibility for the present situation, but that it is solely the responsibility of the Government.

I would refer to the terms of the Amendment standing in my name and the name of my hon. Friends, which I understand is not to be called. It points to the fact that the present economic difficulties are the direct result of the foreign policy pursued by His Majesty's Government, with the approval of the Conservative Party, which has led to the political, military and economic subjection of Great Britain to the United States; that unless this subjection is ended there is no remedy for our ills. There we have the fundamental facts of the present situation; that it flows directly from the Coalition sell-out to the Americans and directly from Marshall Aid. I should like to remind the House that I was one of the handful who voted against the Marshall Plan. I was fortunate enough to be able to speak in the Debate on the Marshall Plan, when I said it could not be any cure for our economic problems, that it would exacerbate them and produce the very crisis we are examining today. I concluded by saying that I believed it was a disaster of the first magnitude for this country to sell its great and grand heritage for a mess of pottage. On Monday night, the British people were doled out one of their first teaspoonsful of pottage by the Prime Minister. Let not any Tory take any glory for this, because the Tories went into the Division Lobby with my then colleagues to vote for the very policy which has precipitated this crisis.

There can be no bridging of the dollar gap by the "phoney" policy of exporting babies' rattles and whisky to the American market. If the British public are led to believe it is possible to increase our exports threefold or fourfold and still obtain from the United States the volume of imports of raw materials to which they were accustomed in the past, they are being fooled. The real solution to the crisis is to find avenues of trade in non-dollar countries where there is no dollar crisis, countries which require and will take our goods and from which we can get the major source of supply of raw materials for our industries. But, by the very terms of the Marshall Aid programme we are prohibited from going to these new spheres and markets.

Mr. J. Hynd

Nonsense.

Mr. Solley

The hon. Member says, "Nonsense." Let me prove my case. I am glad to see that the Coalition is operating very effectively at the moment.

By Section 117 (d) of the Foreign Assistance Act, 1948, which is an American Measure, the Administrator of Marshall Aid is given some powerful strings to pull should this country become a little bit difficult from the point of view of Wall Street. It says: The Administrator is directed to refuse deliveries to participating countries"— as we are— of commodities which go into the production of any commodity for delivery to any nonparticipating European country"— for instance, the Soviet Union— which would be refused export licences to those countries by the United States in the interests of national security. We know what the Americans consider to be national security, because in a United Nations' debate a representative of Poland gave evidence that the Americans consider that the export to Poland of cotton linctus, synthetic resin, tubes for condensers, radio lamps, apparatus for measurement, gramophone discs for recording and needles for the textile industry were contrary to the interests of American national security. If that is the sort of conception which the American controllers of Marshall Aid have about national security we can see to what extent they are preventing this country from benefiting by possible avenues of trade and overcoming our present difficulties.

Mr. J. Hynd

The hon. Member stated that we were prevented from trading with Russia and Eastern Europe. We are, in fact, trading considerably with them, and would trade even more if we could get agreement with them.

Mr. Speaker

I hope there will not be too many interruptions. We are running short of time, and the final speeches for today have to be delivered. I do not want time to be wasted.

Mr. Solley

In reply to the hon. Gentleman the Member for Attercliffe (Mr. J. Hynd), I would point out that I had not in mind the comparatively small trading agreements already achieved between ourselves and Eastern Europe and the Soviet Union. I have in mind trading on a vast scale, which has not yet been envisaged. If we want to overcome the dollar gap we must switch from the dollar market to the non-dollar market in Eastern Europe and the Soviet Union. That means not small trading agreements but big trading agreements. To continue the embargo placed on our trade with Eastern Europe and the Soviet Union, as a result of the American policy to which we have become a party, we had this year a Statutory Rule and Order, No. 652, which specifically prohibits the export to Eastern Europe and the Soviet Union of a large number of manufactured articles and various metals, which could be subject to a wide trade agreement. The curious fact is that anyone who happens to have a factory in Greece, Turkey or Portugal need have no export licence for these goods whereas anyone in this country does require such a licence

What is the Labour Party's policy in relation to the present crisis? It is not that put forward by Members on the Front Bench, but the one to which they were pledged, and to which Members on this side were pledged, at the time of the General Election. I remember that at the Labour Party Conference in 1944 we adopted a report on full employment and financial policy in which a principle was stated—and principles should stand if they have any merit at all. This is what was said: Worst of all has been the orthodox theory that bad trade calls for economy—economy in all new development, both public and private, economy in bankers' loans, economy in wages, economy in social services.… This disastrous doctrine dominated British policy between the wars.… The Labour Party was right when it declared that all this was the exact reverse of the truth, and that the supposed cure only made the disease worse. The best cure for bad trade is to increase purchasing power and to speed up development. When we come to the application of that policy, we find the Chancellor of the Exchequer, speaking to the bankers' at the Lord Mayor's Dinner on Tuesday, 4th October, saying There will, of course, be some decrease in consumption due to the fact that the cost of living will rise without, we hope, any rise in personal income. That will be a burden that will fall almost entirely upon the wage earner and will be felt most heavily by those with the lowest incomes. To what depths has the Labour movement sunk. I am in my outlook in sympathy with the traditional Labour Party policy, but to what depths have the leaders sunk when they betray the cause of the working classes and as a sop to public opinion announce some small additional taxation in relation to the Purchase Tax. On the subject of taxing profits here is what "The Accountant" of 8th October says: The increase in profits tax is even more modest than at first sight appears, when its effect on the pocket of each individual taxpayer is considered. Not all businesses are subject to the tax; moreover, the increase applies only to distributive profits, and if profits of a subsequent year are ploughed back the extra tax on former distributive profits is in a way refunded. Finally, as profits tax is allowed as an expense for income tax purposes, the maximum increase cannot be more than eleven-twentieths of 5 per cent., that is less than 8d. in the £. It makes the comment that: the tax is not for the purpose of raising revenue, it is simply to induce the mass of workers to refrain from making higher wage claims whether on account of the already increased cost of living or the increase that must inevitably follow devaluation. That is neither the "Daily Worker" nor "Pravda," but one of the most respectable organs published by the Accountancy profession, and it says that what we are really doing is giving a sop to public opinion. That is certainly not taxing the rich or the profiteers. On the contrary we have it from the Chancellor of the Exchequer that it is the working classes which will be faced with a loss of income.

My time is up. I cannot go on and put forward—[Laughter.] I know it will be to the great disappointment of hon. Gentlemen opposite, because I venture to think, without feeling that I am in any way superior to anyone else in this House, that this is the first speech made today which has any relevance to the real crisis. But I am conscious of my own faults.

We cannot save the British people from mass unemployment and misery except by a complete re-orientation of our foreign policy, whether we like the ideologies of Soviet Russia or the Eastern European countries or not and that is a matter we can discuss another time. We can only save ourselves financially and possibly save ourselves from war by doing trade with them on a scale never previously envisaged. That is the only solution, and it is a solution to which the British people would rally. When the General Election, about which so much has been spoken, comes along, and I put forward these matters to the people of Thurrock, as I intend to do, I am certain that I shall win their support.

9.55 p.m.

Mr. Osbert Peake (Leeds, North)

The right hon. Gentleman the Minister for Defence who has been so constant an attender throughout the Debate today, is, I think, the sole survivor in this House of the Labour Cabinet of 1931.

Mr. Alexander

No, there is my right hon. Friend the Lord President of the Council.

Mr. Peake

I am speaking of the Cabinet. I am sure that the mind of the right hon. Gentleman, like mine, has often reverted during the day in nostalgic reminiscence to the autumn of that year. It seems to me that the Lord President of the Council, who at that time was not a Cabinet Minister but enjoyed a position of greater freedom—

Mr. Alexander

He was a Cabinet Minister during the crisis.

Mr. Peake

I am very much obliged to the right hon. Gentleman. The Lord President of the Council came into the Cabinet for the purpose of the crisis. At any rate, he has obviously learned some lessons from 1931. In the first place, he has permitted us, contrary to the wishes in all parts of the House, only two days for this very important Debate. In the second place, we have been refused a White Paper setting out in detail in black and white the precise nature of the cuts which the Government now propose. The refusal of a White Paper is monstrous. Without it, we cannot tell exactly where the detailed cuts will operate, nor can we tell to what precise extent they will fall on the public or the private sector of expenditure.

At the present time, ordinary men and women are worried and anxious, as a result of constantly repeated Ministerial warnings of crisis and ever more urgent exhortations to work harder. They are asking themselves whether the Government are on top of the crisis or whether the crisis is on top of the Government. They strongly and rightly suspect that the latter is true. They feel that they have been badly misled, and I believe that they have lost faith in His Majesty's present advisers. There have been too many contradictions and tergiversations, and too many Ministers have behaved like the grand old Duke of York and led their men up the hill and then led them down again. It is a feature common to almost every Minister, from the Home Secretary in regard to capital punishment down to the Minister of Food over the sweets ration, that they have had to reverse their engines and their policies during the lifetime of this Government.

We have been told by the Chancellor of the Exchequer on many occasions that no economies on public expenditure of any substance were possible or could be achieved. Today we are debating a motion approving certain cuts by the Government in public expenditure. I want to refer the House for a moment to the Economic Survey for 1949, which was presented by the Chancellor to Parliament in March of this year. It is Command Paper 7647. In the final paragraph 141 of this Survey, we find the following statement: This Survey has sought to set out plainly the prospects good and bad which face the British people and their Government in 1949. If this account is correct we should, in the present year, consolidate the gains of 1948 and take a firm step forward towards the paramount aim of economic independence. There is likely to be no rapid change of the kind we saw in 1947 and 1948. The policies we must follow are no longer the transitional policy of readjustment from time of war or the improvisation of crisis. They are becoming rather the steady policies of long-term programmes. With the continued understanding and co-operation of the whole community, the Government is confident that these policies can succeed. All these prophecies have been completely belied by events.

Mr. A. Edward Davies (Burslem)

Would the right hon. Gentleman—

Mr. Peake

I have a good deal to say and only limited time—

Mr. Davies

What about the dollar problem?

Mr. Peake

I have been making a simple quotation from a Government statement, and it cannot be controverted. Within four months of the publication of that document, the Chancellor came to the House on 6th July to explain to us what the new crisis was about and the measures necessary in his opinion to meet it. This is the Government which professes that it is the only Government which has ever had a plan. What a criticism that document is of the Government's plan for 1949. The fact is—I regret to say it because most of us on this side of the House, and, I think, in all parts of the House, like the Chancellor of the Exchequer as a man—that his words have lost much of their former weight since he has had to eat them over the subject of devaluation and since his broadcast on 18th September, which is now shown to have been so very unfortunate. In my opinion he would have stood much better with the House and the country if he had offered his resignation when devaluation, which he had resisted for so long, became inevitable.

Tonight we are asked to approve the Government Motion set out on the Order Paper: That this House approved the lines of action to deal with the present economic difficulties as outlined in the Prime Minister's statement made on 24th October. Previous to this statement, we had had a fortnight's uncertainty caused by the statement by the Minister of Health about an early General Election. That uncertainty and anxiety were prolonged by the statement by the Lord President 10 days ago that unpleasant things were in store for us all, and after all this, a long-drawn-out and undignified washing of party linen in public, the Prime Minister produces this pitiful list of economies disguised and dressed up so as to appear bigger than they are in fact.

There are cuts in the capital expenditure programme totalling £140 million. They include £35 million on the housing programme, and apparently another £35 million which is somehow or other to be achieved by tightening building controls. I must confess that I should have liked a little more detail as to how £35 million of capital expenditure is to be saved by tightening building controls. That is a subject upon which a great deal more information should have been given to the House. It seems to me that, in order to save £35 million by tightening up building controls, it will only mean that a great deal of house and other property in urgent need of repair will have to go un-repaired and remain in its present dilapidated condition.

So far as the £35 million on the housing programme is concerned, that is, of course, a real and genuine loss to the nation. It means, as the Chancellor told us today, that 25,000 houses a year which would have been built will not be built, and I cannot avoid expressing my surprise that the Chancellor should have agreed that the whole of this curtailment of the housing programme should have been taken out of the houses to be provided by private enterprise. They are the only houses which do not automatically cast a further burden by way of subsidy upon the public purse. I should have thought that at least the Chancellor might have spread the cut evenly over public authority and private enterprise housing.

Neither of these two cuts in the capital programme will affect the Budget in any way. The remaining £70 million of capital cuts apparently include the diversion to export markets of some commercial vehicles and engineering equipment, and some postponement of schemes relating to fuel and power and education. The only item in the whole £140 million of capital cuts which can affect the Budget in any way is the figure relating to education, and that must be a small one because it is specifically stated, both by the Prime Minister and by the Chancellor, that this capital cut, so far as education is concerned, does not comprise any cut in school buildings. Apparently it consists entirely or in the main—

Mr. K. Lindsay

It means the retardation of some schemes.

Mr. Peake

—of equipment connected with the provision of meals in school.

Sir S. Cripps

I said £7½ million.

Mr. Peake

I am much obliged. That leaves us with £7½ million out of £140 million of capital cuts which will have budgetary consequences. Now, in order to complete his total of £250 million, the Prime Minister clearly required a further £110 million of cuts on Revenue account, and in his broadcast the right hon. Gentleman said that the savings on Revenue account added up to £100 million. In the House of Commons, but not in his broadcast, he explained that the £100 million included the recent increase in the tax on undistributed profits.

It appears to me to be a curious and a complete abuse of language to describe an increase in tax as a reduction in expenditure. After all, the terms are not exactly interchangeable. If they were, of course, the task of Chancellors in explaining Budget statements to the House would be rendered much easier than it is. But without the £14 million from the increased Profits Tax, we are left with £86 million to be pruned off next year's Estimates, and the Prime Minister, in support of that figure, gave us details of expenditure of £74 million.

Now the net result, so far as budetary expenditure is concerned, cannot be more than £90 million over the full year 1950–51, and that on a current expenditure on Revenue account in the Budget of over £3,300 million. This figure, as a contribution towards meeting the crisis in which we find ourselves, is really quite derisory. Against it, of course, we have to set the automatic increases arising from past commitments under National Insurance and other legislation. Nor is there any provision for the automatic increases in Budget Estimates due directly to devaluation. Many Government costs must rise as a result of devaluation. Nor have we yet ever been told the extent of the loss which must have fallen upon the Export Credits Guarantee Department as a result of devaluation. I cannot believe, therefore, that this saving in a full year of £90 million, which in the present year must be a much smaller figure, can make any real contribution towards lightening the burden of national expenditure, or making any provision at all for essential and necessary tax reductions.

My right hon. Friend the Member for Warwick and Leamington (Mr. Eden) went into considerable detail this afternoon regarding the sort of matters into which he would look for a really large reduction in expenditure. [An HON. MEMBER: "Did he?"] I am not covering all the same ground again, but I will say, for the sake of Members who were not here and did not hear what my right hon. Friend said—and also because these are matters to which I have often referred in past Debates on the Budget and the Finance Bill—that matters at which I should look for big reductions in public expenditure would be, first, public buildings of all kind; secondly, I should look, as my right hon. Friend indicated, very carefully at food subsidies, on which the Government have at long last made a reluctant start. I would look very closely at Defence expenditure, because I cannot bring myself to believe that we are getting any real value for the nearly £800 million which we are spending today upon Defence. Finally, I should look once more at the Civil Service staffs. In short, I should like to see the list of economies in the form in which the Chancellor proposed them to the Cabinet before they were reduced to their present pitiable proportions by being chipped at by all the Ministers concerned.

I have said that I should look again at the staffs in Government Departments. My views on this were much reinforced by a letter I received yesterday morning from a constituent of mine, a young lady, who said: I was employed by the Home Office from 1939 until July, 1949. I had been doing little more than one day's work per week for the last eighteen months and was actually found redundant in August, 1947. The complaint of this young lady is that she retired voluntarily from the Civil Service on 9th July, 1949, two years after she had been found redundant and after 18 months in which she had been doing only one day's work a week, and that she retired, unfortunately, three days before the day on which she would have qualified for a gratuity. If it is possible—and I have no reason to doubt the truth of this lady's statement—to remain in a Government office doing one day's work a week for a period of 18 months, we have a situation which calls for very close inquiry.

Finally, in regard to economies; this is a subject upon which there is a certain touchiness in certain quarters of the House, and I am only expressing tentatively my own opinion about it. No general scheme of economy such as I believe the present situation demands would be generally acceptable or be regarded as fair by the public unless it included some sacrifices regarding Ministerial salaries and the salaries of Members of Parliament. That is only my opinion, that without something of that sort we could not get a general and large scheme of economy accepted by the public as a whole.

There is, in my belief, not only reasonable disappointment, but rising anger against Ministers who have mishandled the situation. People are contrasting the magnitude of the crisis as it is described to them by Ministers from day to day, on the one hand, and the pitifully small nature of the proposed remedies on the other. Our post-war difficulties could, I believe, have been overcome by now by a team of resolute Ministers pursuing a settled and determined policy during the last four years. Had Budget expenditure been adequately reduced, had taxes fallen and had the purchasing power of our money been stabilised and maintained, we should not have had a constant threat of inflation and the recurrent recourse to what the Chancellor has described as a series of expedients, the efficacy of each of which is rapidly exhausted. These pitifully small cuts are, I believe, the last ditch, and it is a ditch which will not afford a refuge for the Government for more than a few weeks.

In my opinion, the basic error of the Chancellor was clearly shown in his speech this afternoon. It is a fundamental difference between the two sides of this House. The right hon. and learned Gentleman believes that high direct taxation is disinflationary in its effects. He believes that taxation on the profits of industry or on the efforts of the individual at 9s. in the pound, rising to 12s. or 13s. in the pound, is disinflationary. I believe precisely the opposite. I believe that taxation at that level saps enterprise, I believe that it checks effort and initiative, I believe that it discourages personal thrift. I am sure that it leads to much wasteful expenditure. The nature of our people is both thrifty and industrious, and I prefer the view of the late Governor of the Bank of England, Lord Catto, on this question to that of the Chancellor of the Exchequer. We firmly believe that a reduction in direct taxation is an absolutely indispensible prerequisite to national recovery.

I said in opening that there was a parallel with 1931. It was noticeable then, as it has been noticeable today, that Government supporters were getting a little jittery. Hon. Members opposite know in their bones that they are being led to electoral disaster. They are not quite as ebullient or as happy as they were on that day in July, 1945, when they sang "The Red Flag" in this House. Nor do I believe that they share the passion of their political leaders for political harakiri. I will end with a quotation from a paper that is by no means a supporter of the Tory Party, the "Manchester Guardian" of yesterday. It said: The only question is how much worse the situation will have to get before the Government starts to deal with it. The longer it waits the harsher the eventual remedies will have to be. Can it be that the Government knows it and prefers to leave things to the Tories? I believe that the answer to that question is in the affirmative.

10.19 p.m.

Mr. Leslie Hale (Oldham)

When my right hon. Friend the Lord President of the Council announced that he was only prepared to allot two days to this Debate, I regretted his decision. Having sat here all day and listened to the Debate, I applaud his superior wisdom. In the course of this long day, scarcely a single constructive contribution has been made. The hon. Member for North Dorset (Mr. Byers) always speaks with sincerity and ability, and if he will forgive me for saying so, occasionally, as today, with pomposity. After expressing somewhat of a distaste for the subject of the Armed Forces of the Crown, he dealt with and put quite clearly proposals that have been put fairly and more ably before by some of my hon. Friends behind me; but he completely overlooked the statement of my right hon. Friend the Prime Minister that the whole of these matters were under very special review at the moment, that an announcement would be made, and that then might be the opportunity of discussing these questions.

Mr. Byers

I am sorry to interrupt, but perhaps the hon. Member is not aware that at Question time the Minister of Defence said that the question of conscription was not under review.

Mr. Hale

I did not suggest that the question of conscription was under review. What the hon. Member said—and I remember his words—was that he did not wish to discuss the Armed Forces at the moment as it does harm, and that to expose what he called the state of our defences might do more. I suggest to him that he could have taken the opportunity of discussing them when the discussion arose.

He followed that with a suggestion as to the limitation of profits, with which I have some mild agreement. I will deal with the question of profits later, but I desire at this stage to say that I was a little surprised at the deputy Leader of the Liberal Party, who has spent his time condemning controls and anathematising the type of control which the Labour Party have found it necessary to introduce in the public interest, proposing a new system of control which would involve an infinitely greater bureaucracy, which would involve an examination of the accounts of every public company, and saying this without even apologising for his previous utterances. Still, I give him some marks.

Among the speeches to which I have listened, I listened with the greatest pleasure to the speech made by my own representative in this House, the hon. Member for Bosworth (Mr. A. Allen); he spoke well, he spoke sincerely and with an ability that we have learned to expect from him. For the rest, I am very sorry that I cannot award marks at all. Perhaps the most lugubrious and extra-ordinary performance—if anything that comes from the National Liberal party today can be regarded as extraordinary—was the speech of the hon. Member for Harwich (Sir S. Holmes), who opened with the somewhat trite remark that history repeats itself, and then showed that he was away back behind history because he had acquired the habit of repeating other people. His speech was the speech of the hon. Member for Orpington (Sir W. Smithers) without that hon. Member's ability. I thought he was responding to the exhortation of the Chancellor of the Exchequer for increased production—responding by endeavouring to expand the production of his own products by spreading nervous depression even wider.

The hon. Member for the Combined English Universities (Mr. K. Lindsay) in the course of a perfectly sincere contribution, made a severe attack on the hon. Member for Monmouth (Mr. P. Thorneycroft) for addressing the House and leaving without waiting for a reply, and then, having done this, he left the House himself. I do not, therefore, propose to follow his speech. The hon. Member for Thurrock (Mr. Solley) expressed astonishment at the decision of His Majesty's Government not to export arms to the Soviet Union. If he is astonished at that, indeed he will be astonished at very many things.

Mr. Solley

What the hon. Member has said is completely untrue. I said nothing about the prohibition of the export of arms to the Soviet Union; I referred to the export of goods to the Soviet Union, not arms or aeroplanes, but commercial goods.

Mr. Hale

The hon. Member is perfectly correct in saying that he did not disclose to the House the fact that he was talking about arms or materials which could be used for arms, so I do not quarrel with that intervention, but the purpose of the order is well known to the House, for it is one of those orders which was approved by both sides of the House and it was to prevent just that sort of thing from happening.

Mr. Solley

Look at the order.

Mr. Hale

The hon. Member has interrupted once; he has had his turn.

That brings me inevitably to the Speeches that have been made from the Front Bench on behalf of the Opposition. The right hon. Member for Warwick and Leamington (Mr. Eden) enjoys a considerable measure of esteem on both sides of the House and in the country. I think that from these benches there would go out to him very genuine and heartfelt sympathy in the task he was called upon to perform. Had he had his own choice, had he been able to plan his own line, had he been able to put his own point of view, I am sure it would have been put more temperately and constructively, in the way we have grown accustomed to expect of him. [Interruption.] I am glad the Opposition have now recovered their ebullience to such an extent that they can laugh at their own leader in his absence. To the right hon. Member for Warwick and Leamington it must be a little galling to belong to a party which he frequently refers to as a democratic party, but in which he has to accept the dictates of a leader who is rarely here, in which he cannot disregard the daily telegrams from Hatfield or the instructions from Chatsworth, or those of a leader who announces a new policy every day and contradicts it most nights, and who has shown in his recent utterances a lack of responsibility which those of us who remember him with affection in the war deplore very greatly.

I have not risen tonight to try to indulge in polemics, but hon. and right hon. Gentlemen opposite are servants of the community; they are salaried servants of the State. [An HON. MEMBER: "No. The hon. Member's friends are the masters now."] Yet they deem it consistent with their duty at a time like this to come to the House without any constructive proposals. [HON. MEMBERS: "What about the Government?"] The right hon. Member for Warwick and Leamington expresses surprise. In the whole course of a speech in which he had to adhere to the party line that this was the fault of the Labour Party—and I will deal with that in a moment very thoroughly, I hope; or try to—in the whole course of that speech he made, so far as I understood him, two suggestions only, apart from a general suggestion that the cuts were not enough.

Mr. Eden

Hear, hear.

Mr. Hale

Apart from some remarkable suggestion that, although the cuts were not enough, we also ought to decrease Income Tax—

Mr. Eden

No. I did not mention Income Tax.

Mr. Hale

Yes, the right hon. Gentleman did. I will remind him of his words. He talked about the easing of the burden and the rates of relief, which, of course, means a reduction in taxation. That was after saying that the cuts were not enough. He made two proposals, as I understood them, and two only. One was a somewhat confused reference to the food subsidies, which seemed to be based on the view that the average working man—the railwayman, or someone with a small income—and his family were being assisted to the tune of 14s. or 15s. a week from the food subsidies, but that the average individual weekly expenditure on alcohol and tobacco was 11s. 6d. a week, and he talked about reducing the food subsidies to the working-class families. It was a fundamental misconception of the point to say that, of course, this expenditure goes pro rata throughout the country, and that payments like that are really doing no good to the poorer working-class families, and that we should cut the expenditure.

Mr. Eden

Will the hon. Gentleman allow me? The whole point of my argument was the exact reverse. It was that a number of people were receiving assistance which they did not need. I did not say that those who were in need were not getting it. What I said was that a number who were not in need were receiving it.

Mr. Hale

The right hon. Gentleman did follow it up with that figure of 11s. 6d. a week per head on alcohol and tobacco, and he said that really food subsidies were subsidising that expenditure. I think I am quoting the right hon. Gentleman quite accurately. I say that this is based on a misconception of working-class conditions, and a misconception of how the figures arrived at—

Colonel Dower (Penrith and Cockermouth)

Are we not the working class?

Mr. Hale

No. Apart from some very sensible references dealing with sterling balances—I hope I shall be forgiven if that sentence sounds a little patronising, and I apologise if it does—the right hon. Gentleman's other suggestion was the reduction of the cost of the administration of the High Commissioner in Berlin, which I think is already taking place. In these circumstances, deprived as we are completely of the advice of the Opposition, of a single constructive suggestion—[Interruption.] I cannot keep on giving way, but I will give way to any hon. Member who says that I have misinterpreted him. I cannot blame them. They dare not express themselves without the leader's voice, and he has not expressed a voice in this matter.

Mr. Walter Fletcher (Bury)

Did the hon. Member listen to the speech by the hon. Member for Oswestry (Mr. O. Poole), which was full of practical suggestions which might well be adopted? Making accusations when a hon. Member has not listened to a speech is entirely wrong.

Mr. Hale

I do not know how the hon. Member for Bury (Mr. W. Fletcher) will face his Front Bench after that interjection. I say at once, in fairness to a proper interjection, that the speech by the hon. Member for Oswestry was the only speech which I missed. I have had no food today but I did leave the House to put through a telephone call on one or two small matters. The interjection of the hon. Member for Bury amply confirms what I have been saying. The hon. Member for Bury does not suggest that a single constructive proposal has come from the Opposition Front Bench.

It was in this state of mingled apprehension and uncertainty that we all looked forward with interest and expectancy to the speech of the right hon. Member for North Leeds (Mr. Peake), a former Financial Secretary to the Treasury, with his vast experience, and a former Chairman of the Public Accounts Committee. Here was someone who, over a long period of years, had handled the Public Accounts and who would undoubtedly come forward with constructive proposals. I expected that from his considerable experience he would undoubtedly have something to say.

He started with sweets rationing. I would like to say one word about that, because the abolition of sweets rationing was one of the recommendations we got from the Tory Party, from Lord Woolton himself, when we asked him what to do—and we did it. We abolished clothes rationing and since then, what has happened? During these last few days, a deliberate campaign from the Tory Press, has frightened people into crowding into the shops and creating an unnecessary shortage. I hope my right hon. Friend the President of the Board of Trade will say that if this goes on, he will have to reconsider this point.

I want to put constructive proposals before the House. It will be a pleasant change. I must deal, as it is right that one should deal, with the misrepresentations that have been the common habit of hon. Members opposite over these months. If the right hon. Gentleman the Member for Warwick and Leamington regards this as a point of humour, I really will put a point to him at which I think, with my respect for him, he will not laugh. A few days before devaluation, on 31st August, 1949, there appeared in an American paper, the New York "Wall Street Journal" a letter signed by a Conservative Member of this House, saying, There is no difference in principle between the policy of Hitler, Stalin or the present Government of Britain. This was when the pound was hanging in the balance. That is a sample of the type of campaign of denigration that has been going on. No one will ever call them again "the gentlemanly party." No one will accuse them—and I do not associate the right hon. Gentleman with this—of patriotism in future.

Mr. Eden

I never heard of this publication. Can we hear who was the hon. Member concerned?

Mr. Hale

That great leader of the Tory Party, the hon. Member for Orpington. [Interruption.] I am surprised to gather that they do not regard him as one of their most forcible thinkers. But when is someone going to disown this sort of thing? When, indeed, are the appeals which the Chancellor of the Exchequer is making to people to limit profits going to be reinforced by a single speech from the benches opposite? The right hon. Gentleman the Member for Woodford (Mr. Churchill), who, we are told, has a constituency engagement tonight, in the Debate on devaluation, made use of this expression as almost his opening sentence: We have reached a point in our post-war story and fortunes which is both serious and strange. We have before us this afternoon the financial measures which have to be taken as a result of four year's government by the Socialist Party."—[OFFICIAL REPORT, 28th September, 1949; Vol. 468, c. 157.] The right hon. Member for Warwick and Leamington was constrained to follow in that course today, though not putting it quite so forcibly. He put it in a manner which was a little more gentlemanly perhaps, but at the same time there was the accusation that the present financial crisis was due to the policy of this Government. [An HON. MEMBER: "What about Dalton?"] I propose to tell the story which Lord Keynes provided for me. He described it as a war-time story of financial prudence which had no parallel in history. Every one accepts that in the conduct of a war you cannot give every detail scrupulous financial consideration. Everyone respects the services of the right hon. Member for Woodford during the war. Everyone appreciates that it would be ungenerous to criticise him too much for the burdens left to the country. But when he comes to this House and says that the burdens which he left were created by us, at least we have the right to reply, and to point out what the truth is. We have heard of people who cannot see the wood for the trees, but it is the first time we have heard of a statesman so myopic that he wanders in a forest of his own planting and fails to see the trees which have grown from his own seeds.

What are the figures? The decrease in sterling balances through overseas losses, pre-war to post-war, was £3,928 million. The loss on foreign investments was £1,118 million. Of the balances, many were mortgaged, and many were depreciating. The depreciation of gold and U.S. dollar reserves was £152 million. Estimated depreciation of our railways, mines and large industrial plants was £900 million. Shipping losses accounted for £700 million, including cargoes. We are told that we have incurred these debts. [Interruption.] These are the figures. Destruction and damage to property amounted to £1,450 million. If we take the total of all these figures, which take no account of the running down of production, of tiredness, of increased depreciation in industry, we have a total of £7,000 million of liabilities accumulated in that period which have to be replaced.

I have not referred to the internal debt of more than £20,000 million, requiring £500 million a year to service it. But to see the real effect of this burden, I ask the House to consider one figure only. The total cost of replacing that over an imaginary period of 10 years—and I know that we shall not do it—is about £700 million, and the total yearly cost of the internal debt is about £500 million. This is the burden left, and £1,200 million represents 10s. in the pound on all wages being paid to all the productive workers in employment in 1938.

It is said that we have caused inflation. That is the claim. It is unparalleled ignorance to say that, but that is what the right hon. Gentleman said. If we want to look at the figures about inflation, the balance on current account has gone up from £1,244 million in 1938 to £3,266 million in September, 1945. The prudent policy of the Chancellor has reduced that. I do not want to delve into history, but I will go, not to polemics, but to the Budget statement of 1922, a statement made by a Conservative Chancellor four years after the First World War, when there was nothing like these burdens to bear—[Interruption.] Well, if we cannot have it from the horse's mouth, we will have it from the harness. What was said by that Chancellor was: I do not think I shall be regarded as exaggerating if I say that it (the past year) proved to be one of unexampled trial and difficulty for industry and commerce, and therefore also for finance. Its first three months were swept by the greatest industrial stoppage which this country has ever known"— and here I would interpolate that, of course, 1926 was still to come, as Tory policy had not yet developed. He went on: That occurrence had a disastrous effect on our trade, and serious results upon the revenue of the year. But, apart from that refractory incident"— and hon. Members will observe that when there is a nation wide lock-out of miners for months, it is a "refractory incident" for which Ministers have no responsibility. The Chancellor of 1922 continued: But, apart from that refractory incident, there was enough in the natural flow of events to cause great anxiety. The trade boom which followed upon the war had given place to a steep and sudden slump … Unemployment, as was inevitable, followed in the wake of these troubles. Its gravity and its extent throughout the whole of the past year have been not only a source of constant anxiety to the people of this country, but also a cause of great expenditure for the State."—[OFFICIAL REPORT, 1st May, 1922; Vol. 153, c. 1019–20.] That was the position, and my hon. Friend the Member for Bosworth, in his remarks tonight, outlined that position in his own way. Incidentally, in that Budget it is interesting to note the Tory Chancellor announcing an increase in the National Debt of £80 million, while the present Chancellor, accused of extravagance, has effected a reduction of £500 million. I thought that I had been here sufficiently long to understand the tortuous working of the minds—if they are minds—of right hon. and hon. Members opposite, but I cannot follow their reasoning for that claim. All of us on this side of the House are glad to see the Chancellor substantially restored to health, and we were all glad to hear his able statement today, and glad also to see that his mind was not disturbed by the venomous attacks to which he has been subjected by hon. Members opposite.

I will conclude with one word about 1922 and finish with this rather dismal story of wages and prices, matters of some importance to the people who depend upon them for their subsistence, even if they are not of importance to the hon. Member for Harwich. In 1923, the engineers' wages had gone up from 38s. 11d. to 55s. The farm labourers' wages had gone up from 18s. to 28s. The shipwrights' wages had gone up from 41s. 4d. to 48s. 7d., and that was at a time when the cost of food had gone up 200 per cent. or more. Indeed it soared to 290 per cent. at one time in that period and the cost of living generally nearly as much. I cannot understand why hon. Members opposite do not understand that, when this is all they have to put before us, there is at least an obligation on them today to make some suggestion or show some change of heart.

The hon. Member for Stroud (Mr. Parkin) made some observations about profits. I should like to make some observations about profits, too, but from another angle. I am associated with private enterprise and have the privilege of advising many large firms conducting private enterprise, many of them working hard to contribute to the national effort and planning the production drive and limiting profits; but we have to look at the overall picture.

Mr. Henry Strauss (Combined English Universities)

What on earth is an overall picture?

Mr. Hale

In the Oxford Bureau of Statistics a few weeks ago, Professor Barna made a careful statistical survey of this important subject, and it is right that the House should have the results of that before them. The result of his figures is that from 1938–48, overall wages—that is the whole wages fund—increased by 205 per cent. Profits increased over the same period by 274 per cent. Professor Barna estimates that if you correlate profits and wages and give them the same relative proportion of increase over 1938 as wages, you would find that profits today exceed that by no less than £700 million.

Mr. H. Strauss

Gross?

Mr. Hale

Professor Barna makes certain adjustments for depreciation and the resultant figure is not net or gross, but what he thinks is the fair economic representation of the figure. [Interruption.] Of course, before taxation. That means—and it is important—that if we take the possibility of an increase in the cost of living as a result of devaluation as amounting to two, three, four, or even five per cent., the whole, and more, of that could be changed by a voluntary reduction of profits to the figure they should be at, if they only maintained a proportion.

I want to mention one matter which I know is very near to the hearts of my hon. Friends and indeed of all right hon. Gentlemen on the Front Bench. This policy that we are considering today is a comprehensive policy. It involves a large number of detailed recommendations. No Minister can hope that every hon. Member approves, or heartily approves, of every one. Many of them cause grave misgivings on these benches. But that the Government have managed to produce a scheme which involves the minimum of hardship with the maximum of saving, I am sure most of my hon. Friends will agree. There is coming to the great Labour movement, which has always had the cure of poverty and the relief of poverty as one of its fundamental resolves, the need to consider at once the question of supplementary allowances. These figures were last fixed in 1948. I hope my right hon. and learned Friend will find it possible to make some increase in supplementary allowances, based, of course, on need, adequate to meet the increase in the cost of living which has taken place, or is likely to take place, since they were fixed. I am sure I do not make that appeal in vain. I am sure he has had it in mind while considering these proposals.

I hope I may mention two other matters which affect my constituency. I have never, as I have said before, associated myself with a general attack on private enterprise. I think that very many firms—a large proportion of firms—work loyally and well in accordance with the national effort. But the picture is not wholly clear. There are firms which are deliberately slowing down production in a district not so far away from my constituency in order that they may spread prosperity over a longer period. I want my right hon. and learned Friend to say, whether evidence is forthcoming to convince him that it is no use appealing to workers who are threatened with redundancy by the policy of the management, that he will take vigorous steps to deal with this. If we can show him large factories not being used to anything like capacity, will he take them over, adapt them and use them in the national interest?

My hon. Friend the Economic Secretary to the Treasury said a few days ago that the dollar crisis would be with us for a lifetime. It was a serious statement to make, but I think it was well to have it said. I agree with him. There is no easy way out of the dollar crisis. I agree with him—or rather I agree with the proposition widely shared—I do not attribute it to him—that devaluation may be a shot in the arm. It is a shot in the arm of a drug which creates and develops a craving. The history of nations which have devalued their currencies is that they have found it necessary to continue the process. It is vital to deal with this on the lines which my right hon. and learned Friend has outlined and to try to find a permanent remedy for this serious position.

I do not think that, in putting forward this proposal, I am putting forward anything new. I know it is being considered by the economic advisers to His Majesty. But the only really permanent solution to the dollar gap is foreign investment. President Truman, in his statesmanlike and progressive approach, made it clear in his fourth point that he was thinking on these lines. We have reached a stage in the affairs of nations when we find that the exporting nations are themselves paying for their own exports. We have reached a point where we have to recognise that foreign investment is one of the real cures for planning in the future.

It must be the duty of the exporting nations to go into the undeveloped territories. Moneys can be used to develop these undeveloped territories and bring life to the darkest parts of the earth. Britain would find vast and much needed markets for constructional engineering; America, or the creditor nations, would have a gilt-edged investment; and Africa would receive the stimulus she never had in years gone by. I have had, during these past few years, the privilege of visiting some of the furthermost parts of the Empire. I have been to Western Australia, wholly unproductive and undeveloped through lack of irrigation. I have been to Vancouver and British Columbia, through vast areas ripe for development. There is ample opportunity for other developments in the Colonial Empire.

The proposals that have been put before the House today have been received by hon. Members opposite with cacophonous laughter, with discourteous criticism and with mild jeers. I do not blame them, though I think it is a sign of their undeveloped minds. Looking back, it seems to me that they were once looking like boys from the school of Mr. Wackford Squeers: today they look more like the pupils of Mr. Robert Copping. There has not been much progress in their education. We in this Labour movement are still endeavouring to assist our navigator and captain in pulling the ship of State through stormy economic waters and, so far as we are concerned, all hands are at the pumps, but too many of the first-class passengers are jeering at us. We have confidence, however, in our captain and navigator, and we are confident that we shall reach undisturbed and undismayed the haven to which we sail.

I want, in conclusion, to say that I regret having had to deal tonight very largely with the type of criticism to which we have been subjected. It would have been much easier and better to deal with this matter on the basis on which the Chancellor of the Exchequer opened the Debate only a few hours ago. It would have been better for the nation had that attitude continued; but we have had to face personal denigration and personal criticism. We have had to face contemptuous insults to the country that have come from the mouth of the right hon. Member for Woodford, whose voice still counts abroad and whose voice—[Interruption.] I gather that hon. Members opposite want to hear this voice. He said: Every account from Europe shows how much more rapid in many ways has been the recovery of the European countries than it has been here. Does anyone believe that?

Mr. Nigel Birch (Flint)

rose—

Mr. Hale

On the same day, the right hon. Gentleman said: I came to the decision at the end of June that the Socialists have brought Great Britain low alike in prosperity and reputation at home and abroad. This great party of ours, which embraces people representing all classes in the community and all creeds and all occupations, preaches no class war and no class hatred. We have been anxious and willing to have the co-operation of all, and not always have we looked in vain. When the Chancellor of the Exchequer today concluded his exhortation, it was greeted with derision by members of the Opposition, but that exhortation will go out into the minds of the nation. It will make an appeal to men of good will on all sides and of all creeds. It is to men of good will that we appeal in these times, to march with us along the road to that ultimate bourne where we seek to build up not merely the security but the progress of man.

It being Eleven o'Clock the Debate stood adjourned.

Debate to be resumed Tomorrow.