HC Deb 07 December 1950 vol 482 cc540-4
The Chancellor of the Exchequer (Mr. Gaitskell)

I promised last week to make a further statement to the House about the recent discussions which we have had with the Governments of India, Pakistan and Ceylon on the special position of their sterling balances in relation to the period covered by the Colombo Plan for Cooperative Economic Development in South and South-East Asia.

The general basis of the proposed arrangements is that the sterling balances of the three Governments concerned should be reduced over the next six years, in the context of the Colombo Plan, to something like the amounts which they would wish to hold in any case as their normal reserves.

We have already been able to examine in some detail with India and Ceylon the use of their sterling balances in this way. As a result of this detailed examination, we have agreed in principle with both countries on the use to be made of the balances during the period of the Plan. Discussions are in progress with the Government of Pakistan and it is hoped that an agreement can be reached at an early date. It is intended that in due course these arrangements should be the subject of formal agreements between ourselves and the three Governments concerned.

The agreement contemplated with India would provide fur transfers to their No. 1 (or free) Account whenever the latter falls below £30 million, with a transfer of up to £35 million in each of the six years beginning on 1st July, 1951. Provision would be made for a measure of flexibility from year to year in the size of transfers, and for full consultation between our two Governments to ensure the smooth working of the agreement.

The agreement contemplated with the Government of Ceylon would be on broadly similar lines. The intention is that under it the Government of Ceylon should be able to draw £21 million of their sterling balances during the period between 1st July, 1950, and 30th June, 1957. Transfers to the No. 1 (free) Account within this maximum would be made when the balances in the No. 1 Account fell below £12 million. Transfers in any one year would normally be limited to £3 million. As in the case of India, there would also be provision for flexibility and for consultation.

I hope that we are thus on the way to finding a solution which will be satisfactory to all parties concerned of this difficult question, which has been the subject of so much consideration and discussion since 1945.

Mr. Oliver Lyttelton

We frequently ask the Chancellor for as much information as possible on sterling balances, and we are therefore grateful for any advance information which he can give us. At the same time, I think he would agree that the statement he has made is of a very imprecise character, perhaps necessarily so at the moment. He says that the balances of the three Governments concerned should be reduced to something like the amounts they would wish to hold in any case as their normal reserves. Later, he makes further reservations. Accordingly, we had perhaps better refrain from any further comment until we have had an opportunity of studying the matter in greater detail, because the statement does not carry us very far.

Mr. Gaitskell

Until the agreements are signed and published we shall not have the full details, but I think that I have given the House a fairly clear idea of what these agreements will contain.

Mr. Churchill

Are we right in understanding that these are in fact arrangements for the repayment to these countries of British debts which were incurred by us in the process of defending them from invasion by Japan?

Mr. Gaitskell

Yes, Sir. They are, of course, debts incurred during the war in that way, but, as the right hon. Gentleman knows, the countries concerned look upon them very much as ordinary commercial debts, and they would certainly hope, and I should have thought we should encourage them to hope, that they would be able to draw on these balances to develop the economies which are so vividly described in the Colombo Plan report for the benefit of that part of the world.

Mr. Churchill

Surely some consideration should also be given to the fact that these debts were incurred for the defence of these countries, and that our right was always reserved until quite recently to make a counterclaim for the immense expense to which we were put? Surely these matters should be considered with a view to thinking sometimes of the interests of our own country?

Mr. Gaitskell

I do not consider that the interests of our own country would be well served by repudiating debts which we have incurred, or by cutting off badly needed supplies from that part of the world.

Mr. Churchill

Is it not a fact that we have always reserved the right to put in a counterclaim for the expenses or a portion of the expenses to which we were put, and that these counterclaims need to be considered not only against these countries but also against Egypt at a time when these settlements are being made?

Mr. Gaitskell

It was never considered that it would be either practicable or wise to pursue the matter of counterclaims.

Mr. Churchill

Is it not a fact that until quite recently that has always been maintained as the British position?

Mr. Gaitskell

That is certainly not the case. The Prime Minister made it perfectly plain on an earlier occasion that we did not consider it feasible to put in these counterclaims.

Mr. Churchill

Was not the Prime Minister a Member of the Government which definitely laid down the principle of reserving the right to make a counterclaim?

Mr. Gaitskell

The Prime Minister also happens to be the Prime Minister of this Government, and has the right to make the decision.

Mr. Norman Smith

Would not the Chancellor agree that this arrangement is part of the healthy process of seeking to equalise standards of living as between the advanced industrial countries and the less advanced countries of Asia? Does he not understand that the Socialist movement welcomes this sort of thing?

Mr. Gaitskell

Yes, Sir.

Mr. Boothby

Does the Chancellor's announcement today mean that the Government have abandoned any hope of achieving a general settlement with our creditors which would involve some scaling down of the capital obligations involved? Has that been completely abandoned?

Mr. Gaitskell

This announcement relates, of course, to these three countries only; it is not a general settlement beyond that. So far as these countries are concerned, I think it is fair to say that any idea of a general scaling down of balances is in our view impracticable because it could only be done by unilateral repudiation, which we are not prepared to contemplate.

Mr. Shepherd

Is it not a fact that this agreement is a breach of the undertaking entered into with America at the time of the American loan? Further, does not the publication of this agreement at this time preclude all possibility of the scaling down of such debts in the case of other countries in respect of which we have a much stronger case than the ones mentioned here?

Mr. Gaitskell

The answer to both questions is "No, Sir."

Mr. Wyatt

Is my right hon. Friend aware that the supplies of stores involved in these sterling balances caused tremendous inflation in India during the war, and widespread suffering, including a famine in Bengal; and that if we had now to say that our sufferings in the war had been greater than those of the Indians we should lose our allies in the East at the moment when we need them most?

Mr. Churchill

Will the right hon. Gentleman recognise that this is by no means an agreed matter between the different parties in the House?

Mr. Gaitskell

It is, I think, well understood on this side of the House that the right hon. Gentleman's attitude to India and the other countries concerned has always been unrealistic and, if I may use the term, totally lacking in humanity.

Mr. Churchill

May I say that I should have hesitated a long time before making such a filthy charge?

Mr. Snow

On a point of order. Is that language which we have had from the right hon. Gentleman—[Interruption.] Is that the sort of language we should have from the right hon. Gentleman, bearing in mind the remarks he made about the Prime Minister in the matter of the settlement of India?

Mr. Speaker

That is not a point of order. That is a matter entirely for the judgment of hon. Members themselves.