DEBATE ON THE ADDRESS

HC Deb 07 November 1951 vol 493 cc191-318

[SECOND DAY]

Order read for resuming Adjourned Debate on Question [6th November]: That an humble Address be presented to His Majesty, as follows: Most Gracious Sovereign, We, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland, in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament."—[Mr. Dodds-Parker.]

Question again proposed.

3.34 p.m.

The Chancellor of the Exchequer (Mr. R. A. Butler)

I have a grave statement to make to the House. I propose to deal with the national economic situation as a problem confronting the whole nation and requiring for its solution the united efforts of the whole country. Hon. Members in every part of the House will, I trust, consider and discuss in that spirit what I have to tell them.

It has been generally known for some months that our balance of payments was deteriorating, and that unless vigorous remedial action were taken we should be once more in crisis as in 1947 and 1949. The previous Chancellor of the Exchequer, who is sitting opposite me now, in a debate in July, said that the position was getting worse. In his speech at the Mansion House on 3rd October he announced that the dollar deficit for the third quarter was 638 million dollars compared with a surplus of 56 million dollars—a surplus—in the second quarter and of 360 million dollars in the first quarter. Those who listened to him could not have doubted that whatever Government were returned to power an ugly situation would be bequeathed to them. In fact, the worsening has continued over the last few weeks.

The Prime Minister gave the House yesterday an outline of the grave position we are now facing. In the third quarter of this year the dollar deficit was 638 million dollars. In the month of October alone it was 320 million dollars. It is not usual, I may say, to give figures except at the end of a quarter, but the seriousness of the situation justifies my departing from precedent. In the third quarter we had a deficit with the European Payments Union of £183 million. In October alone the deficit was £89 million, and in a few days' time we shall be paying substantial amounts of gold to the Union.

The present situation is one, therefore, in which the central gold and dollar reserves of the sterling area are being drained away very fast, and a situation in which the sterling area has a deficit with the European Payments Union on a scale which will rapidly exhaust our quota and, indeed, may threaten the stability of the Union itself.

The size of these figures, as hon. Members will observe, is evidence in part of a weakening of confidence in sterling throughout the world. Any weakening in confidence is bound to have a cumulative effect. Consequently, we must immediately quench any doubts which there may be about the strength of sterling and about our ability in the United Kingdom to manage its affairs effectively. We must put beyond question our determination to develop the earning power which is needed to buy the food and raw materials upon which our island economy depends.

In his speech at the Mansion House my predecessor, on the best information then available to him, attributed much of the loss in the third quarter to abnormal and non-recurring factors. So far as the third quarter was concerned those estimates were roughly correct, but some of the factors which we thought were exceptional have continued to operate. With the fuller information now available, and with the clearer view of 1952 which we can now take, our latest estimates reveal an underlying balance of payments situation even worse than had been previously forecast.

It is now believed that the current deficit of the United Kingdom in 1952 on the present trends and import programmes may be of the order of between £500 million and £600 million, and that the loss of gold and dollar reserves in respect of the transactions of the whole sterling area with the rest of the world may be appreciably more. These estimates are based on a forecast of current transactions and take no account of losses due to speculative movements.

When I remind the House that the reserves at the end of October were less than £1,100 million the gravity of this situation speaks for itself, and it must be put right at once, as soon as we possibly can.

That, then, is the situation in which we now find ourselves. I repeat that it appears to me, as, I trust and believe, it will appear to the House, as much too serious a matter for partisan treatment. The only question worth discussing is "How are we to get out of it?" and I trust that the remedies I shall shortly propose will appeal to the House, as they do to the Government, as matters not of political choice but of national necessity. But before I deal with the remedies it is necessary to examine the causes underlying the deterioration with which we have to deal.

Over the last 12 months external factors have imposed new and heavy loads on our balance of payments. There has been, for example, the worsening of the terms of trade during the last 18 months or so. There has been the loss of Abadan. The development of our defence programme, of course, involves substantial external expenditure. All these external special factors imply an increase of external expenditure of the order of no less than £600 million a year compared with 1950.

When new pressure of this kind comes on the balance of payments it is absolutely essential to have a highly flexible internal economy in order to adjust to it, but our economy is not showing this flexibility, and there are three main reasons for the present rigidity. The first of these is that our basic industries of coal, steel and transport, are not productive enough to provide the basis for an economy adequate to our needs and our commitments. We need more coal than we are likely to get on present trends; we need some 1½ million tons of finished steel more than we have been able to produce or import in 1951 to meet home and essential export needs; then the transport system is working under conditions of the greatest strain.

Second, the main impact of the defence programme is on those industries from which any really substantial increase in the exports must come. Third, there is the general overloading of the internal economy which prevents resources being switched, as they must be, to the places where they are most needed. Government expenditure is at a level which necessitates crippling rates of taxation. Last, the home demand for engineering products is far in excess of possible supplies. Taking another example, the work programmed for the building industry in 1952 is 10 per cent., or about £140 million, more than the amount of work which the industry is likely to be able to do in that year. I shall be coming back to this matter in making some proposals.

It is true that there has been some reduction recently in the excessive demand of consumers for goods over and above the supplies available, but we have not yet got the really competitive conditions in the home market which are necessary to increase exports to the maximum. On top of this we have the impact of the defence programme. In January the late Government estimated the cost of the three years' defence programme at £4,700 million. This was adopted at the time, with almost universal support in this House, as a programme that would be pressed through to completion as fast as the limits of our resources and capabilities would allow.

But our programme does not stand alone. It is part of a common defence effort by the North Atlantic Treaty countries, and we are making our full contribution. We, in our turn, depend on the contribution of our North Atlantic partners. The North Atlantic Council has set up a special organisation, which is now meeting in Paris, to establish how to balance the requirements of defence with the combined resources, economic and otherwise, of the partner countries.

As this meeting is going on at present I must not anticipate the outcome of this operation, but I should like to tell the House that its results may well have a vital bearing on the defence programme itself and on our internal economy, and these two are so obviously linked up together. Later in my speech I shall describe the measures within our own control which we are taking to restore soundness to our own domestic economy.

Our decisions about the right way to manage our own economic affairs and to use our resources at home must be governed, not only by our own national wishes and aims, but also by the demands which world conditions make upon our economy. These demands have first priority. For example, if world prices rise we must pay them, cost what it may; if new competitors in overseas markets emerge we must be able quickly to adapt ourselves to deal with them; if we are menaced we must re-arm and find the means to do it.

Such new developments are not to be regarded as unhappy accidents. For an exposed island living, as we do, upon imports, they are our normal pattern of life, like our weather, or like the seas which gird our shores, now rough now smooth. We must always be ready at very short notice to make the required changes in our economic rig. We cannot make such changes if we refuse to do without some things that we now have, and if we are so rigid that men and resources cannot be spared to meet new needs.

We have adapted ourselves before, but those of us who were trained in the hard school of listening to and understanding the well justified jeremiads of Sir Stafford Cripps will understand that today we are facing a general balance of payments crisis and not, as in 1949, a problem predominantly of trade between the sterling area and the dollar area. Not only is the United Kingdom in deficit. Many of the other sterling area countries which earlier in the year were in substantial surplus have in recent months moved into deficit themselves. Consequently, the whole sterling area is in deficit all round the world, and this is at once reflected in losses from the gold reserves.

It follows that there is not at the present time as sharp a distinction as there was in recent years between so-called hard currencies and so-called soft currencies. Indeed, all foreign currencies are, alas, now hard. The problem of trade balance between the sterling area and the dollar area continues to be the hard core of our balance of payments problem and we must continue to build up our exports to the United States and Canada accordingly: but in the present crisis the deficit with the rest of the non-sterling world is no less important and demands effective treatment also.

I have said now, I think, all that I need to say on the nature of the situation and the diagnosis of the trouble. This is a critical situation. Let me remind the House in plain terms what it means. By running this overseas deficit we are buying with our accumulated gold reserves, or obtaining on credit, hundreds of millions of pounds worth of food to keep us alive and materials to keep us at work. This will not continue, for if we do not find means to correct the disparity between what we earn and what we buy we shall find that we cannot buy what we want.

We shall lack the materials to maintain employment and to keep the rations even at their present level. We shall, in fact, be bankrupt, idle and hungry. We cannot afford to waste a day in putting our balance of payments right. That is why the Government feel it essential that I should not only give a frank picture of our present situation, but also make some definite proposals designed to aid our recovery.

First, I will spend a few minutes on our long-term objective. In the Government's view, the only ultimate solution must be one of expansion. We are determined to get output up and encourage the country to produce more. That is the long-term objective. The most important materials whose shortage is restricting output at present are coal and steel, as I have said. More of these must be obtained. My colleagues principally concerned will be dealing with these matters in detail during this debate, and so I need not develop these subjects, as they will do it more ably than I can.

In finding means of overcoming the obstacles to expansion, the Government will co-operate closely with the industries concerned. In our efforts to do so, we shall rely upon the good will of the trade unions in these industries, and, indeed, on the whole trade union movement. The Government warmly welcome the Trades Union Congress's recent assurance of friendly co-operation, and will look forward to the closest consultation with it on all matters of common concern, in pursuit of the common national object of strengthening and expanding the national economy.

If we can get enough expansion at the crucial points I have mentioned—and the Government will reject no plan, however unconventional, for achieving these ends—our other problems will fall much more easily into place. In particular, increased steel supplies will make it possible to expand the output of the metal using industries on which we are relying so heavily for defence production, for exports and for home investment. But all this will take time. At the moment, therefore, the essential thing is to strengthen the foundations of the economy before adding to the superstructure. We must, therefore, take drastic steps to solidify and establish these foundations. First, we must ease the over-load both on the external and on the internal economy. Let me consider, first, the external aspect.

In view of all that I have said, and in view of the picture presented, the Government have decided to take immediate and direct action to reduce imports. The series of measures which I shall now describe is designed to save £350 million a year of external expenditure, and to do so in a way which will give the strongest support to our gold and dollar reserves. We are, therefore, not imposing restrictions on our trade with our partners in the sterling area. This total of £350 million may be compared with estimated total imports in 1952, at end-September prices, of about £3,620 million. The full impact will not necessarily be felt at once, for there are existing commitments and contracts which will not be interfered with.

The following are the detailed measures. We propose, first, to revoke open general licences for private imports from Europe and other non-sterling countries on a selected list of commodities, and substitute import licensing with, in most cases, a quota for each commodity based on the value of imports from these sources in the year July, 1950, to June, 1951, and at levels substantially below those in recent months. Certain raw materials will be included in the list, but the reduction in these will not be very great.

This measure will give a saving of about £130 million a year, mainly in un-rationed food but also in a few manufactured goods. In food, the total cut on these privately imported commodities will be equivalent to about one quarter of the total private imports of food from all sources. The items to be cut include canned hams and meats, of which a tremendous and expensive import has developed in the last year or so, various forms of sugar manufactures, such as fon- dant and sugar-fat mixtures, canned fruit and vegetables, and fresh fruit and nuts. The total saving from all the cuts in private imports will be about £130 million.

To prevent forestalling, these measures must be taken at once. Particulars of the items affected will be announced tonight by the Board of Trade. This is an action which the Government are very loth to take. [Laughter.] I hope that hon. Members will realise that these decisions have had to be taken in a most serious atmosphere. This decision involves the reimposition of quota restrictions, which in themselves are contrary to our aim to liberalise intra-European trade. It will, in due course, limit the housewife's choice of food supplies—[Interruption.]—perhaps the House will listen to this—which, although not absolutely essential, have been a welcome improvement to the diet in the last few years.

I need hardly say that we are doing this only because we are forced to do so to help put right the balance of payments. There is, in fact, no escape from it. We are running so heavily in deficit with the European Payments Union that we must take immediate action. If we did not, as I save said, the Union itself would be irremediably weakened, and this would be a crushing blow to Europe and, indeed, to the whole of the free world.

We have framed our list in a way which secures the maximum saving consistent with the minimum damage to the liberalisation of intra-European trade. Even after these cuts have been applied, some three-fifths of our imports on private account from other European countries in the O.E.E.C. will still be free from quota restrictions. It has always been provided in the O.E.E.C. that a country which has serious balance of payments difficulties may re-impose restrictions in this way, and we shall supply to them the necessary information to establish that we have acted in full accord with our obligations.

I come to the second recommendation under this head. While the crisis lasts, we shall have to forgo increases in the total consumption of rationed food above the average 1951 level. There will have to be reductions in some rationed foods, and there will also be a reduction in the supply of unrationed foods imported by the Ministry of Food as distinct from the private imports to which I referred earlier.

Third, we propose to slow down the further carrying out of the strategic stockpiling programme instituted by the previous Government. Good progress has been made on this—[HON. MEMBERS: "Hear, hear."]—if I am to hear those cheers I wish they had been made earlier—and our hope would have been to maintain this progress. In present circumstances, however, we cannot afford to continue at the same rate. It should be clearly understood that this will not affect our defence production programme. Significant supplies of many of the more bulky commodities have already been accumulated and, in our view, some delay is a necessary price for solvency.

Fourth, we propose to reduce the tourist allowance from £100 to £50 per head. This reduction will come into effect immediately. We intend that the reduced allowance of £50 shall be available for the 12 months ending October. 1952. I realise that this decision is bound to cause inconvenience and disappointment, but the situation is too serious to allow expenditure on tourism to continue as it is. I might add that this will not affect the special arrangements of travel which we have with Norway, Sweden and Denmark.

Last in this series, the Government are giving prompt consideration to the reversion of all softwood purchasing to private trade, with arrangements for a global limitation of purchases. We intend that the consumption of softwood shall be maintained at its present level.

The sum of these, together with the saving of shipping and a general tightening up of closer administrative scrutiny of external expenditure of all kinds, should save some £350 million a year. This immediate action does not fill the whole balance of payments gap, but in combination with the internal measures, which I am now about to describe, it should make a substantial improvement in our position.

I turn next to what is broadly called home investment. The building programme, which was authorised by the late Government last summer, rests on the assumption that the output of the building industry would increase by 5 per cent. in 1951 and 10 per cent. in 1952 over the output in 1950. In the first half of 1951, however, the output of the industry, so far from increasing, was below the average output of 1950 as a whole. This was due partly to bad weather—this is reminiscent of earlier debates—and this bad weather was under the administration of right hon. Gentlemen opposite; partly to the shortage of building steel and partly to the attempt to achieve too much in the wrong way.

The combined result of all these factors is that the building industry is now badly overburdened. Much more work has been started or approved than can be done with the labour and materials, particularly steel, which are available. Consequently, individual projects have been taking longer to complete than ever before. This will get worse unless steps are taken quickly to lighten the burden on the industry. The only way to do this, particularly in areas where the excess demand is greatest, is to reduce the amount of new building work which is started, until the industry is abreast of its tasks, and to secure that the subsequent programme does not exceed the capacity of the industry at any particular time. To do this and to speed up completion of projects the Government have decided that no new starting dates for building work will be granted for operation during the next three months, except for special schemes approved as exceptionally urgent in the national interest.

Mr. Hugh Gaitskell (Leeds, South)

Will the right hon. Gentleman tell the House whether that covers housing?

Mr. Butler

I have a complete statement, and I think I shall be able to satisfy the right hon. Gentleman on almost any score.

I was saying no new starting dates for building will be allowed except for special schemes approved as exceptionally urgent in the national interest. Starting dates already granted for operation after 1st December will be reviewed and Postponed for at least two months, again subject to special exceptions. This decision will not apply to housing, which uses very little steel but the rate of starting new houses will be adjusted where this is necessary to improve the rate of completions and reduce the time taken to build houses.

The House may be interested to know that these measures should result in more building work of all kinds being actually completed in 1952 than would otherwise be possible, and they will stop further increases in overload.

Mr. Emrys Hughes (South Ayrshire)

How many?

Mr. Butler

Among the more essential national requirements is a larger housing programme. It is the Government's intention to build more houses, but we cannot make satisfactory progress until the overload on the building industry has been dispersed by the measures I have announced and some of the existing work is completed. After that, we intend gradually to introduce more housing into the building programme. This will be possible because housing, which does not use much steel, will be able to absorb labour and resources released from other building work held up because of the shortage of building steel. It will also be necessary to review investment in plant, machinery and vehicles.

Mr. Aneurin Bevan (Ebbw Vale)

Before the right hon. Gentleman leaves that part of his speech would he be good enough to inform the House what kind of building projects will be stopped, and roughly in what part of the country starting dates will be postponed? I ask that because we have a global housing figure, which produces more houses in some parts of the country and fewer houses in the industrial areas where the need is greatest.

Mr. Butler

The right hon. Gentleman has put a perfectly legitimate question, and I feel certain that there will be an opportunity in debate for hon. Members to go into the matter more fully. I should not like to enlarge my statement at this lime, because I have, unfortunately, a good deal more to say. If I may I will leave that to one of my colleagues to deal with later in the debate. It is a perfectly legitimate question which the right hon. Gentleman has raised, and he can rest assured that the industrial areas are as much in our hearts as they are near to his.

It will also be necessary to review investment in plant, machinery and vehicles, in the light of the steel shortage and the need to export more capital goods. As I have said, unless we can rapidly increase our supplies of steel, much needed investment may have to be deferred so that more engineering products can be exported.

From limitation of investment I come to the need for economy. One of our most important tasks in combating inflation is to reduce Government expenditure. It is the classical function of the Chancellor of the Exchequer to see to this, and it is an aspect of the Treasury's functions to which I shall devote particular attention. With my colleagues' help I hope to be successful. After only 10 days or so in office it would I consider be a sign of levity in me to produce a complete programme of retrenchment. These things affect the whole country and all our citizens. It is quite clear, for example, that decisions on policy need careful thought and must be concerted. To be fair one must be thorough.

Meantime, I should like to tell the House how my colleagues and I have already set on foot the necessary review of all Government expenditure within the vast field of administration. Some critics have suggested that a committee of outside investigators should be set up. I do not favour this course. Economy is not a prescription to be imposed from outside and I do not want my colleagues to be put in the position of defendants, bound to protect their Departments against attack. They have already promised me their co-operation.

The Treasury can, and of course will, make many suggestions where savings can be made, but each Minister is best placed to enforce savings over the whole field of his Department and to instil a sense of economy into all his officials. We shall work together on this as a team, which it is the Chancellor of the Exchequer's task to lead and to direct. It must be my special duty to ensure that all play their part in the common effort and that the drive to secure savings is pursued with the same intensity and the same sense of urgency in all Departments.

This is the way in which I propose it shall be done. We are now at the time of the year when each Department prepares its Estimates for the coming year and presents them to the Treasury. It is the time when the expenditure of the Departments and the number of their staffs are examined as a whole. This examination will be the basis of our work. I have asked my colleagues, and they have agreed, each of them person ally, to ensure that their Estimates as submitted to the Treasury are cut to the lowest possible figure, and I shall play my part in helping them to do so. Together, we shall ensure that, in the Estimates submitted to Parliament, all waste and unnecessary expenditure are cut out, and that less essential services are deferred or slowed down wherever possible.

We shall pay particular attention to capital expenditure and to the reduction of any activities which are keeping in Government employment those kinds of manpower which are most needed elsewhere. We shall watch those services in which the Government's expenditure is not directly or closely governed in Whitehall. I have in mind—to give one example—local government services on which we pay grant. Expenditure here is often increased not by conscious major acts of Government policy, but by the frequent admonitions to expand and improve which are given by the Departments concerned, working in recent years in an atmosphere of amiable prodigality.

We shall review the thousand-and-one instructions, regulations and manuals of advice which go out from Whitehall to the local authorities, to see that there, too, the same principle of reasoned economy is observed. I must wait until my review of the draft Estimates is completed before I am in a position to decide whether sufficient savings have been made. If not, still more stringent methods will be necessary.

As for the cost of living, into which I shall not go at great length today—although that does not mean that I do not understand its great importance to our people—and which has risen sharply over the last 12 months, a great deal will depend upon the effect of the measures we are now taking, which are all designed to combat inflation and to maintain the value of the £. Unless we are successful here, no patching up of particular prices can have any real or lasting effect. These measures need the support of the whole community. Continued restraint in personal incomes and personal spending is as essential now as it has ever been. Savings are also vital, and I look with confidence to the National Savings Movement to intensify their efforts to marshal the great army of small savers in support of Government policy.

I turn now to dividend policy. Hon. Members are aware that it is our view that statutory control of dividends is not the way to deal with excessive dividends. It must surely be our policy to create conditions in which excessive dividends are not so easy to obtain; but this does not end the immediate question of dividend policy. The effect of the amount of money put into use by the increases in dividends during the past nine months can be overstated, but the gravity of the story I have begun to unfold to the House makes it plain that it is not possible to exaggerate the consequences of anything that encourages the present strong tendencies to further inflation.

Moreover, it will be abundantly clear to all boards of directors that the financial difficulties ahead make it imperative that they must use the present situation to build up internal resources which will enable them to maintain their fixed assets and to meet coming strains. Therefore, I must emphasize, as has been done before, the absolute necessity, in the interests of the economy as a whole and of the companies themselves, of a very cautious policy on dividend distribution.

But I must go further. Good profits have been made during the past year, and this tendency is likely to continue, as the effects of re-armament, on top of our other efforts, extend throughout the economy. Before the election, we announced our intention of imposing a form of excess profits tax to operate during the exceptional period when the abnormal process of re-armament created a fortuitous rise in profits. Speaking for the Government, I confirm that intention. It is premature to give any outline of the form of the tax, but in order to give warning ahead I want to make it plain that it is the Government's intention that it will become effective as from 1st January, 1952. The 1st January has precedents for the application of profits tax in the past.

The measures I have just described deal directly with the problems of the internal economy; but they would not be effective unless the financial climate of the economy were right. It is common ground that restriction of credit is an essential part of the policy in producing the right climate. My predecessor, in his Budget Speech, said of physical controls that they would not be nearly so effective if they are working against the tide, and they must therefore be accompanied by a strict fiscal and monetary policy to restrain civilian expenditure."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 828.] In recent years the policy of successive Chancellors has been to influence the volume and direction of bank credit by requesting the banks in framing their advances policy to restrict unessential lending to a minimum and generally to be guided by the lines of directives issued to the Capital Issues Committee.

Successive Chancellors of the Exchequer have recognised the full co-operation which the banks have given. If adequate results had been achieved I could leave things where they are. It is, however, unfortunately clear that the present situation requires additional measures in the monetary field to combat inflationary tendencies, by action designed to make possible more direct influence on the volume of credit. After the most careful consultation with the Governor of the Bank of England I have come to the conclusion that it is necessary to depart from the arrangements now in force under which, in practice, the bank rate is quite ineffective and the Bank of England supplies the needs of the money market at fixed and very low rates.

The Bank of England are today, with my approval raising the bank rate by per cent. to ½ per cent., to 2½ per cent., introducing at the same time a new rate of 2 per cent. at which they will be prepared, when necessary, to lend to the market against Treasury Bills. Bill rates may be expected to increase somewhat and to fluctuate according to supply and demand, subject to day-to-day operations by the authorities.

The effect of these measures will be to move away from the rigid rates of approximately ½ per cent. at which Treasury Bills have been held and to restore flexibility to the short-term market.

I propose, at the same time, to take the very important complementary step of bringing the floating debt into more manageable proportions by a short-term funding operation. Full details of this operation will be given to the financial Press today, but its main feature will be an issue of one, two and three year fund ing stocks at the appropriate rates, against the surrender of Treasury Bills.

To those who call for a more drastic increase in the rate I would say two things. First, a departure from the present arrangements under which the bank gives credit on tap at sight does not call for any dramatic process. What it does call for is a clear change of emphasis, and that is what we are providing. If I may put it like this, the patient has been for so long in plaster of paris—or, shall I say, of Whitehall—that all concerned in his recovery prefer to watch what use he makes of his limbs when the plaster is removed. My second reason for deciding upon a gradual step is that those with whom I have the good fortune to work agree with me that any sharp attempt to try to switch to drastic deflation would be unwise.

There is no question here of any degree of deflation such as to arouse the old-fashioned fears of unemployment. Today, the risk of unemployment comes from shortages of fuel and raw materials arising from failure to export enough to buy the supplies we need and to maintain the external value of sterling. If we went on as we had been going on, we should have been facing not only the danger of large-scale unemployment but the collapse of our whole economy. I want just to add one personal comment. The experience of all parties between the wars and ill our joint labours under the war-time Coalition Government have surely instilled into all of us a determination to husband the finest and most important of all our resources, the active employed working population.

These changes, particularly in the Bill rate, will add about £25 million to the budgetary charges for the debt, but, of course, quite a bit comes back in Income Tax. No one would wish to add to the charges on the Budget; but I am satisfied that this change in the short-term interest structure will liberate part of the economy which is at present artificially restricted, and thus strengthen it. It is upon the health and strength of the economy as a whole that the modern Budget depends.

We shall at the same time increase the rate for advances to local authorities by the Public Works Loan Board to the appropriate market rate of 3¾ per cent. The present situation rests on an entirely artificial foundation and the rate at which local authorities mainly operate, namely, 3 per cent., contains an appreciable element of concealed subsidy. It is inconsistent with the general principles of monetary policy, which I have just been outlining, that a long-term programme of capital investment should be financed at a rate which does not reflect the true current cost of money for that type of investment. A change is therefore considerably overdue.

But in the case of housing, if no other adjustments were made, the result would be to impose on local authorities the responsibility of financing the increased charges either by increasing the burden on the rates or by raising rents. My right hon. Friends the Minister of Housing and Local Government and the Secretary of State for Scotland propose to bring forward the date of the regular review of the housing subsidy, which would otherwise take place in June, and to open discussions forthwith with the local authorities. The increase in the interest rates will be one factor in these discussions. They intend that the discussions should go as wide as the circumstances require and should not rule out consideration of any changes in the present structure of the subsidies, if that was found desirable.

Let us be clear about the effects to be expected from these changes. I do not believe that in present circumstances monetary policy by itself will have decisive results, but I am sure that direct influence over the volume of credit can do much to support other measures to combat inflation. In view of the grave situation which I have disclosed, we cannot afford to neglect any measures which can contribute in this direction. I have asked the Governor of the Bank of England to tell the banks that I am confident that in their operations they will have full regard to the Government's economic policy, as I have outlined it today, and as it will be further developed in due course. We rely upon them to continue and intensify their efforts to restrict credit to essential purposes and, in particular, to ensure the highest priority for our defence programme and our exports.

The House may be relieved to hear that I am now drawing towards the close, but I should like just to summarise the position as I have endeavoured to put it in as fair a manner as possible considering the seriousness of the situation. Let us now see where we stand. The reduction in imports—apart from the reduction in imports for the stockpile—will in itself, since it reduces the goods available on the home market, add to the pressure of inflation here. On the other hand, the change in the Bank rate, the review of the investment programme and the reductions we propose to make in Government expenditure should all work in the opposite direction. The whole balance of the economy will be thoroughly reviewed in the light of all these changes before next April, when the Budget gives an opportunity for a comprehensive survey and resolute action.

I have now described the immediate steps which the Government have taken and the general lines of our financial and economic policy. In 11 days we have considered the up-to-date and comprehensive information placed before us and determined our general strategy. If the steps we have decided upon are inadequate—and I should like this to be quite clear—if any further action over the whole field is required, in order to establish our position and maintain the strength of sterling as an international currency, we shall not hesitate to take it. Let no one doubt our intention to make and keep sterling strong.

The next step will be discussion with our colleagues in the Commonwealth, for this is a problem of the entire sterling area. Their interests are as closely bound up in the strength of sterling as are ours. I am informing the Commonwealth Finance Ministers of the action which we are taking, and arrangements are well in train for a meeting with them in January. I am sure that we shall then be able, having taken here what immediate action is appropriate, to agree about a common policy for the strengthening of sterling and the development of the most effective joint plans for its defence.

There will also be discussion in the next few weeks with our partners in N.A.T.O. and O.E.E.C. We have framed our measures with very full regard for our international obligations and responsibilities, in order to prevent avoidable damage to our partners' interests. But it must be clear that our first duty and responsibility to our partners in N.A.T.O. and O.E.E.C., as to ourselves and to our colleagues in the Commonwealth, is to pay our own way and not to buy what we cannot afford or promise what we cannot perform.

If we cannot carry out this duty, we shall be a liability and not an asset to the North Atlantic alliance, and we shall be a source of weakness and not a fountainhead of strength to the Commonwealth. We cannot solve our problems in isolation. They are, at bottom, the problems of the defence of the free world. But we cannot call upon others to help in their solution unless we ourselves are playing our full part.

The crisis in our economic affairs is a grave one, which will not be overcome quickly or easily. But if we can tackle it with sufficient vigour and resolution there is no reason to doubt that we shall succeed. The figures of the deficits in our economy are large, but look at our resources. Look at the wide range and strength of our Commonwealth of nations. Think of the latent power of this great confederacy. We can surely rely again on that readiness to act together which we always display in times of difficulty and trouble. Look at the inherent strength of our own economy, which, when circumstances allow, is capable of a rate of growth compared with which our present deficiencies need not loom large.

Let us remember, above all, the power of united action which our own people have never failed to exhibit when the truth is put plainly before them. When we see that our country's stability is threatened, we begin to feel the strength of those hidden sympathies and links which bind together all sections and classes. Once we act together, once we can get our economy moving in the right direction, we may well surprise the world again by the rate at which we go forward. Here is a task in which a new Parliament can give a lead to a country which expects us to do our duty.

4.32 p.m.

Mr. Hugh Gaitskell (Leeds, South)

I must compliment the right hon. Gentleman on the very frank and clear statement he has made to us. Much of what he said was unexceptionable from our point of view, and much of it had a rather familiar ring about it. For example, he very rightly emphasised the importance of the external forces and factors which led up to the present situation. If I may say so to the right hon. Gentleman, his speech was in very striking contrast with some of the election speeches, and it will no doubt prove instructive to hon. Members on the benches behind him.

The right hon. Gentleman was good enough to quote from some of the speeches I had made in recent weeks and I am grateful to him, because he, at least, did not pretend for one moment that we had failed to disclose the situation. I feel that I ought to say a few words upon that subject because of the phraseology of the Gracious Speech, which implies, to my mind at least, that the late Government in general, and I in particular, withheld information from the public.

I do not accept for one moment what seems to me to be a most dishonest and untrue imputation. In so far as any hon. Members make use of it—and, of course, I hope that they will not do so—I put it to them that it would be dishonest, because they would be doing it only to rid themselves of the embarrassment caused by promises of de-control, more houses, reduced taxation, more meat and various other things, and the embarrassment caused by the continual outpouring of propaganda over the past few years that every inconvenience and discomfort from which we suffered was due to the actions of the Labour Government.

The party opposite seem to me in this to be trying to excuse themselves for making these promises by saying that they could not have known the facts. But they should have known, and most of them did know, the facts. After all, these facts are published regularly in, for example, the Monthly Digest of Statistics, the Customs figures of exports and imports, the weekly figures of the coal situation and, of course, the quarterly figures of the gold situation. And I think the House will agree with me that in recent speeches I myself have commented on the situation quite frankly and have never sought to withhold information. I refer to my speech last July, from which the right hon. Gentleman quoted, my speech to the Trades Union Congress in September, and my speech at the Mansion House.

It is also said in some quarters—it has not been said here today or yesterday—that in the Election neither side really drew any attention to the economic situation. I really cannot accept that, So far as I am concerned. I certainly made a very large number of speeches in which I emphasised it. I even went so far as to say that I did not think that the cost of living problem was the most crucial one facing the country. I said that the crucial problems were to get our defence programme through and to solve our balance of payments problem. Nor did I disguise for one moment that cuts would have to be made in imports and action taken to stimulate exports which was bound to involve inconvenience and possibly hardship.

I was by no means the only Minister who spoke in that vein. My right hon. Friend the former Foreign Secretary, for example, made a speech on, I think, 13th October dealing with this in great detail, but the fact is—and it may well be true of speeches made by hon. and right hon. Gentleman opposite—that for some reason or other the Press gave extremely little prominence to this aspect. [HON. MEMBERS: "Oh."] Yes, very little prominence was given to this aspect in the Election. I make no criticism of it. In my speeches to which I am referring, I also, of course, talked about various other things, and for the most part it was those other things that were singled out and not the warnings that I gave about the economic situation.

Perhaps I may quote one sentence about this matter from "The Times" leader of last Monday, which said: The new Government seem shocked by what they have found, but the nation's plight should cause little surprise. Though neither party was disposed to warn the electors clearly about the menacing state of affairs"— and that I do not accept— the Labour Government made no attempt to conceal it before the election campaign began. Having said that, I should like to emphasise once again that, of course, we on this side of the House fully appreciate the gravity of the situation and fully accept that it must be dealt with urgently. There was no doubt whatever—again, I am quoting from my own election speeches—that whatever Government was returned after the Election would have to take drastic action quickly. The real question is simply whether the action is appropriate, whether it is sufficient, and whether there are any alternatives that can be offered.

There are, as the right hon. Gentleman has made clear, two problems facing us. They are rather mixed up in the phraseology of the Gracious Speech. There is the sterling-dollar problem, which is a matter for the whole sterling area, and there is the United Kingdom balance of payments problem. These two problems overlap, but if we deal with one of them it does not mean that automatically the other is dealt with.

Perhaps the clearest way of explaining that is for me to remind the House that in 1949, which is so frequently and, quite naturally, described as a crisis year, the United Kingdom had a surplus in its over-all balance of payments, and the whole problem really centred on the sterling area. The whole difficulty which eventually led to the devaluation of the pound, one can reasonably say, was largely caused by the fall in prices and purchases of the major sterling area raw materials.

Perhaps, following the right hon. Gentleman, I could now turn to the sterling-dollar problem. I gave in my Mansion House speech the latest figures and the causes, as they were then apparent to me, for the deterioration in the situation, but I should like to emphasise something which applies both to the sterling-dollar position and the United Kingdom position; that is the extraordinary speed with which the deterioration has developed. It is quite true that, so far as the dollar situation is concerned, I did warn the House a long time ago that it would not continue to be so favourable, but I do not think any of us expected it would turn to such an extent and so rapidly in such an unfavourable manner.

The scale of the deficit which in the Mansion House speech I estimated as the hard core was between £400 million and £450 million a year. Evidently new calculations have been made since then. The right hon. Gentleman was good enough to say that at the time I made the speech the figures were as I gave them. Of course, that is true, but evidently fresh calculations have been made which indicate some rather less favourable prospect. The right hon. Gentleman did not give us—I make no complaint about it—very many assumptions on which these estimates were based. He will know as well as I how extremely difficult it is to make accurate forecasts in this field, but it is no doubt as well to take pessimistic rather than optimistic assumptions on which to base policy.

What have been the changes since then? The right hon. Gentleman referred to the October figures. I think there must have been a pretty substantial movement of funds involved in these figures. Although of course, under exchange control we do not have the prospect of a serious outflow of capital in the ordinary sense of the word, it is possible for the balances which will be held here on commercial account to be varied up or down, and I dare say they have been falling fast in these weeks. It is also possible for those who are earning dollars to delay their conversion into sterling over quite a long period. I think the Exchange Control Regulations prescribe six months for the time allowed before an exporter has to pay over the dollars.

I hope the right hon. Gentleman will not in any way be panicked by this movement of funds. I think also it would be as well, if I may suggest it, for the right hon. Gentleman to look into the possibility of tightening up the controls on the movement of funds, perhaps particularly within the sterling area. The six months I have mentioned always seemed to me to be rather a long period and I think it might well be reduced, and of course if it were reduced it would immediately relieve the situation.

I now turn to the longer-term problem of the sterling area. The right hon. Gentleman has already made plain that there will be cuts so far as our imports are concerned, and I presume he included dollar imports, although he did not specifically refer to the dollar imports into the United Kingdom. But it is quite evident that not only the United Kingdom but the whole sterling area will have to restrict its purchases not only from the dollar area but from Europe also. I have no doubt at all that we can look forward to co-operation from the other members of the sterling area. They certainly gave it in full in the 1949 period, and I have no doubt that again it will be forthcoming in the conference which we arranged some time ago and which will take place at the end of the year.

I should like to say, in the comparative freedom of these benches, one or two things about the working of the sterling area which I hope will not be embarras- sing to the Chancellor of the Exchequer, I think we should all understand that it is an extraordinarily difficult arrangement to operate, when we have low reserves in relation to sterling liabilities, as we have had ever since the war, and, although the gold reserves are substantially higher than they were—even after the figures given by the Chancellor—they are still low in relation to sterling balances.

It is also extremely difficult to operate it when we have, as we have had, a very loose system of control. Sometimes other countries imagine that the sterling area is controlled rigidly from the Bank of England or Whitehall. That, of course, is not the case at all; we are dealing—apart from Colonial Territories—with independent countries, members of the Commonwealth, who decide their own policies, and we cannot intervene in them.

We have, for example, little information about the movements of stocks in the rest of the sterling area. We do not know, for instance, when calls upon the sterling-dollar pool for dollars are fairly low, whether it is due to a reduction in consumption or a decline in stocks. Also we have had to face a considerable time-lag in implementing any new policy which may be adopted. I think we members of the sterling area should all feel the immense value it is to us, but I suggest to the right hon. Gentleman that he should take the opportunity afforded by the forthcoming conference to have a round-table discussion about the whole operation of the sterling area and try to devise arrangements which will more effectively prevent these sudden movements and sudden claims upon the central reserves.

I now come to the United Kingdom problem, and I agree with the right hon. Gentleman that, although we ourselves cannot solve the dollar problem alone, obviously we must pay our own way and give the best lead we can to the other members of the sterling area. Here again, I must point out that there is really no question of any new disclosure. The facts of the situation of the United Kingdom have been available, apart from the estimate of the invisible exports, every month. Indeed, the Customs figures give, for various reasons, a much gloomier picture of the position than really exists. Again, in speeches I have given repeated warnings of the situation.

When the Prime Minister spoke yesterday of the rate of deficit that we were running in the second half of this year as being £700 million and contrasted that with the rate of surplus at the end of 1950, he was doing something which seemed to me rather dangerous. I remember last year people coming to me and saying, "What a wonderful situation; we have a surplus of £400 million." Of course, it was not true; it was a purely temporary phenomenon and associated with low purchases of raw materials at that time and very high exports of raw materials which were bound to be temporary.

I suggest to the right hon. Gentleman that he must be careful not to do the same thing, as it were, the other way round. Undoubtedly in the second half of the year the volume of imports has been going up fast. I do not wish to under-estimate the seriousness of the situation, but to take the highest point of the surplus and compare it with the highest point of the deficit is not a very good way of dealing with it.

The right hon. Gentleman has given us an estimate for 1952 of a deficit of £500 million to £600 million if no action is taken. There are a number of questions I wish to put to him about this. In the first place, what amount of stockpiling is included in those figures? I do not know whether he is pursuing the plan we generally had in this matter and whether he has in mind something between £150 million and £200 million, for instance, for stockpiling in the year 1952, which I think was roughly in our minds. I do not know what assumptions he has made about invisible exports. I hope that as soon as possible he will give some idea of what is expected there. Is he assuming, for instance, that we shall get no invisible export at all from the Anglo-Iranian Company and Persian oil? That is a matter of considerable importance; the total amount is, I think, about £100 million.

What assumptions is the right hon. Gentleman making on productivity? What assumptions is he making about the terms of trade? It is very difficult to comment on an estimate of this kind. The estimate is a good deal larger than the last one given to me by the Treasury when I was Chancellor. It is very difficult to comment on it until we know the basic assumptions. I should have said that the extent of the burden might be expressed as follows: if we aim at a 10 per cent. increase in exports, that would bring us in about £280 million more, If we combine that with a 5 per cent. cut in imports, that would save about £170 million, and when we add the stockpiling figures in we would not be far from closing the gap. I was indeed rather surprised that the right hon. Gentleman laid so much stress in his policy on the cutting of imports, and relatively little on the expansion of exports—but I will perhaps come back to that point later.

The reason that I have emphasised the size of the burden as being a rise of 10 per cent. in exports combined with a 5 per cent. cut in imports—various combinations could be put forward—is that the really striking causal factor in all this is the extraordinary change in the terms of trade. To mention a few figures, in May this year the prices of our imports had risen to 42 per cent. above the average for the previous year and those of our exports by 18 per cent. In the latest figures which I have available, those for August, the rise in the prices of imports was down to 38 per cent. and that of exports was up to 24 per cent.

That is to say, the terms of trade had begun to move in our favour. I rather assumed that that was likely to continue. I do not know what assumptions the right hon. Gentleman has made about that, but it is obviously of enormous importance. A 10 per cent. rise in export prices and a 5 per cent. reduction in import prices means that the gap is closed.

The causes of this position have been adequately dealt with by the right hon. Gentleman. Perhaps I might put it in terms of figures I have used before. When we decided upon the defence programme, we knew, of course, that we would have to carry also the burden of a further deterioration in the terms of trade. At that time, in February, I put the net additional burden from the rise in the prices of imports being faster than the increase in the prices of exports at £300 million. I think it is likely to be about £500 million this year, about £200 million worse than our original estimate. That is the first cause of the deterioration.

The second is Persia, and that, I suppose, adds between £50 and £100 million so far as the invisibles are concerned.

The Minister of State for Economic Affairs (Sir Arthur Salter)

The right hon. Gentleman will agree that, as this is not just a United Kingdom balance of payments crisis but also a sterling area crisis, if this hoped for change in the terms of trade should take place, there would be a debit in respect of the rest of the sterling area as well as a credit in respect of the United Kingdom itself?

Mr. Gaitskell

I was for the moment talking about the United Kingdom position. Exactly how it affects the sterling area depends on which raw materials fall in price. We are trying to discuss what has gone wrong. What has mainly gone wrong is that prices of imports have gone up much more than we expected and prices of exports less. The second thing is what has gone wrong in Persia.

There has also been some lag in exports, particularly of consumer goods, below what we hoped they would achieve, but the two major causes are those I have mentioned. It is not clear that our own defence programme has yet been of major importance in restricting exports but it is clear that the circumstances in which we carry out the defence programme have materially worsened.

It is fair to point out, and I took it that the right hon. Gentleman had this in mind, that when we as members of the North Atlantic Treaty Organisation put forward the £4,700 million programme, we assumed, I think rightly, that the burdens would be fairly shared between the different members of the Alliance. Our original discussions with the United States in the summer of 1950 led up to the decision that any American aid that might be available would be shared out in accordance with the decisions of the North Atlantic Treaty Organisation itself.

An inquiry into all that has been and is still going on. I suggest that it should take into account the deterioration in our position. It is not due to any responsibility of ours. That is to say, the worsening in terms of trade and the Persian situation.—[Laughter.] I think hon. Members opposite had for various reasons better be a little careful before they laugh at that.

I hope very much that our spokesmen at official level in this inquiry will insist that the new situation in which we are placed is taken fully into account so that our claims upon any balancing assistance there may be are correspondingly strengthened. I mention that because, although we have a serious situation to face, we are entitled to request from our partners reasonable co-operation. We agreed at Ottawa that these economic problems should be tackled jointly just as the military problems should be tackled jointly. The right hon. Gentleman may be assured that for any proposals of that kind he puts forward in this N.A.T.O. inquiry he will have the full support of the Opposition.

I come to the action to be taken at home. I suggest that our aim must be to minimise the total sacrifices involved.

Mr. Bevan

Would my right hon. Friend make that sentence rather clearer? Do I understand him to say that conversations may take place between the Government and our Allies in N.A.T.O. under which they or the United States will make a financial contribution towards Great Britain sustaining the same burden of arms, and that that would be satisfactory to the Opposition?

Mr. Gaitskell

I was saying that N.A.T.O. is making a study of the sharing of the burden of re-armament among the various countries: that, as I understand it, the American Congress has voted a certain sum of economic aid which will be divided in accordance with the conclusions of this burden-sharing inquiry which is now being made in N.A.T.O.: and that if the right hon. Gentleman decided to point out that the burden that we were carying was now all the heavier as a result of the change in the terms of trade and to the Persian situation, and that any claims we might have to any balancing assistance in this matter were thereby strengthened, he would certainly have the support of the Opposition.

Mr. Bevan

I wish to be clear about this. There was always a possibility that the £3,600 million programme originally agreed could not be sustained without a United States contribution, which was subsequently withheld. But it is not within my recollection that the previous Government ever agreed to a re-armament programme that could only be sus tained by us with direct American help to our defence.

Mr. Gaitskell

No, I was not saying that at all. The right hon. Gentleman will probably recall that instead of the direct contribution which was at one time contemplated arising on the £3,600 million programme, it was decided that there should be this investigation into the way in which the burden fell on the different members of N.A.T.O., and that any claims we might have had to Amen-can assistance would be covered by this inquiry.

That is, of course, an entirely different matter from a suggestion that we made our defence programme dependent on specific promises of American aid. We never did that. We said "We will go ahead with this programme. We assume that we are partners in this together and that any necessary assistance will be divided on fair principles," and those principles were to be worked out by the Organisation.

I was saying that our aim in these circumstances must obviously be, by the highest possible production of the right things—that is extremely important—to minimise the total sacrifice which is imposed on our people. At the same time we must ensure that the sacrifices which have to be called for are fairly shared. By that I mean quite plainly that in these circumstances, if we face—and I have warned the country on more than one occasion that this is so—a decline in our standard of living, we should see that those with the lowest incomes should not suffer any reduction in their standard of living. These are the principles which we should adopt.

I wish to say a few words about production, of which the right hon. Gentleman also spoke. During the Election there was a great deal of talk about freeing industry from controls in order to provide more scope for initiative and enterprise. My obvious comment on that is that we had certainly a far better record of production in this post-war period with controls than we had without them in the pre-war period—[Interruption.] The facts are well known.

I am convinced that the major issue here, in this year and in 1952, will be the supply of materials; and in particular the supply of steel to the engineering industry. There I agree with the right hon. Gentleman. The problem arises because we have been maintaining steel production and expanding it in recent years on the basis of very large imports of scrap from Germany. Those imports have dried up, and the problem really is how to replace them. I would say they can be replaced only by the additional production of pig-iron on the basis of higher imports of iron ore.

I suggest to the right hon. Gentleman and his colleagues that at this moment, when undoubtedly the output of steel will be the most crucial thing of all, it really is almost unpardonable to create further uncertainty in the steel industry. I do not believe for one moment that right hon. and hon. Gentlemen opposite have worked out all the implications of handing back the industry to private enterprise. They do not know what is the attitude of workers and management to the reappearance of private shareholders, and they are doing this at a moment when it is absolutely apparent that greater control within the steel industry is going to be essential, not only to ensure that we get the very utmost production, but so far as the distribution of steel is concerned.

I would put it to the Chancellor, and I hope he will take this up with the Prime Minister—I know he approaches these problems in a broad and objective spirit—I hope he will suggest to his right hon. Friend that he should make a great gesture to national unity and drop this idea. I warn him that if deliberately and wantonly he throws a spanner into the works by introducing a Bill, then the responsibility for the consequences rests entirely with him.

I turn now to the coal situation. Again, of course, the facts are available. The Prime Minister referred yesterday only to the house coal situation. He pointed out that the stocks were very much lower than they were last year. But he did not say that the general level of stocks was 1½ million tons above the level of last year. He did not say that this summer the consumers have had some 600,000 tons of coal more distributed to them, and 1,600,000 tons more than the summer before. I do not propose in the time available to discuss the question of imports of coal. I will simply say that this is a matter which the late Government considered very carefully indeed. The whole question is very evenly balanced, and I hope that some of my right hon. Friends, speaking later in the debate, will be able to deal with it in greater detail.

The whole problem which faces us here is coal exports, because unless we can increase coal exports we shall have the greatest difficulty in getting the required quantities of iron ore. I fully agree with the right hon. Gentleman that this industry, with the steel industry, is the key factor of the situation. We shall, of course, do everything we can to encourage the maximum production of coal. We shall use whatever influence is available to us to persuade all those in this industry to do their best. But I must warn the Government that if they start messing around with nationalisation they are really not going to get the results that they themselves desire from this industry.

There has been, unhappily, in the last few years a great deal of unfair criticism made of members of the Coal Board. Not so much recently, it is quite true, but in the previous Parliament, the 1945–50 Parliament, a great deal was said about these gentlemen that was grossly untrue and very unfair as well. I suggest it would be a helpful thing if the Minister of Fuel and Power were to say something to the effect that he accepted that nationalisation was necessary. I think it would be a good thing if he were to say a few words of praise to them—[HON. MEMBERS: "And the miners."] They are usually a little frightened of the miners. They generally say something nice about them, and I dare say they will do it again. Let the right hon. Gentleman put on one side all his party prejudices, let him accept nationalisation— and let him beware, by the way, of ex-coal owners advising him too closely.

Turning from production to the restrictive side of the policy, I think it is clear that we must have three types of cuts—import cuts, cuts in consumption and investment cuts, the last two intended to stimulate exports. I would only say here that it is quite clear, and the right hon. Gentleman has conceded it abundantly in his speech, that this cannot be done, except on the basis of a greater degree of physical controls.

He referred to the various cuts in imports which were to be made, and for my part I support what he is proposing to do about imports from Europe. I am sure it is necessary. It is quite in accordance with the rules of the European Payments Union, and we really have no option. I was a little surprised to hear that he was going to slow down stockpiling straight away. I will not comment on that. It is impossible to do so unless one knows what particular things are not to be produced. Although, as he says, the programme has proceeded rapidly, and in the main not unsatisfactorily, that is truer in the case of some materials than others, and therefore a good deal of discretion will be necessary. I also favour the cut in tourist allowances, and I have little doubt that we should have done the same.

The only point on which I feel disposed to quarrel with him about this side of the policy is the rather peculiar statement that he was going to consider very seriously allowing the trade in softwood to revert to private enterprise. I was surprised at that because, when my right hon. Friend the Member for Huyton (Mr. H. Wilson) was President of the Board of Trade and passed back trade, so far as Europe was concerned to private importers, he did so because he felt this was necessary in order to achieve the necessary degree of imports. We have had—and in some senses it is a justification for the policy—a very high level of timber imports lately. But we have also had to pay extremely high prices, and I should have thought the right hon. Gentleman would have considered the danger of the price going up still further if it is handed back to private enterprise.

Now we come to consumption. The right hon. Gentleman gave us some excellent maxims on public expenditure, but so far as any concrete proposals are concerned there is only one, and that actually involves an increase—a rise in Treasury Bill rates. I think he still maintains the position adopted by his party, and by Lord Woolton in particular at the election, that food subsidies will be maintained and the social services will be maintained. If he differs from that—if he has come to the conclusion that it will not be possible to do that—I hope he will say so. I do not know whether the right hon. Gentleman will give the House and the country an assurance on that point at once? I think it is very important, and we should really like to have an answer.

Mr. R. A. Butler

The first thing I can say, I think, is that I have probably said enough for one day; but I shall have plenty of opportunity of dealing with this matter at a later date. Second, I would certainly say I support any statement made by the leaders of my own party—knowing their public spirit and determination—to look after the social services, to the best of my ability.

Mr. Gaitskell

I am afraid that that qualification was not introduced by Lord Woolton. I would draw the attention of the right hon. Gentleman to another leader in "The Times" of 1st November, which, strangely enough, read awfully like some of my own speeches—but I did not write it—in which it is pointed out that if the interest charge is deducted, only 11 per cent. is expenditure other than on defence, social services and food subsidies, It pointed out that it is really quite silly to expect substantial economies in this 11 per cent.

He will, I know, find that out. While I certainly support the general intention of keeping down expenditure as far as we can, and, of course, keeping the greatest degree of efficiency, I must tell him that what he announced to the House that he is doing is precisely what I did myself last year. It is none the worse for that, but I think that the House should know that it may not lead quite so far as the right hon. Gentleman led us to believe.

Mr. Butler

I may be more successful.

Mr. Gaitskell

The right hon. Gentleman may be more successful. On the other hand, he has the same officials to do the job for him. I, personally, found them extremely good and efficient.

There is one matter of public expenditure, however, of which we have heard a good deal, and that is the cut in Ministerial salaries. We were told by the Prime Minister yesterday that this was a signal. It was not to be taken as a reproach on the Labour Party—that was very nice of him—but as a signal. I do not quite know what he meant by that.

One asks oneself first what is the net gain to the Exchequer from this very generous action of the Government. Of course, the answer is that it all depends on the income of the individual concerned. It would be very invidious, and I have no intention of doing it, to take the individual incomes of Ministers, and certainly I would not know them precisely. But I must point out that to those who are in the happy position, shall we say, of paying 19s. 6d. in the pound Income Tax and Surtax, the benefit to the Exchequer of this £1,000 cut in salary is precisely £25. There will be a range of saving between that and the saving on the salary of the Cabinet Minister who has no other income at all.

The saying on him will be £300, so that the average saving is somewhere between £25 and £300 per cut of £1,000.

Mr. William A. Steward (Woolwich, West)

What about the saving on Ministers' cars?

Mr. Gaitskell

On the question of cars, I feel that any business paying a man £5,000 a year—I am not saying that Ministers are over-paid: after all, I have just been one and there is no reason why I should say that, and I do not think that they are; they work very hard indeed for their money—but any business paying a man that amount of money would surely take the elementary precaution of getting as much of his time as they could. They would probably find it paid them to provide a car and a chauffeur. It is a rather silly thing that a £5,000 a year Cabinet Minister should waste a great deal of his time driving his own car around and trying to find somewhere to park it, which is difficult nowadays, when he would be much better employed dealing with his papers and paying some attention to what the Opposition are saying in the House of Commons as well.

I know that some right hon. Gentlemen opposite will have private cars and chauffeurs available to them. I do not complain of that. If, in fact, the proposal had been not to give cars to those who were sufficiently wealthy to be able to provide their own cars and chauffeurs anyhow, that would have been a different matter; but, of course, that is not the proposal.

I was not clear what the Prime Minister meant by the word "signal." Is it a signal to other wealthy people? Is it an appeal to the directors to cut their fees and high salaries in business, or, for that matter, to the Civil Service and the nationalised industries? Are they all to come down? I wonder. This was a very odd way of proceeding if that was intended.

Obviously what is really needed if the Government intend to cut the incomes of well-off people is a stiffer rate of Surtax. That is the only fair way of doing it as between the different classes. The present proposal takes £25 off the best off Cabinet Ministers and £300 off the worst off Cabinet Ministers. That is very unfair as between Cabinet Ministers. I can see a lot of sympathy expressed from the opposite benches. There may be one or two who are among the worse off.

I seriously suggest to the right hon. Gentleman that he should bring in a Bill to raise the rate of Surtax. I can assure him, speaking for the Opposition, that we should be glad to facilitate that and, what is more, we will stay for a week longer after "Early in December" in order to put it through.

Colonel Alan Gomme-Duncan (Perth and East Perthshire)

This is a red herring.

Mr. Gaitskell

This was your red herring. I have painted it blue.

The right hon. Gentleman also spoke about the dividend policy. I was flattered to find how very much he used the same words that I used in my Budget and on later occasions. Obviously, we must reserve comment on the Excess Profits Tax. One of the questions in which we shall be interested is whether it is to be 100 per cent. or not. The sooner we could be informed of that, the better.

I turn to the question of controls over consumption. Here I felt that the right hon. Gentleman was really omitting something. I think that he would probably agree with me, in the light of his very Socialistic statement, that we could not possibly rely on monetary weapons alone here. There is a danger if we simply cut down the consumers' purchasing power that the effect may be that they buy less tobacco and less beer, and that the Revenue suffers, while they continue to buy all these articles which really ought to be exported.

There is the further danger, to which the right hon. Gentleman the Minister of State for Economic Affairs often drew attention when he was on the Opposition benches, that any cuts in incomes for spending purposes would be offset by dissaving. Therefore, I suggest that the right hon. Gentleman should consider extending the use of physical controls to restrict deliberately supplies to the home market where the goods can profitably be exported.

Just as the cuts in imports were, of course, the result of inquiries and investigations which we set on foot several months ago, so also in July we set on foot an inquiry as to what further steps might be made here. I repeat what I said earlier. The right hon. Gentleman has said a great deal about cutting imports, but very little about stimulating exports. It is far better for all of us to right the balance of payments by higher exports than it is by reduced imports.

Sir A. Salter

The right hon. Gentleman has generalised an argument. I made about dis-saving as applied to a particular form of tax to which it was specially relevant. I did not make the argument general.

Mr. Gaitskell

I do not think that there is very much between us there.

I wish to say a few words about controls over investment. I entirely agree with the right hon. Gentleman. I do not think that the present situation can be overcome by reducing consumption alone. There is the whole problem of whether we can find the markets for exporting additional quantities of consumption goods. There is the difficulty, of which we are all very much aware, of expanding the whole output of the engineering industry to carry both defence, exports, and home demand. Therefore, I cordially agree that reduced investment is necessary.

I might say to hon. and right hon. Gentlemen opposite that they will find it very difficult to explain some of the comments they made earlier this year about reducing initial allowances. But, after all, we are very glad to have won them over at last, even though it has taken rather a time, and a General Election too.

I come to something which I must confess seemed to me to be not quite in keeping with the rest of the right hon. Gentleman's speech. That is what he had to say about housing. He began, if I remember rightly, by saying that the building industry was heavily overloaded and that in fact the total claims upon it exceeded by some 10 per cent. what it was capable of producing. He then went on to say that, apart from housing, there was to be, except in certain very special cases, a complete suspension of starting dates for all other building. He did not tell us exactly what he had in mind.

Are we to understand that no factory building whatever will be started in the next three months, that no schools, no hospitals will be started? What has he in mind? We stopped the starting of offices some months ago. I hope we shall have some explanation, perhaps later on in the debate on these matters, but I must say that it is all very well to say that, by taking labour off some houses started now, we will manage to get a better 1952 figure. What is the 1953 figure going to be?

Finally, I repeat that I think the right hon. Gentleman was less than frank in trying to persuade the House, after what he said about the timber situation, that we could, in these circumstances, both carry out the housing programme at the kind of level which he has in mind—that is, above the present level—and also carry out our defence programme and do the minimum essential of industrial investment. This matter will certainly be probed very much further by my right hon. and hon. Friends in the debate.

I come to the question of credit control. As the right hon. Gentleman knows, I have always recognised that it was necessary to keep a tight hold on credit, but I have opposed—and I have made this plain before—suggestions put forward from time to time that the best method of doing this was to increase the Treasury Bill rate. The right hon. Gentleman has admitted that the gross cost—I am not sure what he had in mind, but it must be less than half per cent. increase—would be about £25 million; so far as I recollect the figures, a half per cent. increase in the rate would involve a gross cost of £30 million and a net cost of £16 million. What is he going to do? What is the exact purpose of it? What is the argument? The right hon. Gentleman has given us nothing at all on this. He simply accepted the mumbo-jumbo idea that if you have higher short money rates somehow or other it will keep credit down.

What are we trying to do here? Surely, he will agree that we are trying to limit advances. That is where the main inflationary influence from the banking system comes. What is the effect which a Treasury Bill rate of¾or⅞ per cent. instead of one of half per cent. is going to have on the level of advances? I do not know; I hope the right hon. Gentleman will seek an early opportunity of saying something further on the subject, or perhaps the Financial Secretary may do so, if he is to take part in the debate. I must tell the right hon. Gentleman that I think he has been "had" about this. What is involved? It is a tiny increase in the Treasury Bill rate and the transfer of a sum of money, let us say, on the right hon. Gentleman's own figures, of £12 million or £13 million which he would be very glad to save in public expenditure if he could, to be made from the taxpayer to the bank shareholders. That is all it amounts to. That is exactly what is involved.

If the right hon. Gentleman would say to us, "I am very sorry, but the only way I can control inflation is by paying the banks a lot more," we would listen to him, though we would take a good deal of convincing. He has not produced any arguments to show what the purpose of it is. I am afraid we must take the gravest exception to what seems to us to be a pure waste of money, quite irrelevant to the present situation and totally unnecessary.

If the right hon. Gentleman were prepared to go to the clearing banks, as I hope he will be, and say to them, "You have to control the level of advances and not allow them to go beyond a certain figure; they must not go beyond that," or would make an arrangement by which the level of advances was directly dependent on the reserves they hold at the Bank of England, while at the same time they were under an obligation to take up whatever Government paper was available, he could control credit inflation. All sorts of ways of producing this result are available to him if only the right hon. Gentleman is not deceived by the advice he receives, if he is prepared to face up to the banks and to tell them what they ought to do. I am sorry that, so early in his career, the right hon. Gentleman should have made such a serious mistake.

Mr. R. A. Butler

Has the right hon. Gentleman studied the matter in the spirit of the Statute nationalising the Bank of England? No doubt the right hon. Gentleman has studied it carefully. Does he think that the dictatorial language he uses fits into that picture?

Mr. Gaitskell

I do not think it is dictatorial language to tell the banks what they ought to do in the national interest.

There is one other subject to which I must refer.

Mr. Butler

May I ask the right hon. Gentleman if, during his tenure of office, he gave to the banks the orders which he is now suggesting that I should give them?

Mr. Gaitskell

I do not think it is necessary to give orders, but to discuss the matter and show them what you want done.

Mr. Butler

Did not the right hon. Gentleman notice in my speech—and I hope he will read it more carefully than he appears to have done—that I used language indicating that, in the right spirit, the proper approaches would be made to the banks?

Mr. Gaitskell

I am delighted, but, in that case, I cannot see the purpose of putting up the Treasury Bill rate at all.

The right hon. Gentleman has announced a programme which, with some exceptions, such as the one we are now discussing, is not unacceptable to this side of the House. We recognise the gravity of the situation, and we realise that firm action is necessary, but I must confess that I have some anxieties about the position of the right hon. Gentleman in carrying out this programme within the Government.

I want to ask him one or two questions about the functions of the Chancellor. Here we have the co-ordinating Peers, one looking after food and agriculture, one looking after transport and fuel and power, and then we also have Lord Cherwell, who is likely to co-ordinate a good deal, and who, I understand, has control of the Central Statistical Office. I am not quite clear about that. Is he also to have control of the Economic Section, which was previously very useful to the Chancellor, or will the Chancellor still have direct contact with the economic advisers to the Government?

Finally, I should like an answer to this question. I cannot delay longer, though I should like to spend much more time on this subject. I want the answer to one simple question. Is the Chancellor of the Exchequer today responsible for coordinating the economic affairs of the Government, or is he not? Could the right hon. Gentleman tell us that? I am sure that, if he does—[HON. MEMBERS: "Answer."] I am sorry, but I did not mean to embarrass the right hon. Gentleman.

Mr. Butler

I am not in the least embarrassed. The right hon. Gentleman seems to have adopted a new technique in our debates. He suddenly uses threatening language, leans over the Box and puts a question, and, if it is not answered, he attempts to prove that one is embarrassed. No tenant of the position of Chancellor of the Exchequer has ever had more reliance placed on him by his colleagues; no man has ever had less reason than I have to complain of the powers at my disposal, but the ultimate responsibility for all Government policy rests with the Cabinet, which is the good constitutional doctrine which was taught to me.

Mr. Gaitskell

I must leave my colleagues to pursue this subject further. It is a very interesting and important one, and they are very interested in these coordinating Peers. We have a fellow-feeling for the right hon. Gentleman, confronted with Lords Woolton, Leathers and Cherwell. What is he to do? For our part, we assure him that we feel that the House of Commons should be in the strongest possible position in this Government, and I hope the matter will be further pursued.

Mr. Butler

The further the right hon. Gentleman and hon. Gentlemen opposite pursue this matter, the happier they and I will be.

Mr. Gaitskell

My right hon. Friend the Leader of the Opposition explained yesterday that we should not be a factious Opposition, and that we should not oppose for the sake of opposing, but we should strongly oppose any measures not in accordance with the public interest. There can be no doubt that the public interest does require that action should be taken swiftly to deal both with the dollar situation and the United Kingdom balance of payments.

We have never for one moment pretended otherwise. I think that the evidence I have produced to the House this afternoon makes that perfectly plain. We set in motion some time ago the consideration of the detailed steps which had to be taken and I am glad to see that most if not all of what the right hon. Gentleman announced this afternoon sprang directly— and to that extent I must share responsibility in it—from inquiries we set on foot. Naturally, we must reserve the right to criticise any particular points in detail, because I am not saying that we made Government decisions on these issues, but merely that we set the necessary inquiry going.

We shall certainly support in general restrictions on imports provided these fall on the less essential items first. It has always been our policy to use controls to put first things first, and we shall continue to support that policy while we are in Opposition. In the same way, we certainly accept the need to stimulate exports by all possible ends, and I have suggested one additional set of measures which might be considered. We shall certainly accept, too, that investment in industry, because of the difficulty of the engineering industry in meeting all its demands, will have to be curtailed.

But we shall not accept measures which under the guise of national necessity involve a cutting down of social services or food subsidies for the benefit of wealthy tax-payers. We shall resist firmly any attempt to abandon economic planning and controls and to rely simply on monetary inflation. We shall not tolerate policies which are aimed at a return to the state of affairs that existed between the wars or attempts to set back the fairer distribution of income which has been achieved during the last six years.

The difficulties are serious, but we can overcome them provided the Government face the realities of the situation which they have so often ignored during the past years when they were in Opposition, and provided, too, that the Government are prepared to accept at long last—and I must say the right hon. Gentleman has done us fairly well in that way today—the policies of controls and fair shares which are not only absolutely right in themselves, but indispensable in the present circumstances.

5.33 p.m.

Mr. Walter Fletcher (Bury and Radcliffe)

I wonder if the right hon. Member for Leeds, South (Mr. Gaitskell), did not forget very frequently during his speech that he was not only addressing this House, but that this debate today is being listened to and observed very carefully by those outside this country who share the anxiety of the people of this country in the future fate of their currency as being a symbol of their own future lives and prosperity. I can hardly believe that one who has held the high office of Chancellor of the Exchequer would have descended so low as he has done in many parts of that speech, and I say as one who has considerable knowledge of what is being thought in Europe, in the Commonwealth and in America that he has done a very grave disservice to this House and country and to his own reputation by some of the frivolous and, I think, mischievous things he has said.

It was extremely noticeable that the point which raised the greatest enthusiasm and cheers among his own followers was that little bit of rather effective playacting in which he indulged about the nationalisation of steel. If there was ever anything that more resembled Satan rebuking sin it was the right hon. Gentleman getting up at this juncture, when 18 months ago he was begging his Government in all seriousness not to take the totally unnecessary and obviously harmful step they took. When we take the remedial step to restore the patient to life and vigour he comes and gives us a lecture on our behaviour.

Mr. A. C. Manuel (Central Ayrshire)

What about rubber?

Mr. Fletcher

I shall talk about that. It is a good thing to talk in this House on something about which one knows, but that is not a universal practice on the benches opposite. The only resemblance between the two speeches we have heard in this important debate was their clarity of exposition, but they seemed to do nothing but unveil to us more grim facts than even we had anticipated, but I am tempted to say, as Sidney Smith said on one occasion when Pitt with matchless eloquence and clarity announced a whole series of unpleasant things and disasters, God send us a stammerer. My right hon. Friend the Chancellor produced a very great many figures in this debate, and that, I think—as is always the case when the Chancellor of the Exchequer is exposing to the world the economic situation of this country—invariably has one effect which cannot be avoided. It makes people think too much in terms of the cash position. The one thing we have to remember at the present moment is that this is a crisis of credit and not of cash. The motto of right hon. and hon. Gentlemen during the nearly seven years of their tenure of office was always, "Take the cash, but let the credit go". From the days of Dalton finance right the way through, it has always been, "Take the cash and let the credit go."

Certainly what the Chancellor said to us today—so far as we on these benches are concerned the restoration of credit is the main task we have in front of us—took a great step forward by the dead honest way in which he presented the facts. I think we can now say, "Restore the credit and the cash will flow, because that is exactly what he intended to do in the very clear exposition he gave us.

It was a great blow to me to hear that the whole sterling area is in deficit. It is hard to envisage that the sterling area which produces the wool, copper, tin, rubber arid all the things we are selling for dollars at relatively high prices should, nevertheless, be in deficit today, and it makes one perfectly certain that the difficulty of emerging from that crisis is going to be even more difficult and even longer than one had anticipated.

It is, I know, the normal practice for everybody on both sides to end their economic speeches by saying that we must stand on our own feet, and we propose to do so at the first possible moment. We have all said it, but I believe that if one is really completely honest the thing which at the present moment one must say is that we are back almost where we were in 1945. Partly through external circumstances, but partly through mismanagement, we have been brought to the position where we should say that we wish to stand on our own feet at the earliest possible moment, but that to do so we shall need a long period during which we shall require credit reinforcements and help, and that must come from about the only source from which it can come.

It is very unpopular to do as I am going to do now and say I believe that unless we do obtain, and obtain fairly soon, that amount of dollar credit which will give us the breathing space in which to restore ourselves, then all the efforts we are going to make, including the admirable start which has been made today, will not restore us to strength in time to carry out our full part in rearming, in maintaining this country on a proper standard of living and in continuing the export drive. We need more breathing space.

Some may think that we should drop one of these three things. I do not think so, but it makes it all the more urgent that we should obtain, and do it quite openly, valuable assistance. The chances of getting it are very much better today than they were four weeks ago. Certainly the confidence which has been restored by the Chancellor's speech and by the remedies he has proposed, which I think are balanced and fair though they will harm and hurt everybody in due course—there is no use denying that—are more likely to restore confidence overseas than anything we have seen for a long time.

Mr. S. N. Evans (Wednesbury)

The hon. Member is a great authority on sterling area commodities and, of course, this is one of the keys to the balance of payments problem. I wonder whether he would like to say something about the buyers' strike that has been in progress against tin and rubber, which of course has contributed so substantially to the present position.

Mr. Fletcher

Would the hon. Member explain in detail which buyers have struck and which have not?

Mr. Evans

The Americans have deliberately kept out of the market. It is their failure to take normal quantities of tin and rubber that has contributed to the situation.

Mr. Fletcher

If the hon. Member will look at the figures he will see that an increase in American stockpiling is going on every month, and he will realise that he is basing his argument on facts which are entirely non-existent. The buying methods may have changed, but they have continued to purchase, and these commodities have not fallen in price owing to the preponderant role America plays in buying them.

Meanwhile it seems to me there is one thing we should study very carefully—and I am going to make one or two practical suggestions later one. That one thing is productivity in this country. I represent a working man's constituency in Lancashire where there is a very wide sweep of industry of every sort. It is not only textiles and engineering; it is the whole lot. I am convinced that a bigger and better realisation of the need of increased productivity exists today than ever did before. The offer of the T.U.C. and the message they have sent out are probably the most significant and encouraging things that we have had for a long time. But it is only right to say—and though occupants of the Front Bench can say it, it must also fall to somebody on the back benches to say it—that we are still not getting the maximum effort out of labour and out of management that we could and should have.

There is in every little group, whether management or labour, a tiny percentage which prevents the honest-to-god working man who really does want to do a job and those at the top who want to do an extra job from doing that job. They are frustrated to a considerable extent. In nearly all businesses there are some who wish to pursue a selfish policy against the public interest. There are bad hats in all walks of life. It is no use pretending there are not. And there are a great number of good hats.

If the T.U.C., working in conjunction with the Government, will now set themselves to the task which a vast majority of their backers—some of whom to the regret of hon. Members opposite continue to vote for me—wish them to undertake; if they will release themselves from that sort of complex they have against turning round and crushing those who give too low a yield in productivity, a very large number of our problems will be solved. I do not think that there is a Member of this House who does not believe in his heart of hearts that that is true, though he may not very much like to say it.

I should like to refer to one point in the speech of the right hon. Gentleman, where he talked in a rather glib way about increasing exports by 10 per cent. We do a very great export business all over the world in many things, and the right hon. Gentleman must know that to pass that off in a few phrases is not a proper representation of the increasing difficulty throughout the world arising from great competition from Japan and Germany, which I dared to mention in this House over six years ago in the first speech I ever made, and which is now hard reality. Lancashire knows it full well from the point of view of textiles. Many of the world's markets are cut off from us entirely, and others are near saturation point. It is more difficult to sell exports at present than it has ever been, with certain exceptions, and those exceptions are things which are in short supply everywhere.

If we count too much on increasing our exports easily over the next two or three critical years we shall be living in a fool's paradise. It is very important to realise that other countries, and notably Japan, have certain advantages over us. Some arise from the credits they are receiving and the assistance, technical and otherwise, they have received in the past; and they have no war debts round their necks. Today they are freer—and of course there was no possibility of their remaining in subjection permanently. They are creating just that amount of competition which is making it more difficult for us to maintain, and therefore more difficult for us to increase, both the volume and the value of our exports.

A great deal depends upon how our raw materials are obtained. When, some time ago, I dared to warn the Government that they should begin to buy, they waited six months after devaluation, and we are paying heavily now for those six months. Advantage was not taken of the fact that the prices of commodities had not risen in the way sterling had fallen. Now we are paying dear. Those countries which did take advantage of that gap have now the advantage over us. It takes a long time indeed for mistakes of that kind to pay off.

It is indeed some sign of the gravity of the situation, which is possibly greater than many hon. Members realise, that we are abandoning stockpiling at the present moment. It is not quite the final life-belt on board the ship, but it is not very far off it. If we are talking in terms of effective rearmament, not only men and weapons, but material out of which those weapons are manufactured must be there in sufficient supply. To call off some of our stockpiling at the present moment is indeed a pointer to the grave difficulty in which we stand.

The Chancellor of the Exchequer talked about unconventional methods being looked at. Well I am going to suggest one. I suggest that now when the dollar gap is so extraordinarily large and dangerous that we should resort to barter, as we did in 1939–40, when very large quantities of tin and rubber were bartered for cotton. That was one of the ways of ensuring supplies for Lancashire in a year when the American crop was 18¼ million bales. It is likely to be as great next year. Yet with this enormous increase we in Lancashire are still in doubt whether we shall have enough.

A barter scheme is not very complicated. It avoids the strain on the dollar. If one takes the prices of rubber, copper and tin and equates them, one is able to ensure, without bringing it into the dollar balance directly—though it does come into it directly later—that both those in the United States who want those goods have an arms drive that will help us, and that the manufacturers here have the vital raw materials about which now they have very grave doubt.

No doubt one of the things that have aroused either derision or worry has been the housing programme. I happen to be one of those sitting on these benches who never liked the 300,000 houses target. [Laughter.] I liked the 200,000 one a jolly sight less. Now hon. Members opposite can laugh. [An HON. MEMBER: "What is your programme?"] It is a thoroughly sound one. I am not thinking in terms of targets. There are so many features in the situation.

I believe that this hypnotism of noughts may do some harm, for this reason. It is perfectly clear from what we have heard today, and from what we have heard before, that we can improve enormously on the figure of 200,000 houses which we have heard from the other side of the House. But I want to ensure that we keep some sort of balance in the whole housing question, that we do not sacrifice to new housing the maintenance and repair programme which is equally important, and in many areas more important. I believe that if both sides of the House were to give up this attack of "nought-itis" from which we are suffering at the present moment—

Mr. Frederick Messer (Tottenham)

"Naughty-itis."

Mr. Fletcher

No, I like to name my own diseases, just as I like to choose my own drinks. I believe that if we say that, given a greater effort, with more intelligence, better planning and more assistance from the building industry, we shall be able enormously to increase the building and maintenance programme, we shall be putting the matter in a better light and in a way which is better understood.

If we build 299,000 houses hon. Members opposite can point their fingers at us and say, "You have failed," but we shall still be 99,000 houses better off than they were. I do beg hon. Members not to continue with this hypnotism of zeros. I am convinced from what the Chancellor said today that what we promised at the Election, which was priority for housing, is going to be a reality; I am enormously comforted by the realistic way in which he handled this question, and I know from those who are going to assist him that he will be thoroughly supported.

There are two points which exercise my mind a good deal; first of all, whether we are going to be able to maintain the sterling bloc as a really homogeneous whole pulling together and not a mixture of countries with different problems tied together by fear. I believe that the common interest to maintain the sterling bloc is much the greater of the two motives. Nevertheless, let us be perfectly clear about it. There are today more stresses inside the sterling bloc than we have seen before. That is to a great extent due to the bad policy which has been adopted towards the members of the Commonwealth in the last five or six years, and it is one of the first tasks of this Government to knit together the sterling bloc and the Commonwealth again.

But do not let us forget this. There is a very great danger, as we go on, step by step, giving political autonomy to areas inside the sterling bloc, that their first reaction will undoubtedly be: "The dollars earned in this area shall be de voted to us." If we have that attitude inside the sterling bloc in two or three years we shall see the standard of living in this country drop by something like 20 per cent. in a short while.

The danger of disruption inside the sterling bloc has been one of the greatest bugbears at the back of the mind of every responsible person in this country for a long while, and it is an immense relief to me to see the set-up which the Prime Minister has made, because it will reassure the members of the sterling bloc on their first fear, which is defence. The team which has been put in the Colonial Office is enormously powerful not only from the point of view of Colonial development but also in economic matters, and that is the best possible augury that we are starting on the up grade again the Dominions and the Colonies.

But I would make one suggestion. When the meeting on economic matters takes place the pros and cons of a Commonwealth bank should be studied. One of the difficulties at the moment is that there are differences of opinion very frequently between the Government banking institutions in parts of the Commonwealth and the Bank of England. If there were a bank in which all had a common interest, it might not be easy to set up straight away, but it would be some protection against the danger of some of the members breaking away from the sterling bloc. I believe that that is worth consideration.

Moving, as I frequently have done, in these areas, I can tell the House that one is always asked the same question: "The monetary policy which is dictated from the Treasury to the Bank of England is very often inimical to our interests; why should we who are, on the whole, the greater suppliers of dollars to the main stockpile, be bound to a great extent by those rules and regulations?" There have been beginnings of breaking away already; I think it is very important that one should bring into the open the fact that this state of things exists, because when we co-ordinate defence and economic policies within the Empire, as we are doing now, we shall have taken possibly through that means a very considerable step forward.

Another suggestion I should like to make is this. I know the Government have a very great deal to look at, but as soon as the main lines have been worked out should we not renew the question of sterling balances and the unrequited exports that arise? After all, these settlements were made in a very different climate. It is perfectly normal practice in business—and I do not hesitate to quote from business practice—that when debtor and creditor find that their situations are very considerably changed they get together, not regarding the letter of the law so much as its spirit, and are enabled to revise and bring up to date by mutual consent arrangements which are too onerous for one or other of the parties to continue to bear.

The review we have had today convinces me as I think it must everybody else that the situation could not be more grave. The question of unrequited exports going out in a considerable volume that adds up to a very great sum at the end of the year, which causes great hardships to be put upon us, should certainly be reviewed at the present time.

I will conclude by saying that I came into this Chamber today extremely worried about what we were to hear. I cannot say that what we heard was palatable, but I can say with absolute honesty that the Chancellor's speech has restored in my mind the highest possible degree of confidence in this country and will, in my view, restore it in the important areas outside this country on whose actions, just as must as our own, depends the stability of sterling.

5.58 p.m.

Mr. H. Hynd (Accrington)

This debate is of particular interest to those of us who have sat in the last two Parliaments on the other side of the House. To listen to the entirely changed tone of the speeches from hon. Members opposite is in fact more than interesting; it is a revelation to us. Certainly it is encouraging to hear their much more realistic approach to affairs today than has been evidenced in the speeches which they inflicted upon us during the last six years from this side of the House. I think that if this Election has resulted in nothing else, it has resulted in a tremendous amount of education to those hon. Members who now sit opposite.

In the peroration to his speech, the Chancellor of the Exchequer said that he hoped that the result of the Government's proposed actions would surprise the world. Be that as it may, I am sure that the speech that he delivered today will certainly have surprised hundreds of thousands, and perhaps millions, of those who voted for Conservative candidates at the Election. Many hon. Members opposite must have very guilty consciences, feeling that they have been elected under false pretences. For instance, those electors who took seriously the promise of 300,000 houses will be astonished to read in the papers tomorrow that in the opinion of the Government the building industry is already 10 per cent. overburdened, that it is attempting more than it can now achieve and that the prospect of 300,000 houses is fading into the dim and distant future.

Those who took seriously the broadcast promises about more food will be disappointed to learn that there is to be less food imported and that the housewife's choice is to be greatly restricted rather than expanded. Local authorities, who have complained in the past about interference from Whitehall, will be alarmed to learn from the Chancellor's speech today that there will be closer examination of the expenditure of local authorities; also by the other indications which he gave that they will be restricted, for example, in their building and that municipal rents will have to be increased because of the higher rate of interest which is to be charged on loans from the Public Works Loan Board.

Squadron Leader A. E. Cooper (Ilford, South)

My right hon. Friend did not say that at all, and municipal rents of existing council houses will not be increased by the process which is now being applied, because in those cases the loans have already been granted by the Public Works Loan Board. The increase applies only to new loans.

Mr. Hynd

The hon. and gallant Member says this increase will apply only to houses built in future by local authorities. That may be the practice of his own local authority—and I know he is a member of a local authority—but it is certainly not the practice of other local authorities, who spread the load over all their council houses, who take the housing account as a whole and who, in order to make the account self-supporting, adjust the rents of all council houses accordingly. I am afraid the hon. and gallant Member is a little too optimistic if he thinks the increased rate of interest on loans from the Public Works Loan Board will apply only to future houses. I am afraid he will find many local authorities, if not his own, taking the view that it will mean an increase in the rents of existing council houses, too.

There was a very obvious threat in the Chancellor's speech that there will be higher prices because of fewer imports. If there is a scarcity of imported goods, it will naturally lead to an increase in prices for those goods. Then when the Chancellor said we should learn not to promise more than we can perform, I imagine he was casting his eyes back to many of the election addresses which are in existence and perhaps was feeling rather sore that so many promises were made by Conservative candidates during the election campaign.

It was very ominous that, when he was challenged by the late Chancellor to give a pledge that food subsidies and the social services would not be attacked, the right hon. Gentleman was unable to give that pledge. First, he would not reply at all, and when he was forced to his feet he deliberately declined to give that pledge. I regard that a very ominous state of affairs, and it seems to me to presage an attack on both food subsidies and the social services.

Another ominous point during the debate was the remark, repeated today, that if unpopular measures were found to be necessary over and above those already announced, the Government would not hesitate to take those steps. Taken in conjunction with that the fact that Parliament is to be sent away for over two months, we must ask whether it means that the Government are hesitating to announce certain unpopular measures today but will introduce them when Parliament is not here and when the Government cannot be challenged on the Floor of the House. It certainly looks very much like it.

Another important point today was the announcement that there is to be less stockpiling for re-armament. If, during my election campaign, I had suggested that step as a possible economy measure, I should have been called a Bevanite. I was called a Bevanite for other reasons, and I certainly would not have made such a suggestion because it would have confirmed the suspicions of certain electors who felt that that label ought to be attached to me.

Mr. Cecil Poole (Birmingham, Perry Barr)

The hon. Member would have had a bigger majority if he had done so.

Mr. Hynd

There is one measure which has not been mentioned and about which we ought to have some information.

Mr. F. A. Burden (Gillingham)

Does the hon. Member suggest that his right hon. colleagues are not reliable?

Mr. Hynd

I made no such suggestion. What I meant was and I think it was—apparent to the remainder of the House—that any attempt to interfere with the rearmament programme was immediately dubbed Bevanism, or given some such label, during the election campaign; yet here we have a Conservative Government saying that we are to cut down re-armament by cutting down stockpiling. [HON. MEMBERS: "No."]

One measure was announced by the Conservatives during the Election about which we have heard no details so far, and that is the proposal to alter the constitution of the House of Lords. Before this debate finishes we shall, I hope, be given by someone on the Government Front Bench an indication of the Government's intentions in that respect.

I want to take this opportunity to mention two specific points. The first is that when the Government say, quite rightly, that there is a shortage of labour and that unconventional measures must be taken to deal with that and other problems, I suggest they should seriously consider the proposal that they should abandon any idea of calling up Z Reservists next year. Part of the Z Reserve was called up this year and undoubtedly it resulted in a fairly substantial drain on the manpower of the country. It was, perhaps, for only a short period in each case but, added together, it amounted to a substantial reduction in the total manpower available to industry.

Since last year the flow of National Service men into the Territorial Army has begun, and I suggest that a certain amount of risk might well be taken by not calling up any more of the Z Reserve next year. A decision to that effect ought to be made and announced now. As a result, to that extent the manpower in industry will be reinforced. I do not think the same necessity for calling up the Z Reserve will exist next year as existed this year, and the decision not to call them up would be a small but welcome contribution to industry.

The second point I want to make will not be received very enthusiastically by the Chancellor of the Exchequer. It concerns old age pensions. While we appreciate the gravity of the situation, I think we are still entitled to expect that, although expenditure must be reduced, we shall continue to deal with anomalies wherever they are found. I suggest that we are faced with a first-class anomaly at present in the treatment of old age pensioners.

The 4s. increase in the pension which was given last year, despite all our financial difficulties, applies only to a certain section of old age pensioners. Those men who have reached the age of 65 and those women who have reached the age of 60 since 1st October this year find that they are not entitled to the extra 4s., nor are certain other old age pensioners. This is an anomaly which the Chancellor of the Exchequer might very well correct, even if it costs a certain amount of money. I think the money involved would be well spent, and that the decision to spend it would be a very popular move and would help. perhaps, to sugar the rather unpleasant pill which the country is having to swallow.

6.9 p.m.

Mr. Angus Maude (Ealing, South)

Before I say what I have to say about the speech of my right hon. Friend the Chancellor of the Exchequer, I must take a few moments to deal with the remarkable speech of the hon. Member for Accrington (Mr. H. Hynd). He started by saying that we on these benches had only just started to make realistic speeches and that we should be sitting here with guilty consciences in view of the things we said during the General Election campaign. Coming from the benches opposite, that seems to me as good an example of the pot calling the kettle black as I have ever heard. Tomorrow I will send to the hon. Member for Accrington a copy of my election address, and I advise all my hon. Friends to do the same.

Squadron Leader Cooper

They can read them during the Christmas Recess.

Mr. Maude

I made a number of speeches, not only in my own constituency, but in others, in every one of which I made it my theme song that we were in a first-class economic crisis, the full details of which had not been divulged by the then Government. I and, I think, most of my hon. Friends went out of our way to make it clear that the steps which would have to be taken to deal with this crisis might not be taken without some people getting hurt, and that it was pure dishonesty to go on through crisis after crisis without making it clear to the people that this would be so.

Mr. H. Hynd

I shall read the hon. Member's election address with very great interest, but would he please say, if this was the tone of his speeches during the election, whether he went out of his way to repudiate the promises made by his party leaders that we should, for example, have more red meat and 300,000 houses?

Mr. Maude

I shall deal with this point in a few moments, because that method of putting it is about as dishonest a way as the hon. Member could possibly choose, and I will illustrate why.

Mr. David Logan (Liverpool, Scotland Division)

Get on with something else instead of election speeches.

Mr. Maude

If the hon. Member already wishes to get the taste of the General Election out of his mouth, for which I do not blame him, I suggest that he leaves the Chamber until I have finished, because I am dealing with the points of the hon. Member for Accrington, which, I think, I have a perfect right to do.

In the election, for example, the candidate opposed to me, who, I have no doubt, was a very good candidate, and candidates in constituencies near mine which I visited, gave no indication whatsoever to the electors in their speeches that the situation with which the Government would be faced upon being returned would be the situation with which my right hon. Friend has been dealing today. We heard nothing whatever about a balance of payments crisis equal to that of 1947 or of 1949. In fact, the whole way in which the economic question was dealt with from the platforms of the Socialist Party was singularly reminiscent, to my mind, of the way in which the Supplementary Estimates for the National Health Service were dealt with in 1950: they were mentioned as seldom as possible.

The hon. Member for Accrington went on to say that the Chancellor today caused the hope of 300,000 houses being built to vanish in smoke. In fact, of course, quite the opposite was the case. For the first time—certainly in my experience of the House, which, I know, is not very long—we did hear somebody who is willing to tackle fundamentally the causes which have prevented an increased number of houses from being built—among them the fact that the building industry has been overloaded with competing forms of building, some of them far less necessary and far less ardently desired by the people of this country than houses to live in. He proposed to cut some of those, if I understood him aright, to make sure that the the way is clear for building more houses.

The hon. Member went on to say that no mention had been made of the danger of price rises in those commodities whose imports were to be cut, his simple argument being that since they were to be scarcer the demand for them would make the prices rise. That overlooks the fact that my right hon. Friend did also mention steps which he proposed to take to reduce the degree of inflation in the domestic economy. He did make one point quite clear, that if we cut the inflationary effects of import reductions, by measures to reduce the amount of inflation at home, price rises should not take place, particularly in view of the fact that the substitute commodities with which those reduced imports compete are already either rationed or price controlled.

I do not think it is necessary for me to deal in any detail with the suggestion that the cessation of stockpiling amounts to a cut in the re-armament programme. Of course it does not, because there was no suggestion whatever that we were to cut imports of the materials currently being used in the production of armaments. So there really is no foundation for the rather mischievous suggestion that we were proposing to cut the current rearmament programme.

The final question in the hon. Member's speech, which I should just mention, was that of House of Lords reform, and he appeared to think that immediate proposals should already have been made. I have no doubt that this matter will be dealt with by one of my right hon. Friends, but I may in the meantime suggest to the hon. Member that, unlike his own party when dealing with the university seats, we prefer, in our party, to make constitutional changes by all-party agreement as the result of discussions between parties; and we are pledged to initiate those discussions.

Mr. David Weitzman (Stoke Newington and Hackney, North)

I think my hon. Friend was making a mistake and doing an injustice to the Government, for have they not already dealt with this question by the putting of Ministers in the House of Lords?

Mr. Maude

The Prime Minister has already eked out the hon. Member's obvious incapacity in mathematics by adding up the number of peers in this Ministry and comparing it with the number in the last. There are two more. I checked that figure, and it is quite right.

Mr. Weitzman

There were not so many in the Cabinet.

Mr. Maude

It is, of course, much too early for anyone to comment on the economic proposals before we have had further details of them. I think that the late Chancellor of the Exchequer rather under-estimated, in his speech, the extent to which the steps now having to be taken are due to past policies of the former Government. I do not think it is possible to over-estimate the probable effects abroad of having, at last, a Government who are willing to take the necessary steps immediately, the moment they are faced with the problem, instead of a Government, at long last, unwillingly adopting small expedient after small expedient while the situation progressively deteriorated. I am sure that the effect of that abroad as well as at home will be very marked indeed.

On the question of Government expenditure, the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), again, as in his pre-election broadcast, made great play with the fact that after we have done away with the payment of debt, re-armament, and so forth, we are left with about 11 per cent. of the Budget on which to economise. Well, 11 per cent. may not be very much, but it is well to have it clear in our minds that the total Budget is something in the nature of £4,000 million a year, and that 11 per cent., roughly—I am working it out in my head—is about £440 million. Having served on the Public Accounts Committee, I looked at some of the accounts and some of the things on which Government money has been spent, and I have no doubt whatever that a substantial saving can and will be made out of that £440 million.

Finally, I want to say a word or two about the question of controls. I noticed the obvious pleasure with which the late Chancellor observed that we were to have a few more controls, as I did the pleasure of the back benchers behind him in their hope—that was immediately dissipated, to their obvious chagrin—that we might possibly be going to cut the housing programme. It is, of course, obvious that there are certain important controls which we must have in order to redress the balance of payments. I am very glad to see present my right hon. Friend the President of the Board of Trade, whom we on this side of the House are particularly pleased to see on the Government Front Bench, because I hope that the Government will take an early opportunity of recognising and reassuring us about the fact that there are still far too many economic controls, many of them with secondary effects which have not been fully realised, which increase all the time, and which make the necessary policy of expansion and of increasing competition for more difficult than it need be.

My right hon. Friend the Chancellor dealt at some length with the question of profits. It is true that in the last six years, since the war ended, it has been easier to make high profits without being really efficient than probably at any period in my lifetime. Of course, in a time of inflation and rising prices profits inevitably rise, and the root cause of over-easy profits is not removed merely by taxing more of the profits away. The only effect of that is at one remove to tax the consumer who is paying the higher prices.

The effect of these controls on managements has, in many cases, been most unfortunate. To my way of thinking, managements, of which I have examined quite a number, have, in the least efficient sectors of industry, got into the habit of thinking that in certain lines they could make easy sales at guaranteed profits. We must cut out these easy profits by making competition a little stronger, by ensuring that the man who has a good idea and the desire to expand, with a real urge to earn his profits by selling better quality goods cheaper, can increase his share of the market and put the rest of the industry on its toes.

Many businessmen have said to me what I know to be true, that since 1939 there has grown up in this country a generation of younger managers—they are by no means all like this, of course, but too many are—who have come to rely overmuch on the Ministry, the Government Department, to solve their problems for them. When some difficulty arises about getting raw materials, when anything at all is held up, it is all too easy to pick up the telephone and ring up a civil servant in the hope that he will solve the problem, instead of doing what the older generation of businessmen would have done—getting a train, a car, or even an aeroplane, and going out to solve the problem themselves. We need far more inducements to efficiency in this country at the present moment.

I know the Government realise this, but I hope they will give an early assurance of their intention to do something which I believe to be vitally necessary, and that is the encouragement of individual initiative and the real instinct for self-help which exists in our people. During the lifetime of the last Government we saw too much of the attitude of mind evidenced during the fuel cuts of 1947, when because the use of electricity had to be cut for those who took their electricity from coal burning installations a man who generated his electricity from a wind pump had to be stopped from using it in case he should get an unfair advantage. That sort of restriction, which carries egalitarianism to the most ridiculous extreme, must go.

We have an immense but frustrated volume of self-help and instinct for self-preservation, and of the desire to do things to help the country to get out of its present difficulties. For example, I know of people who are doggedly, bit by bit and year by year, building their own houses with their own hands, using £100 worth of their own labour and materials every year, building one room a year and putting a tarpaulin over it until they get the timber to finish the job. That sort of initiative and energy could, if properly harnessed, do an immense amount to help this country. But it has not been harnessed; it has been almost deliberately frustrated at every point. We do not even yet know how great is this potential energy which is only awaiting a signal from the Government to be released.

I am sure that my right hon. Friends realise that the whole of the future type of society in which we will live is at stake and depends upon the atmosphere the Government produce for us now. Ministers are at this moment having to grapple with urgent and immediate problems, which we know must be tackled urgently and immediately, but I do not think there is any reason whatever to forget the more important long-term aim. We need an early encouragement of our best and most energetic people, who have for so long been frustrated. We need a little less of telling people what they must not do and a little more of telling them what they can do, and of encouraging them to do it.

6.26 p.m.

Mr. Harold Wilson (Huyton)

I shall not follow the hon. Member for Ealing, South (Mr. Maude), into all the subjects with which he has been dealing for the last quarter of an hour. I will only say, following his reference to the frustrated volume of self-help, as he calls it, that the degree of frustration will grow very considerably from now on, and the main reason for that will, of course, be the tremendous disappointment that has been generated in the hearts of many people who were taken in at the General Election by the promises of hon. and right hon. Gentlemen opposite.

I wish to deal with the speech of the Chancellor of the Exchequer, and with the financial position repeated in that speech. He said, as did the Prime Minister yesterday, that from an overall surplus last year running at a rate of some £350 million we have now moved to an over-all deficit running at a rate of some £700 million. Why has there been this worsening? I think that one of the regrettable features about this debate so far is that, apart from a partial attempt by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), no real attempt has been made to find out why there has been this serious worsening in the position since 1950.

It is quite clear that there have been two major factors at work: first, the increase in import prices and the worsening of the terms of trade, referred to by my right hon. Friend; and second, the stagnation in exports, which I am sure must be causing very great anxiety to the President of the Board of Trade. Other factors have been mentioned, of course, such as Persian oil, and so on, but I wish to deal in particular with import prices and the stagnation in exports.

The rise in import prices, and the continuing rise until the last month or so, has been caused by movements in world prices, by world supply and demand, by the world commodity boom, by American stockpiling, and by the volume of Atlantic re-armament, and it is no good trying to look within this country for the causes of the world increases in prices. A number of us said in this House in July, and earlier, that unless the American arms programme, combined, as it is, with the virtually uncontrolled domestic inflation in this country, was brought into line with the resources available, then the economies of the western world would very quickly be wrecked; and it is encouraging at this moment that, in addition to the second thoughts that American authorities seem to have about stockpiling, some Americans are having second thoughts even about the volume of their rearmament programme.

It was interesting to see even in the "Economist" on 6th October—and this may have passed unnoticed by several hon. Members, because they were otherwise engaged about that time—it suggested that at that time there was a danger of the strength of Soviet Russia being over estimated. I tremble to say this in the presence of my hon. Friend the Member for Birmingham, Aston (Mr. Wyatt). It said: Mr. Lewis Douglas and other shrewd and realistic observers are right when they say the programme should be cut down. It goes on to say: When one imagines what expenditure at the rate of 65 billion dollars a year, continued for several years, will bring forth, when one hears talk of an Air Force of 140 groups, it is difficult to believe that it is not being overdone. if so, it should be cut back, for too large a programme creates too much dislocation of one sort while it continues and of another sort while it stops … The argument for cutting down is not one for scrapping these new plants or failing to use them. It is an argument for planning to shift them down into low gear earlier than is at present planned, and in any case before they suck in all the spare materials of the world and create a mountain of weapons so monstrous that it is either wastefully redundant or menacingly tempting. That might have been taken from the pamphlet published a little earlier, called "One Way Only."

When we last debated the financial and economic situation in July, I said then: I seriously put it to the Government that the time has now come for a high-level approach to the United States, in which to say to them that, while a substantial measure of re-armament must go on, has not the time come when there should he a high-level inter-allied examination of the strategic necessities of the position, and the economic consequences—the world economic consequences—of the present level of production."—[OFFICIAL REPORT, 26th July, 1951; Vol. 490, c. 2414.] I believe that my right hon. Friend missed a great opportunity in not pressing for the scaling down of world re-armament on the American Government at that time. It does seem that General Eisenhower has taken the point about the need to scale down Atlantic re-armament, and particularly re-armament in Western Europe. Unless that point is taken and acted upon it is, of course, monstrously dishonest of any candidate, such as those we have heard—

Mr. Woodrow Wyatt (Birmingham, Aston)

Would the right hon. Gentleman elaborate when, how and where General Eisenhower has taken the point that rearmament should be scaled down?

Mr. Wilson

I am relying at the moment on the reports in the American Press, and I have to confess that I have no more knowledge than my hon. Friend's restricted sources of information about what is going on either in America or Russia. The words I used were that "it seemed" that General Eisenhower had taken the point. If he has not taken the point I apologise to General Eisenhower and to my hon. Friend. Unless that point is taken, it is dishonest of anyone to suggest that any measures taken in this country can really affect the cost of living and can bring prices down.

It is equally dishonest for the Tory Party to suggest, as they did in the election, that we are in the position to do anything to control the rising cost of living, unless they are prepared to get at the root causes of the rising cost of living, namely, the overloading not in this country but of the economy of the western world as a whole.

My right hon. Friend the Leader of the Opposition pointed out yesterday that there was no reference in the Gracious Speech to any measures for dealing internationally with the economic causes of our present difficulties, apart, of course, from the Commonwealth Conference, which we all welcome. The main cause of our balance of payments position is the stagnation of our exports. What is happening in the export trade at the present time is sad proof of the rightness of what some of us said months ago, when we said that we cannot press on with this arms programme and hope to pay our way by exports. We said at the time that we hope we would be proved wrong. We have to admit this afternoon that those hopes are frustrated. Last Sunday's "Observer"—a paper which has not taken this view before—said: It is now obvious we shall not be able to carry through our re-armament programme and maintain our external balances without some form of American aid. With that diagnosis, I think we all agree. The "Observer" is expressing the view that some of us have been saying for months past, that it is not possible to maintain the arms programme and maintain viability in our overseas payments. With that diagnosis I agree, but with the deduction from it I emphatically disagree. I hope that we shall hear no more of this suggestion that we should carry on with a programme which is admittedly beyond our resources and, at the same time, go cap in hand for American aid. If the "Observer's" diagnosis is right—and I submit that it is—it is a case not for going to American aid for carrying out an intolerable programme; it is a case for the fair sharing of the burden between the Atlantic nations as a whole.

The impact of the arms programme is, of course, heaviest of all on the engineering industry. No doubt that is one of the main reasons for the anxieties that the right hon. Gentleman must be feeling at the present time. The engineering industry was responsible for some 50 per cent. of our export trade in those years when our export trade was breaking new records almost month by month in 1947, 1948, 1949, and 1950. But with the arms programme we have now a very serious overloading of the economy, not merely in the financial sense, as suggested by the Chancellor of the Exchequer, but particularly in those resources which are vital to our export trade and to our balance of payments.

Re-armament is placing an additional burden on the coal resources, steel resources, transport resources, and on the electricity power resources of the country. Electricity power is a very good illustration on what is happening. Rearmament is, at the same time, preventing or limiting necessary expansions in generating capacity and placing an additional weight on the capacity that is available.

Therefore, if we are to get the exports that are necessary—and I agree with my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) that the Chancellor of the Exchequer said far too little about increased exports as opposed to reduced imports—and the engineering industry cannot do it, that must automatically fling a bigger load on to the textile industry, clothing, pottery and other consumer goods.

That means that the right hon. Gentleman will soon be heading up a new export drive. I wish him well in that; I have some experience of it. Not for him but for some of his hon. Friends this will involve a very big change of heart in relation to some of the things they have been saying in the last six years, when Sir Stafford Cripps was labelled "Austerity Cripps", and when the present Prime Minister was himself condemning any export drive based on planning and control. He said that the only export drive that could succeed was one based on the overflow from the home market. The right hon. Gentleman said in 1947 in this House: .… exports are only the steam over the boiling water in the kettle. They are only that part of the iceberg that glitters above the surface of the ocean."—[OFFICIAL REPORT, 28th October, 1947; Vol. 443, c. 701.] I suggest to the right hon. Gentleman that if he is going to succeed—

Squadron Leader Cooper rose—

Mr. Wilson

I know what the hon. and gallant Gentleman is going to say, because he said it right through the last Parliament. He is going to ask me what the right hon. Member for Ebbw Vale (Mr. A. Bevan) said in 1935. Even given the control to make available more textiles not by overflow from the home market but by physically making them available—making available more clothing—are we to have a market for these products overseas? We are already seeing a very serious state of affairs developing with the export of motor cars. The market has dried up, I hope only temporarily, in Canada, and vehicles are now coming back.

Mr. Burden

Is the right hon. Gentleman aware that a great disservice was done to the textile industry by the speech of his right hon. Friend the Member for Bishop Auckland (Mr. Dalton). as a result of which textile buyers in the export markets expected and waited for lower prices to come into operation before buying?

Mr. Wilson

The hon. Gentleman should read his own propaganda. That was being put about within 24 hours of the statement by my right hon. Friend. If the hon. Gentleman will look at the facts and the trade reports from Lancashire, for instance, the "Manchester Guardian" and "The Times Review of Industry," he will find that this slackening in the market occurred long before my right hon. Friend spoke. He will also find from the latest reports that there has been a slight improvement in the marketing position.

Mr. Burden

Since the Labour Government were flung out.

Mr. Wilson

I am quoting "The Times Review of Industry," which was issued before the result of the election.

The President of the Board of Trade, if I might deal with someone who will have a more serious approach to this problem than the hon. Member for Gillingham (Mr. Burden), will be the first to agree, particularly in textiles, that we are facing a difficult situation in world markets that is bound to get more difficult as the result of Japanese competition, to which the Prime Minister referred yesterday. The special problem of exports, particularly the engineering exports, is right at the heart of the sterling area problem, as referred to by the hon. Member for Bury and Radcliffe (Mr. W. Fletcher).

In the sterling area most countries want capital equipment. The Colombo Plan is now trembling in the balance because of the uncertainty of our ability to supply the equipment that the Colombo Plan countries need. If the plan failed, it would be a great blow to development and to peace in Asia. Australia and New Zealand need a great deal of capital equipment from this country, and I agree with the hon. Member for Bury and Radcliffe that the sterling area itself at the present time is in danger of breaking up.

We have seen the Copland Plan, which suggests that if Australia cannot get the capital equipment they need from this country they will demand a free use of the dollars that they earn. That would strike a blow at the very centre of the sterling area. They cannot get the equipment they need because the engineering industry in this country is fully deployed on an unrealisable arms programme. It will not be much good the right hon. Gentleman confronting the Commonwealth countries and saying he is sorry he cannot let them have bulldozers and other transport equipment, but that he can let them have a nice line in men's woollen underpants. What they want is capital equipment and that is what they cannot get.

The problem is well set out in the last report of the Economic Commission for Europe, where, referring to Britain, they said: Cost inflation is rampant and towards the end of the year may well he enhanced by the demand flowing from the heaviest rearmament programme in Europe. In the election some of us were called Communists, fellow-travellers, Quislings and all kinds of things because we suggested that our armament programme should be cut down to a level within the capacity of this country to fulfil. Does it make one a Communist, a fellow-traveller, or a Quisling to suggest that? As the E.C.E. report goes on: For one reason or another exports are wavering. This, combined with the high cost of imports, has created the new balance of payments problem. Therefore, we all have actual sympathy for the Chancellor of the Exchequer, and I feel very special sympathy for the President of the Board of Trade. One is bound to feel sympathy for those faced with this problem. They will need sympathy because of the misleading and dishonest election promises, which they have now either to implement or to betray. For six years we have heard these promises and suggestions of easy living conditions if only the present Prime Minister could get back to 10, Downing Street. All world problems would then disappear and as to the cost of living, he would mend the hole in the purse. The high cost of living was the result of the high cost of Socialism. That is the sort of stuff we have been hearing throughout all these years. Now a number of election and pre-election slogans are coming home to roost.

It is not appropriate for me today to refer to the budgetary problem the Chancellor of the Exchequer will be facing when he attempts to reconcile the high promise to lower almost every item of taxation with the Tory pledges, which he was slow to repeat this afternoon, that they would not cut the food subsidies or the social services. We have already seen coming home to roost some of the promises about capital investment. In the last five or six years we have been given an impression that the restriction on capital investment was the result of Socialism, and that if only the Tory Party got into power these restrictions would disappear.

The right hon. Gentleman was asked this afternoon whether the restrictions on building meant the stopping of building of new schools or the starting of new school construction. Perhaps the Minister of State for Economic Affairs will tell us the answer to that sort of problem. During the election, in my constituency, which borders on his, the Tory candidate got votes by saying that the Labour Government had held up the Lancashire County Council's school programme, and promised that if the Tory Party got in there would be no restriction on the County Council's school programme or on any other.

Sir A. Salter

My right hon. Friend was asked this question, and he said that a statement would be made later in the debate.

Mr. Wilson

We shall be delighted to see how it is reconciled with the statements which were made in my constituency. I cannot say anything about the hon. Gentleman the Member for Ealing, South, because I do not know what he promised, but I know what was promised in my constituency. Then we had promises about controls and planning. We heard very little of that this afternoon.

Let us say this for the Chancellor of the Exchequer: he sees the need for planning in the present situation, which is more than the Secretary of State for the Colonies ever did. We can at least take some comfort that in this strange Cabinet which has been created it is the right hon. Member for Saffron Walden (Mr. R. A. Butler) and not the right hon. Member for Aldershot (Mr. Lyttelton) who has gone to the Treasury, because it was only a year ago this week that the Secretary of State for the Colonies based his whole speech on what he called the fundamental fallacy of trying to pin a planned economy to a free society. When he was challenged by my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman) he said it was impossible, and now the right hon. Member for Saffron Walden has got the job of doing it himself.

The problem of steel has been referred to. I hope the Government will make an early announcement, not about the doctrinaire proposal of the ultimate ownership of the industry, but the practical decision on the introduction of a steel distribution control, which the previous Government said they would introduce this autumn. For all these reasons right hon. Gentlemen will expect to get a lot of sympathy, and I think they are entitled to a lot of sympathy because of the structure of the Government in which they are going to have to work. These lordly co-ordinators!

There is the obscure position of the Paymaster-General. I do not need to warn the President of the Board of Trade or the Chancellor of the Exchequer about the dangers that are involved in the Paymaster-General's appointment, because I am quite sure that those officials who were there in war-time have already warned these Ministers what to expect.

They have with them the Minister of State for Economic Affairs, who has probably got a lively memory of the kind of things to expect. It must be said that the position of the right hon. Gentleman, whether he is co-ordinating economic affairs or not—he seemed very doubtful about that point when asked this afternoon—will be made impossible if he has to contend with the misleading statistics and the unsound judgments that are likely to be poured into No. 10 from the miscellaneous crew of astrologers and economic charlatans that are likely to be infesting it. I am sure that the right hon. Gentleman knows all about it, and I am sure that he will be warning his friends.

Mr. W. Fletcher

Can the right hon. Gentleman tell us how it is that this ill-constructed and worst-manned Government to which he has referred is succeeding with conspicuous success, whereas the mixed bag of the last Government, out of which he slipped with some skill, was a conspicuous failure?

Mr. Wilson

The hon. Gentleman is so carried away with the exuberance to which he has referred that he now not only believes that the Chancellor made a fine speech, but that he is succeeding in solving the economic problem.

I want to refer to the "phoney" gesture about Ministerial salaries. I do not think it has taken in anybody. If it were intended to impress the country and be a signal in this situation, right hon. Gentlemen would not be taking a notional cut in their gross salaries but would announce to the country that they were going to live on £4,000 a year and hand over all their other incomes to the Exchequer. What is important about this matter is that the Government must not use this empty gesture—because it is one—as an excuse or signal for cutting, shall we say, the salaries of civil servants, than whom there is no more hard-working or under-paid body of men and women in this country, or for cutting the salaries of teachers, as was done 20 years ago.

Enough has been said to make it clear to anyone who did not realise it before that the problems that we are facing are indeed grave and that they will need to be dealt with by far-reaching measures, going far beyond those which have been announced and involving decisions taken in the Atlantic field as a whole and in the field of Atlantic re-armament. If the problems are to be solved they will need sacrifices on both sides of the House of policies that have previously been taken.

Above all, they will need the sacrifice of some of the doctrinaire approaches that right hon. Gentlemen opposite bring to their tenure of those benches. It will need the confidence of all of us that the measures proposed are in the interests of the whole country and not of a narrow, privileged class with which the actions of hon. Gentlemen opposite sometimes suggest they are more concerned than with the interests of the country as a whole.

6.54 p.m.

Mr. Cyril Osborne (Louth)

I am very grateful that I have been called. I would ask the right hon. Member for Ebbw Vale (Mr. Bevan), who is leaving the Chamber, to remain in his seat because I wish to refer to him.

I had hoped that this discussion would be free from the narrow party bias which the right hon. Member for Huyton (Mr. H. Wilson), has imported into it. I had prepared a speech that had nothing to do with party politics, but since the right hon. Gentleman has quoted so many newspapers and has given the diagnosis of the "Observer" about what has happened here, may I, without offence, give to him and his right hon. Friends the diagnosis of another newspaper? On 24th April this year, the "Daily Herald" had a heading, "Bevan's Defence." and this is what they said: Nothing that he"— that is, the right hon. Member for Ebbw Vale— told the House can explain satisfactorily why he chose this moment to storm out of the Cabinet, creating bewilderment in his own party and delighting its enemies. That is the diagnosis of a "Daily Herald" editorial—not the gossip columns. It went on to say: Mr. Bevan now talks of this policy"— the re-armament policy— as if it were the conception of a Cabinet of lunatics"— the right hon. Gentleman ought to know— in which he was the sole sane man. If that is how he felt, why didn't he resign when the policy was launched? The right hon. Gentleman who has just spoken asked for quotations. I have lots of them. This is the charge I bring against the right hon. Gentleman. The "Daily Herald" stated: Mr. Bevan, though he is all for liberty, leaves to others the unpopular task of telling the nation that liberty means sacrifices. Finally, this "Daily Herald" editorial says, about the right hon. Member for Ebbw Vale: He appoints himself, the idol of the Wishful Thinkers, who look upon Socialism not as an orderly and responsible way of life, a religion of priorities, but"— and I ask hon. Gentlemen to observe this— as a device for getting everything for nothing. The next day, the "Daily Mirror," that produced that filthy cartoon two days before the election—perhaps this is the "prostitute Press" that right hon. Gentlemen opposite talk about?—said about the right hon. Member for Ebbw Vale: So Mr. Atlee's Government has lost its General MacArthur, the orator who refused to face dangerous facts. Could any worse accusation have been made against the right hon. Gentleman? That is the right hon. Gentleman who would be the Prime Minister of England and who, the "Daily Mirror" said, refused to face dangerous facts. It said: Alone of the big guns in the Cabinet, Mr. Bevan would leave Britain confronting a perilous world, armed with false teeth. The right hon. Gentleman asked for it. I am quoting, as he quoted. The next day, the "Daily Herald" then turned to the right hon. Member for Huyton, for whom I have a considerable regard. It said in its editorial: Mr. Harold Wilson yesterday explained to the House of Commons why he has resigned from the Cabinet.

Mr. W. T. Williams (Hammersmith, South)

On a point of order, Mr. Speaker. Is it in order for an hon. Member to read newspapers in the Chamber?

Mr. Speaker

I did not observe any hon. Member reading a newspaper, in the usually accepted sense. I understand that the hon. Member for Louth (Mr. Osborne) was quoting extracts from a newspaper. That is permissible, provided that it is not carried to excess.

Mr. Bevan

May I be allowed to ask a question?

Mr. Speaker

Is the right hon. Gentleman rising to a point of order?

Mr. Bevan

It is a point of explanation, Sir. As I had no information from the hon. Member that he would make any reference whatsoever to me today and he has now finished, may I leave?

Mr. Osborne

I said at the beginning that I had my speech carefully prepared, but as the right hon. Member for Huyton repeatedly quoted I thought that I was entitled to quote back.

Mr. H. Wilson

When the hon. Gentleman has finished his orgy of quotations will he explain to the House the relevance between the present situation and quotations which are some eight months old? I seem to have provoked him into this by making one or two quotations from very recent issues of newspapers, such as last Sunday's "Observer" and last month's "Economist" which I considered had some bearing on the present situation.

Mr. Osborne

Truth does not alter even though it is eight months old.

Next day, 25th April, the "Daily Herald" said: Mr. Harold Wilson yesterday explained to the House of Commons why he has resigned from the Cabinet. Broadly, his reasons coincided with those which Mr. Bevan had given on Monday. I commend to the House what follows: The curious thing about Mr. Wilson's attitude is its lack of perspective. As I have said, truth does not alter even though it is eight months old. The "Daily Herald" finally says: If the security of Britain is priority number one, how can a responsible man"— that is, the right hon. Member for Huyton— shrug his shoulders at the prospect of insecurity and choose free false teeth as a consolation prize. I hold that the argument which we had from the right hon. Gentleman was really a continuation of his disagreement with the late Chancellor of the Exchequer over the re-armament programme

I had hoped that we should, as a House, look at the country's desperately serious position without throwing brickbats at one another. The Chancellor showed that the country is living beyond its income. No one disputes that. It is obvious that that cannot continue. The Chancellor will take certain action to try to put it right. I am sure that hon. Members on both sides will agree that that action cannot of itself remedy our position. By their own efforts and by themselves alone can the people of Britain rescue themselves.

I regretted an omission from the Prime Minister's speech yesterday. I had hoped that the Prime Minister would say that it was the intention of the Government to stay in office for a full five years and give the country a rest from the niggling and naggling of party politics and give trade and industry a chance to pull things round and get the country on its feet once more. Yesterday, the Leader of the Opposition said: It strikes me that one matter is under-stressed, and that is that this is essentially an international problem. This problem is not one that affects this country only."—[OFFICIAL REPORT, 6th November, 1951; Vol. 493, c. 63.] That is all too true, and all would agree with it.

I would remind the House of two factors in world affairs. The greatest factor today is the enormous growth in world population. Every year 25 million more people are born than those who die, and the demand on world food supplies and of raw materials is a terrifying development. It has nothing to do with party politics or with this House solely, but it is the one controlling world factor. If the population increase continues at its present rate there may well be a world food famine in which we shall be engulfed and no Acts of Parliament can insulate us from it. The question of whether there will be enough to eat may arise before long, and that is the problem that we have to face.

For 200 years the English-speaking peoples of the world have been privi- leged. They have had a higher standard of life than the black, brown and yellow peoples and have enjoyed great b privileges, but the privileges and advantages that our people have enjoyed are going and will never return. The people of Africa and Asia are demanding a greater share of the good things of life, and quite rightly so, but unless there is an enormous increase in the production of the natural wealth of the world either they will not get the extra share which they expect or we shall have to take a much smaller share. The world does not owe us a high standard of living; we shall get it by working for it or we shall go without it.

The second important factor in world affairs is the distribution of world income. The United Nations Report for 1949 gives some extraordinary figures. Taking the income—expressed in American dollars—of 70 countries, it shows that there are 25 countries with a population of 1,128 million, or 54 per cent. of the total population of the world, with an average per capita income, both personal and national, of less than 100 dollars a year. That is about 12s. 6d. a week.

Some 12 countries with a total population of 650 million have a national income per capita of less than 50 dollars a year, something like 7s. a week. If they are to have a greater share and the amount to be shared does not increase, we ought to be honest with our people and tell them that we shall have a much worse time than anyone here can envisage. That is what I hoped would have been said today instead of our throwing things at one another.

The average income in the United Kingdom was 773 dollars, eight times as much as in the case of more than half the population of the world and 16 times greater than in the case of 30 per cent. of the world's population. If we are to share the world's weath more fairly, equitably and justly, as many hon. Members opposite desire, either the world's wealth has to be increased colossally or we shall go down to a state of degradation about which no hon. Member dare tell his constituents.

These are the facts, and party politics will not solve the problem. We must talk to our people and put before them the real facts of the situation. The one problem before the new Government is the problem which defeated the Labour Government. It is: can we make the ordinary people in all walks and ranks of life realise the significance of these figures?

Sir Stafford Cripps, who was, we all agree, a most honest politician, even though we could not agree with his theories, said in December, 1948, in paragraph 30 of Command Paper 7572: The difficulties of the present economic position do not present themselves in an obvious form to the British public. Unemployment is barely noticeable; jobs are apparently secure; industry is finding it easy to earn profits; wages are relatively high; the necessities of life are more fairly distributed. … A real and pave crisis in economic affairs seems remote and unreal. The test before the new Government is, above all: can it do what its predecessors confess in that paragraph they were unable to do? Can it make the people of this country realise how tragic and desperate is our position?

If the House will allow me to make one personal reference, I asked the Lord President of the Council, as he then was, some three years ago what the then Government proposed to do about our desperate economic position. The right hon. Gentleman called me a defeatist because I asked those simple, straightforward questions, the truth of which the right hon. Member for Huyton now acknowledges. The test for all of us is whether we have the courage to go back to our people and say to them, "These are the tragic facts. The war has impoverished us. Other people are growing up towards our standard, the world's population is growing, and if we are not careful we have had it; and only by an immense effort can we hope to survive."

The right hon. Member for Huyton and the ex-Chancellor of the Exchequer talked about exports. Do they not think it would be fairer to the House and to their own constituents if they discussed the facts about exports, the difficulties—

Mr. H. Wilson

A lot of what the hon. Member has been saying for the last 10 minutes is something that would find a ready acknowledgment on this side of the House, but if all this is true—and I believe that it is—will he explain why he and the whole Tory Party, in 1946, tried to make a political issue, tried to get votes at by-elections, out of our action in introducing bread rationing, which was necessary because we had sent grain that could have come here from Australia to avert a disastrous famine in India?

Mr. Osborne

I do not wish to be tempted—[Laughter.] I beg hon. Members opposite to listen to me. I have been trying to be honest with them. I cannot be responsible for everything that is said on my side of the House any more than they can be responsible for everything that has been said from their side; and the right hon. Member's own Front Bench would not accept everything which is said even by the right hon. Member for Huyton.

As regards the foreign trade position, we must export or we shall die. The right hon. Member has said so himself, but he has never told the country how difficult it is to do that. If I may make one more quotation, the "Economist" of 27th October said: Lancashire faces Japan. This should appeal especially to the right hon. Member, who has a Lancashire constituency. Present evidence points to serious trouble for the Lancashire textile industry in two or three years' time. By then, if the current trends of Japanese recovery from the war continue without any counterpoise, competition from Japan will he so severe that Britain's export trade in textiles must decline, with all the crippling consequences to the nation's economy that that would entail. The "Economist" goes on to say—and this is serious; I beg the right hon. Gentleman to go back to Lancashire and to tell the people this: … there is an even greater difference between Japanese and British production costs today than there was before the war; the difference is probably over three times as great … How are we going to sell against Japanese competition? The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) has complained about Japanese pottery competition. Soon my hon. Friends who come from engineering constituencies will be complaining about German competition. We have got to go to our people and say, "There is no hope for us unless we all work a great deal harder and work together." Legislation from these benches will be no more effective than it was when the right hon. Member for Huyton was sitting on this side of the House unless the nation is behind it, and the right hon. Member knows this all too well.

Mr. A. Edward Davies (Stoke-on-Trent, North)

Surely the hon. Member does not imagine that we must go back to our constituents, who, as far as I can see, are working very hard indeed—certainly they are in the pottery industry—and tell them that they must work a great deal harder. Does he mean longer hours for less wages? Does he say that that is any complete answer to what is happening in Japan, for example, and would overtake the competition such as he has outlined?

Mr. Osborne

I never said "less wages." Please do not put that red herring across. I am trying to put a serious economic argument, and not a beastly red herring about lower wages. What we have got to say to our people is that the standard of life we can enjoy is the standard we are prepared to earn—that is all.

Before I make my last point, I should like to give another quotation. The "Spectator" of 2nd November, speaking about the "Critical Days in Israel," said: The economic problems are the most acute. As they present themselves to the majority of the people of Israel they are quite simply defined: there is not enough to eat. That is the tragedy that may come here, and none of us dare go back to our people and tell them so. We face terribly critical days, and our job is to go back and speak honestly, whether we get votes or not. Hon. Members have been talking about elections. One of my friends said to me, "Cyril, do not talk so much about hard work. They do not like it."

Some of us have put the problem before the nation. The only way out is the way suggested at the E1 Alamein dinner by Field Marshal Montgomery. Speaking to the 7,000 men, their wives and their relatives, he said that the problem simply came down to this: that we either work more or eat less. I wish that that could be displayed on every hoarding in the country. He also said this, and I commend it to my right hon. Friends as my last words: … if we want prosperity we must win it for ourselves or else go without it; we shall win it for ourselves only by hard work and by personal sacrifices on the part of us all. … What the British need today is to he told what is wanted and to be told the truth … Today"— he added— we want two things from our leaders: truth and courage. We can then play our part provided we are given good leadership. I believe that we shall have both the courage and the truth. I am certain we have got good leadership, and I think that if we will all play our part the country, despite its economic difficulties, can be pulled round.

7.17 p.m.

Mr. Roy Jenkins (Birmingham, Stechford)

I thought that in the earlier part of his speech the hon. Member for Louth (Mr. Osborne) was going to mark the return of his own party to power by giving up talking to us about economics and confining himself to polemics against my right hon. Friend the Member for Ebbw Vale (Mr. Bevan), but in the latter part of his speech he came back to more familiar ground.

The difference merely was that the return to power of his own party seemed to have taught him almost overnight a great number of hard facts about the economic situation of the world which have been well known to us on these benches for a long time, but about which we have not heard much from the Conservative Party. It is no good the hon. Member for Louth, who has recently stood as a Conservative candidate and has no doubt obtained a great number of Conservative votes, coming along and saying that he had nothing to do with Conservative promises when embarrassing questions are put to him, as they were just now.

This debate has in a number of ways been an interesting contrast between the economic debates which we used to have in the last Parliament, and particularly, perhaps, with the last one we had in July. The first contrast, of course, is marked by the fact that the new Prime Minister has wisely, I think, silenced, so far as the economic debates are concerned, most of the people we used to hear from his side of the House. We are going to have to get along without the wisdom of the Minister of Works and the Secretary of State for the Colonies, and a number of other people.

Mr. Hugh Dalton (Bishop Auckland)

There is the hon. Member for Orpington (Sir W. Smithers).

Mr. Jenkins

The Financial Secretary to the Treasury, who, I am sorry to see, is not here, must be feeling extremely thankful that although he often addressed us, he very rarely did so on financial matters. I think he owes his promotion to his office largely to that.

The second contrast which strikes me between this debate and the one we had in July is that at that time many of the remedies which the Chancellor put forward this afternoon were being sharply criticised as highly undesirable by right hon. and hon. Members speaking for the Conservative Party—cuts in imports, for instance. In that debate I suggested that one of the strengths of our position this year was that we did have rather more fat to take off as far as imports were concerned than we had in previous times of balance of payments difficulties. That, I think, is borne out by the cut the Chancellor has been able to announce this afternoon. Imports, I thought, had been running a little too heavily, but hon. Members of the Conservative Party would not accept that, at all. The hon. Member for Flint, West (Mr. Birch), now Under-Secretary for Air, is another financial expert who has been silenced. He said in that debate: If our industry is to carry on at all our imports must increase."—[OFFICIAL, REPORT, 26th July, 1951; Vol. 490. c. 2381.] I do not know what he thinks of the proposals made by the Chancellor this afternoon, as he was saying as recently as three months ago that if our industry is to carry on at all our imports must increase.

Then there is the cutting down of capital investment. The right hon. Gentleman who is now the Secretary of State for the Colonies was very strongly against that at the time. Referring to the cuts which my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) had announced a short time previously, he said: This reduction will strike at the roots of our future prosperity as an industrial nation. But presumably he is supporting the proposals for further reductions put forward by the Chancellor this afternoon. If the Colonial Secretary had not had to sit on the Front Bench beside the Chancellor and occasionally nod agreement—although I did not see very many nods of agreement—but had been free to criticise, I think he could have criticised the Chancellor's speech as sharply as he criticised the speech of my right hon. Friend last July, and almost exactly in the same way. The Colonial Secretary, when talk- ing about my right hon. Friend's speech last July, said this: Faced by the dilemma of what is to give way, I suppose the policy of the Chancellor is something like this: First, a reduction, by an unspecified amount, in civilian capital investment. We are to have fewer houses, no office buildings, fewer machine tools, fewer plant extensions and so forth. Secondly, there is to he a reduction in personal expenditure and consumption by the public—I emphasise that. Thirdly, there are further exhortations to keep wages and salaries down and some little price control and statutory limitation of dividends. This afternoon we have again had the exhortation, but without the price control and the dividend limitation: Fourthly, there were some fulminations against paper profits and dividends. …"—[OFFICIAL REPORT, 26th July, 1951; Vol. 491, c. 684–5.] He characterised the whole thing as "little counter irritants" and smokescreens put up by the Government to cover their failure to run our affairs properly.

It seems to me that the criticisms the right hon. Gentleman made of the proposals of my right hon. Friend the Member for Leeds, South, could be applied in almost exactly the same words to what we have heard from the Chancellor this afternoon, but, so great is the party loyalty of hon. Members opposite, that they come forward with this small programme and say it is a great programme which will restore confidence and undo the harm of the last six years, whereas we know it marks no new departure at all.

The speech of the right hon. Gentleman made only two proposals which were at all specific. The first was the cuts in imports, which are largely non-controversial and which I have no doubt would have gone through in much the same form if my right hon. Friend had still been in office, and, secondly, the increase in the bank rate. I do not think anyone, even the Chancellor, will suggest that the increase in the bank rate will produce any sensational results.

Even the "Financial Times" in a leading article this morning—and I think there is no doubt that financial opinion was thinking in terms of an increase not to 2½ per cent., but to something like 4 per cent.—said that the balance of advantage was very narrow as far as putting up the Bank rate was concerned. Yet, that was the one specific proposal we had from the Chancellor this afternoon.

It is interesting to note that the "Financial Times" went on in that leader to say that, of course, if the Chancellor decided that from a disinflationary point of view the balance of advantage came down on the side of making credit dearer, he would be up against great difficulties as far as the question of housing rents was concerned. The "Financial Times" put it very strongly. It said: But the new Government has promised to do its best, within the limits set by rearmament, to raise housing production to 300,000 houses a year. And Mr. Butler must obviously bear in mind the risk of the Government laying itself open to a charge of ill-faith by making such a pledge and then creating monetary conditions which render it impossible to fulfil. Then we were told that a conference was to be held with the right hon. Member for Bromley (Mr. H. Macmillan) and others to have a look at the housing subsidy policy, but nothing approaching a guarantee was given in the speech that the results of that conference would undo the effects on house rents which the dear money policy will automatically bring about.

I am very glad that the Chancellor did not this afternoon in any way attempt to suggest that my right hon. Friend the former Chancellor, or the Government generally, had concealed the facts of the situation from the public. There has been a certain tendency to suggest that in recent weeks. What I think the present Chancellor could complain about far more than that the Labour Government concealed facts from the country is that leading members of his own party refused to take any notice of the warnings the Government were putting forward. I was very surprised that the Chancellor went so far in reply to an interruption. He was very careful in replying to some, but in reply to one interruption he said that of course he stood by every statement made by a leading member of his party. I would have thought it logically impossible to stand by every statement of leading members of the Conservatives in the Election, and it would certainly be a very rash thing to attempt.

It was after my right hon. Friend—following his fairly grave July warnings —went to the Mansion House at the beginning of October and put forward the facts in a way that has not been challenged, that we had the whole of the Conservative propaganda in the recent Election suggesting that there were all sorts of benefits that could be given. It was after that that we had a broadcast speech by Lord Woolton, of which there has been a certain amount of recollection on these benches this afternoon. He talked of "red meat." He also talked a good deal about housing and seemed to put the target up to 365,000 houses, because he said: If a Government in whom both sides"— both sides of the building industry— had confidence that they would get a straight deal—if such a government were to ask the building trades, as a piece of national service, to build one thousand houses or flats a day, could their ability to do it be doubted? That would be 365,000 a year—

Lieut.-Colonel Sir Thomas Moore (Ayr)

Working days.

Mr. Jenkins

That was certainly not specified. At any rate that was after the speech of my right hon. Friend at the Mansion House. We had a leading member of the Conservative Party—indeed so leading a member that it is not clear whether the Chancellor of the Exchequer is subordinate to him in the hierarchy of Ministers—corning forward with a proposal for 1,000 houses a day. It seems to me that if there are any criticisms which lie against politicians in this country for not taking full notice of the gravity of the present situation, the Chancellor ought to direct them at some of his own colleagues and not at the benches on this side of the House.

I wish to turn briefly to a question about the sterling area. It is perfectly true that this crisis, this balance of payments difficulty, is very different from that which we had in 1949, because although we then had this severe gold and dollar drain, we ourselves were in balance in our accounts with the whole of the outside world, whereas today we have both 'a dollar drain and a United Kingdom deficit with the rest of the world.

That might be thought to put us to some extent in a weaker position vis-à-vis the rest of the sterling area than we were in 1949. But I none the less hope that people will not suggest that the sterling area is regarded as some sort of benefit society for the United Kingdom. I do not think that is so, but I thought there was a suggestion of that in the speech of the hon. Member for Bury and Radcliffe (Mr. W. Fletcher). My right hon. Friend the Member for Huyton (Mr. H. Wilson), also mentioned a suggestion, which has been put forward by Sir Douglas Copland, that Australia might wish to leave the sterling area because we could not fulfil our obligations to her.

I hope that Australia would never think of acting on such a dangerous suggestion, but it is important that we should remember that Australia is at present in no position to do anything of the sort because she is, if anything, having a worse balance of payments difficulty than we have ourselves. In the quarter July-September Australia had a deficit of £A111 million, a bigger deficit than they have ever had in any previous quarter. It is an enormous sum for a country with the limited population of Australia.

They had that deficit largely because their imports were 70 per cent. higher in September than in September last year—very different from the position in this country—and their exports, so far from being up a little, as in the case of this country, were just over 15 per cent. lower. That does not suggest that the mere return to power of a Tory Government means that one escapes from one's balance of payments difficulties.

The "Financial Times" brought out this fact about the present state of the Australian economy, and said: … some observers foresee a deficiency of at least £A250 million this year, with also a further reduction in the level of Australia's sterling balances. While I do not suggest that we should in any way under-estimate the seriousness of the position that we are in at present, both in so far as it results in a direct loss of dollars and in so far as it affects the position of this country with the rest of the sterling area, it would be quite wrong if we allowed the impression to get about that we were the only sterling area country which was having difficulty at present, and that we were living on the backs of the rest of the sterling area.

It is clear from the Chancellor's speech that there is a lot more to come, that he thinks that other measures must be taken to follow up those which he announced this afternoon. It may well be that when those measures come along they will prove to be a good deal more controversial than those which he has announced today. Perhaps the Chancellor wanted to think things over before putting forward the more controversial proposals.

I thought that the right hon. Gentleman was almost as vague on the question of food subsidies as he was on his own relationship with Lord Leathers, Lord Wool-ton and Lord Cherwell. I wish we could have had from him this afternoon a much more categorical assurance about that. When he comes along with the specific measures—the present ones will not by themselves get us out of the difficulty. I hope we shall look at them carefully, and if they are really necessary for dealing with the situation we will give him what support we can.

I hope that he will not fall into the position of bringing forward measures which are in effect a retreat from the greater equality we have built up in the last 10 years under the guise that they are intended to help the balance of payments situation. They will not help in that if, in the guise of making cuts in Government expenditure, they in fact merely take away a little from the poor and give a little more to the rich. That will not help the balance of payments difficulty, but it will do a great deal of harm and provoke a great deal of bitterness in this House and the country.

I agree about the seriousness of the present position; no one will underestimate that. I hope that in facing up to it the Chancellor will realise that that is in itself an argument not to retreat from the present degree of fair shares that we have, and that he will if necessary push that policy still further along. I hope that he will realise in regard to certain Conservative election promises so far as the taxes on businesses and the rich are concerned, that at a time when we are faced with a general cut in the standard of living because of the balance of payments difficulty this is the last time to carry them out. I hope that he will not use these genuine difficulties as an excuse to carry through controversial measures which would not help us in our present position, but which would undo what has been one of the greatest achievements of this country over the last 10 years.

Squadron Leader A. E. Cooper (Ilford, South)

I suppose it was inevitable in the first few days of a new Parliament that many of the speeches should have the flavour of the General Election still about them. None of us can have any complaint about that, but in the present grave circumstances in which we find ourselves I feel that very little purpose is served by engaging in a slanging match with each other.

It ill becomes hon. and right hon. Gentlemen opposite to levy charges of dishonesty against hon. Members on this side of the House, particularly when one recollects that we were charged with being warmongers. All kinds of other charges were also levied against us during the General Election which really had no relationship whatever to the wishes or ideals of the Conservative Party. It never seems to have occurred to anybody that if we were to do just one or two of the things that were attributed to us—slash subsidies, create unemployment, plunge the country into war—these would be calculated to make us exceedingly unpopular in the country and make sure we would not retain ourselves in office. It is illogical and preposterous to levy such charges against the Conservative Party.

Mrs. Eirene White (Flint, East)

It was not just in the Election that charges were made against us, but in the Gracious Speech itself, in which it was stated: a full disclosure must he made to the nation about the economic situation. That is what we have been complaining about, not something said in the heat of the Election.

Squadron Leader Cooper

I am sorry that the hon. Lady has not been here during the whole of the debate. Many speeches and many interjections have been made by hon. and right hon. Gentlemen. The phrase: "red meat" has been flung across the Floor of the House so many times that everyone says it automatically. A reference to 300,000 houses has been trotted out automatically, and full employment has been referred to. All these things have been flung across the Floor of the House, and I do not think that they help us in meeting the present situation.

I wish to refer to one or two remarks made by the hon. Member for Stetchford (Mr. Roy Jenkins). He talked about the discussion which is to take place between the Minister for Housing and Local Government and local authorities on the question of housing subsidies. He referred to the rise in rents which would be brought about by the increase in the interest rates on the loans from the Public Works Loan Board.

I intervened on this point earlier in the debate to point out that the interest rates now to be charged through the Board applied to new loans on new schemes. I understand that there may be some authorities who apply the whole of their interest charges to cover the whole of their housing schemes. I submit that that is inequitable and something which tenants could justifiably complain about. The fact is there is no justification under the proposals made by my right hon. Friend this afternoon for tenants in existing council houses to have their rents raised at all. It can apply only to new loans for new schemes which may be developed in the future.

Then there was the reference made to the remarks from Lord Woolton that the housing programme was to be speeded up to 365,000 houses. I do not know whether he said that at all; I would not think he did. However, I would point out that that was approximately the figure of the number of houses built in pre-war years with approximately the same building force in the industry which obtains today. The previous Chancellor of the Exchequer will remember discussions which took place on the question of the Girdwood Report, where it was pointed out that productivity within the building industry today is something like 22 per cent. below that of pre-war. Surely it should not be beyond the wit of the industry to do more than is being done at the present time.

I wish to deal with the problem of increased productivity in what I think is a rather more fundamental way. When all is said and done our immediate problems, indeed, our long-term problems, can be solved only by increasing production. That has been the constant cry of right hon. and hon. Gentlemen opposite over the past six years, and it is also the cry which goes up today. Much has been done in the past six years, but much more still remains to be done. Nationalisation has failed in its objective—[HON. MEMBERS: "No."] Output has not been increased appreciably. There is no evidence of greater harmony within the nationalised industries. The consumers have certainly not benefited at all, and finally, the Socialist planners themselves appear to have lost all faith in nationalisation as a policy. The high cost of living and the penal taxation of the past six years has acted as a serious deterrent to greater output. Savings by small investors have virtually ceased in contrast to the high level of personal savings between the wars.

House building has proceeded at a snail's pace, notwithstanding that labour in the building industry is approximately what it was before the war. The truth is that too rigid controls have depressed productivity and have forced many of our people to live in misery. We cannot but be greatly alarmed at the high and rising divorce rate, the many broken marriages, the high rate of juvenile delinquency and the packed prisons

These facts are the imperishable monument to six years of Socialism in our time. Whatever may be our political views in our approach to these problems, the happiness and prosperity of our people is the ultimate aim of all political parties. We differ only in the road we travel. We believe that the policies we put forward are based on common sense and to that end will provide greater opportunities to help the country in these difficult times.

Our proposals to increase productivity are outlined in the Gracious Speech, where these words are used: They will be mindful of the great demands on our productive capacity, and will consider all methods for creating that spirit of partnership between management and workers on which industrial harmony and a high level of productivity must depend. In their election manifesto the Liberal Party said that they were firmly in favour of co-ownership and to that extent I believe they over-simplified the problem. I believe that co-ownership, co-partner-ship, simple profit sharing, or variation of any one of these may be necessary according to the type of industry. The position of the nationalised industries is something which will have to have great consideration. [HON. MEMBERS: "Tell the miners that."] Whatever method is adopted a sense of partnership at all levels must be created.

The status of the individual worker must be recognised. His conditions of employment must be properly established and he should be given every opportunity to train for a better job and to increase his own efficiency—[HON. MEMBERS: "Hear, hear."] I am very glad indeed to have such support from hon. Members opposite. I would call their attention to a recent television performance of the hon. Member for Attercliffe (Mr. J. Hynd) who expressed himself in quite contrary terms. He is not in favour of co-partnership, co-ownership or any of these things. He has all sorts of reasons for wanting to be opposed to them; but we, in common with the Liberal Party, believe that it represents the only real and positive way to increase productivity in this country.

Mr. James Glanville (Consett)

Where is the Liberal Party?

Squadron Leader Cooper

I do not want hon. Members to think that what we are proposing now is anything new. There have been many Conservative employers who have been carrying out schemes such as this over many years. I am happy to say that the company with which I am associated is co-owned, and that we find great benefits accrue to our company as a consequence. We have to create an entirely new atmosphere in industry. There is no real conflict between employer and employee, however much people may seem to think there is.

The ultimate ideal of all people who work in industry is to earn their bread and butter. Whether they be manager or managed the fact remains that if the company prospers they do well and if it fails they do badly. The interests of all of us in industry are the same, and we have to try as hard as we can to bring about a new atmosphere which will do much to dissipate the bad feelings which have existed for many years.

The difficulties with which the nation is now confronted should not frighten us. They should be regarded as a challenge, an opportunity to bring into play these new forces which are driving through the nation. At the present time there is an earnest desire on the part of people at all levels in industry to bring about a new approach, and it is the duty of Parliament to express itself in a way in which it thinks this can best be done.

I am opposed to the policy of the Liberal Party with its proposal of compulsion, because I do not think that this new approach can be brought about in this way. It can be brought about only by a series of conventions which have some statutory effect and, as we suggest in our election manifesto, by permitting Government and local government contracts to be placed with those firms which can conform to the new set of conventions which Parliament thinks it wise to impose.

Security within industry must be created. Incentive must be restored. Hon. Members may think this is just idealism, but it really represents the only way in which, in the long term, we can increase productivity within our industry. A happy and prosperous industry means that our heart is sound. Given this, we can turn back the tide of Communism and move forward together to happier times.

7.49 p.m.

Mr. Ellis Smith (Stoke-on-Trent, South)

Our geographical position, our historical economic development, together with the impact of two world wars during which a strain was imposed on our people which is not yet recognised to the extent it should be in the United States of America, have contributed to bringing Britain to a stage when, in the view of students of economic affairs, we can no longer solve our problems by orthodox methods. In my view we are travelling from one expedient to another, and it will be the mass of our people who will pay very shortly for this policy of expediency, adopted by parties from one or other side of the House.

As to the last Government, wherever Labour's real policy was applied with vision, courage and determination it met with real success. Wherever there was vacillation or lack of understanding or lack of courage it was there that we failed. We all need to be reminded that the 14 million votes the Labour Party received at the last General Election were, in the main, working class votes. It is on the working classes that the country is now dependent and the working classes should assert themselves more and more.

Six years ago there were on the files in several Government offices real Labour proposals to deal with our problems. This afternoon the Chancellor of the Exchequer informed us that we would have to con- centrate our resources to the maximum extent, first of all in coal, second, in steel and, third, in transport. No one can point a finger at the mining industry. It has made; a mighty contribution towards solving Britain's economic problem. It was my privilege during the General Election to attend meeting after meeting of men who had just come up from the pits. It was a real treat to address them and to be amongst them. If only the same effort were being made in all walks of life as is being made by the miners then, serious as our problems are, they would be lessened to that extent.

It is not only the Conservatives who are on trial in this debate. We on this side are also on trial. When we have the responsibility of carrying on again—as we shall have—we should remember the lesson that if we approach our problems in the orthodox economic sense we, also, will travel from one expediency to another. There are proposals on the shelves of Government offices which were made years ago, not now when it is easier to deal with problems which are there for us all to see. We must now turn those ideas into concrete reality.

In our plans in 1945–46 there were suggestions that would have enabled the country to concentrate its resources on the three industries mentioned by the Chancellor of the Exchequer this afternoon. There were also proposals for an immediate Commonwealth economic conference so that the Commonwealth could approach our economic problem as a whole and not as isolated units. The world situation demands that if Britain is to make a contribution to world affairs she must travel along those roads at the present time.

During the limited time at our disposal I want to concentrate upon three points in the Gracious Speech. The first is that which states: My Government view with concern the serious shortage of labour, particularly of skilled labour, which has handicapped production in a number of essential industries. I want to place on record some facts about the scandalous treatment during the past 37 years of the skilled engineers referred to in that Speech. Unless there is a fundamental change in the treatment meted out to the highly skilled engineers of this country they will be completely justified in taking any action to remedy their position. I am thinking of and comparing their lot with the lot of many professions, including many people on both sides of this House, who have not contributed one atom to Britain's economic development.

The parents of those men have had to make terrible sacrifices to give them a chance in life. In modern times a boy at the age of 16 is selected from among others because of his promise. He then has to obtain a general knowledge and afterwards a specialised knowledge of geometry and mathematics and the use of tools. That boy has to be able to concentrate upon and take a pride in his work. He has to be ingenious and adaptable. He has to be efficient, because he is not obtaining his living by talking. The skilled engineer must work hard and with speed and he belongs to a section of the community who are admired throughout the world.

To qualify for this work he must serve an apprenticeship of at least five years and attend day and evening classes. These are the men who have worked almost night and day during two world wars. These are the men who equipped Britain's Armed Forces at a record speed after we had dumped all our arms in the sea when our men retreated from France and Belgium through no fault of their own, but because they were badly let down by other people. At that time the praises of these men were ringing in every speech made throughout this country.

These are the men who are now making a mighty contribution to Britain's economic recovery and enabling us all to live, for without the products of engineering very little food would be imported into this country. These are the men for whom I am speaking. These are the men who have been left behind and have had to watch the status of others being raised. They have seen others being given paid holidays up to a month, superannuation and pensions of all kinds. In 1945 I said: I hope that we in this country are going to avoid the repetition of the industrial disputes of the past, because Britain can no longer afford those disputes. I reiterate that because it is necessary to do so. Since the termination of hostilities we have been more free of industrial strife in this country than at any period in our history. The Americans would have been delighted if they could have been as free from industrial strife as we have been. I hope that state of affairs will continue, but there will have to be changes in the treatment of our engineers. They must not be discouraged as they will be by one or two suggestions which have been made in the course of the debate today.

The Economic Survey for 1951 stated: and … one of the most difficult problems facing industry as a whole is likely to he finding the highly skilled workpeople … who will be urgently needed to prepare the production lines … Here are a few facts about the treatment of those men. During the First World War at no time did their wages advance in proportion to the cost of living. The Prime Minister in particular will remember this. It was his courageous action which resulted in the saving of a very nasty situation in this country about 30 years ago. When he gave the skilled engineers an increase of 7½ per cent. and consulted the Cabinet afterwards and got their approval, it prevented a very serious situation from arising.

A similar situation can arise again unless there is a fundamental change in the treatment of the engineers. Later we had what were known as the unsheltered trades, and between 1920 and 1923 in the unsheltered trades we had wage reductions of 38½ per cent. while others only had reductions of 12 per cent. and the salaries of lawyers, town clerks and others remained the same.

These are the men on whom now, according to the Gracious Speech, we are going to rely for training thousands of others to enable us to deal with our problems. We were subjected month after month to reductions in wages; in one month, after I was married, I lost 25s. a week in one reduction. That is typical of the lashing that the skilled engineers in this country have had during the past 37 years. In 1937 we were again called upon to make our contribution to rearmament, and the men worked as they had never worked before because they felt that all that was best in life was at stake owing to the Nazi menace. After all that, we find that the skilled engineers' wage is well below the wages of many other people, according to the weekly wage rates published in the Ministry of Labour Gazette.

For 37 years we have witnessed a worsening relative position of Britain's highly skilled engineers, and it is time that the attention of this House in particular was focused upon this problem, because if we are to continue to get the best service from these men there will have to be a fundamental change in the treatment meted out to them. The skilled engineers' differential rate over general workers in Britain is 16 per cent. In the United States of America it is 55 per cent., and in Russia it is 80 per cent.

Therefore, before it is too late I hope that the new Minister will consider the facts which have been placed on record—because no one will have the excuse that he has not been warned about this—so that the country can avoid a nasty situation which could arise unless there is a change in the treatment of the men for whom I am speaking.

The next point I want to raise relates to the reference in the Gracious Speech to the Japanese Peace Treaty. I see in the American Press that proposals are being made for the introduction of a fair wages and conditions clause similar to the one which we have in our country. I have extracts from the American Press before me from which I would like to quote, but as I wish to save time I will not do so.

My point is that I agree with the American proposals for introducing fair wages and conditions clauses in America; but if it is right to do it in Britain and if it is right to introduce it in America, then the time has arrived when it ought to be introduced throughout the world. We have now fought in two world wars to stave off military aggression, and the time has arrived when those of us who have played our part in staving off that aggression are entitled to call upon the allies who fought in the two world wars now to make their contribution towards a new policy which will stave off economic aggression.

Before the war, when the pottery industry lost orders it was always because of Japan's competition. They made little inroads into our home markets, except through the chain stores, but they made enormous inroads into our Commonwealth countries. In a decade before the war, imports of Japanese pottery increased by 50 per cent. into Canada, 70 per cent. into Australia and 40 per cent. into South Africa, and by 1940 the Japanese claimed to be the world's chief producers of domestic pottery. I ask the Government at the next Commonwealth conference to raise the question of the need for protecting our Commonwealth markets against slave condition products of the kind I have been speaking of.

There is in a Stoke factory at the present time an example of Japanese pottery copied from a product of the Stoke firm. Stoke products were taken round in America and the Americans were informed that the Japanese could produce our products practically identical, but not of the same quality, at one-third of our prices. This is economic aggression of the worst kind, against which our industries should be defended. Twice the people of our country have resisted military aggression, and it is time that steps were taken to prevent economic aggression of that kind.

It is no use indulging in criticism of the Peace Treaty now because it is signed, but I do consider that to protect our people we are entitled to put such an interpretation on this Peace Treaty that we can be enabled to introduce protective measures. I want to quote from the Peace Treaty, as follows: Whereas the Allied Powers and Japan are resolved … to co-operate in friendly association to promote their common welfare … In my view, the Foreign Secretary and the President of the Board of Trade should say at the conference which is to be held under the auspices of the United Nations that there can be no friendly association or common welfare unless our people's standards are protected.

Our task now is the full implementation of the undertakings given in this preamble to the Peace Treaty. When this matter comes before the United Nations we should insist—we shall do so in this House, and everyone from Lancashire, from the Macclesfield area and the pottery area will do so—on an interpretation of the undertakings in such a form as will enable us to protect our economic standards. For generations our people in this country have paid pounds and pounds to build up their trade unions. They have built up their trade unions to improve their standards, and it is just as logical now to ask the Government of the day to make their contribution towards the protection of our standards throughout the world. Our main markets must be safeguarded against these slave conditions of which I am speaking.

In Article 12 of the Peace Treaty we find these words: Japan declares its readiness promptly to enter into negotiations for the conclusion with each of the Allied Powers of treaties or agreements to place their trading, maritime and other commercial relations on a stable and friendly basis. They cannot place their relations on a friendly and stable basis unless our standards are safeguarded. The big business people in America have insisted on certain clauses being inserted into this Peace Treaty in order to protect their interests, and we should also do the same.

Further, it is stated in Article 23 that the present Treaty shall be ratified by the States which sign it, including Japan, and will come into force for all the States which have then ratified it. … and it is then added that Japan will be able to apply for membership of the United Nations.

In my view, the Government representing our country at the United Nations should strongly object to Japan being allowed to become a member of the United Nations until Japan has given undertakings which will assist in the protection of the standards which we have built in this country. Included in the safeguards should be, first of all, an international fair wages, hours and conditions clause. There should be an undertaking that no victimisation and no interference will take place in Japan when the workers of Japan are attempting to build up their trade union. There should be a clause to prevent the copying of designs and to allow regular trade union inspection to take place in Japanese industry.

This newly-elected Parliament meets at a very opportune time. It is imperative that the elected people's representatives—and let me emphasise. "the elected people's representatives"—[HON. MEMBERS: "Oh."]—should speak as soon as possible: The reason I emphasise that phrase is that there are so many in the Government who were not elected.

Mr. Beresford Craddock (Spelthorne)

They are not here.

Mr. Ellis Smith

But they will have a powerful influence over policy, and in my view that is a challenge to democracy. The United Nations General Assembly is now meeting and we shall be sending a message to it from this Assembly, the most democratic of its kind in the world. We have our urgent economic problems, but they are scarcely inseparable from the international problems which are now being considered in Paris.

Those of us who have seen the present Foreign Secretary at work for many years, while we differ from him politically, have great respect for his sterling character, his political integrity and his record; particularly those who remember the courageous speech which he delivered from that bench when he had not many supporters during that difficult period when we were all put to the test. We also remember the terrible loss he suffered directly and indirectly from the last war.

At the General Assembly, where he is now present, he will have his instructions from the Government, but I also appeal to him to use his personal initiative wherever he can, bearing in mind that we on this side of the House represent almost 14 million people in this country and that most of the hon. 'Members returned on this side of the House represent areas where the real work is done. [HON. MEMBERS: "Oh."] All that is necessary is for hon. Members to make an analysis of the results. They will find. in the main, that it is in the north where the work is done and where the greatest contribution for many years is being made. [An HON. MEMBER: "What about South Wales?"] Well, it applies to South Wales, too.

I want to remind the House and the Foreign Secretary that time after time we have made constructive proposals for dealing with the world situation. In our view the time has arrived when the United Nations should be reinforced. We remember the humiliating experience we had with the failure of the League of Nations. The United Nations should profit from that experience.

We want a five-power pact negotiated as soon as possible to buttress and reinforce the United Nations, with a world plan for economic development and enormously increased food production and capital investment. In this country Vickers are on the eve of bringing out the finest and mightiest tractor in the world. We should put that into produc- tion, producing as many as we possibly can, and, in return, should ask for food, aiming at mechanising world agriculture on the same lines as British agriculture.

Our people are heartily sick of war. They can see nothing in the world worth talking about if we cannot avoid war. What is the use of all the work we have done for generations if it is to be thrown overboard again, as it has been twice in our lifetime? What is the use of all this work if the cream of our boys is to be skimmed off again? We should, therefore, be speaking in such a way that the world will have no doubt where democracy in this country stands in relation to the worsening world situation

All who have been closely in touch with the people during the recent election will realise the mounting uneasiness which exists throughout the country. People are urgently desiring and praying for an easing of the world tension. They want the world to work together. They are no longer satisfied merely to talk about brotherhood on a Sunday; they now want it translated by world statesmen into world politics. This is the road towards a world plan for international co-operation. The British people urgently desire tilt world to harness science for man's benefit and not man's destruction.

We remember the speeches made by that great man, President Roosevelt. Time after time speeches which he made contained exactly the ideas which will fit the needs of the world today. It was my privilege twice during the last war to spend some time with Wendell Wilkie when he came to London. I can see that man now, with his very fine physique. He was travelling round the world then, meeting as many people as he possibly could in order to get the ideas of as many men as possible, because the more experience one gets and the more one realises that nobody knows it all and that we can all benefit by contact with others, the better. Wendell Wilkie was applying that principle, travelling round the world and preparing himself for when he was to become President. He wore himself out and died an early death.

I have here the last election address of President Truman. The ideas of President Roosevelt and of Wendell Wilkie and of the people of this country are to be found in it. I am convinced that it is the urgent desire of the people of the world, whether their skins be black, white or yellow, that we should be saved from another terrible catastrophe and that man should turn his attention to increasing the production of food throughout the world so that science can be harnessed for man's benefit and not man's destruction.

8.18 p.m.

Lieut.-Colonel Sir Thomas Moore (Ayr)

May I say how glad I am to find myself speaking again under your genial and competent chairmanship, Mr. Deputy-Speaker. I do not propose to make any examination of the speech we have just heard from the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), except to say that it was typically sincere. I think the whole House, or those who are present, welcomed his impassioned appeal for what he termed the finest body of workers in this country, to whom the country owes much, and also the higher ideals which he expressed towards the end of his speech. He will, I know, forgive me for not going further into the questions he raised; time is passing and many others are waiting to speak.

So far during this debate, especially today, but also yesterday, the emphasis has been largely on the financial and economic difficulties and problems of this country. I should, therefore, as the hon. Member who has just spoken, like to bring the debate back to the speech which we are supposed to be discussing, that is, the Gracious Speech. I note a sense, of urgency, a sense of purpose, a sense even of direction in it which we have sadly missed in the other Gracious Speeches we have listened to in the last six years, and I believe that in our heart of hearts most hon. Members in this House feel rather glad of the change. If they are not, and I have made a mistake, still I know one thing—the country is glad to have a speech of this character. They are rather bored and tired of the sort of stuff that has been handed out to them in recent years. Cattle grids did not greatly inspire the people last year.

The Election is over, and I imagine that very few are sorry; and I imagine some are rather regretting the methods which they used to bring about the result.

Mr. M. Follick (Loughborough)

I thought the hon. and gallant Gentleman was to talk about the King's Speech.

Sir T. Moore

I am making my own speech, which is more important to me, and I have no doubt that the hon. Member will make his at far greater length than mine when I have finished, or at some other time. In our state of affairs at home and abroad, ruthlessly exposed both by the Prime Minister yesterday and by the Chancellor of the Exchequer today, I think we should be wise to try to look forward instead of back. It is very exciting at times to describe the various evils of one's opponents of 50 or 20 or 15 years back, but surely we do not really get much satisfaction out of that in the end. What we want to do is to rebuild our country and to restore it to the prosperity and its significance in the world that it used to have. But in order to get out of this tragic predicament in which we find ourselves we must examine how we got into it.

To do him justice, the former Chancellor of the Exchequer did, in a speech just before the Summer Recess, give us a very powerful warning as to the way in which we were heading. Although he did not use the word "bankruptcy," he suggested we were on the way to it unless something were done to turn us back to another and more prosperous road. Things have got worse since then, and so now the problem is graver. At that time the then Prime Minister made a number of speeches in both the country and this House, the substance of which was that we all must work harder; although I must say that he said them in such muted accents that they did not seem to have very much weight with the people to whom he meant them to apply.

The trouble was that both he and the Chancellor withheld the one inducement necessary to achieve their purpose, and that was to leave enough money in the pockets of the people to make harder work worth while. The freezing of wages damped the efforts of the workers, while the freezing of dividends damped the enthusiasm of the employers, and so that increased productivity of which so much has been talked today eluded us, the dollar gap widened, and the balance of payments became more formidable.

Indeed, if I were asked to express a candid opinion, as, no doubt, I shall be, I should say that the late Government seemed to remain in a permanent state of adolescence in regard to the facts of life. Instead of helping us and encouraging us to adjust ourselves to a distant though possible Utopia, they treated us as prisoners in a non-existent Utopia, which was really very foolish of them, because we had then, as we have now, still a long way to go to reach Utopia.

Another trouble was that they got the whole relationship of man to the State all muddled up. They tried to translate into practice the theory that man is the servant of the State, instead of recognising the fact that the State is man's creation for his own service. All these things unhappily mounted up one after another, and so they found themselves in the difficult position of not being able to meet their obligations to the country, and I think that they welcomed the opportunity to transfer them to wider and stronger shoulders than their own. There is one lamentable result of the past six years, and that is that man has become rather apathetic, or so accustomed to servitude that he is almost prepared to accept it as a permanent condition. I only hope that this Government will restore men to the freedom they want and make them once more the useful and much needed citizens of our community that they should be.

I do not envy those now charged with this gigantic job of bringing back our country to prosperity. Neither do I envy those, the Prime Minister and the Foreign Secretary, who are charged with restoring our country to its former position of leadership amongst the free peoples. Still, they undoubtedly have began well, and the Gracious Speech blazes the trail. Let me examine one or two of the most notable signposts in that Speech.

First of all, I imagine that it appeals to all on this side of the House—indeed on both sides—that the desire and determination are expressed "to maintain and strengthen the most intimate and precious ties of understanding between ourselves and the rest of the British Commonwealth and Empire." I do not know whose fault it was, but one of the most painful features of the last Socialist administration has been this gradual weakening of the links, both economic and spiritual, between ourselves and the other members of the British Empire and Commonwealth. [HON. MEMBERS: "Oh."] Yes. I have travelled about the Empire and seen it. I do not say for a moment that it was intended. I am talking about the result.

I therefore would suggest that we just recall some of the benefits that we have received from those great Dominions that so recklessly and generously rushed to our aid at a time when we needed their help so much, and gave us of their lives and their treasure. It was right that they should agree early in the Gracious Speech to show the Dominions that that period of disintegration was finally over.

Mr. W. T. Williams

The hon. and gallant Gentleman is making accusations which are completely untrue. Ls he not aware that the volume of trade between Britain and the Empire has been greater in the last six years than ever before, and that a Member of his own party recently described the difference in the relations between the Empire and Britain, saying that the political links were closer than ever?

Sir T. Moore

That statement is certainly open to argument and dispute, and will no doubt be dealt with by my hon. Friends who speak later.

I next wish to refer to the determination of His Majesty's Government, not only to ensure our national safety but to build a more tranquil and prosperous world. That noble conception of bringing the free countries of Europe into unity with the peace-loving and peace-wanting countries of North America and the British Empire means, I believe, not only are we doing something to provide a barrier against further Communist infiltration into the Western World, but we are also providing those nations which are still prisoners behind the Iron Curtain with an incentive to burst their bonds and join the company of free peoples.

I leave those two matters and come next to one about which I am sure all Scottish Members present would like me to speak on their behalf, when the Gracious Speech says: First steps will be taken to fulfil the plans of My Ministers for the management of Scottish affairs. As has already been said, we have started well; there has been appointed a most admirable, able and experienced Minister of State resident in Scotland.

Mr. J. Rankin (Glasgow, Tradeston)

While dealing with that point, would the hon. and gallant Gentleman also enlighten the House as to the functions of this new Minister in carrying out this new appointment?

Sir T. Moore

May I repeat the words of a far more distinguished statesman than any of us here?

Mr. Rankin

"Wait and see."

Sir T. Moore

"Wait and see." This is a first and most admirable step. The second step is to free our nationalised industries and services in Scotland from the stranglehold of Whitehall. That is essential, as has been said on many occasions on both sides of the House. The third step, as we know, is the setting up of a Royal Commission to ascertain what is best for the future relationship between Scotland and England, and to make suitable recommendations to the Government. I hope that one of these recommendations will be to hand back Prestwick to its former owners, and thus enable private enterprise to do what public enterprise has so far failed to do.

Finally, I wish to refer to the arrangements to be made for our nationalised industries, and what to do with them so as to bring some sort of efficiency into their set-up. I must confess that I had no real prejudice against nationalisation when it was first introduced in 1945. I thought that it was one of those things, like prohibition and Communism, which had to be tried out. It had been offered as a panacea for all the industrial ills of this country for 50 years. These things had to be tried out, and were tried out. Prohibition failed in America because they found that there were more drunks under prohibition than ever before, and it was wisely dropped. Communism would have failed if the believers in Christianity in the West had not been so smug and complacent, but had stood up and fought for what they believed to be right. But we did not, and so allowed this tempting philosophy to sweep across Europe, until it has only now been halted by 'the Atlantic Pact.

We must admit that nationalisation has failed. [HON. MEMBERS: "Why?"] I will prove it, and then I will quote a statement made by the right hon. Member for Ipswich (Mr. Stokes), which disclosed the oddest attitude towards economics that I have heard for a long time. Nationalisation has involved higher prices. [HON. MEMBERS: "How?"] It has involved higher prices to the consumer and heavier taxes for the taxpayers as a whole through the various methods used by the Chancellor, of P.A.Y.E., Purchase Tax and so on.

What did the right hon. Member for Ipswich say? He said in a broadcast that it was untrue to say that the taxpayer had to find any money to pay for the losses of the nationalised industries; he said it was "carried on the books." Suppose, for example, that the railways lose £20 million in one year. Suppose they then go on losing. Are the railwaymen not to be paid any more? What happens is that the Transport Commission go to the Treasury for the money. Where do the Treasury get it? They have got no money except what comes from our pockets, so inevitably we must pay for the losses of the nationalised industries.

Mr. H. Hynd

Is the hon. Gentleman aware that since nationalisation the railways have not gone to the Treasury, but prior to nationalisation they did go to the Treasury, and the private railways were subsidised by the taxpayer?

Sir T. Moore

That is one of those partisan statements which would need nearly half an hour's speech utterly to demolish.

Mr. Ernest Popplewell (Newcastle-upon-Tyne, West) rose—

Sir T. Moore

I cannot give way again. With regard to the possibility of building 300,000 houses a year, I would try to make this point. The dogmatic approach of the Socialist Party has always been against profits. Apparently they do not realise, and never will, that the average builder—in Scotland anyway—is a small man who cannot afford to build a second house until he has recovered the money on the first. What does all this matter, so long as the houses go up, since it inevitably means that more people will have homes of their own.

I think that we must all rejoice in the statement in the Gracious Speech that special attention is to be given to suitable bed-sitting room flats for the elderly and lonely. All of us have met this problem in our constituencies. I am told that there are something like five million people over 60, lonely through family bereavement or because their families have departed, and I think that the provision of these flats will solve one of the greatest human problems which the nation will have to face.

There are one or two things not mentioned in the Gracious Speech and not referred to by the Chancellor of the Exchequer in his speech. One is a question which was raised in previous Parliaments about redundant Ministries. I know that it may seem like doing some of my hon. Friends out of jobs, but it does not seem right to me that in the present economic position we should maintain war-time Ministries without being certain that they are absolutely essential to the well-being of the country. The Ministry of Supply was created to produce equipment for the Army and Air Force; the Navy would not touch it. Why cannot we return to the old system that we had of the War Office and the Air Force acting for themselves? We have large hotels to accommodate the staffs, with magnificent doors costing £20,000. If we did this the taxpayer would be saved a great deal of money.

The work of the Ministry of Fuel and Power used to be done by the Secretary of Mines. Why cannot that be done again and so release a large amount of accommodation and many admirable civil servants for more important jobs? Then there is the question of food. The Minister of Food is responsible for providing the country with food; so is the Ministry of Agriculture. These are arguments I know used by Liberal speakers in the last Parliament, but truth does not cease to be truth because it was stated six months ago. Civil aviation is merely a modern form of transport and should be lumped in with the Ministry of Transport. All these things could be done without interfering with the efficiency of our administration.

Mr. Frederick Peart (Workington) rose—

Sir T. Moore

I cannot give way again. Some of the interjections already made have not been over-intelligent—[An HON. MEMBER: "That is not fair."]—nor particularly pointed to the discussion on hand.

There is one final word I would like to say about something which has not been mentioned in the Gracious Speech, and that is: What, if any, steps have been taken to resolve the present world tension? I know that our Prime Minister has definitely blazed a trail by the speech which he made the other day, in which he advocated discussions at the highest level. I know that M. Auriol followed suit for France. In a minor way, although I am not taking any credit for it, I have advocated this meeting of Truman, Stalin and the Prime Minister, with possibly the Leader of the Opposition to demonstrate the unity of this country, to thrash out at the very highest level the problems that are facing the world. It may lead to nothing; it may be a complete failure, but it may save the world from some time or other destroying itself.

Those are the few points which I wanted to raise, and which have occurred to me in reading through the Gracious Speech. I hope that they will be heard and shared not only by the Government and by my friends on this side of the House, but by hon. Members opposite as well, because I believe that we all want the same thing. We may have different methods of seeking it, but it is still the same, and it was well said many years ago by Disraeli when he declared that the policy for Britain and for all Britons was the unity of the Empire, peace abroad and the betterment of the conditions of the people.

8.42 p.m.

Mr. Cyril Bence (Dunbartonshire. East)

I trust that the House will bear with me in what is a very difficult task on the first occasion on which I address it. The other great difficulty under which I labour is that I sit here in the place of one who, throughout many years, won the very highest esteem and regard of Members of this House on all sides. I hope that we shall again see Mr. David Kirkwood in the vicinity of Westminster.

I want tonight to deal with the issue of the restoration of the value of the £, a theme which runs through the Gracious Speech and the speeches of hon. Members opposite. It is troubling me and many of my constituents, especially the small business men and traders and the engineering workers on Clydeside, who have suffered bitterly in the past. What is the value to which the £ is to be restored? Is it the value of what it was 30 years ago or 100 years ago? To what are we going to restore it?

When one thinks in terms of the value of the £ and the value of the commodity called money, one must think of it in reference to the things which money buys. The principal commodity that money buys is the labour of the working men and women throughout the country, and if the value of money is to be raised, surely it is logical that the value of the labour of the common people at their various tasks is to be lower. The raising of the one seems to me to lower the value of the other.

I hold the view that even today there are not sufficient pounds, particularly among the engineering workers on Clyde-side. Many of those highly skilled workers on Clydeside draw about £6 for a 44 hour week, so there are not too many pounds there. If the value of the £ is restored, we must accept that there are too many pounds in existence. Therefore, the number of pounds must be cut down. Perhaps there are too many pounds in circulation; perhaps there are too many of these units of money.

I understand that I must not be controversial and, therefore, I am not going to suggest in what quarters I think there are too many pounds, but I know that among the working class folk whom I represent there are not too many pounds. I would have much preferred that the Gracious Speech and the speeches of hon. Members opposite had contained some suggestions other than the statements about increasing the value of the £—some action to reduce the number of pounds that are drawn out of the economy by institutions and people who seem to have a gargantuan appetite for pounds. But there is, and has been, no mention of that.

Had we been returned, we should have taken action to curtail the quantity of pounds that get into the hands of certain sections of the community. I am afraid, from my experience, that if it is the intention of His Majesty's Government to restore the value of the £ by the same technique as has been used in the past, they may create a situation whereby there will be some surplus of labour. Perhaps the Minister of Labour was thinking in those terms, that as a result of this monetary policy, that there would be some surplus of labour to be directed towards purposes other than those in which it is employed today.

Another important point that worries me in connection with an increase in the value of the £ is that the results may be very similar to those we experienced from the same form of policy some 28 years ago. Today, many of our young fellows are becoming apprentices in the engineering trades. That practice decreased when I was a young man because the value of engineering workers had gone down as a result of raising the value of the £. It is to be hoped that the result of this new monetary policy, and the increase in the value of the £ by monetary technique and the action of the Bank of England, will not be to create in the future a fear by parents against putting their boys into industry generally and into the engineering trades particularly.

In South Wales, where I was raised, some of us did everything in our power to stop our boys and girls from going into productive industries. We had come to appreciate that because of the increasing value of money the value of the product of our labours had gone down. We struggled hard to see that our children never entered industry of any description. My wife and I made many sacrifices to put our children into other occupations. I am suspicious that the general policy expressed in the Gracious Speech and by the Chancellor of the Exchequer may have this same result again. I hope there is no such intention on the part of the Government and that they will take other measures before there is anything in the nature of a slide downhill into that terrible situation which was arrived at in 1922 as a result of a similar policy.

We reached at that time the amazing position that we were said to be overproducing. If we produced less we should all get richer, was the predominant idea. It would seem that if the community produced nothing we should all be millionaires. I hope that we are not going to be steered in that direction. We should rather do everything in our power, by increased production, to pre- vent this deflation and by, if you will, the diversion into productive industry of certain classes of people employed in certain functions in the community that are perhaps unnecessary. We should also curtail the gargantuan appetites that take so much out of the system of money without making a contribution equal to what they take out.

8.50 p.m.

Mr. Robert Crouch (Dorset, North)

I would first congratulate the hon. Gentleman for Dunbartonshire, East (Mr. Bence) on his maiden speech. Little did I think just over a year ago that it would so quickly fall to my lot to congratulate an hon. Member upon his maiden speech. The hon. Member has made a very valuable contribution to the debate, and we look forward with interest to his taking part in future debates. He most certainly follows a very well known Scot. When he began speaking I thought I had at last met a Scotsman whom I could follow. Scotsmen are very nice fellows, but the more intelligent they are the more difficult it is to understand what they say.

Before the hon. Member finished his speech he told us that he came from Wales and not Scotland, and that may account for the fact that I was able to understand him so clearly. We look forward to his taking part in future debates. He has a very difficult task in following Mr. David Kirkwood, but I am sure that with his knowledge of the engineering industry, a very important industry today, he will make many valuable contributions to our debates.

I congratulate my right hon. Friend the Chancellor of the Exchequer upon his excellent speech. It is many years since a Chancellor of the Exchequer spoke so boldly to the House and to the country. He realises the difficulties in front of us, and he is most determined that we shall face them. I believe that if we face them we shall overcome them. I would offer a word of warning to the Opposition. They must be exceedingly careful to await the end of the Chancellor's statements before they begin to jeer at what he says. The importance of this was apparent when my right hon. Friend mentioned a cut in building. I had an idea that it would be a cut not in the building of houses but in Government building. It will be wiser in the long run for the Opposition to await all that my right hon. Friend has to say before they comment.

I wish to address myself to that part of the Gracious Speech which says: My Ministers will vigorously encourage production of food by the basic industries of agriculture, horticulture and fisheries. During the last five or six years we have heard a great deal from the late Government about continued increase in agricultural production, but that has been in monetary value and not in the actual amount of food produced. My colleagues and I were alarmed when we saw the last September returns of British agriculture. The most alarming decrease is that of some 3½per cent. in the agricultural labour force. The position is even more serious than that. We have some 66,000 fewer male workers in agriculture than we had in 1936.

The late Minister of Agriculture went to very great pains to tell the House and the country about the increase in wages that had taken place during the last 10 years, but this fall in the number of workers has taken place despite the increase in wages. It has not only been a question of wages that has been concerning our workpeople, and if we are to overcome our present difficulties as outlined this afternoon by my right hon. Friend the Chancellor of the Exchequer, the first thing we have to do is to see that we get a return of our workers to the industry. Unless we have a sufficient labour force, we shall be unable to turn out the production that is at present so urgently needed.

My right hon. Friend announced that he is making cuts in certain unrationed foods. That will mean an even greater demand upon British agriculture. If the industry is given the right encouragement, if it has sufficient encouragement from the top, I feel that it will respond, but we have a lot of leeway to make up.

I return again to the September figures. We have lost 200,000 head of livestock during the last 12 months, and our livestock figures today are less by nearly one million than in the period before the war. This downward trend has, I know, been accelerated in recent months by the failure of the Government to buy elsewhere the meat that was required for the people, and undue emphasis has been laid upon meat production; but nevertheless we have that leeway to make up. Our sheep population is now very much less than before the war; there has been no increase in the last few years. As far as pigs are concerned, while there may have been a great increase in the last 12 months, the numbers are still a million short compared with 1939. I am much more concerned about figures of this kind than about the monetary values of agricultural products.

The poultry industry has 21 million fewer poultry than before the war, and this is a very high percentage when the pre-war figure was some 74 million. It has been reflected in the output of eggs. I know that during the Election the previous Prime Minister suggested we had many more eggs now than we did before the war. With less poultry, however, that would be impossible. Not many days before the last Parliament broke up, I asked the then Minister of Food what was the number of eggs that went through the packing stations before the war as compared with the present figures. The right hon. Gentleman told me that the figures were not really comparable because before the war the scheme was voluntary whereas now it is compulsory. The prewar figure was 1,200,000 standard cases of 30 dozen eggs, as compared with 10,200,000 eggs today—and that is where the previous Prime Minister got his figures about the production of eggs.

We have definitely got to produce more food at home. I was encouraged over the weekend to notice that one of our local daily papers—the "Bournemouth Echo"—had devoted the whole of its leader to this very serious fall that has occurred in agricultural production. When a newspaper which is produced in a seaside town devotes its leading article to the position of agriculture, it indeed indicates that the townsman is getting very concerned about how much food he is going to get and where it is to come from.

We fully support the policy of guaranteed prices to the British farmer. This was introduced by my right hon. Friend the Member for Southport (Mr. R. S. Hudson), who was the Minister of Agriculture during the war years, and it was embodied in the Agriculture Act, 1947. What we want, however, is a more stable food policy. We must stop the continual swing, the continual robbing of Peter to pay Paul, year by year if we are to get full production and prosperity from our industry.

This year, the emphasis has been put upon meat at the expense of milk and eggs, with the result that the numbers of livestock have decreased, and in less than 18 months we shall have a very serious milk crisis. I believe, and it is my honest opinion, that what we have to do is to see that each commodity is awarded a price which will cover the cost of production. When we have that we will begin to start full production of industry. If each commodity is awarded a proper price, we shall get each area of the country producing the commodities for which it is most suited and we will not have very thin hill farms trying to produce beef as some are trying at present. Immediately that we get a change of emphasis a great loss of production occurs. We must have a very much more steady policy than we have had in the last few years.

Mr. Manuel

Before the hon. Member leaves that point, I feel that he is painting far too gloomy a picture. Surely he is aware that our agricultural policy, over all, has been much more stable during the past six years than ever, and that there has been a 50 per cent. increase in production over all—[HON. MEMBERS: "Oh."] These figures cannot be refuted and, if hon. Members want a better figure, Scotland can provide it.

Mr. Crouch

The hon. Member is following the example of his hon. and right hon. Friends by quoting monetary values.

Mr. Manuel

No.

Mr. Crouch

Yes, Sir. I would suggest that he goes into the Library, where he will find, in "The Farmer and Stock Breeder," the actual figures, not monetary values, the figures of the commodities I have mentioned. There are something like one million less livestock than before.

I feel that the late Government failed the country and the industry by not providing sufficient feedingstuffs. If they had brought in more feedingstuffs instead of buying the finished product we would have had considerably more food than we have had and than we have at present. I believe it very much wiser to spend our foreign exchange on raw materials than on finished products. It would have been wiser to let our merchants go to Canada and spend as many dollars as were available to buy coarse grains which were for sale. Unfortunately, that grain went to the United States of America. I hope and believe that the new Government will encourage the importation of very much larger quantities of coarse grains so that our farmers can produce the food so urgently required by the people of this country today.

9.4 p.m.

Mr. J. A. Sparks (Acton)

I listened with very great interest to the speech of the Chancellor this afternoon and, as that speech unfolded, I felt that the Chancellor was doing more than anyone on this side of the House could do to disillusion a great many people who supported the party opposite in the General Election. His speech proved conclusively that they could not redeem the many promises made to the electors to reduce the cost of living, build more houses, and make life easy for everyone.

The speech, nevertheless, was a serious one, and certainly it outlined to this House and the country the very serious and grave problems we have to meet in the months and years ahead. The Chancellor said, in relation to our internal economy, that its efficiency was based very largely upon a trinity, which he described as coal, steel and transport. He said that we must have more coal produced in our country; that we must also have a greater steel output; and that we must have a more efficient transport system, a system which he stated was carrying great burdens.

I wish to devote my time to the last of the trinity, namely transport. I am not sure in my own mind that the Government are proposing to deal with this problem in a way which will restore its efficiency and make it the influence that it must be in the economic life of our country. We all know that transport is the artery of our economic life, and that if this artery ceases to function or functions imperfectly the effect is felt throughout the whole economy.

Therefore, the railwaymen of this country are watching this Government to see exactly what they propose to do. So far we are not satisfied that the proposals made by the Government will achieve greater efficiency in the transport organisation of the country. We must first understand, when we talk about internal transport, that we refer mainly to the railway system and the system of road haulage. It is the policy of the Government and of the party opposite to divorce the road haulage system from the railway transport system.

I warn the Government that if they pursue a policy along those lines they will bring the transport system of this country to chaos and anarchy, because it is important to realise, and it not very often is, that the competitive basis of road and rail is very different. In many respects it is an unfair basis. The railways have been built up over the past 120 years or more, and at the time of nationalisation the industry was over-capitalised.

When one realises that the railways had to buy land at extortionate prices to lay down their permanent way, fence off thousands of miles of track and establish systems of signalling along the whole of the routes, one must appreciate the vast capital cost involved which has been a burden upon the industry. When one compares the competitive basis of road haulage one will find that there is really no fair basis of comparison between the two.

When the road haulage system first began to develop after the First World War it had not to do what the railways had to do: it had not to buy thousands of miles of land at exorbitant prices, it had not to undertake the fencing of thousands of miles of land, nor did road haulage have to go to the expense of organising a system of traffic signalling throughout the country.

It had provided for it at public expense the whole network of roadways throughout the country and a complete system of signalling. All that those engaged in it had to do was to take their vehicles out upon the roads and use what public funds had already provided. I know it may be said that road vehicles make a contribution to the Road Fund, but after allowance is made for that the road systems of this country are subsidised very heavily from local rates, and it is these roadways which the road haulage system is using.

Therefore, this theory of trying to divorce the road haulage from the railway system is bound to be disastrous for the transport industry. In my view, and in the view of those actively engaged in the transport industry, there is only one solution to this transport problem. That is the closest co-ordination of both the railway and the road haulage systems. They are part and parcel of the transport system of our country, and we must seek ways and means of co-ordinating their activities more closely in a better form of organisation.

There are some traffics which the road haulage system can carry more efficiently than the railway and vice versa. At present, the railway industry with, as it were, its hands tied behind its back, is compelled by law to take any traffics tendered to it, whether remunerative or otherwise. The road haulage system on the other hand can pick and choose and take only that traffic which is most remunerative. As long as we have that discrimination between road and rail transport we cannot expect to have an efficient transport organisation in this country.

If the Government desire to see the transport system efficiently and properly oraanised, they must drop the idea of divorcing road haulage from the railway system, otherwise disaster will overtake our transport system. If they could devise means of knitting together more closely the road haulage system and rail transport, I believe that they will go a long way towards solving the transport problem.

Those who have been connected with transport for a long time view with some apprehension this proposal of the Government to extend the limit of operations of certain classes of road haulage over a greater distance than the radius of 25 miles. This means making rail transport less economic. The difficulty confronting the railways at present does not arise from a lack of good will on the part of the railwaymen to make the system work, or from a lack of efficiency on the part of those responsible for the management and organisation of the railways. It is the fact that the more remunerative traffic taken by the railways during and after the war period has gradually been filched away by road haulage. So long as we are prepared to tolerate that kind of thing the railways will always be up against the difficulty of maintaining that standard of efficiency which we expect of them.

An hon. Member opposite is smiling. I do not know whether he disbelieves what I say. But if any emergency descends on this country it is the railway system which will have to see us through and not the road haulage system. Therefore, we cannot afford to neglect our railway transport.

I believe that from the psychological point of view, if the Government are going to tinker about with transport, and interfere with nationalisation, they will create far more difficult problems than exist at present. If they believe that the railwaymen of this country are with them in this they are making a big mistake. They should hesitate and think seriously before taking such a course of action which must inevitably increase the difficulties of rail transport and cause still more remunerative traffics to be diverted and filched away from it to the road haulage system.

The hon. and gallant Member for Ayr (Sir T. Moore) talked about nationalisation failing. I do not think that nationalisation has failed as far as the transport system of this country is concerned. I will go so far as to say that had not nationalisation taken place the market value of railway stocks would have been very considerably less than they are at the present time. We know that during the period between the wars when private enterprise was supposed to have been at its best the railway transport system of this country was always in great difficulty. At one time, as mentioned by my hon. Friends, the State had to come in and heavily subsidise the railway industry. The State has not done that since the railways were nationalised. The railways have not come to the State for subsidies. Therefore, if the railways and transport system of this country had not been nationalised the state of transport in this country would have been now far worse than it is.

I urge the Government to consider this matter very seriously. If they can devise and evolve a policy which will knit together the road haulage system and inter-grate it with rail transport I believe they will have the support of the people of this country and of the railwaymen.

Sir Arthur Salter

Do I understand the hon. Member to say that the Government had largely subsidised the railways between the wars? I only want it for the sake of accuracy of the record.

Mr. Sparks

Yes. After the First World War the Government did so. I think the subsidy was about £30 million which they gave to the railways in the immediate post-war period.

Sir A. Salter

In payment for war services?

Mr. Sparks

No, not for war services at all. The right hon. Gentleman will realise that in the years immediately following the First World War the railways were in great difficulties as a result of the general conditions following the carrying of war-time traffic. The railway managers went to the Government and the Government advanced a subsidy of £30 million for a limited period of time. There was difficulty from that day onwards. The railways had great trouble in raising additional capital for capital development because the return on railway stock was quite inadequate to attract capital in the ordinary way.

Therefore, the difficulties with which we are dealing today are not new in that sense and, as I said before, the only solution is the co-ordination of the railways with the road haulage system. If we proceed along the line of divorcing road haulage and making it a competitive element, when the competitive basis for each side of transport is so unfair, we cannot expect the railways to compete with the road haulage system. To pursue a policy which would divorce road haulage from rail haulage would merely make the railway system go further and further into the depths of inefficiency.

The solution is to unify the road and rail systems and to support the British Transport Commission in the policy carried out in recent years. I believe that policy is right. I hope the Government will give their utmost support to the Transport Commission and will hesitate very seriously before starting to tinker about with the nationalisation of transport.

9.20 p.m.

Miss Irene Ward (Tynemouth)

-I listened with very great interest to the speech made by my right hon. Friend the Chancellor of the Exchequer which, if I may say so, was, I thought, addressed to the nation and not to any party, and which I am sure the country will warmly welcome. I also listened with equal interest to the speech made by the late Chancellor of the Exchequer. [HON. MEMBERS: "The ex-Chancellor of the Exchequer."] I quite agree, "ex-Chancellor" is a much better word. I am delighted to put emphasis on the word "ex."

The argument of the ex-Chancellor of the Exchequer was that at his Mansion House speech he had already warned the nation of the very serious economic situation into which we were running, and I think everyone would recognise that he was entitled to take credit for that. But what he did not do, and what his party did not do, was to say during the election that already on the social services the emphasis of the disastrous financial policy which his Government had followed was already taking effect. That is what was missing from the statement made by the right hon. Gentleman.

I want to put it on record, because I took a great deal of trouble to find out the facts during the election campaign. I noted, for instance, with very great interest that in my part of the world the ex-Minister of Education had already instructed the local authorities to cut their education estimates by some 25 per cent. In the great City of Sunderland the ex-Minister of Education had stated that the schools provided for in the education estimates by the local education committee had to be reduced from six to two. I also noticed that in Gateshead, on the south side of the Tyne, the ex-Minister of Education had refused to accept the grammar school for the Catholic fraternity; that had been wiped out of the education estimates.

I also noticed that in my part of Northumberland the education estimates for Newcastle-on-Tyne had been very severely cut indeed by the ex-Minister of Education. Indeed, so irate was the local education authority for Newcastle-on-Tyne, because their whole education programme had been unbalanced in that the emphasis was laid on primary education to the detriment of secondary education, that at the time of the General Election they were arranging for a deputation to interview the ex-Minister of Education. So the impact of the serious financial policy which had been followed by the ex-Socialist Government had already begun to destroy those services which had been built up by the Coalition Government during the war.

Then with regard to the Ministry of Health, the regional hospital boards had already been instructed by the ex-Minister of Health to start cutting those services which were essential to the proper development of our National Health Service. Indeed, in my part of the world we had already been told that we would not have the accommodation that was needed for the chronic sick.

We had already been told that one of the training schools for nurses, the building of which had already been allocated and furnished, must stand idle because it was impossible for the regional hospital board to employ sufficient nurses to attend the hospital beds through lack of finance. The whole sorry story about the regional hospital boards and the local education committees remained undisclosed by either the ex-Chancellor of the Exchequer, the ex-Minister of Education or the ex-Minister of Health.

Mr. Popplewell

Would the hon. Lady tell us the number of schools which have already been built or are under construction in Newcastle and also the number of additional nurses provided in the hospitals on Tyneside?

Miss Ward

I am not in any way contradicting that. We have, of course, a considerable number of new schools, and there has been considerable additional recruitment of nurses to staff the hospital beds. Everyone was very glad that that development took place in both the educational and National Health services. All I am saying is that just before the General Election, in August and September, these instructions were issued, imposing serious cuts on both our educational and health services in the North of England, and we must not lose sight of those facts.

Mr. Popplewell

When the hon. Lady says that serious cuts were imposed, would she say exactly what she means? I represent a constituency in the City of Newcastle and I should like to know what she means by "serious cuts," because I suggest that she is very much over-painting the picture.

Miss Ward

I should have thought that to cut a programme of six schools in Sunderland to one of two schools was quite a serious cut. If the hon. Gentleman would like me to do so, I will send him the full report of the Newcastle-upon-Tyne local education committee's reaction to the statement made by the ex-Minister of Education when he instructed the Newcastle education committee to reduce their estimates by 25 per cent. If I may say so, with very great respect, when an ex-Minister requests a local education authority to cut their estimates by 25 per cent.—which, after all, is a quarter of the total—that could be regarded as a serious cut. At least, that would be my interpretation. Perhaps I need not comment further on that, because there are many other subjects I want to mention.

Mr. Popplewell

The hon. Lady is on rather dangerous ground.

Miss Ward

Not at all. I want to turn to another point which I think is of very great importance. We all knew that the coal situation was deteriorating but, if my memory serves me accurately, I recall the ex-Minister of Fuel and Power announcing that more coal was to be allocated for the use of the domestic consumer. [HON. MEMBERS: "It was."] Hon. Members opposite say it was. In other words, they were allocating coal which was not there. Anything more like the story of Alice in Wonderland I cannot imagine.

If I may say so, it is no comfort at all to the domestic householder to be told that additional stocks of coal have been allocated for domestic consumption and then to hear, when there is a change of Government, that the stocks of household coal are in a deplorable state. I think I am justified in saying that during the election the ex-Minister of Fuel and Power never told the country that the householder, the ordinary domestic consumer, would be faced with a most unpleasant winter.

The ex-Chancellor of the Exchequer made his Mansion House speech to those who had ears to hear, but in his broadcast he did not disclose to the electorate the facts which I have just stated to the House, nor were they disclosed by his supporters in the country who were fighting for their seats.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

I think that the hon. Lady is under a misapprehension. I do not think she noticed that the ex- Chancellor of the Exchequer explained that the price of coal was reduced in the summer so that instead of stocks being accumulated nationally householders would be encouraged to put stocks in their cellars where that was possible; and a very large amount of coal, while it is not stocked publicly, is stocked privately.

Miss Ward

Yes, but my argument, which I have made on several occasions in this House, is that the ex-Minister of Fuel and Power was pandering to the people with coal cellars to the detriment of people who are not able to stock at summer prices, and that was one of my criticisms against the right hon. Gentleman, which I repeat; he has done a great disservice to the old age pensioners and people living on retired pay.

If the right hon. Gentleman the Member for East Stirling (Mr. Woodburn) does not want to say anything more about that matter perhaps he will allow me to proceed with my speech. I was very interested that the question of transport was raised because I do want to make this point to my own Front Bench. I think that the situation with regard to the railways is a very serious one indeed, and I want to put in one plea for the railwaymen. It has certainly been during, the past few years the policy of the late Government to do everything that was in their power—and nobody grudges them it—for the miners. However, the railwaymen have, I think, a most legitimate grievance. They did a magnificent job during the war that drew very little public attention, and they have been of recent years the Cinderellas of the industrial community.

I do not know whether hon. and right hon. Gentlemen noted that during the election campaign the Chairman of the Railway Executive went to the appropriate Tribunal to ask for permission to increase the railway fares to the ordinary public by some 25 per cent. and to the season ticket holders by some 50 per cent. It has not escaped hon. Members on this side of the House that on the last occasion when the deficiency on the railways was discussed application was made to the appropriate tribunal that the deficiency should be met by increasing the freight charges, which, of course, in turn increased the general cost of living. It did not at that time directly increase the travelling charges to the ordinary public. Now we are faced again with a very large deficiency on the nationalised railways, and, as I say, the Chairman of the Railway Executive has already made application for permission to increase the travelling charges to the public by 25 per cent., and to the season ticket holders by 50 per cent.

If the railways are to be maintained, as I assume they are, as part of our national industrial equipment it may well be that we shall have to examine whether it is fair, when a deficiency appears on the nationalised railways, that that deficiency must be borne by the travelling public or by the freights which are carried. It may be that we shall have to consider whether we should look after the railways partly in the defence programme and partly through the National Exchequer account.

It does seem to me that in a small island with so many millions of people with not a very great deal of road space it is in the national interest to ensure that we have an adequate, efficient, safe and cheap railway service, and when I, in my very humble way—because I am not an expert on these matters—try to look at this railway problem it seems to me that if we are to do justice by the railway employees—and it is very important to see that they have adequate wages and a proper standard of life—it may be that it will not be possible for the railways themselves to carry the burden OF the expenditure.

All I am anxious to ascertain from my right hon. Friend is that in looking at our national financial position a broad view will be taken of our responsibilities to the railways, and that the running of the railways will not be regarded within the narrow terms imposed on the system by the nationalisation Act.

Mr. Cecil Poole (Birmingham, Perry Barr)

Does the hon. Lady subscribe to the policy of her party of drawing traffic from the railways and giving it to a large number of road transport people, who are to be given greater scope, as forecast in the Gracious Speech?

Miss Ward

Fortunately, I have always been independent in thought in my own party, and even though I now occupy a seat on this side of the House I still feel that I should be able to draw attention to problems as I see them. I readily agree that on this problem I am not competent to offer any well thought out suggestions; I do not know enough about it. All I know is that we must ensure that our railwaymen are properly treated as good employees. Incidentally, it may interest hon. Gentlemen opposite to learn that the railwaymen dislike nationalisation intensely. I have a considerable number of railwaymen in my constituency, and many of them voted for me.

Mr. Popplewell

How does the hon. Lady reconcile that statement with the fact that at the request of the railwaymen I spoke in her division on the question of nationalisation during the General Election? At the request of the railwaymen I spoke pointing out its benefits, to contradict the propaganda the hon. Lady was putting out.

Miss Ward

Is the hon. Gentleman not aware that in her election address my opponent pointed out that under nationalisation it was not possible to offer railwaymen a proper standard of life? If the hon. Member is now able to reassure railwaymen, I have no doubt they would be delighted to hear him. Nevertheless, some of them voted for me.

This is a vast and difficult problem, and I hope that my right hon. Friend will look at it from a broad point of view, from the point of view of doing the right thing b-, the railwaymen and by the travelling public. We cannot, in order to keep the railways solvent, increase either our freight charges or our passenger charges without gravely imperilling both freight and passenger traffic.

I wish to make one other point on the general subject of incentives, although I do not wish to make myself unpopular with my own Front Bench. This concerns not only incentives to industrial workers, to black-coated workers, or even to the whole range of workers. Housewives also require some incentives. When the ex-Minister of Fuel and Power was making appeals to domestic consumers to save coal, gas and electricity—which we all agree was essential—he was never human enough to point out that a wife does not want to send her man to work in a ship-repairing yard, in a railway shed, or in a fishing trawler from a cold house.

It does not increase production to have someone feeling thoroughly uncomfortable, eating, in a cold room, a breakfast which has not been properly cooked. If I may go a little further, I would say that mothers do not like to send their children cold to school. If one sends a child cold to school, one loses the value of the money spent on the educational service because when a child is cold it is not so ready to absorb the teaching which it gets.

I appeal to my right hon. Friend, when he is looking at the question of incentives—and I hope that he will realise that I am not tonight discussing equal pay on this issue—that there are housewives who would like, if they are to be attracted, as, unfortunately, perhaps they may have to be, to go into the factories to work for the re-armament programme, to have Purchase Tax taken off washing machines. Labour saving devices in the home may free some of the women to make a contribution to the national production effort. All I am saying—and I am delighted to see my right hon. Friend is nodding his head—is that there is a very wide field for dealing with this incentive problem.

Mr. R. A. Butler

For the purposes of the record, I ought to say that I was listening with rapt attention to the hon. Lady, and I did not make any inclination or wagging of my head at all.

Miss Ward

I am sorry. I thought that my right hon. Friend seemed inclined to do so at one moment. I am sure that when he sees on paper what I have been trying so inadequately to say—it never occurred to me that I should be able to make a speech so easily and readily tonight—he will appreciate that incentives cover a very wide field. Already the exPostmaster-General—I may as well get in everything I can into my speech—has said that I could pursue my campaign for the erection of a low-powered television transmitter at Pontopike, for the North-East area, with his successor. I am only indicating that incentives are not necessarily just money in the home, and that is all that I want my right hon. Friend to bear in mind.

We all realise that we are in a very difficult position. We want to make the best effort we can to get the country out of it, and I am sure that everyone will agree we can easily make the sacrifices necessary if we feel that we have a Government which understands that the human can make superhuman efforts if his tastes and his problems are properly examined and he is not just regarded as a cog in the machine. That is the difference, I think, between this new Government and the old one. I have very great pride and pleasure in feeling that we can, as a nation, work for the common good of all.

9.44 p.m.

Mr. John Taylor (West Lothian)

I had not thought of entering into the debate on the fourth day of this Parliament, and I would not have done so but for the speech of the hon. Member for Dorset, North (Mr. Crouch). Even if I had not heard that speech, I would have been tempted to make an intervention after listening to the speech of the hon. Member for Tynemouth (Miss Ward). May I say to her that she gave several refreshing indications of conversion at some time in the future, particularly when she talked of the railwaymen.

I think that it may have escaped her notice that today the railwaymen have reaped one of the advantages of the last administration by being given an 8 per cent. increase in their wages and certain other advantages in regard to Saturday and Sunday working. I welcome some of the hints that she gave which showed that she understood that the real problem of the railway and transport industry is the responsibility not merely of the industry but of the State.

I was induced spontaneously to enter into this discussion by the charges made by the hon. Member for Dorset, North, who seemed to me to say that the increase in agricultural production in recent years was not a factual increase of produce but a monetary increase of value. When my hon. Friend the Member for Central Ayrshire (Mr. Manuel), intervened to correct him, the hon. Member underlined the point, restated it and argued that it was, in fact, more an increase in the monetary values than in the produce values.

Records very clearly show that the increase has, in fact, been spectacular in actual produce values. I am not very well acquainted with the actual figures of increase in England and Wales, but I know that in Scotland the Scottish Farmers' Union are enthusiastic about the extent and percentage of the increase, particularly since 1947. In poultry, pigs, cereals, cattle, milk, and indeed in every aspect of production in Scotland this increase has been of a high percentage, not merely in a monetary sense—it has, of course, been in monetary values, too—but also, which is much more important, in actual produce.

I should like now to make reference to two of the shortest paragraphs in the Gracious Speech, those dealing with the affairs of Scotland and the affairs of Wales. That dealing with Scotland amounts to 18 words—18 vague words of postponement; that dealing with Wales to 23 words, equally vague but nevertheless recording something which has been attempted. It is true that that something has been received with raucous and scornful laughter by every Welshman with whom I have come in contact, but they are a record of something actually approved.

These 18 words for Scotland are vague terms of something unspecified, which may or may not take place as the programme of the Government unfolds itself. There is no mention in those 18 words of the appointment of the Royal Commission, for which many organisations of the heterogeneous nature that we in Scotland encourage sold their souls to the Tory Party at the last Election. They agreed to sink all their previous programmes in support of the promise of a Royal Commission.

My hon. Friends on this side of the House, who represent Scottish constituencies, have no material objection to the appointment of a Royal Commission, providing we know what its terms of reference are. I have some sympathy with this Royal Commission that is subsequently to be appointed, and I hope that the Government will perhaps consult us about the terms of reference.

I have no hope that we, as corporate Members of this House, will be able to reach agreement upon those terms of reference. I am not despairing about that, because I know, as a matter of certainty, that whatever terms of reference may be agreed upon and conveyed back to Scotland, no two persons in that country will ever reach agreement upon them.

It is rather significant that the right hon. and gallant Gentleman whom I suspect to be the author of the Conservative Party's alleged policy for Scotland, the right hon. and gallant Member for Kelvingrove (Lieut.-Colonel Elliot), still remains a back bencher and receives small reward for his many efforts in preparing and working out that very vague and face-saving policy.

The Chancellor of the Exchequer is now in the House. I wonder whether I might put one final point which has been rather worrying me with regard to the speech which he so competently made this afternoon. He made a reference to the building programme. Perhaps it is a small point, but it is one which is exercising my mind. I can explain what I mean by an example which arises in my constituency. I have an engineering works which has a very good record for progressive management, and for progressive ideas of ploughing back into the industry the profits that are made and maintaining for its directors a small margin of profit.

This industry wishes to expand itself, but is unable to do so because the land surrounding its works is a bog which is becoming increasingly waterlogged. There is a danger of the seeping water reaching a furnace, and that the seepage, unless it is stopped, will close that furnace down. The workers are in very great personal danger. The firm are wondering what they will have to do.

The news today of the prevention of further building makes me wonder whether a firm in that position would be able to get permits not only to do the necessary drainage, which is a local government matter in that area but, when that is done—and it must be done very speedily or that furnace will close down and the valuable engineering production will cease—to carry on the building of an extention of their factories for products which will have a great value in the near future for this country in general and for Scotland in particular.

I am sorry I have selected so many brief and perhaps trivial points for this speech, which I had not anticipated making tonight, and I crave the indulgence of the House for making them at such great length.

Mr. Sydney Silverman (Nelson and Colne)

The debate is being carried on under rather exceptional circumstances. It is exactly the same kind of debate as we have had on economic affairs at various times in the past four or five years.

Before making a contribution of my own to the debate, perhaps I may be 'permitted to offer my congratulations and, I am sure, the congratulations of all other hon. Members without any distinction of party, upon the very effective maiden speech to which we have just listened. I regret two things only about it. One is that I did not hear the whole of it, having no more notice than did my hon. Friend the Member for West Lothian (Mr. J. Taylor) that he would deliver it. The other is that no hon. Member opposite was prepared at five minutes to 10 to intervene in the debate, because these compliments to my hon. Friend, which are very sincerely expressed, always come with better grace from a member of the opposite party than from a member of the party to which the hon. Member belongs.

The Minister of Health (Mr. Harry Crookshank)

Not if they are so well put.

Mr. Silverman

I am very much obliged for that remark. I listened with the greatest attention and interest to what my hon. Friend had to say, and I am certain—I am glad to be reinforced by what the Leader of the House has said—that his remarks were listened to with equal respect and sympathy by every hon. Member without any distinction of party and without reference to agreement or otherwise with the points made. His points were made with a lucidity and persuasiveness which will commend his intervention in debates in future, and we look forward to hearing him again.

As to the contribution which I wish to make, the debate is being conducted in rather exceptional circumstances, in that almost the same speeches as we have heard have been made in all similar debates for a number of years, except that the personalities giving utterance to the different sentiments and ideas seem to have changed somewhat and the speech of Sir Stafford Cripps comes almost as persuasively from the present Chancellor of the Exchequer as the speech of the present Chancellor would have come from this side of the House in those other days.

The real difficulty is to relate the sentiments expressed and the policies expounded, so far as they have been expounded, from the other side of the House and in the name of the new Government with the propaganda and discussions on the platform and in the Press during the General Election campaign. One is really puzzled to know how it has come about that the Chancellor of the Exchequer was able today to deliver the speech which he delivered in the name of the party which issued the Tory manifesto at the beginning of the General Election campaign. I see absolutely no connection at all between them.

It seems to me that one can characterise the discussion in this way, that in relation to what they have to say about the recent Labour Government during the General Election campaign the attitude of the Tory Party was, "Let us see what Tommy is doing and tell him that he must not." Whatever the Labour Government did was wrong. [HON. MEMBERS: "Of course."] Yes, in the General Election campaign the Tory Party thought it was true, but what do they think now? The position is quite different today. No longer does the Tory Front Bench say, "See what Tommy is doing and tell him that he must not" they say instead—

It being Ten o'Clock, the debate stood adjourned.

Debate to be resumed Tomorrow.