§ The Chancellor of the Exchequer (Mr. R. A. Butler)
With your permission, Mr. Speaker, I propose to make a short statement about the arrangements for continuing the European Payments Union which were agreed at the meeting on 7th June of the Council of the Organisation for European Economic Co-operation.
The details of these arrangements have already been reported in the Press. The difficulties which confronted the Union arose, firstly, from the inadequacy of the convertible assets to sustain its normal operations, and secondly, from the need to deal with the creditor position of Belgium in the Union. It was, of course, most desirable—and I am sure that the House will agree with this—to avoid a collapse of the Union. Indeed in accepting the election of my right hon. Friend the Foreign Secretary to the chair, Her Majesty's Government have indicated their abiding interest in Europe's economic problems.
To ease the Union's difficulties it was decided to alter the scale of gold payments by debtor countries so as to increase the proportion of gold payable in the earlier stages of their quotas. The overall proportions of gold and credit in the quota remain unchanged. It was also decided to establish a guarantee fund of 100 million dollars to which all members would contribute in proportion to their 406 quotas if the level of the Union's convertible assets were to fall at any time below 100 million dollars. These would be temporary loans, repayable as soon as the assets rose again above 100 million dollars.
In the Belgian case, the problem was, first, to arrange for the funding and repayment of the credits outstanding in excess of the Belgian quota, and secondly, to determine the method of settlement of Belgian surpluses for the future. Arrangements have been made to deal with 180 million dollars of the outstanding credits. Part will be paid off at once; part will be funded over five years (and unless Belgium can arrange for the immediate mobilisation of the amount involved the whole settlement will come under review again). Part will be turned into bilateral obligations by the United Kingdom and France towards Belgium and paid off by deliveries of defence items over two years. Our share of this last part will be 25–30 million dollars.
Finally, these arrangements for settling Belgium's outstanding credits were conditional on Belgium agreeing that her surpluses for 1952–53 should be settled up to a total of 250 million dollars on the basis of 50 per cent, credit and 50 per cent. gold. This is a very important point, because it means that Belgian surpluses will be dealt with on the same basis as the surpluses of other creditor countries. This has made it possible for the Union to deal with the outstanding credits without undue strain on its convertible assets.
In the view of Her Majesty's Government, the arrangements agreed by the Council, which must, of course, be taken as a whole, represent a satisfactory settlement. The solvency of the Union has been assured, and the problems arising out of Belgium's creditor position have been resolved with good will and a spirit of compromise on both sides.
I should like to say a word about the impact of these arrangements on the United Kingdom itself. First, the alteration of the gold scales will not affect us immediately, since we have already exhausted our quota and are paying 100 per cent, gold for our deficits. But it does mean that when we move back into surplus we shall recover the gold we have paid inside our quota at a slower rate. On the other hand, if the Union had not 407 been made solvent, our ability to recover the gold at all would have been impaired. Secondly, we shall have to meet our share of about 27 million dollars, in the Guarantee Fund; this will require legislation. Thirdly, although we assume a bilateral debt to Belgium of 25–30 million dollars, we are given immediate credit in the Union; this means in effect that we are getting payment in gold in advance for defence items to be delivered over two years.
I now turn to some more general aspects of our balance of payments position. It is our fixed purpose to establish our economy on a secure basis, and so we must put the balance of payments first in all our considerations. I now want to state to the House what I said to the Council of O.E.E.C. last week, namely, that from time to time we shall continue to take whatever further measures prove necessary to maintain confidence in sterling and to balance our payments.
In the meantime, there are certain points I wish to mention. I come first to the position of our gold and dollar reserves. It has been the practice to make a statement about the reserves quarterly. This practice will be followed early in July. I am, however, considering whether this is the best procedure. Some people are apt to judge the position which we are in solely in the light of our deficit in the European Payments Union. These European Payments Union deficits are undoubtedly a serious liability, but they have declined in recent months as measures introduced by Her Majesty's Government and other sterling area Governments have begun to take effect. Moreover, these deficits are only one factor in our balance of payments position.
The House may like to know the facts. Since the end of March our gold and dollar reserves have fallen by less than £10 million. This loss of less than £10 million in nearly two and a half months compares with a loss of £334 million in the last three months of 1951 and £227 million in the first three months of 1952. This quarter's figures include the first instalments of the 300 million dollars of Defence Aid from the United States in accordance with the arrangements announced last January.
408 The second point I want to stress is this. We are holding the position and have had a welcome and definite respite in the loss of our reserves which fully justifies the action which we and the rest of the sterling area have felt obliged to take, but a long and hard task lies before us. It is not a question of getting over a hump. It is much more a question of building up our position steadily over the next two or three years.
There is another factor. We have many external capital commitments and we must provide for building up the reserves from their present level. Unless provision for these can be made out of our current earnings in exactly the same way as imports are paid for, we are not meeting our obligations and the loss must ultimately fall on the reserves. Therefore, it is not sufficient for us just to balance on current account. A surplus must be our aim.
In the third place, our capacity to fulfil these tasks, unless it is done by the less desirable method of cutting down imports and consumption, is to expand production, to make the goods which the world wants at the price it is ready to pay. In particular we must expand our exports to the dollar and non-sterling world. This is a task for all; workers, employers and Government.
Finally, I will repeat what I said in Paris, that our motto must be "Trade, not Aid." A large and expanding share of the world's trade is a condition of the success of the policies at home and abroad to which we are all dedicated, and it is the fixed policy -of the Government to strain every nerve to achieve this end.
§ Mr. Gaitskell
Before I put questions to the Chancellor of the Exchequer, may I say that we welcome the election of the Foreign Secretary to the chair of O.E.E.C.? May I also say that the statement the Chancellor has made is an important one and clearly calls for study and, I would hope, early debate.
First of all, may I ask the right hon. Gentleman two points of detail? The first is, when does he anticipate that the legislation he foreshadowed in his statement will be introduced? Will it be before the summer Recess? Secondly, can he tell the House how much United States economic aid has been received this quarter, or, in other words, what the 409 state of the gold and dollar reserves would be today if no economic aid had been received?
May I now ask him three more general questions? First, as regards Belgium, does the right hon. Gentleman appreciate that when the Union was formed it was the general understanding that each country would attempt to keep in balance with the rest of the Union, and that when we were in surplus we took special steps to increase our imports from the other countries in the Union? Will he please tell us what steps Belgium is now taking to do the same, and also any other surplus countries?
Secondly, would not he agree that the introduction of additional gold payments by debtors in the early stages is bound to have a depressing effect on European trade because of the fear of additional gold losses which it is bound to introduce into the minds of debtor countries?
Thirdly, as regards the slogan, "Trade, not Aid"—which we would all support —will the right hon. Gentleman please tell us what steps he is taking to discuss with the United States of America and other countries ways of achieving this end?
§ Mr. Butler
I am very glad to answer the right hon. Gentleman's questions, but first I should like to thank him for his tribute to the fact that my right hon. Friend the Foreign Secretary was elected to the chair of O.E.E.C, which I think has significance for our country as a whole and which was decided unanimously by all member States present in O.E.E.C.
Secondly, on the subject of legislation, I cannot forestall any statement to be made by the Leader of the House, but at the earliest possible date the Government will give an answer to the right hon. Member and to the House as a whole. The third question was about the extent of United States aid. I am in a position to say that about one-third of the 300 million dollars has so far come in, which means that the picture I gave of a substantial improvement is not very much altered by that figure. About one-third has so far been received and we sincerely hope the rest will not be too far behind.
The answer to the general question is as follows. I fully understand the right 410 hon. Gentleman's preoccupation with the responsibility which should fall on the shoulders of individual nations, and I think it is a sign that Belgium realises her responsibility by the fact that she has accepted that her surpluses for 1952–53 should be settled on a basis of half credit and half gold. This will impose considerable necessity upon Belgium so to plan her trading accounts that she is, so to speak, a partner working with us in the common concern of the Union.
There was a point about additional gold payments by debtors. The right hon. Gentleman will be aware that several nations were very concerned about this, including Denmark. The answer to that point is that unless members of the club are able to pay up more at this stage and in the immediate future it will be impossible for the Union to remain in balance; and in the long run this is a much wiser policy than letting the Union collapse with all the consequent bad effects on Britain and the debtor States.
On the question of "Trade, not Aid," the mere fact that Her Majesty's Government are now proposing to take a lead in a most important position in O.E.E.C. and that we have already not only our own connection but close friendship and contact with the Commonwealth indicates that in any future approach to the United States of America we shall have with us the influence of all these great areas of the world in which we shall not only be a partner but also a leader; and that is the position our country should be in.
§ Mr. Bevan
Is the right hon. Gentleman aware that the figure of £10 million he gave as the run-down in reserves would have been £40 million if 100 million dollars had not come in from the United States? Secondly, is he able to form any estimate whatsoever of what will be the cost of the British troops on the Continent after June next year in view of the fact that his right hon. Friend the Secretary of State for Foreign Affairs has committed himself blindly to an unknown figure? Will he therefore be able to tell us whether it will be £130 million a year, which is the existing German cost of the British occupying troops, or some similar figure, and if so, what?
Thirdly, will the right hon. Gentleman say to what extent the reserves are being 411 held by the consumption of stocks, because if industrial stocks are being consumed it is in fact equal to eating up reserves of money? Will he, therefore, if he cannot do it today, take an early opportunity of giving a more detailed and candid picture of the economic situation than he has given this afternoon?
§ Mr. Butler
The right hon. Gentleman, with great perspicacity, has worked out the sum quite correctly, namely, that one-third of 300 million dollars in aid, added to the sum which I mentioned, works out at a trifle more than he himself indicated. That is why I took the opportunity to indicate that we have received this aid in this period, and I am glad we have received it in aid of our defences.
But that does not get away from the fact that there is a great deal of difference, whether one interprets the sum as £10 million or £47 million in the last quarter, between that and the loss in the first quarter, when this Government came in, of £334 million and the loss which we consequently reduced in the next three months to £227 million. This is evidence that the sacrifice made by the country as a whole, which this Government have had to impose, has some reason behind it. I hope that the right hon. Gentleman will remember that in interpreting the policy of Her Majesty's Government in the country.
On the second point about the policy with regard to our troops in Germany, I think the right hon. Gentleman takes an unduly simple view of the statesmanship and foresight of the Foreign Secretary. I would prefer to leave the conduct of our foreign affairs, including this very serious point, which the right hon. Gentleman is quite right to mention because it is a thing towards which we should look, to my right hon. Friend with all his qualities of statesmanship and wisdom, aided, I hope, by a severe Chancellor of the Exchequer.
On the question of stocks, I have openly stated in every statement I have made to the House or to the House in Committee that the stock position does feature in the balance of payments measures which we have taken. That is well known. If it had not been that we had had some reliance on stocks, many further sacrifices would have had to have been imposed, and I do not think 412 that it is a bad thing to state the facts accurately to the House. I am equally convinced that no step has been taken with regard to stocks which would prejudice our national position. That is a responsibility which rests with Her Majesty's Government which I am satisfied has been properly carried out.
§ Mr. Bevan
May I ask the Chancellor, in the interests of the House and the country as a whole, to be a little more candid? We cannot possibly form an estimate of what reserves are at our disposal unless we have the figure of the extent to which stocks are being run down, because those stocks will have to be replenished if our economy is to continue. We have already had three figures, or rather two different figures and a vague estimate. First it was £10 million and now it is £47 million. If one adds the run-down on stocks, it will be a much larger figure. What is it? We should like to know. Furthermore, there will be far greater anxiety about the cost of occupation troops in all parts of the House just now because we have committed ourselves to a policy without in fact knowing the financial cost. If that is not blind bargaining, I do not know what is.
§ Mr. Butler
I cannot imagine why the right hon. Gentleman should desire to present his country's position in the worst possible light. That is not in the interests either of the country or of himself. Further, the right hon. Gentleman should remember that the Government of which he was for part of the time a member lived for a great period of their office on American aid and squandered it.
§ Mr. Assheton
Is my right hon. Friend aware that the country will feel that he is much to be congratulated upon checking the loss of gold and dollars and that the country is ready to support him in further efforts in this direction? Is he also aware, or would he agree, that not only is production of great importance, but that the increase of our invisible exports and our commerce are equally important?
§ Mr. Butler
I had no time to dwell upon them in detail but I agree that our invisibles are of first-class importance, as is production.
§ Mr. Shinwell
May I ask the right hon. Gentleman a question arising out of his statement about the provision of defence 413 items to Belgium for the next two years? Are these items to come within surplus stocks or within new production? Will any of the items consist of modern weapons and to what extent are we going to deprive ourselves of these weapons? Will the right hon. Gentleman give some details? He said something about the need for increased production. Will the Government tell us what plans they have for increased production?
§ Mr. Butler
I think it would be inappropriate to go into the latter subject on this occasion. With regard to the defence items, no doubt the details can be brought out in due course, but much depends upon the orders which the Belgians themselves desire to place. I could not say whether they are new production or out of existing stocks. All I know is that there is a great opening here for us to save ourselves gold payments and to indulge in a form of exports which I believe will be in the national interest.
§ "Trade, not Aid" is the most sensible thing he has said for a long time, but it is meaningless unless he takes steps to remove all barriers to international trade and make the pound sterling freely convertible as soon as possible? Will the Government have the courage to take whatever steps are necessary, however unpopular, and damn the electoral consequences?